10th Dec 2024 08:53
(Alliance News) - Ashtead Group PLC on Tuesday cut its annual outlook and proposed a primary US listing, a move that would see the industrial equipment rental firm leave the FTSE 100 index.
London-based Ashtead believes that "the US market is the natural long-term listing venue" for the company and that shifting its primary listing to the US from London "is in the best interests of the business and its stakeholders".
It still plans to keep a secondary UK listing.
"Today Ashtead is substantially a US business, reporting in US dollars, with almost all the group's operating profit (98% in FY24) derived from North America, which is also the core growth market for the business. The group's executive management team and operational headquarters are based in the US and the vast majority of the group's employees reside in North America," Ashtead said.
Ashtead said a listing move would increase exposure to US investors, enhance overall liquidity and optimise positioning for inclusion in the premier US equity markets.
The firm said it will discuss the proposal with shareholders over the coming weeks before putting forward a proposal at a general meeting "in due course".
"The board expects that the necessary steps would be implemented over the next 12 to 18 months," it added.
In recent years, plumbing and heating products firm Ferguson Enterprises Inc, bookmaker Flutter Entertainment PLC, building materials supplier CRH PLC, and miner BHP Group Ltd have been among a rush of large companies moving their primary listings from London.
Ashtead said revenue improved 2.2% to USD5.70 billion in the half-year that ended October 31 from USD5.57 billion a year prior. Pretax profit, however, declined 4.2% to USD1.20 billion from USD1.25 billion.
Group rental revenue rose 6% with US rental revenue up by 5%.
"In North America, the strength of mega projects and hurricane response efforts have more than offset the lower activity levels in local commercial construction markets. These local construction markets have been affected by the prolonged higher interest rate environment. However, underlying demand continues to be strong and we expect this segment to recover as interest rates stabilise," the firm said in a statement.
Ashtead reported "lower used equipment sales and a higher increase in depreciation and interest costs", keeping a lid on its bottom line.
Looking ahead, it now guides for group rental revenue growth of 3% to 5% for the full-year, its outlook cut from 5% to 8%, principally as a result of local commercial construction market dynamics in the US.
Full-year profit will be "lower than our previous expectations". Ashtead also expects capital expenditure for the year to be USD550 million lower than previous guidance at the mid-point.
In response, shares in Ashtead were 11% lower at 5,588.00 pence in London on Tuesday morning. The wider FTSE 100 index was down just 0.6%.
Nonetheless, Ashtead said it looks to the future with "confidence".
"We remain in a position of strength, with the operational flexibility and financial capacity to capitalise on the ongoing structural growth opportunities we see for the business and enhance returns to shareholders as we follow our Sunbelt 4.0 plan," it added, referring to its US rental business.
Ashtead also said it is kicking off a USD1.5 billion share buyback programme to span the next 18 months.
It increased its interim dividend to 36 cents per share from 15.75 cents a year prior. Ashtead noted it rebalanced the split of its annual dividends to "broadly one third interim, two thirds final".
By Jeremy Cutler, Alliance News reporter
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