IRELAND’S LARGEST publicly quoted company, CRH, plans to switch its primary stock exchange listing to London from Dublin, paving the way for its entry into the benchmark FTSE 100 index.
The international building materials group, which last year had sales of €17 billion, is the latest big Irish player to drop its primary listing on the Dublin market.
Last month, drug developer Elan moved its primary listing to New York. CRH’s move represents a bigger blow for the Irish market – it accounts for close to 30 per cent of the Iseq index and generates a high volume of trade.
CRH said yesterday that from December 6th, its shares in Dublin will be reclassified as secondary listed, while they will retain their premium listing on the London Stock Exchange.
The move will facilitate its entry into the FTSE 100 index, which should broaden its shareholder base, as funds which track the index will have to include the Irish group in their portfolio.
Last night, it emerged that the Irish group had cleared the first hurdle on its way to being included when the FTSE nationality committee gave it “UK nationality”, which it must have in order to be eligible for inclusion in the benchmark index.
The FTSE European, Middle East, Africa regional committee will consider the Irish company for inclusion in the FTSE 100 index when it meets on December 7th.
Assuming that the committee agrees to include CRH, the Irish company will become a FTSE 100 stock on December 9th.
CRH will remain as an Irish-registered and headquartered company and it will continue to be domiciled in the Republic, which means that it will pay its corporate taxes here. It said yesterday the fact that most of the trading in its shares now takes place in London prompted its decision.
The move will have no impact on shareholders’ rights or protections. As with many companies that have a primary listing in Dublin, CRH already adheres to the UK corporate governance and London stock exchange takeover codes.
Chief executive Myles Lee said that the move would be in the company’s best interests. “The changes announced today represent a logical progression for CRH given the international nature of its business and the fact that the majority of trading in the group’s shares is on the LSE,” he said.
A spokesman for the Irish Stock Exchange pointed out that CRH would continue to list its shares on the Dublin market and would continue to be included in the Iseq index of Irish shares.
CRH announced its move yesterday in tandem with an interim management statement which said that full-year profit before tax is likely to be between €20 million and €50 million ahead of the €658 million it recorded last year. The group said that earnings would be broadly in line with 2010, when they were €1.6 billion.
The figures were below the group’s earlier guidance for the year and also behind most analysts’ predictions. However, its shares closed almost 4 per cent up at €13.015, after hitting a high of €13.28 earlier in the day, as investors focused on the likely positives of the change in its primary listing.
Investors buy into move to London but figures disappoint
ANALYSIS:INVESTORS WERE more than happy with the news that CRH intends to move its primary listing to the London Stock Exchange, and, more than likely, gain entry to the benchmark FTSE 100 index.
The building materials giant’s shares closed up 3.95 per cent at €13.015 in Dublin yesterday, and at one stage hit a high of €13.28, about 6 per cent stronger than their opening quote of €12.52.
It is unlikely the market was responding to the group’s interim management statement, which predicted that profits would be €20 million-€30 million ahead of the €658 million it reported last year, while earnings would be flat at €1.6 billion.
Those predictions are behind earlier guidance and below what most analysts expected. The main reason is that business in Europe, which accounted for about half its €17 billion turnover last year, has been weak.
Analysts were lukewarm. Robert Eason of Goodbody said the figures were disappointing. None of this put off investors, who bought over 2.1 million of the group’s shares yesterday.
They obviously regard the move to a primary London listing/secondary Dublin listing as a good decision. The company itself is being more low-key.
Chief executive Myles Lee indicated that it was a natural progression, as trade in its shares has been increasingly concentrated in London.
“In 2009, for every one share traded in Dublin, there was one traded in London, but now about 55 per cent of trade is in London, 25 per cent is on off-market exchanges and 25 per cent of trade is in Dublin,” he said.
In addition, he estimated that 80 per cent of the group’s shareholders are international, that is, not Irish.
While the consensus was that entry to the FTSE 100 would be good for the share price, Lee was cautious. He said that the macro-economic picture seems to influence the share price more than anything else.
He pointed out that the company’s own observations indicated that when the news from Europe generally was good, CRH shares advanced; when the news was bad, they retreated.
Relative to its peers, the group’s price has been strong this year. The entire sector has lost value, but while CRH was down 17 per cent by midway through last week, Cemex was down 56 per cent.
What difference, if any, FTSE membership will make over the medium term, remains to be seen.
