Shares of Ashtead Group ($AHT) saw a significant decrease of nearly 11% during morning trading on Tuesday. This comes as the equipment rental services company announced an increase in shareholder payouts while simultaneously reducing its guidance for fiscal 2025. Additionally, Ashtead proposed relocating its primary stock listing to the US. In the current environment of sustained higher interest rates, the performance of US construction markets has been uncertain.
As a result, Ashtead adjusted its outlook for rental revenue growth for the 12 months ending in April 2025 to a range of 3% to 5%, down from earlier expectations of 5% to 8%. The company now anticipates profits to fall short of its previous forecasts, although it remains optimistic regarding the strength of underlying demand and a recovery in its segments once interest rates stabilize. Furthermore, Ashtead revised its capital expenditure guidance to between $2.5 billion and $2.7 billion, reduced from a prior projection of $3 billion to $3.3 billion.
The company's free cash flow expectations, however, were raised to $1.4 billion from $1.2 billion. In light of these developments, the group introduced a share buyback program of up to $1.5 billion over the next 18 months, with RBC Capital Markets anticipating a commencement as soon as Wednesday. In terms of dividends, Ashtead declared an interim payment of $0.36 per share, an increase from last year's $0.1575 per share.
However, the company faced challenges with lower used equipment sales, along with increased depreciation and interest costs that impacted profits attributable to equity holders, which dropped to $889.5 million for the six months ending on October 31, compared to $941.4 million during the same period last year. Revenue growth remained steady, increasing to $5.69 billion from $5.57 billion year-over-year, with group rental revenue surging by 6% due to the demand generated by mega projects and hurricane response initiatives in North America. Over the next 12 to 18 months, Ashtead, headquartered in London, intends to move its primary listing to the US while maintaining a secondary listing in the UK.
This strategic move is aimed at aligning its primary listing location with the majority of its business activities, executive team, and workforce. RBC had previously indicated that it might have been premature to upgrade Ashtead to outperform last week. The firm continues to view the stock favorably as the supply-demand equilibrium improves.
Analysts at RBC emphasize that the positive outlook for the US economy could stimulate construction activity, enhancing Ashtead's earnings per share momentum following a less than stellar previous year. Notably, with approximately 95% of its EBITA exposure tied to the US market, AHT presents a strong investment opportunity for international investors seeking exposure in the FTSE100..