CRH plans to move listing from London to New York

A day after media reports suggested that Japan’s Softbank (JP: 9984) was going to opt for a primary listing in New York for Cambridge-based chipmaker Arm, it has emerged that CRH (CRH), the world’s largest building materials supplier, is planning to shift its listing from London to New York.

That’s bad news for Rishi Sunak, as he attempts to reinvigorate London’s capital markets, but shareholders didn’t seem unduly concerned, as the group’s valuation spiked in early trading on results day. It’s likely that the swift re-rating was primarily linked to the news, even though cash profits trumped earlier guidance, up 8 per cent on a like-for-like (LFL) basis to $5.6bn (£4.63bn). Management has also decided to crank up the share buyback programme through further repurchases worth up to $3bn over the next 12 months.

The London market’s reputation as a centre for global capital-raising may be coming into question, but long-delayed plans for investment in infrastructure assets in the US are finally coming to fruition, and the country accounts for the lion’s share of CRH’s sales, so the move must be seen in that light. It follows on from last year’s transatlantic shift in the primary listing of Ferguson (FERG), the plumbing and heating products supplier. The London market finds itself in a bind on the listings front given the vast state aid packages being doled out by Washington.

LFL sales for the Americas materials division were up by 12 per cent, but for a business that needs to hold a reasonably high proportion of inventories as part of its current assets – up 16 per cent to $4.19bn – there is usually a lag as far as cost pass-through is concerned. Management said poor weather conditions had depressed volumes, but a relatively modest LFL cash profit increase highlights the difficulty in offsetting rising cost inflation even if you manage to successfully initiate operational efficiencies.

Demand in the building products segment held up remarkably well, with LFL sales up by 11 per cent, or by 26 per cent on a reported basis. This reflects not only the step up in budgets for utility infrastructure, but also the impact of acquisitions during 2022, which cost a total of $2.7bn. The acquired assets are mainly located in the US, so it is not difficult to appreciate the direction of travel. The segment currently accounts for around a fifth of group sales, but it would be realistic to assume this will increase over time.

We see the US focus, rather than the NYC listing, as the growth engine, particularly given medium- to long-term infrastructure demand from both US Federal and state authorities. We retain a buy rating, with the shares trading at 15 times forecast earnings. Buy  

Last IC view: Buy, 3,223p, 25 Aug 2022