Housing asking prices ease, but demand resilient, Rightmove | News – £1.7bn Stonehenge road approved, finally | COST, AUK, BRCK
Company news
Costain Group (COST, 47p, £131m mkt cap)
UK construction and infrastructure services group. Contract extension. Appointed by United Utilities to work as its managed service provider (MSP) for a further two years, from May 2024 to May 2026, with an option to be extended for a further three years and builds on the original five-year MSP contract awarded in 2019. The award extends into the next regulatory cycle, ‘AMP8’, from 2025-30. The framework consists of a core maintenance contract, covering maintenance of more than 90 sites, and non-core capital projects.
Aukett Swanke Group (AUK, 2p, £5m)
UK’s only quoted architect, active in UK, Middle East and Europe. Acquisition of Anders+Kern (A+K), a distributor of smart workplace systems, from a wholly-owned subsidiary of SmartSpace Software (SMRT), for a maximum of £560k in cash. For the year ended 31 January 2023 SmartSpace reported A+K revenues of £2.09m and a trading loss before tax of £169k; net assets are estimated at £250k. It currently has seven employees. Aukett Swanke announced at its latest results that it has been evaluating a number of acquisition opportunities to develop its expertise in the integration and operation of Smart Buildings, and A+K is the first of these to progress to completion. A+K’s revenue sources include the provision of hardware, software, and installation services for room and desk booking systems and the provision of sensors to monitor environmental and occupancy data. The data created can be analysed using Artificial Intelligence to get meaningful actionable insights to improve occupier experience within the built environment.
Brickability Group (BRCK, 55p, £166m)
Construction materials distributor. FY (Mar) results. Rev +31%, £681m (LFL +4.0%); adj PBT +29%, £44.6m; stat PBT +88%, £34.5m; adj EPS +111%, 9.3p; div +5.3%, 3.16p; net debt, £8.0m (FY 22, net cash, £0.4m).
Trading: “The group continued to see strong demand for its goods and services across all divisions, however, the demand for bricks fell during the second half of our financial year as a result of the subdued housing market. Significant year-on-year price inflation mitigated the financial impact of reduced volumes”. Acquisitions made of Modular Clay Products in May 2022, E.T. Clay and Heritage Clay Tile in September and, post period end, Precision Façade Systems, in June. Further expansion made in the Distribution division, with property purchased to facilitate continued new branch openings within the U Plastics business and a warehouse for HBS NE.
Outlook: “The group believes that the underlying long-term demand for UK housing remains robust as does the demand for quality materials for the construction sector generally. The Board remains confident that the group is well placed to continue delivering on its strategic objectives and the underlying organic growth of the business and, notwithstanding a number of industry participants publicly communicating their own expectations of volume reductions in the near term, trading in the current financial year to date has remained in line with Board expectations. Whilst mindful of the broader macroeconomic uncertainties the Board believes that its diversified multi-business strategy places it in a good position to meet stakeholder requirements moving forward for the long-term”.
Economic data
Housing market. The price of property coming to market has fallen by an average of 0.2% in July, after no change in June, as new sellers temper their price expectations in response to rising mortgage costs, according to the Rightmove House Price Index. Recent base rate rises have led to the number of sales agreed falling by 12% compared to 2019’s more normal market, in contrast to 2023’s better-than-expected first five months. However, buyer demand is 3% higher than 2019, with agents reporting that right-priced homes are still attracting motivated buyers due to a shortage of property for sale compared to historic norms; the number of available properties for sale is 12% lower than at this time in 2019. The time to secure a buyer has risen from 32 days a year ago to 55 days, unchanged for four months, but down from a peak of 74 days, in the aftermath of late September’s mini-budget (see below).
In other news …
Infrastructure The Department for Transport has approved plans for the long-delayed £1.7bn A303 Amesbury to Berwick Down upgrade including a tunnel under the Stonehenge site, ConstructionEnquirer.com. The green light was finally granted on Friday following a long-running planning saga. Planning permission for the scheme was originally granted in 2020 but was quashed by the High Court in 2021 following a campaign by local residents. The three-way European MORE joint venture between Spanish contractor FCC, Italy’s WeBuild and Austria’s BeMo Tunnelling is lined-up as main contractor on the eight-mile stretch of road upgrade. The main works contract covers the construction of the proposed tunnel’s civil, structural, mechanical, electrical and technology components, including the tunnel boring machine, along with the approach roadworks and structures over the five-year construction phase. Costain and Mott MacDonald have been awarded the £60m contract to be the project’s Delivery Assurance Partner to help co-ordinate and oversee construction of the scheme.
Carillion. Former Carillion group finance director Richard Adam has been disqualified as a director for 12 and a half years, ConstructionEnquirer.com. Adam, 65, was finance director at Carillion between 2007 and 2016. His ban follows an 11-year disqualification for former Carillion finance director Zafar Khan who held the role for nine months before stepping down shortly before the firm collapsed in 2018. Adam was fined £318,000 last year by the Financial Conduct Authority. The Insolvency Service stated Adam “caused Carillion plc to rely on false and misleading financial information for the preparation of its consolidated Financial Statements for 2015 and 2016 and the reporting, as regards both revenue and costs, of the performance of Carillion’s major construction contracts”.
This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.
Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position, and/or may perform services or solicit business from, any of the companies or related securities mentioned.
Any prices quoted in our research are as at the previous day’s close.