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 15, 2022

Construction vacancies still rising and housing transactions face delay as Land Registry votes for strikes

Company news

Speedy Hire (SDY, 43p, £210m mkt cap)

UK and Ireland tool, equipment and plant hire services provider. H1 (Sep) results. Rev +14%, £212m; adj PBT
-3.4%, £14.1m; stat PBT -7.7%, £13.2m; adj EPS +25%, 2.3p; interim div +6.7%, 0.8p; net debt, £86.7m (H1 21, £47.9m. Trading:  Op profit behind H1 22 reflecting the impact of inflation on the cost base and the continued investment in growth strategies. Continued hire rev growth of 5.5%; improved pricing helping to mitigate inflationary cost pressures. Investment in hire fleet of £30.5m in part in response to retail strategy rollout and advanced purchasing to mitigate the impact of supply chain lead times and price inflation; H1 utilisation was 54.1%, improving to 58.1% currently. Outlook: “We remain confident of delivering results for the full year in line with the Board’s expectation. We are well placed to maximise opportunities within major UK projects”. Hire revenue growth in October and November, c. +6% Y/Y; new contract wins and “heathy pipeline”; price increases continuing to build in H2.

Land Securities Group (LAND, 624p, £4,645m)

Leading UK commercial property investment, development and management group. H1 (Sep) results. EPRA earnings +9.4%, £197m; stat loss before tax, -£192m (H1 21, +£275m); EPRA EPS +9.5%, 26.6p; interim div +14%, 17.6p; net debt, £3,475m (£4,254m); LTV, 31.1% (34.4%). Trading: “Positive leasing performance in Central London offices and major retail destinations, despite general macro challenges, highlight high quality of Landsec platform and portfolio, with strong progress on executing strategy since late 2020 creating balance sheet resilience and optionality for future growth”. Outlook: “We continue to expect underlying EPRA EPS for this year to grow by a low to mid-single digit percentage, excluding the benefit from increased surrender premiums which were up £10m in the first half of the year, and we expect dividend for the full year to grow in line with underlying EPRA EPS. Beyond FY23, the exact shape of earnings progression will rely on the pace of future disposals and reinvestments, but our strategy and strong capital base continue to offer the potential to grow earnings and total accounting return over time. We anticipate global economic uncertainty to remain elevated. Decades of globalisation, fuelling growth and depressing inflation, have started to go into reverse, with rising geopolitical tensions adding to risks around energy reliance and supply chains. Positively, the turbulence in UK politics in late summer has started to normalise. Still, it is clear that London remains a top global city which continues to attract new businesses and talent; that the future of major retail destinations is more positive than most thought two years ago; and that there remains a structural need to remodel city centres in a sustainable way. It is difficult to say where interest rates will settle and whilst we think this is unlikely to be where they have been for the past decade, our strategic decisions over the past two years mean we are in excellent shape for any eventuality”.


Economic data

Employment. Job vacancies in the construction industry in Aug – Oct rose by 10.4% seasonally adjusted to 49,000 from the previous three months, up by 3.6% Y/Y (link). Construction was one of only five sectors that recorded a rise in vacancies out of 21 tracked; total UK vacancies slipped 3.6% on a rolling Q/Q basis to 1.225 million. The data forms part of today’s employment release (link) which showed total UK unemployment of 1.224 million, with the rate moving up to 3.6% from 3.5% the previous month. Viewpoint: still a very tight labour market in construction.

In other news …

Conveyancing. Property transactions face potential new delays after the Land Registry and the Registers of Scotland were among the 125 government departments to vote for strike action this week, Property Industry Eye (link). The strikes, over pay, pensions, jobs, and redundancy terms, are set to begin next month and could last until mid-2023, with Mark Serwotka, general secretary of the Public and Commercial Services Union warning of a “prolonged programme of industrial action into every corner of public life” should ministers fail to meet their demands before the end of next week. The current proposal of an average pay rise of 2% fails to match the 10% pay increase demanded by PCS.

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