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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April 30, 2024

HWDN, TPK, API | Economics – Housing transactions increase for third straight month, HMRC

Company news

Howden Joinery Group (HWDN, 880p, £4,833m mkt cap)

UK’s largest supplier of kitchens and joinery products to trade customers, primarily small local builders. Trading update, 16 weeks to 14 April.

Guidance: “We have made an encouraging start to the year with trading in line with our expectations. We are also continuing to make good progress in implementing our strategic initiatives which drive profitable growth. We are on track with the outlook for 2024, while mindful of the second half weighting of sales from our autumn peak trading period”.

Trading: UK depot rev +5.4% Y/Y (+0.5% LFL, adjusting for additional 53rd week in 2023). International depots (c. 3% of group rev) +4.6% (-2.5% LFL). “At the start of the new financial year, we have implemented modest price increases across all geographies, that are being retained at acceptable levels as we continue to maintain the right balance between margin and volume, in line with ongoing market conditions”.

Outlook: “We are continuing to invest in our strategic initiatives and plan to open around 30 new depots in the UK, around 5 – 10 new international depots, and refurbish around 85 older UK depots”. HY results 25 July.

New product introductions for 2024 include 9 new kitchen ranges. Our new fitted bedroom ranges have been on sale in all our depots since the start of the year and our paint to order and solid work surface ranges are generating encouraging attachment rates to kitchen sales. Digital investments continue to support our customers and we are rolling out an enhanced ‘click and collect’ service in the UK depot network.

Travis Perkins (TPK, 762p, £1,618m)

Leading UK builders’ merchant and owner of Toolstation. Directorate change. Jasmine Whitbread, Chair, intends to step down at close of business on 31 May when Jez Maiden, Senior Independent Director, will assume the role of Chair on an interim basis and who commented: “We are grateful to Jasmine for her contribution and service to the Travis Perkins Group over the last three years. The Board is fully focused on the succession process for Chair and CEO. Our continued priorities are to transform our operating model, to build a stronger business and enhance cash generation, and rebuild shareholder value”.

abrdn Property Income Trust (API, 52p, £199m)

Specialist UK ‘last mile’ logistics real estate investment trust – subject of a lapsed merger with CREI in March, when rejected by API shareholders. FY (Dec) results. IFRS EPS, -2.2p (FY 22, -13.1p); EPRA EPS -3.7%, 2.8p; div unch, 4.0p; net asets, 78.2p (84.8p); LTV, 31% (23%). Trading: “After the challenges of the second half of 2022 and the resultant market re-pricing, 2023 saw some stabilisation with a marked improvement in real estate total returns, albeit these remained marginally negative”.

Outlook: “Looking ahead to 2024, there is cautious optimism around the trajectory for UK real estate returns.  Increased investor demand should strengthen the market for good quality real estate assets in the right areas of the market with appropriate ESG credentials. At a property market level, there is an expectation of continued rental growth in the industrial sector as well as the retail warehouse sector where vacancy rates have been falling.  Both these sectors are areas of the market in which the company has positioned itself with good levels of exposure, indicating continued positive performance for the portfolio”.

Economic data

Housing transactions. Housing transactions rose by 1.4% M/M on a seasonally-adjusted basis in March to 86,980, following a 1.0% increase in February, according to the latest HMRC data. This is the third consecutive monthly rise, a cumulative 3.8% increase since December. On a Y/Y, non-seasonally adjusted measure, there was an 8.6% decline, following an annualised -3.4% in February – but well below the maximum deficit of 32% last April. The latest SA monthly result is 16% below the 10-year average of 100,300 (below).

Viewpoint: More evidence of the modest but steady improvement in housing volumes. HMRC data is based on completed transactions, and covers cash as well as mortgaged sales; more forward-looking data, from RICS and BoE mortgage approvals, suggests the improvement in completed transactions will continue for at least the next few months.

UK housing transactions

In other news …

House prices. The smallest homes have seen the biggest increases in price, especially for flats, new research by Halifax has revealed, reported in Property Industry Eye. The findings, from Britain’s largest mortgage lender, and based on its monthly House Price Index, showed UK prices had grown 1.9%, or £5,318, year-on-year as of February 2024. But within the data, flats and terraced homes saw their value increase faster than semi-detached and detached homes. Flats saw the biggest jump in average value, rising 2.7%, or £4,290, to £163,016 compared to February 2023. Meanwhile, the slowest growth was recorded among semi-detached houses where average prices grew 1.7% (£4,797) to £295,199. In the year to February, the average price of a flat increased by 2.7%, while the average terraced property value rose by 2.6%, Halifax said. Prices for semi-detached and detached homes increased at lower rates, rising by 1.7% and 2.0% respectively. Across Britain, Scotland saw the strongest growth in prices for flats over the past year, with a 5.9% increase, Halifax said.

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