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 6, 2023

Big jump in purchasing managers’ expectations as supply chain pressures ease | GFRD, FOXT, HOME

Company news

Galliford Try Holdings (GFRD, 175p, £189m mkt cap)

UK construction and infrastructure services group. Contract. The Environment business has secured a place on Southern Water’s new AMP8 framework for medium non-infrastructure works. The £600m framework covers an initial 39-month period, with an extension option to 57 months, and covers works across Southern Water’s geographical region including the Isle of Wight. Activities include capital asset maintenance schemes, support and delivery of emerging needs including new build installations, environmental improvement programmes, asset improvements to pumping stations and process improvement works to water, wastewater and sludge process improvement works. HY (Dec) results, 8 March.


Foxtons Group (FOXT, 40p, £122m)

High profile London estate and lettings agent. Acquisition. Atkinson McLeod acquired for £7.4m, adjusted for current assets less total liabilities at completion, which will be funded through the group’s existing cash resources. £0.7m of the consideration is deferred for a period of 12 months. Atkinson McLeod is an estate agent, operating in Central East London across four branches, with a lettings business that generates c. 90% of its revenues across c.1,100 tenancies. “The acquisition represents further progress against our strategy of acquiring lettings businesses that deliver an attractive return on invested capital, enhance earnings and improve the resilience of the group’s earnings, whilst also reinforcing Foxtons as London’s largest lettings brand. Since 2019, the group has significantly increased the size of its lettings portfolio through acquisition, driving good levels of growth in lettings revenue and profitability. For the year ended 31 December 2022, non-cyclical and recurring revenues, primarily delivered by lettings, represented c. 65% of Group revenue, significantly enhancing earnings resilience”. Atkinson McLeod’s unaudited revenue and operating profit for the 12 months ended 31 March 2022 were £3.1m and £0.9m respectively. Gross assets as at 31 March 2022 were £2.5m. The Directors believe the acquisition of Atkinson McLeod will be earnings accretive in 2023, and through the delivery of synergies, post-completion profitability will be enhanced from historical levels. FY (Dec) results, 7 March.


Home REIT (HOME, 38p, £301m)

Real estate investment trust funding the acquisition and creation of properties providing accommodation to the homeless. Tenant update. Gen Liv UK, a tenant making up 5.7% of the Company’s annual rent roll, has entered into a creditors’ voluntary liquidation and has appointed FRP Advisory Trading as liquidators. Lotus Sanctuary, a tenant making up 12.5% of the Company’s annual rent roll, also entered into a creditors’ voluntary liquidation on 2 March. “The Company is in discussions with prospective tenants to take on new leases of Gen Liv UK’s and Lotus Sanctuary’s portfolios and it should be noted that whilst discussions with prospective tenants are ongoing, arrangements have been made for existing care and support services to continue, to ensure that there is no impact on underlying residents. No resident will lose their accommodation as a result of the above creditors’ voluntary liquidations”.

Economic data

Construction activity. Construction activity in the UK rose at its fastest rate for nine months in February, driven mainly by a revival in commercial activity, according to the latest purchasing managers’ survey. The headline seasonally adjusted S&P Global / CIPS UK Construction Purchasing Managers’ Index registered 54.6 in February, up from 48.4 in January and above the neutral 50.0 no-change threshold for the first time in three months. The latest reading was the highest since May 2022. Commercial construction was the best-performing sector (55.3), with the rate of expansion the steepest for nine months. Civil engineering activity also returned to modest growth (52.3)There was a fall in residential building work for the third consecutive month in February (47.4), however with a shallower rate of decline than in January. Overall, order books picked up for the first time since November, with the jump in commercial cited as due to “the improving near-term economic outlook”. The latest survey also indicated that supply pressures continued to ease; delays with vendor delivery times were the least widespread for just over three years. The latest round of purchase price increases was also the slowest since November 2020. Looking forward, around 46% of the survey panel anticipate a rise in construction activity over the year ahead, while only 13% predict a decline. The resulting index pointed to the highest level of optimism for one year. Meanwhile, there was a reduced pace of decline in the Eurozone after ten successive monthly falls. The headline index increased from to 47.6 from 46.1 in January, the lowest rate of decline since May 2022. This was supported by softer drops in residential and civil engineering activity, as commercial construction projects decreased at a slightly quicker pace.

Construction PMI Index Mar 20 - Nov 22
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