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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June 29, 2023

Mortgage approvals recover in May, BoE | MGNS, MRL, CSH, IWG

Company news

Morgan Sindall Group (MGNS, 1,740p, £824m mkt cap)

Construction, regeneration and fit-out group. Trading update.

Guidance: “As noted in the trading update on 4 May, full year performance is expected to show more of a weighting towards the first half than in recent years. This will be mainly due to the performance of the Fit Out division which has continued to perform strongly since the trading update and is now expected to show profit in the first half around 40% above the level reported for the same period last year. Consequently, as a result of the continued strong momentum in Fit Out and its forward order book for the second half, together with the anticipated net prospects for the rest of the group, the Board now expects full year profit for the Group to be ahead of its previous expectations”. Half year (Jun) results, 3 August.

Marlowe (MRL, 590p, £566m)

Safety and compliance provider to commercial properties. FY (Mar) results. Rev +47%, £466m (organic +10%, “ahead of previous guidance”); adj PBT +41%, £53.6m; stat loss before tax, £6.9m, (FY 22, PBT, £5.9m); adj EPS +20%, 45.3p; div, 0p (0p); net debt, £161m (£109m).

Trading: Statutory loss reflected amortisation of acquisition intangibles, integration investment and movement in contingent consideration provisions. Both divisions delivering growth in excess of market (GRC growth, 8%; TIC, 11%). Approx 85% of revenue was recurring, underpinned by regulatory compliance. Four bolt-on acquisitions since the start of the new financial year for a total consideration of £15.3m.

Outlook: “The new financial year has started well, with continued organic momentum, and we expect to continue to deliver strong financial performance with at least high single digit organic growth complemented by selective earnings enhancing acquisitions”.

Civitas Social Housing (CSH, 80p, £486m)

Care-based social housing REIT, providing homes for working age adults with long-term care needs. Under recommended offer at 80p per share, from CK Asset Holdings. FY (Mar) results. Net rental income +3.9%, £52.7m; EPRA earnings -9.7%, £26.9m; EPRA EPS -8.1%, 4.4p; divs +2.7%, 5.7p; NAV -1.0%, 109p; LTV, 35.6% (FY 22, 34.4%). Investment property valuation +1.0%, £978m; based on net initial yield, 5.6% (5.3%); vacancy, 0.0% (0.0%).

IWG (IWG, 140p, £1,409m)

Global operator of workspace brands, including Regus. Trading and financing update.

Guidance: “The Company remains cautiously optimistic for the remainder of 2023, and despite the strengthening of Sterling, management has not changed its financial expectations for FY 23. IWG and Worka continue to trade well. IWG remains committed to reducing its ownership stake in Worka in the medium term. The Company is well-positioned to continue to take advantage of future growth, its capital-light strategy and year to date has made improvements on all core KPIs since December 2022”. Revolving credit facility maturity extended, resulting in no group debt maturing before November 2025. HY (Jun), 8 August.

Economic data

Housing activity. Net mortgage approvals for house purchase in May rose 3.1% M/M to 50,500, seasonally adjusted, according to the Bank of England Money and Credit report. Approvals for remortgaging rose 3.4% to 33,600 during the same period. The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages rose by 10 basis points, to 4.56%.

Mortgage approvals

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

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