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.

<< Back to Property & Construction Daily archive

June 20, 2023

Rent vs earnings highest in a decade | News – BKG scoops £2.2bn Birmingham regeneration | LORD

Company news

Lords Group Trading (LORD, 61p, £101m mkt cap)

Building materials distributor. AGM.

Guidance: “Since the full year results on 3 May, the resilient trading performance of the group has continued and we maintain expectations for full year [Dec] trading performance to be in line with market expectations [rev £474m; adj EBITDA, £31.0m; adj PBT, £17.9m]”.

Trading: “Whilst a persistently negative macroeconomic backdrop and uncertain interest rate environment has persisted throughout FY23 and has impacted consumer sentiment, our diverse product offering and end-customer base combined with our carefully executed M&A strategy has meant that softer demand in some segments have been offset by robust performance in others. In Merchanting, we continue to expand our geographical presence and broaden our product range, as was illustrated by the acquisition of Chiltern Timber Supplies in April. In Plumbing & Heating, the group has scope to increase our Mr Central Heating offering to 50 branches over the next five years, whilst also expanding our product range and margins through the inclusion of additional products such as air source heat pumps and underfloor heating, underpinned with the obligation to de-carbonise. All acquisitions executed in FY22, as well as Chiltern Timber Supplies, are performing in line with our expectations and the pipeline of M&A opportunities remains strong”.

Outlook: “Following the refinancing of our facilities on 6 April 2023, we have financial headroom to expand on our less than 1% market share by being one of the few acquirers of choice in the market”.

Economic data

Annual rental income slowed in April, but remained in double digits for the 15th consecutive month, stretching affordability to a decade low, according to Zoopla. The property portal’s UK Rental Market Report showed that Y/Y rental growth on new lets slipped to +10.4%, from a recent high of 12% in August, with rents taking up 29.1% of average single incomes, with evidence of growing stress for renters on lower incomes. Rents have grown faster than average earnings over last 21 months and the pressure is likely to be maintained by demand increasing by up to 40% over the summer months. London saw the highest Y/Y growth, +13.5% to £2,001, with rents at 49.9% of a single earner’s income. The rest of the UK rose 9.1% to £928 (affordability, 29.1%). Outside London, the highest regional growth was in Scotland (+13.1%, £725, 24.1%); and lowest, Northern Ireland (+3.7%, £699). With little prospect of increased supply, Zoopla predicts the growing unaffordability of renting will reduce rental growth towards 8% by the year end, still above earnings growth and higher than Zoopla’s earlier forecasts of 4 – 5% in its March report.

Rent as percentage of gross earnings

In other news …

Berkeley Group’s (BKG.L) St Joseph Homes business is set to become development partner for the £2.2bn regeneration of the vast Ladywood Estate in Birmingham, . The estate renewal scheme, set over 60 hectares, will take more than 20 years to deliver building 7,000 homes, new schools, 14 hectares of green space as well as two public parks.

Ladywood Estate Birmingham

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.

Download Insight as PDF

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.