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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November 2, 2023

MGNS, MTO, HWDN, DLN, ESP

Company news

Morgan Sindall Group (MGNS, 1,898p, £899m mkt cap)

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

Guidance: “Since the time of the half year results on 3 August, general market conditions have remained challenging yet manageable. Based on the performance to date and with good visibility of secured orders through to the end of the year, the group remains on track to deliver a full year [Dec] performance in line with its expectations, with strength in Fit Out, Construction and Infrastructure offsetting a weaker performance in Property Services”. Ave daily net cash for the full year is expected to be around £270m, slightly higher than previous guidance.

Trading: Orders +7% from YE 22, £9.1bn. “Both Construction and Infrastructure have performed better than expected, continuing to benefit from their ongoing focus on long-term client relationships, operational delivery and risk management. Fit Out has continued to trade strongly and, with the visibility of its order book, is well-placed to deliver a result for the full year which is slightly above the top end of its medium-term target [£50 – 70m]. In Property Services, contract performance has remained difficult. Although the remediation programme being implemented to address operational delivery and contract pricing has made some positive progress, this has been slower than expected and the loss in the year is now anticipated to be higher than previously expected. Partnership Housing has progressed as planned, with the focus on long-term partnerships with the public sector continuing to provide some resilience against the softer housing market. In Urban Regeneration, progress on the various schemes within its development portfolio has been broadly as expected, albeit procurement and planning processes are increasingly protracted”.

Mitie Group (MTO, 99p, £1,317m)

UK facilities management group. Acquisition. GBE Converge Group, a leading independent provider of fire, security and information and communications technology solutions, acquired for a maximum cash consideration of £27m, comprising an initial payment of £20m and deferred payments of up to £7m over three years, linked to performance. For the 12 months ended 31 December 2022, revenue. £36m (+17% Y/Y); EBITDA, £2.4m (+53% Y/Y).

Howden Joinery Group (HWDN, 644p, £3,531m)

UK’s largest supplier of kitchens and joinery products to trade customers, primarily small local builders. Trading update. Guidance: “The Board maintains its full year expectations for 2023, but recognising a more uncertain macro-economic outlook this is expected to be towards the lower end of the range of analysts’ consensus forecasts [PBT, £330 – 365m; cons £346m]”.

Trading: UK rev, periods 7 – 11, -3.3% LFL (YTD, -1.8%); International, -16.8% (-12.3%). “Howdens has continued to trade well since the half year and has gained market share. UK depot sales during our peak trading period remained consistent with last year’s record performance”.

Derwent London (DLN, 1,845p, £2,072m)

Real estate investment trust owning commercial portfolio predominantly in central London. Q3 (Sep) trading update.

Trading: Letting activity in H2 to date totals £8.5m, on average 10% above December 2022 ERV. YTD lettings total £27.8m, +8.1% vs December 2022 ERV. EPRA vacancy rate reduced to 3.7% at 30 September (30 June, 4.5%). EPRA LTV, 25.2% (30 June, 25.0%).

Outlook: “London’s diverse occupier base continues to prioritise quality, amenity and location. Our distinctive portfolio has benefitted from these trends with ongoing strong letting activity in H2. The opening of our second customer lounge is well-timed to further reinforce our appeal. The investment market remains subdued, but our strong balance sheet positions us well for the opportunities ahead”.

Empiric Student Property (ESP, 85p, £514m)

Fund owning and operating UK student accommodation. Trading update.

Guidance: Revenue occupancy 99% achieved for academic year 2023/24. LFL growth in average weekly rents for academic year 2023/24 at 10.5%. EPRA EPS of approximately 4.0 pence per share anticipated for financial year 2023. Dividend target for 2023 financial year increased to 3.5p, +27% Y/Y. Minimum LFL rental growth of 5.0% targeted for academic year 2024/25.

Outlook: “The booking cycle for academic year 2023/24 has exceeded all expectations, with the estate effectively full and like-for-like rental growth above ten per cent. Underpinned by the continued attractiveness of the UK’s top tier universities, the demand for high quality student accommodation remains strong. With demand and supply imbalance expected to continue for the foreseeable future, our premium accommodation offering and high quality customer service, positions us well for growth within this resilient and growing market”.

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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