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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May 16, 2024


Company News

Barratt Developments (BDEV, 511p, £4,982m mkt cap); Redrow (RDW, 722p, £2,387m)

Britain’s largest housebuilder by volume, making recommended all-share offer for smaller top-10 rival, Redrow. Shareholder agreement (from 13:30 yesterday). At Barratt General Meeting, 99.8% of shareholders voted in favour of the Combination. At Redrow General Meeting, 99.9% voted in favour. It is expected that the Scheme will become effective during the second half of 2024.


Vistry Group (VTY, 1,291p, £4,394m)

Formed from the mergers of Bovis Homes and housebuilding and partnerships divisions of Galliford Try (GFRD) and Countryside Partnerships; currently transitioning to a high volume, high ROCE partnerships model. AGM.

Guidance: “We are seeing good demand in the Partner Funded market and accompanied by an improving trend for our open market sales, are on track to deliver more than 10% growth in completions to 18,000 in FY 24 [previous guidance “in excess of 17,500”], with half year and full year profit expected to be ahead of last year”.

Trading: Total sales rate, YTD, 0.96 (FY 23 YTD, 0.87), increasing to 1.23 (1.24) over the last eight-week period. “We continue to see attractive Partnership opportunities that meet our requirements for a minimum of 50% of units to be Partner Funded, a 40% return on capital employed and over 12% operating margin”. New land and development opportunities secured. totaling 6,037 mixed tenure new homes across 19 developments YTD. “Demand from registered providers for affordable homes has remained robust, with for profit RPs, a high growth sub-sector of this market, continuing to demonstrate strong demand.  We recognise the current need for some traditional RPs to invest in the maintenance of their existing housing stock and are working closely with them to ensure Vistry remains their partner of choice for their new housing investment. We also continue to see strong interest from private rented sector (PRS) providers. We have seen an improving trend in our open market sales rates since the start of the year.  Pricing on open market sales has remained relatively flat with incentives running at c. 4% of the open market sales price.

Outlook: “We are well positioned for FY 24 with 95% of our targeted completions on secured development opportunities and for FY25, 75% of targeted completions on secured development opportunities. The group will benefit from lower year on year building material costs in FY 24 reflecting engagement with our supply chain throughout 2023 and our high level of visibility on forward sales and build programme.  The group is focused on driving operational and capital efficiency.  Our timber frame operations will step up delivery in this year, with around 4,000 of our new homes to use our timber frames and further significant growth planned in 2025. We remain committed to returning £1bn of capital to our shareholders over the next three years with our latest £100m share buyback programme commencing as planned in April, purchasing £18m of shares to date”.


Grainger (GRI, 272p, £2,017m)

UK’s largest listed residential landlord. HY (Mar) results. Group rev +2.9%, £114m; net rental income +11%, £53.2m (of which LFL PRS rental growth +8.1%); adjusted earnings -5.7%, £44.4m; IFRS loss before tax, £31.2m (reflecting £58.8m impact from MDR tax treatment changes (HY 23, PBT £5.7m); loss per share, 3.0p (EPS 0.6p); interim div +11%, 2.54p; EPRA NTAV per share, 294p (305p); net debt, £1,497m (£1,416m); LTV, 39% (37%).

Trading: “Despite some further yield expansion, strong rental growth has offset this with underlying property values broadly flat, demonstrating the performance of our platform and resilience of our asset class”. Accelerated disposals programme delivering sales proceeds of £71m (£74.6m) “providing significant capital to recycle and support our continued growth.

Outlook:  “We expect EPRA Earnings to grow to £55m by FY26. We are delivering c. 1,000 new, purpose-built, energy-efficient, mid-market rental homes this year in our existing cluster locations of Birmingham, Bristol and North London, including the successful delivery and launch of 307 new homes at The Copper Works in Cardiff in the first half of this year”. On track for REIT conversion for October 2025.


Costain Group (COST, 80p, £223m)

UK construction and infrastructure services group. AGM.

Guidance: “Trading for the period [since 1 Jan] is in line with Board expectations and the group continues to have a high-quality forward work position that aligns with its strategic plans for both the Transportation and Natural Resources divisions”.

Trading: Ave weekly net cash position YTD, £169m, of which £60m held in joint ventures (FY 23 YTD, £123m, £57m).

Outlook: “The group is in line to deliver its targets an adjusted operating margin run-rate of 3.5% during the course of 2024 and 4.5% during the course of 2025. It remains confident in the Group’s strategy and medium to long-term prospects.

