Economics – modest decline in transactions continues | News – Aldi targets London office sites for store expansion | LOAD, KINO, HMSO |

Company news

Crestchic (LOAD, 399p, £113m mkt cap) – PERL provides research services to Shore Capital on this stock

International electrical power reliability and drilling tools hire and manufacturing group. Acquisition effective. The acquisition by Aggreko, agreed by both boards on 8 December 2022, becomes effective today under a Court-sanctioned scheme of arrangement. Under the terms of the acquisition, Crestchic shareholders will receive 401p. Trading in Crestchic shares on AIM will be suspended with effect from 07:30 today, pending the cancellation of admission to trading, expected to be effective as of 07:00 tomorrow.

Kinovo (KINO, 36p, £22m)

Property services provider, specialising in compliance and sustainability. Contract win and net zero carbon framework. Contract awarded worth £12m over five years by The Hyde Group, an existing client owning c.  50,000 homes and over 100,000 residents. The contract comprises electrical testing and associated works for both Hyde’s domestic and communal properties.  In addition to the company’s recent award of highest-ranking regional contractor for a number of direct lots via the National Housing Maintenance Forum, Kinovo has also been ranked in first position for a number of sustainability lots. The lots, relating to the Greater London, Southeast and East regions, comprise part of the Net Zero Carbon Works, including Planned Maintenance, Net Zero Carbon and Passive Fire Safety Works. The NHMF estimates the potential value of the framework to be worth £200m nationally, across the relevant contractors in aggregate, over four years.

Hammerson (HMSO, 29p, £1,452m)

UK and European retail property group. IASB Accounting Interpretation and impact on 2021 income. In October 2022, the IASB IFRS interpretations committee finalised an agenda decision in respect of ‘Lessor forgiveness of lease payments (IFRS 9 and IFRS 16)’. This stipulates that losses which were incurred on granting rent concessions, which the group occurred during the Covid-19 pandemic, should be charged to the income statement in the year they are granted. In its 2021 audited financial statements, its treatment of Covid-related concessions, consistent with certain other companies within the sector, has been to recognise these as lease modifications such that the impact was initially held on the balance sheet and then spread forward into the income statement over the lease term or period to first break. The impact to be reflected in the forthcoming 2022 full year results is that 2021 figures have been restated, with FY 21 gross rental revenue being increased by £8.8m to £250.4m and adjusted earnings being reduced by £15.4m to £65.5m. The change of policy will also benefit FY 22 adjusted net rental income and adjusted earnings by c. £2m. There are no other material changes to the group’s income, net assets, or cash flows.

Guidance: “The group’s earnings expectation set out in the Q3 trading, operational and rent collection update dated 8 November remains unchanged with adjusted earnings not expected to be less than £100m”. The group will present 2021 and 2022 figures on this basis at the forthcoming 2022 full year results on 9 March.

Economic data

Housing activity. The number of completed UK residential transactions in January fell by an estimated 7.5% Y/Y to 77,390 on a non seasonally-adjusted basis and by 3% M/M from December seasonally-adjusted, according to latest HMRC data from yesterday. Regional Y/Y NSA declines were: England, -6.2%; Wales,-15.1%; Scotland, -11.4%; Northern Ireland, -21.7%. The UK rolling 12-month total (red line, below), declined by 0.5% to 1.25 million.

Viewpoint: The HMRC data is the most complete of all volume data, as it encompasses cash as well as mortgaged transactions. However, it only reflects completed transactions, so has probably only been reflecting the impact of the 23 September mini-budget for the past month or so, especially given that many mortgaged purchases have taken longer to transact. However, both Y/Y NSA and M/M SA declines look significantly less serious than many observers were predicting. This echoes reported and anecdotal comments from housebuilders, agents and data analysts that have appeared progressively more optimistic as January and February have progressed.

In other news …

Retail, offices. Supermarket group Aldi plans to nearly double its 60-store-strong London portfolio as part of a UK expansion drive that will see it target empty office blocks and new housing locations, Property Week (paywall). The German discounter is on the hunt for locations suitable for its standard 20,000 sq ft stores with 100 parking spaces. The supermarket giant has 990 branches across the UK and is the fourth-largest chain in the UK after overtaking Morrisons, although it remains under-represented in London. Aldi’s overall UK store target is 1,200 by 2025 and the company plans to invest £600m this year, after investing £700m in 2022.