Ashtead Joins London Market Exodus, Shares Down on Profit Warning

The FTSE 100 firm is the latest large London business to exit its UK listing in favour of a US home

Ollie Smith 10 December, 2024 | 10:47AM
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Shares in equipment rental company Ashtead AHT are down on a profit warning, but its decision to exit the FTSE 100 in favor of a US listing is what has really raised eyebrows.

Ashtead was originally founded in the UK, but its sizeable US operations, which trade under the moniker Sunbelt Rentals, mean that it is the second-largest rental equipment provider in the US.

Yesterday the company said it was abandoning its UK origins for a more favorable business environment stateside.

In a note, Matthew Donan, senior equity analyst at Morningstar, says at first glance the move makes sense.

“Ashtead also announced it will move its primary listing to the US, which we believe makes sense given over 90% of its revenue is earned in the region. We maintain our £53.00 fair value estimate and view shares as fairly valued following the share price decline," he says.

“Rental revenue grew 5% during the second quarter, boosted by large construction projects and hurricane response efforts from August to October in the US. The outlook for US construction activity is favorable, underpinned by recently signed government legislation that will boost investment in infrastructure construction.

“However, Ashtead is seeing weak demand from commercial construction end markets due to the high interest-rate environment. Revenue is underpinned by a combination of organic and bolt-on growth.”

In a statement, Ashtead said it would complete a formal shareholder resolution before implementing the decision within two years.

“Today Ashtead is substantially a US business, reporting in US dollars, with almost all the Group’s operating profit (98% at full year 2024) derived from North America, which is also the core growth market for the business,” it said.

“Over the coming weeks, we will discuss this proposal with shareholders before putting forward a formal resolution for approval for a move to a US primary listing at a general meeting in due course. The Board expects that the necessary steps would be implemented over the next 12 to 18 months.”

The decision makes Ashtead the latest UK business to shun its London listing.

Cloud computing firm Endava DAVA, chipmaker Arm ARM, building materials company CRH CRH, betting group Flutter Entertainment FLTR, travel operator Tui TUI1, and fast food technology platform Just Eat Takeaway JET, have all ditched London listings for other locations.

Challenger bank Revolut and buy-now-pay-later credit provider Klarna are also now likely to swerve London flotations.

Ashtead’s Shares Are Now Trading Below Their Morningstar Falue Value Estimate

Source: Morningstar Direct

Key Morningstar Metrics For Ashtead AHT

• Morningstar Fair Value Estimate: £53.00
• Morningstar Rating: 2 Stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Medium
• Sector: Industrials

Ashtead’s news comes amid a profit warning announced in a separate statement to markets yesterday.

“Principally as a result of local commercial construction market dynamics in the US, we now guide to Group rental revenue growth for the full year in the range of 3-5% and hence, full year profit lower than our previous expectations,” it said.

Ashtead will now commence a share buyback programme over the next 18 months.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Ashtead Group PLC5,300.00 GBX-1.71Rating

About Author

Ollie Smith

Ollie Smith  is editor of Morningstar UK

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