When Tempus advised readers to buy into Ashtead last October its stance was right – for a fortnight or so. Since then, shares in the plant-hire group have fallen nearly 40 per cent from their autumn peak, undermined by concerns about the outlook for so-far resilient non-residential construction spending in the US – from where Ashtead draws 85 per cent of profits – and the company’s high leverage, both operational and financial.

Rental companies carry high fixed costs, such that falls in sales have a disproportionate effect on profits. Ashtead itself also suffers from substantial balance sheet gearing: it carries net debt of £963 million, a consequence of the $1 billion (£507 million) acquisition of NationsRent, its US rival, two years ago and recent heavy capital spending on upgrading its fleet.

So this week’s debt-reducing disposal of its oil-related Ashtead Technology division for £96 million – or a quarter of its parent’s now-reduced stock market value – should have been well received (albeit that it will modestly dilute earnings in the near term given that its profits were bigger than the forecast reduction in Ashtead’s interest costs). More significant was the disclosure in yesterday’s full-year results that strong cash generation (an estimated £400 million over the next three years) should mean that Ashtead’s net debt falls to £785 million by the end of the financial year. With the average age of its equipment on both sides of the Atlantic having fallen substantially, it can afford to invest less for now.

In the meantime, Ashtead continues to trade well. Pretax profits were an above-forecast £123 million, operating margins have risen 4 percentage points to 19.7 per cent and utilisation rates – the proportion of equipment out on rent – remain high. US rental rates fell 5 per cent in the last quarter of its financial year, but now appear to have stabilised. The caveat is that Ashtead has grown more cautious on the outlook for 2009, predicting a worsening of trading before a recovery in 2010 – a perspective that prompted current-year forecasts to be trimmed by about 6 per cent.

The problem is that the UK stock market continues to take a more pessimistic view of Ashtead’s US fortunes than the US stock market does of its domestic peers – so that, including debt, it sits at a lower multiple to the likes of United Rentals, its closest rival. For those with patience, hold.

Kesa Electricals

Jean-Noël Labroue, the French chief executive of Kesa Electricals, was full of Gallic shrugs, quips and asides when he presented full-year results yesterday.

“There is no need to be depressed,” he said, referring to the continuing decline in consumer confidence. “Life is full of ups and downs.” But Kesa’s share price was heading only one way after the owner of Comet and Darty predicted further difficult trading ahead, prompting current-year profit forecasts to be cut by up to 10 per cent. Kesa also decided to defer the start of its planned share buyback, through which the proceeds of last year’s €550 million (£279 million) disposal of its BUT furniture chain would have been returned to shareholders.

There was little cheer in the numbers, either. A rise in like-for-like sales at both Comet and Darty in the three months to April 30 was not enough to prevent Kesa from recording a £1.9 million loss in the last quarter of its revised financial year.

Trading at its newly acquired Spanish chain has been dire, while recent weak consumer spending data from France augurs badly for Darty, which accounts for about three quarters of forecast operating profits. The broader point is that the downward trajectory of Kesa’s profits, which touched £186 million three years ago, remains in place – forecasts for its next financial year are as low as £101 million. Even casting consumer weakness aside, the proposed entry of Best Buy, the US electrical retailer, into the UK and internet-driven price deflation remain serious challenges.

Even at 157½p, down nearly 10 per cent at a record low, the shares, trading at eight times forward earnings and yielding 9 per cent, are best avoided by all but the most steely nerved of income seekers.

Safestore

Safestore’s traits read like a checklist of all that is out of favour: a property company with exposure to the housing market whose debt is nearly as big as its stock market value. In having a customer base made up largely of consumers rather than companies, and relying heavily on roadside signage to attract trade, the self-storage specialist also has many similarities with a retailer, another unpopular breed. That explains why shares in Safestore – which, with nearly double the number of sites as Big Yellow, is the biggest in its sector – have fallen by more than a third since last year’s float.

They ticked modestly higher yesterday as Safestore’s first-half results were more upbeat than last month’s update from Big Yellow. Trading in the second half of its financial year has begun positively. Rental rates per square foot – which rose 12 per cent in the six months to April 30 – remain strong, and occupancy levels are holding up well: up 1.5 percentage points in total to 60.9 per cent, but down 1.4 percentage points on a like-for-like basis. Given that rates are the biggest determinant of profitability, those trends should give reassurance.

So, too, does the rise in its customer’s average length of stay: to 85 weeks from 77 weeks a year ago. With people who might have moved house to gain space likely to stay put, but needing to store possessions, that pattern should continue. However, at 160p, a 25 per cent discount to net asset value, and with Bridgepoint retaining 35 per cent, it is hard to see what will drive the shares up. Avoid.

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