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 6, 2023

SPR, 0KGP, HOME | Economy – further output weakness drags down input costs at fastest rate for 14 years

Company news

Springfield Properties (SPR, 53p, £62m) – SPR is a client of PERL

Scotland’s only quoted housebuilder. Contract. New affordable housing contract, worth £6.1m, signed with The Highland Council. The design and build phase of the contract is due to commence in the coming weeks and be delivered over a period of approximately 18 months, with payment on a monthly basis. Springfield has established relationships with housing associations, local authorities and other public bodies throughout Scotland.

“As noted in the FY 23 results announcement, the Group recommenced engaging with affordable housing providers following an increase in the Scottish Government’s affordable housing investment benchmarks in June, which has made affordable housing projects more attractive. The Group is well-placed to benefit from a return in this market, which is supported by strong fundamentals, including a Scottish Government target to deliver 110,000 new affordable homes by 2032”.

Outlook: “We continue to be encouraged by the interest we are receiving from local housing authorities and other affordable housing providers as they seek to meet the Scottish Government’s targets and help meet recognised housing needs across the country. Since 31 May, we have signed affordable housing contracts totaling c. £24m and we expect to be awarded further contracts in the near term”.

Kingspan Group (0KGP, €70, €12,629m)

Insulation and building envelope supplier. Q3 (Sep) trading update.

Guidance: “At this point in the year, we are on track to deliver a record full year trading profit, in the region of €875m, comfortably ahead of 2022”. YE net debt expected to reduce by a third Y/Y to c. €1.05bn (1.0x EBITDA).

Trading: YTD rev, €6.14bn, -7% LFL. Insulated Panels – Q3 rev -9%, -10% YTD. “Third quarter sales volumes were up mid-single digit globally. Activity in the Americas remains strong overall, France is robust, the UK market has weakened considerably since mid-year with central and eastern Europe stable at sluggish levels of activity. Insulation – rev -10%, -7% YTD. “Board sales volumes recorded high single digit volume growth in the third quarter. Acoustic insulation is performing well and we continue to make inroads in the natural insulation category which will be boosted further by our acquisition of 51% of Steico, expected to complete early in 2024. District heating applications could see some project deferral in the current interest rate environment”.

Outlook: “It is difficult to look too far ahead in this environment. Whilst end markets have their obvious challenges, the global backlog of orders has remained reasonably stable over the last number of months. As highlighted at our recent Capital Markets Day, the activity pipeline in data technology, EV automotive, and refurbishment activity in general are all notable positives. There is still some way to go in 2023 with the seasonally important fourth quarter remaining”.

Home REIT (HOME, shares suspended)

Real estate investment trust funding the acquisition and creation of properties providing accommodation to the homeless. Monthly update on property disposals, valuations, rent collection and financial performance. Includes: £15.3m cash balances as at 31 October of which £2.7m is unrestricted; valuation information expected to be published by the end of the year. “Due to the application of the revised accounting policies, the ongoing inspection programme and BDO enhanced audit requirements, the Board currently anticipates publication of the outstanding accounts in early 2024. The Board and AEW remain committed to the restoration of the trading in the Company’s ordinary shares as soon as is practically possible”.

Economic data

Construction activity in October continued to decline, albeit at a slightly slower rate than in September, dragged down by housebuilding, according to the latest PMI data.  However, the S&P Global/CIPS UK report shows that input prices are now declining at the fastest rate since 2009. The headline purchasing managers index for October was 45.6 up slightly from 45.0 in September but still the second-lowest reading since May 2020. House building decreased for the eleventh successive month in October and at a much steeper pace than elsewhere in the construction sector (index at 38.5). Civil engineering activity also decreased sharply in October (43.7), the fastest rate of decline since July 2022. Meanwhile, there were signs of stabilisation in the commercial building segment, with activity falling only marginally and at a slower pace than in September (49.5). Prices fell for timber, steel and transportation costs while an increase in the availability of sub-contractors led to the first fall in their rates since July 2020.

Construction Total Activity Index

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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