Nexus Infrastructure (NEXS, 83p, £7m)

Provider of civil engineering infrastructure services to UK housebuilders through its operational business, Tamdown (having sold its TriConnex and eSmart Services infrastructure and utilities services businesses). HY (Mar) results. Rev -49%, £25.8m; loss before tax, £1.48m (HY 23, PBT £0.05m); EPS, continuing operations, ‑15.93p (+0.12p); interim div, 1p (1p); net cash, £9.2m (£16.0m).

Trading: Eight new awards secured by Tamdown in the period, including contracts with Taylor Wimpey, Vistry, Persimmon, Bellway, and Dandara, “reflecting Tamdown’s strong relationships and reputation for quality delivery. Operational discipline has been maintained, together with the management of costs. New processes have been introduced to enhance productivity. Contract margins have improved as a result. As part of its strategy, the group has instigated a review of civil engineering opportunities in other key national infrastructure sectors including water, transportation, and energy.

Outlook: Orders, £72m (HY 23, £85m; FY 23, £46m). The group is encouraged by initial improvements in the market and is strategically positioned for the opportunities ahead, whilst remaining focused on operating discipline, improving margins, and managing costs. Market sentiment remains consistent that there will be a recovery in the housebuilding market over the next 18 months. Nexus entered the second half with good visibility of new contracts with the Group’s longstanding customers on significant multi-phase developments”.

Michelmersh Brick Holdings (MBH, 101p, £95m)

UK’s fourth largest brick manufacturer by volume with Belgian subsidiary. AGM.

Guidance: “Since reporting our full-year 2023 results in March, we have continued to experience positive momentum in our order intake, reflecting the benefits of our product portfolio’s broad reach and the strong customer loyalty and distributor relationships we have across our end markets. We remain mindful of the higher interest rate environment and as such continue to focus on appropriate portfolio pricing to maintain diversity in our forward order book, which is drawn from social and specification housing, RMI, new build and commercial sectors. While delivery schedules have been impacted in the first quarter, as a result of more challenging seasonal conditions, production volumes continue in line with our expectations. With order intake momentum at levels not seen since the end of 2022 driving improved volume and quality of the forward order book, we anticipate increased despatch volumes for the remainder of the financial year, which when combined with the strength of our balance sheet, positions the company well for delivering full-year expectations”.

Eurocell (ECEL, 131p, £143m)

UK retailer and manufacturer, recycler of PVC windows and doors. AGM.

Guidance: “Trading conditions in our key markets have remained challenging, with continuing macroeconomic uncertainty impacting activity levels in both the RMI and new build markets. However, we continue to focus on closely managing costs and cash flow and have seen some further reduction in raw material cost pricing in 2024. As a result, our expectations for underlying profit before tax for the year remain unchanged.

Trading: Rev, 1 Jan – 30 Apr, -6%. Profiles division – rev -10%. “Subdued RMI activity and a continuing weak new build market have resulted in sales volumes below 2023. Building Plastics division – rev -4%. “Although general RMI volumes in the branch network are down, sales include the initial benefit of good progress with our strategic initiatives for garden rooms, windows and doors, resulting in overall volumes level with 2023. However, increased competition for limited demand continues to drive pressure on margins in the branch network. Capital allocation – “Taking into account our strong balance sheet, expected organic investment needs and good cash management, the Board has decided to extend the buyback programme by up to a further £5m, increasing the maximum consideration to up to £10m.

Outlook: “We are on track with the delivery of the early stages of our new strategy. Our balance sheet is strong and the actions we have taken, including those on costs and cash flow, position us well to benefit when our end markets recover”.

Tritax EuroBox (EBOX, 62p, £500m)

Investor and manager of Continental European logistics real estate assets. HY (Mar) results. IFRS rental income +10%, €35.9m; adjusted EPS -3.0%, 2.62 cents; IFRS Basic EPS -2.32 cents (-27.2 cents); interim div unch, 2.5 cents; EPRA TNAV per share, €0.96 (€1.02); LTV, 44.5% (46.4%); portfolio value, €1,464.8m (€1,561.9m).

Outlook: “Although future income growth from within our own portfolio will continue to be primarily driven by the annual fixed and index-linked uplifts inherent in nearly all our leases, unlocking the €15.9m of rent reversion within the portfolio through asset-management initiatives remains a priority. In addition, the ongoing engagement with our strong customer base will continue to be a source of new opportunities to grow income. The Board continues to believe the emphasis on delivering high-quality earnings, paying a covered dividend, and maintaining balance sheet strength through completing the planned disposal programme, remains appropriate and will deliver value to Shareholders in the long term. However, despite the progress with our strategic priorities and well-positioned portfolio, the Board remains acutely aware of the significant share price discount to NAV. The Board is in regular dialogue with the Manager and the Board’s advisers about how to address this issue, and there is a clear alignment and focus to deliver value for all shareholders in an effective and efficient manner”.

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