logo-loader

Housebuilders in focus as Barratt Developments and Bellway update on trading

Last updated: 15:25 12 Oct 2018 BST, First published: 12:36 12 Oct 2018 BST

house

The housing market has slowed since the UK voted to leave the European Union but low borrowing costs and government schemes have continued to support demand.

Investors will be looking at updates from housebuilders Barratt Developments PLC (LON:BDEV) and Bellway PLC (LON:BWY) in the week ahead to see how well the two have held up, given the uncertainty surrounding the outlook for the sector and the wider economy.

Earlier this month, Halifax revealed that house prices fell in September at the fastest pace since April, although other data showed less of a slowdown.

Halifax said house prices dropped 1.4% on the month in September after a 0.2% fall in August, while figures from Nationwide showed a 0.3% monthly rise after a 0.5% dip in August.

Meanwhile, a survey from the Royal Institution of Chartered Surveyors (RICS) revealed that Brexit uncertainty had hurt confidence in the property market in September. Its index measuring sentiment in the market fell to -2%  from +1% in August.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “We suspect that the housing market will be relatively lacklustre over the coming months - although there are varying performances across regions with the overall national picture dragged down by the poor performance in London and parts of the South East.”

Barratt Developments boosted by Help to Buy and low-interest rates

Barratt Developments has so far avoided the strain of a slowdown in the housing market, thanks to low-interest rates and the government’s Help to Buy scheme.

The housebuilder posts its first-quarter trading update on Wednesday and analysts expect it to show a strong order book and an increase in home sales at higher prices.

However, management’s tone in recent trading updates has been cautious and there is nothing to suggest that this will change,” said Graham Spooner, investment research analyst at The Share Centre.

“This will be reflected in the land and plot acquisition strategy while the cost pressures of rising material and labour prices is likely to also become more prominent.”

While the company’s recent successes have been buoyed by government schemes and low-interest rates, analysts have warned that these conditions can’t last forever with the Bank of England saying it would gradually raise rates and Help to Buy due to end in 2021.

Bellway’s full-year revenues to rise

Bellway will issue its full-year results, having already recently informed the market of some key metrics.

The housebuilder said it completed the sale of 10,307 new residential dwellings -- marking the first time it has ever topped 10,000 homes and a 6.9% increase on the 9,644 it completed last year.

Bellway estimated revenue growth of 16% to nearly £3.0bn after reporting £2.5bn the previous year. Brokers are tipping pre-tax profit of £641mln.

The operating margin is expected to dip to 22.0% from 22.3% as house price growth has eased.

Unilever to post 'notable acceleration' in sales growth 

A somewhat chastened Unilever PLC (LON:ULVR) reports on third-quarter trading on Thursday after it recently aborted plans to abandon its dual-listing structure.

In the first half of 2018, the Anglo-Dutch (still) consumer goods giant reported underlying sales growth (USG) of 2.5% from the year before.

UBS is predicting a “notable acceleration” to 5.0%, of which 2.3 percentage points it predicts will be from increased volumes and the rest will be accounted for by price increases.

That puts the Swiss bank ahead of the consensus forecast of 4.3%.

The extended summer will have done no harm to the sales of its ice cream and personal care products, while it should see a partial recovery of the sales lost in Brazil in the second quarter when there was a strike by lorry drivers.

All eyes on Rentokil’s pest control business

Rentokil Initial PLC (LON:RTO) has been pivoting towards its pest control business of late, snapping up 20 companies in the first half and recently buying Mitie Group PLC’s (LON:MTO) pest control arm for £40mln.

Given the increased focus on this part of the business, investors will want chief executive Andy Ransom to be pleased with its performance again, as he was at the half-way point.

Recent trading is likely to have been boosted by these acquisitions, despite severe weather conditions disrupting some of its operations.

Rentokil’s performance in Asia and the Americas will be important, as will attempts to increase its emerging market presence.

Pipeline key for Segro

Property investment group Segro PLC (LON:SGRO) is due to publish a third-quarter trading update on Wednesday.

The shares have outperformed the market and many other commercial property groups so far this year, largely because of its large warehouses which offer it exposure to the booming online retailing industry.

July’s half-year results showed a 21% rise in pre-tax profits and an 8.5% increase in net asset value per share.

Investors will be focused on the retention rate and any comments on the level of demand for its properties. Segro has a large pipeline of new properties to develop so any update on that, and the amount of capital needed to complete it will also be of interest.

