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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September 19, 2023


Company news

Henry Boot (BOOT, 204p, £273m mkt cap)

Land Promotion, property investment & development and construction group. HY (Jun) results. Rev +25%, £180m; u-lying PBT -38%, £23.3m; stat PBT -36%, £25.0m; EPS -42%, 14.0p; interim div +10%, 2.9p; net debt, £70.8m (FY 22, £48.6m); NAV +2.6%, 303p.

Trading: Land promotion – 1,900 plots sold (HY 22, 3,447); profit per plot, £11,400 (FY 22, £6,066), due to significant sale at Tonbridge, offsetting the volume reduction; op profit -1.2%, £17.0m; land bank, 97,095 plots (December 2022: 95,704 plots); 8,335 plots with planning permission (FY22, 9,431). Property investment & development – op profit -57%, £8.5m; c.700,000 sq ft of Industrial & Logistics development underway (HB share, £96m GDV). Stonebridge home completions +154%, 99, on 72% of FY23 target order book secured “following delays in bringing activity to site as customers proceed cautiously”.

Outlook: “There is no doubt that the rapid increase in short term rates is slowing the economy [and] reducing customer demand across our markets. We have seen the rate of inflation come down throughout the Group with the prospect of more to come by the year end giving us a degree of confidence in being able to achieve our current year ambitions. Henry Boot is not immune to these pressures, but its focus on high quality real estate and customer care affords us some resilience. Our NAV has shown consistent growth through cycles. This allows us to invest in opportunities, such as land, both to promote in the medium term and to build houses as we scale up SH. It also allows us to build out our high quality committed development programme”.

Billington Holdings (BILN, 345p, £45m)

UK structural steel fabrication and construction group. HY (Jun) results. Rev +30%, £60.1m; adj PBT, £5.0m (HY 22, £1.5m; stat PBT, £4.6m (£1.3m); EPS, 28.8p (8.7p); interim div, 0p (0p), final div, FY22, 15.5p; net cash, £10.8m (£4.1m).

Trading: “The first half saw Billington achieve record first half revenues and good profits, with a strong performance across all its business units.  The group has been successful in securing a number of significant contracts and has a very healthy pipeline of current and potential business, with significant work in progress”.

Outlook: “The group is currently trading ahead of the Board’s previous expectations for the full financial year.  Significant work in progress, a good current order book and a positive pipeline of opportunities provides confidence for a continued strong performance in the second half”.

Kinovo (KINO, 57p, £36m)

Property services provider, formerly Bilby, specialising in compliance and sustainability. Rx3 Holdings, No intention to bid statement. “Further to the announcements made by Kinovo and Rx3 regarding a possible offer to be made for Kinovo by Rx3, Rx3 confirms that it does not intend to make an offer for Kinovo. As detailed in its announcement on 30 August, Rx3 remains concerned over the unresolved and hence open-ended issues that persist with regard to the DCB projects that the Company has stated that it believes will be finalised by the end of 2025 at a cost of £18m with £14m expected to be recovered from clients and subcontractors. Having not been permitted access to perform due diligence, nor having received a response from the Company seeking to clarify or counter any of the points made in the Rx3 announcement, this has heightened Rx3’s concern and resulted in it deciding not to proceed with any offer. Rx3 will continue to seek further clarity as to the contractual position and the Company’s financial exposure regarding the DCB projects”.

Safestyle UK (SFE, 8p, £12m)

UK manufacturer, recycler and distributor of window, door and roofline PVC products. Trading update.

Guidance: “We achieved our profit expectations in July and August. Whilst our order intake went according to plan in early August, since mid-August we have fallen behind our internal forecasts and this has persisted into early September.  It is management’s belief that following a wet summer, the unseasonally warm weather at the end of August into the hottest early September on record is compounding the macroeconomic factors that influence current market demand levels. As a result, management has continued to take further steps to mitigate these weaker demand levels.  These measures alone are, however, not sufficient to fully mitigate the adverse impact of current demand and thus, volume levels in the short-term.  Our best estimate is that, whilst we expect demand levels will pick up versus current levels in line with seasonal trends, we believe it is likely to be below previously expected levels.  Consequently, the Board now expects revenue for 2023 will be between £140m – £142m and consequently, underlying loss will be in the range of £(9.5)m – £(10.5)m. On the above basis, year-end net debt is expected to be between £5.5m and £6.5m.  The group has debt facilities of £7.5m and was in a net cash position of £1.5m as at the end of its August reporting period.  The trading outlook and timing of working capital outflows for the year to go are the primary cause of the expected year-end net debt position.  The Group intends to engage with stakeholders to strengthen the balance sheet in order to support its recovery and help facilitate future growth”.

Outlook: “The Board maintains the growth recovery prospects are strong and clear data highlighting the UK’s ageing housing stock in need of repair underpins this”. Shares have fallen 46% since the announcement this morning.

Kingfisher (KGF, 236p, £4,469m)

Owner of home improvement stores across France and Europe, including B&Q in UK. HY (Jul) results. Rev +1.1%, £6,880m; adj PBT -29%. £336m; stat PBT -33%, £317m; adj EPS -29%, 13.0p; interim div unch, 3.8p; net debt £2,181m (HY 23, £1,848m). Trading: “Positive UK & Ireland performance (LFL +1.7%) with strong market share gains at Screwfix”; “strong performance at B&Q across May and June (LFL +7.0%), with July impacted by unseasonal weather; acceleration in LFL from Q1 at Screwfix supported by robust demand from trade customers”. France (LFL -3.8%) “resilient performance at Castorama; weaker at Brico Dépôt”; Poland (LFL -10.9%) “impacted by strong comparatives and weaker than expected Q2”.

Outlook: Current trading in Q3 to date: LFL sales -2.4%. “Against Q2 sales trends, continued positive momentum in the UK & Ireland, slight slowdown in France, small improvement in Poland. Based on our H1 performance and the trading environment, we are updating our FY 23/24 adjusted PBT guidance to c.£590m (previous guidance: ‘comfortable with consensus of sell-side analyst estimates for FY 23/24 adjusted PBT of £634m’)”.

British Land Company (BLND, 308p, £2,858m)

Leading UK commercial property investment, development and services group. Investor visit. Updated guidance on retail parks.

Guidance: “Strong demand and limited supply, combined with our scale and focus on operational execution is keeping occupancy at 99% and is giving us strong pricing power. We continue to see significant leasing momentum, and in the five months to 30 August have leased 511,000 sq ft, 15.3% above of ERV, with 677,000 sq ft under offer at 19.4% above Given we continue to lease significantly above ERV we are upgrading our retail park ERV growth guidance for FY2024 from 2 – 4% to 3 – 5%”.

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.

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