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.

November 27, 2023

RMV, EPWN | News – Leasehold reform gathers pace; Bricklayer numbers fall but wages rise | Fortnight ahead

Company news

Rightmove (RMV, 509p, £4,092m mkt cap)

UK’s leading residential property portal. Trading update.

Guidance: “The overall full year outlook for [FY (Dec)] 2023 remains at least in line with our previous guidance. In terms of performance, we expect: average revenue per advertiser (ARPA) growth of £112 – 116 [previous guidance, £103 – 105]; revenue growth of 8 – 10%; underlying operating profit growth of 7-8%; underlying margin of c. 73%.

Trading: “Since we reported our interim results in July, overall revenue growth has continued to track marginally ahead of consensus expectations, despite uncertainty in the housing market.  The increase is driven primarily by higher-than-expected ARPA. Our performance underscores the strength and resilience of the business, with both estate agent subscriptions and new homes development listings stable. Our share of consumer time in the second half to date remains unchanged at c85%. The majority of [ARPA] growth has been driven by new homes developers, who have extended their usage of our Native Search Adverts and Advanced Development Listing products to sell their developments.  Estate agents have continued to build their pipelines using a mix of branding, lead-generation and property products. Our Commercial Real Estate business unit continues to grow as planned.  We have also continued to make good strategic progress with our Mortgages business, and just last week, we took an important strategic step by launching our first broker product, to enable consumers applying for a mortgage to access brokered advice through our site”.

Outlook: At an investor day today the company will set out the detail of plans to deliver by 2028: rev, >£600m; commercial real estate rev, >£35m; mortgage rev, >£25m; u-lying op profit, >420m. “The strength of our performance against an uncertain market backdrop … illustrates the resilience of our business model in all phases of the property market cycle. We continue to look to the future with confidence and remain focused on the delivery of our strategic plans, both in our core business and in strategic growth areas”.

Viewpoint: In an interview this morning with Radio 4’s Today programme, CEO Johan Svanstrom went further to discuss the underlying housing market, saying that since the summer, “We seem to have turned the corner. Generally, there is much better confidence in the market than many people will have expected”. Given that the UK’s largest property portal arguably has a stronger finger on the pulse of just about any market participant, this is an encouraging signal – and reinforces relatively upbeat signals on October trading from housebuilders Persimmon and Bellway.

Epwin Group (EPWN, 67p, £97m)

Low maintenance building products manufacturer. Trading update.

Guidance: “Trading in the second half has been resilient, despite the more variable end-market conditions widely reported across the UK construction sector in September and October 2023. The Board remains confident of achieving FY 2023 underlying operating profit ahead of the prior year and in line with market expectations (consensus, £24.0m). The group has made good further progress with its strategy, including continued operational improvement, new product development, integrating recent value-enhancing acquisitions and sustainability. The medium and long-term drivers for the group’s products remain positive”. Buyback of up to 3 million shares launched today.

In other news …

Leasehold reforms. Legislation that would ban the creation of new leasehold houses in England and Wales will be introduced to parliament today, Property Industry Eye. The Leasehold and Freehold Reform Bill will mark its first step on the path to become legislation, hailed by housing secretary Michael Gove as a “People work hard to own a home. But for far too long too many have been denied the full benefits of ownership through the unfair and outdated leasehold system”. Charges will also be addressed, with a consultation on capping existing ground rents, to ensure leaseholders are protected from making payments that require no benefit or service in return and can cause issues when homeowners want to sell up. The changes could make it easier for people to sell their properties and obtain mortgages, making it cheaper and easier for more leaseholders to extend their lease, buy their freehold and take over management of their building. The standard lease extension term will be increased from 90 years to 990 years for both houses and flats, with ground rent reduced to £0.

Building costs. ‘Housing slump hits brickies’, ConstructionEnquirer.com. Construction payroll group Hudson Contract has reported an 11% fall in the number of payments made to tradespeople by brickwork contractors in October 2023 compared to the same month last year, indicating fewer employees, but average pay rates for bricklayers are still increasing as contractors keep on experienced workers at the expense of trainees. Hudson warned: “We saw the same thing happen following the financial crisis of 2008. If contractors let people go and materials suppliers cut back on production, it will take a long time for the industry to recover. If young people who are still learning their trade leave the industry, it will be very difficult to get them back and if materials production lines are mothballed and merchants closed, costs and inflation will simply bounce back to the levels that caused the intervention in the first place due to labour and material shortages”. The latest pay trends show record weekly earnings for self-employed tradespeople in Wales (+2.7%, £1,041) and the South East (+4.8 per, £1,074).

Fortnight ahead

Construction and Property company and economic news

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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