Domino’s Pizza investors hope for better news

Investors in the UK branch of pizza chain Domino’s Pizza Group PLC (LON:DOM) will be hoping for a more upbeat outlook when the firm releases a third-quarter trading update on Thursday.

The group reported lower than expected sales for the second quarter in its half-year results in August, while also citing an “uncertain” trading environment going forward as consumer incomes continue to be squeezed while inflation piled pressure on the sector.

Despite the gloomier outlook, Domino’s chief executive David Wild said at the time that the group expected underlying pre-tax profits for the full year to be “in line with current market expectations” of between £95.9mln-£101.4mln.

At the end of last week, investment bank UBS cut its target price for the group to 250p from 270p, citing concerns around the company’s relationship with its franchisees and value for money.

Gear4Music looks to make the right notes in interims

Musical instrument seller Gear4Music Holdings PLC (LON:G4M) will be hoping to put on a repeat performance of its trading update in September when it releases its interims on Tuesday.

The firm reported a 36% surge in sales over the six months to £42.5mln compared to the same period last year, while its UK and rest of world (ROW) sales rose 34% to £24mln and 39% to £18.5mln respectively.

Gear’s chief executive, Andrew Wass, also said sales had been ahead of expectations for the period, benefitting from the industry’s shift to e-commerce from retail.

UK retail sales, inflation and jobs data

Bank of England policymakers will be paying close attention to this month’s instalment of official data on inflation, jobs and retailers ahead of the next interest rate decision.

Last month, the Office for National Statistics revealed that wages were still rising more than inflation. The UK inflation rate rose to an annual rate of 2.7% in August, the highest level in six months, while wages grew by 2.9% in the three months to July.

As retail wages outpaced inflation, shoppers went on a summer spending spree in August with retail sales up 3.3% compared to a year ago.

The central bank, which raised interest rates in August to 0.75% from 0.25%, considers economic data when making policy decisions. However, the Bank is likely to hold off on further rate hikes until there is more certainty on Brexit.

Significant announcements expected week ending October 19:

Monday October 15:

AGMs: Pires Investments PLC (LON:PIRI)

Economic data: US retail sales; Empire State manufacturing survey

Tuesday October 16:

Trading update: Ixico PLC (LON:IXI)

Finals: Bellway PLC (LON:BWY), DotDigital Group PLC (LON:DOTD), Nanoco Group PLC (LON:NANO), Netcall PLC (LON:NET)

Interims: Gear4Music Holdings PLC (LON:G4M), BP Marsh & Partners PLC (LON:BPM

Economic data: UK unemployment; UK average earnings; US industrial production; US JOLT jobs; US housing market index

Wednesday October 17:

Trading update: Barratt Developments PLC (LON:BDEV), Segro PLC (LON:SGRO)

Finals: Softcat PLC (LON:SCT), CAP-XX Ltd (LON:CPX)

AGMs: BHP Billiton PLC (LON:BLT), Barratt Developments PLC (LON:BDEV), Tlou Energy Ltd (LON:TLOU)

Economic data: UK CPI, PPI, HPI inflation; FOMC minutes; US housing starts

Thursday October 18:

Trading updates: Unilever plc (LON:UVLR), Rentokil Initial PLC (LON:RTO), Domino’s Pizza PLC (LON:DOM)

Finals: Applied Graphene Materials PLC (LON:AGM), Tristel Plc (LON:TSTL)

Ex-dividends: To take 1.6 points off FTSE 100 index - BAE Systems PLC (LON:BA.), Smiths Group PLC (LON:SMIN)

AGMs: Falcon Oil & Gas Ltd (LON:FOG), Myanmar Investments International Ltd (LON:MIL), Rank Group PLC (LON:RNK), Renishaw PLC (LON:RSW)

Economic data: UK retail sales; US weekly jobless; Philly Fed business outlook survey

Friday October 19:

Trading updates: London Stock Exchange Group PLC (Q3)(LON:LSE), Provident Financial Group PLC (Q3) (LON:PFG), Dechra Pharmaceuticals (LON:DPH), Essentra (LON:ESNT), Record PLC (LON:REC)

Economic data: UK public sector finances; US existing home sales

HANetf founder and co-CEO discusses shift to active management in ETF market

HANetf founder and co-CEO Hector McNeil tells Proactive's Stephen Gunnion about shifting trends in the exchange-traded fund (ETF) market in the United States, indicating a big move towards active management within ETFs. Despite the European market lagging behind the US by three to five years,...

14 hours, 5 minutes ago