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MARKET WATCH


Taper tantrums and other tremors


EHN’s financial analyst, Nick Spoliar of WH Ireland, gives his thoughts about the hire sector as we near the year end.


A busy reporting season for the hire sector has seen share prices for the UK stocks down by an average of 10%. Speedy Hire updated the market on 25 September - inline despite the Carillion hit, and good to see an end to the exceptionals.


No new news from HSS since the July update, but it was noted that an associate of CEO Steve Ashmore bought shares at 31.9p at the end of August. No new news from Ashtead, but the company has continued to buy back shares in order to fulfil the £1bn share repurchase agreement that it announced at the end of last year.


A-Plant’s parent, Ashtead, has continued its agreed share buyback.


This all seems positive enough, and at the


end of September, Vp confirmed that Brandon Hire is integrating well with their business ahead of results set for 27 November. So why the share price falls? Clearly, (1) the market as a whole has fallen, with AIM (the Alternative Investment Market, the main crucible for small/medium stocks) down 10% from the highs.


Secondly, despite a relatively buoyant Budget and some warm words from some of the hire companies, business expectations in the construction sector fell to a six-year low, according to the most recent PMIs.


Thirdly, uncertainty… as the Bank of England likes to point out, there are many variables inherent in the current situation. The Bank believes there may be inflationary pressures (the so-called Output Gap, or degree of spare capacity in the UK economy, now judged to be close to zero). Growth forecasts have been trimmed. Companies are investing less.


Arguably, hovering behind all of this lies renewed trepidation about the so-called ‘Taper Tantrum’. In other words, rising US interest rates


11


Speedy reported progress in line with expectations.


and an appreciating dollar cause big trouble for companies around the world that have borrowed in dollars (and emerging countries), leading to fears of global recession.


Thinking hire, it may be naïve to observe that the sector has always done well when it was more worthwhile for clients to rent than to buy - and the ending of the era of cheap money offers some real positives to the sector from that point of view.





Vp reports that Brandon is integrating well into its business.


WH Ireland disclaimer: WH Ireland states that this is not an offer or a solicitation to buy or sell any security. Please refer


to http://research.whirelandplc.com/research/regulatory.asp and


http://research.whirelandplc.com/research/conflicts_of_interest.asp for WH Ireland’s research disclosure and disclaimers and conflict management policy regarding Non-Independent Research. WH Ireland Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: 140773)


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