Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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October 18, 2023

BDEV, MSLH, SRC, SGRO, AUK | Economy – House prices rise for fifth month while annual rate slows further, ONS

Company news

Barratt Developments (BDEV, 424p, £4,131m mkt cap)

UK’s biggest housebuilder by volume. AGM.

Guidance: “We continue to expect to deliver total home completions of between 13,250 and 14,250 homes in FY 24 [-17% to -23% compared with 17,206 achieved in FY (Jun) 23], including c. 650 home completions from our JVs and c. 750 completions for the private rental sector. All other guidance from our FY23 results on 6 September also remains unchanged”.

Trading: Net private reservations per site per week during period , 1 Jul – 8 Oct, 0.46 (equivalent period FY23, 0.55). During the period sales to the private rental sector and registered providers of social housing contributed 0.04 (0.04). In the prior period Help to Buy reservations accounted for 12% of private reservations. Private sales 60% forward sold for FY 24 (70%). “The completion profile in FY 24 is expected to remain broadly in line with the typical seasonal pattern with around 45% anticipated in the first half and around 55% in the second half”.

Outlook: “Whilst we expect that the backdrop will continue to be difficult over the coming months, we are a resilient business with a strong balance sheet and a highly experienced management team. We remain committed to building the communities that our customers want to live in to help address the country’s housing crisis and drive long term, sustainable growth for our business”. HY (Dec) results, 7 February.

Marshalls (MSLH, 198p, £501m)

Leading manufacturer and supplier of paving and hard landscaping products. Q3 (Sep) trading update.

Guidance: “Trading in the third quarter was in line with the Board’s expectations which anticipated a sustained period of lower volumes.  The Board does not expect any material changes in current trading patterns during the fourth quarter of the year [to Dec] and therefore remains confident of achieving a result that is in-line with its expectations for 2023”.

Trading: YTD rev -3%, £528m, including four additional months from Marley acquisition; LFL, -12%. Q3 LFL rev, -9% (Marshalls Landscape Products -8%; Marshalls Building Products -14%; Marley Roofing Products -7%); H1, -13% (-18%; -9%; -7%). Landscape Products’ “contraction slowed in the third quarter, driven by softer prior year comparatives and a seasonal weighting towards commercial products, which have performed better than those sold into the domestic market”.  Building Products’ “rate of contraction in the third quarter increased.  The rate of revenue decline in drainage and aggregates moderated in the third quarter; however, this was offset by a slowing in the bricks and mortars businesses, which had been broadly flat in the first half”. Marley’s “rate of contraction was in-line with the performance in the first half. In the third quarter, the group reported a moderation of the decline in the traditional roofing business offset by a softer performance from Viridian Solar, due to weakness in the new build market”. Previously announced actions were largely concluded by the end of the third quarter and are expected to deliver annualised savings of around £9m. Surplus land disposals have generated around £6m in the year to date, and focusing on efficient working capital management in order to reduce net debt, £190m at Q3 (Q3 22, £222m).

SigmaRoc (SRC, 49p, £343m)

Heavy construction materials group active in the UK, Channel Islands and Benelux. Q3 (Sep) trading update.

Guidance: “Whilst remaining mindful of the continued challenging conditions in some markets, the delivery of a strong set of Q3 numbers, combined with our diversified end market exposure and decentralised operating model, provides the Board with confidence in delivering unchanged full year expectations [rev, £597m; u-lying EBITDA, £110m]”.

Trading: Rev +7%, £436m. U-lying EBITDA margin, 20%; +11%, £87.1m “ahead of both the prior year and management’s expectations”. Volumes evolved in line with HY 23, at -4%, “given softer demand in the residential construction sector which was largely offset by resilient conditions in infrastructure and industrial mineral markets”.

Segro (SGRO, 735p, £9,023m)

UK’s leading owner and developer of warehouses and industrial space, also active in Europe. Trading update.

Guidance: “On track for a strong year of rent roll growth due to active asset management and demand for our high-quality product”.

Trading: Total new headline rent -24%, £58m; uplift on rent reviews +22% (UK +32%, from +27% prior year period; EU +8%); occupancy, 95.3% (96.7%); customer retention, 81% (76%). Net debt, £6.2bn (£6.1bn); LTV, 34% (34%). Over £250m of disposals completed or exchanged year to date, above book value. “Prioritising profitable development opportunities with £77m of potential rent from projects currently on site or expected to commence shortly at an anticipated yield on cost of 7.3%”.

Aukett Swanke Group (AUK, 1.525p, £4m)

UK’s only quoted architect, active in UK, Middle East and Europe. Acquisition. TR Control Solutions, a developer of energy management software and provider of energy efficiency services acquired for £364,450. The consideration comprises the issue to the vendors of 17,800,000 new ordinary shares 1.525p, the mid-market closing price on 17 October 2023, and £89,000 in cash. Half of the cash consideration is payable on completion, with the remaining £44,500 payable on the first anniversary of completion. Following Admission, the Company’s issued share capital will be of 293,155,938 ordinary shares. The Consideration Shares are subject to a 12-month lock-in, followed by an orderly market arrangement for a further 12 months.

Outlook: “We are pleased to have completed a third acquisition in our Smart Buildings strategy, following the purchases of Torpedo Factory Group in March and Anders + Kern in July. TRCS brings proprietary IP and recurring revenues to the group. The acquisition gives us scope to develop the use of artificial intelligence in building management as the group continues to expand both its smart buildings and architecture activities”.

Economic data

House prices. Average UK house prices increased by 0.2% Y/Y in August, down from a revised +0.7% in July but, on a M/M basis rose by 0.3%, the fifth consecutive monthly increase, according to latest data from the ONS. This is the most comprehensive house price data, which captures cash transactions and is measured at the completion of the sales process. The average UK house price was £291,000 in August 2023, which was little changed from 12 months ago but 3.2% above the recent low point in March. Average house prices over the 12 months to August 2023 remained unchanged in England, £310,000; decreased by 0.1% in Wales to £217,000; and rose 1.1% in Scotland to £194,000 (1.1%). For the 12 months to Q2, they increased by 2.7% to £174,000 in Northern Ireland. The North East saw the highest annual percentage change of all English regions in the 12 months to August 2023 (3.6%), while the East of England saw the lowest (-1.6%). Next release, 15 November.

Av house prices 2005-23
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