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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March 26, 2024

FORT, BWY, VTY, MBH

Company research

Forterra (FORT, 175p, £373m) – FORT is a client of PERL

UK’s second largest brick producer and leading building materials producer. FY (Dec) results. Rev -24%, £346m, reflecting falling sales volumes partially offset by ‘resilient’ pricing; adj PBT -56%, £31.1m, 7.2% ahead of our estimates, which were upgraded following the Jan trading update. Link to our research note: Biggest customers poised to bounce back most:

“Forterra’s FY23 earnings were slightly higher than guidance, which was raised in January, with resilient pricing partly offsetting a steep fall in demand among its main end users, large housebuilders. Our estimates are broadly unchanged, other than reflecting a more conservative stance on the final dividend. Despite a cautious tone in the outlook statement, we believe the largest housebuilders may now rebound more strongly than smaller peers.”

Company news

Bellway (BWY, 2,632p, £3,131m)

Top five UK house housebuilder. HY (Jan) results. Completions -28%, -4,092; rev -30%, £1,273m; u-lying op margin, 11.0% (HY 23, 17.6%) “reflecting the effect of lower volume output, cost inflation and the use of sales incentives, together with extended site durations”; u-lying PBT -57%, £134m “in line with our expectations”; stat PBT -62%, £117m; u-lying EPS -58%, 80.6p; interim div -64%, 16.0p; NAV, 2,888p (2,819p); net cash, £77m (£292m).

Trading: Ave selling price -2%, £309k “primarily driven by a lower proportion of private completions”, 75% of total completions, (79%). “Trading patterns were less volatile than the comparator period”. Land bank, 94,492 plots (100,367) “enabling a cautious and targeted approach to land buying activity during the period”.

Outlook: From 1 Feb – 12 Mar, private reservation rate per outlet per week +20%, 0.67 (equivalent period FY 23, 0.56). Order book -16%, 4,914 homes [including FY 23 outstanding orders; and an improving trend vs 31 Jan 24, -22% Y/Y]. “We are encouraged by customer enquiry levels and the pick-up in reservation rates in the new calendar year. The group remains on track to deliver volume output of around 7,500 homes (FY 23, 10,945) in the full financial year and, if market conditions remain stable, we are well-placed to build the order book through the second half which will serve as a platform for a return to growth in financial year 2025”.

Vistry Group (VTY, 1,214p, £4,136m)

Formed from the mergers of Bovis Homes and housebuilding and partnerships divisions of Galliford Try (GFRD) and Countryside Partnerships. Partnerships agreements to deliver 1,900 mixed-tenure homes. Agreement with registered housing provider Abri to deliver 1,500 quality new homes in Arundel at the Ford Airfield Site, to be delivered in a 50:50 joint venture of which 50% of the homes will be presold for affordable housing amd significant community infrastructure. Vistry will also deliver 400 homes at a new site at Hatchfield Farm, Newmarket. Under the group’s new Partnerships model, 200 have been pre-sold to Clarion Housing Association for affordable housing. The remainder of the scheme will be sold on the open market utilising both our Bovis Homes and Linden Homes brands to maximise sales and speed of delivery. Both deals will contribute to the Group’s strategy of focusing on its high-growth, capital light partnerships model. “We have well-established, long-term relationships with Abri and Clarion, At both sites we are providing additional affordable housing in excess of our Section 106 obligations. The sites will also provide long-term visibility to our supply chain partners and certainty of work”.

Michelmersh Brick Holdings (MBH, 102p, £95m)

UK’s fourth largest brick manufacturer by volume; Belgian operation acquired in February 2019. FY (Dec) results. Rev +13%, £77.3m (LFL, +1.3%); adj PBT +9.6% LFL, £13.8m; stat PBT +8.1%, £12.5m; adj EPS +12%, 11.9p; divs +5.9%, 4.5p; net cash, £11.0m (FY 22, £10.6m).

Trading: “A positive financial performance, with earnings for the year ahead of market expectations. Full production capacity was maintained throughout the year alongside focused cost management [which] has led to strong profit performance. Resilient operational cash generation supported investment in inventory and capital investment in solar at plants to supplement longer term energy requirements”.

Outlook: “Our focus on maintaining a well-balanced forward order book and pricing stability is expected to support resilient order intake across our diverse end market customer base for 2024. Energy price hedging is in place with over 70% of our expected requirements secured for 2024 with the expectation of a more stable outlook expected to underpin forward prices. The group continues to focus on delivering both excellence in product and customer service and, with the resilient qualities of our business model, the Board remains confident in the strategic outlook of the business”.

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