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Ashtead investors have a lot to digest at the moment. The equipment rental group’s shares tumbled by double digits after it served up a guidance cut alongside its half-year results, while management confirmed plans to shift the primary listing to New York.
Trading in the second quarter came in below consensus market forecasts. For the six months to October 31 as a whole, revenue nudged up 2 per cent and cash profits were up 4 per cent on a margin of 47.4 per cent.
The outlook statement contained more concerning news. The annual rental revenue growth outlook was cut from 5-8 per cent to 3-5 per cent as a result of “local commercial construction market dynamics in the US”, while lower capital expenditure is also expected. The messaging is that higher interest rates have hurt.
Brokers, including Goldman Sachs and RBC Capital Markets, downgraded their forecasts in the wake of the results. Karl Green at RBC cut his earnings per share forecasts for financial years 2025 and 2026 by 9-11 per cent and noted that investors are “confused” about why Ashtead’s “messaging has diverged so much from that of its key listed peers”.
The primary listing announcement was no surprise, given that Ashtead derives almost all of its operating profit from the US. If the move is approved by shareholders, Ashtead will still be accessible on the London Stock Exchange, as it plans to retain a listing on the international companies segment. Management expects the process to complete within the next 12-18 months.
Perhaps in an attempt to display confidence in the group’s prospects given the share price dip, chief executive Brendan Horgan bought £213,000-worth of shares on December 11.
Ashtead trades on 16 times forward consensus earnings, slightly below the 17 times at key US rival United Rentals.
Activist investor Nelson Peltz’s Trian Partners boosts Rentokil initial stake
Activist investor Nelson Peltz’s Trian Partners has raised its stake in UK pest control group Rentokil Initial, soon after the hedge fund’s head of research Brian Baldwin took a seat on the board.
Shares in the FTSE 100 company jumped nearly 4 per cent after it disclosed that New York-based Trian had purchased 7.5mn shares for a total of £31mn. The firm now owns 64.6mn shares in the company, a 2.5 per cent stake according to FactSet.
US billionaire Peltz first appeared on Rentokil’s shareholder register in June. At the time, Trian said it had “reached out to Rentokil to discuss ideas and initiatives to improve shareholder value”.
Baldwin joined the board as a non-executive director at the end of September. This was just two weeks after the company issued a profit warning that sent shares down by a fifth and wiped more than £2bn from its market value.
Rentokil has been struggling with the integration of US rival Terminix, which it acquired for $6.7bn (£5.2bn) in 2021 at a hefty premium. The group has witnessed a slowdown in demand in North America, which makes up more than half of total revenues.
In a third-quarter update in October, management maintained its reduced 2024 guidance, but said 2025 profits and margins would be hit by a two- to three-month delay in realising synergy benefits from the Terminix acquisition.
Rentokil is trading at an enterprise value of 11 times 2025 ebitda, compared with a rating of 28 times for US peer Rollins. Deutsche Bank analysts think management must prove it has “got to grips” with the issues impacting Terminix’s integration in the US and that it can close a revenue growth gap with Rollins.
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