The UK housing market is set to come under close scrutiny in the week ahead with a slew of earnings due from housebuilders.
Investors will be keen to see how well companies have fared in the face of a sector-wide slowdown following the Brexit vote.
Barratt Developments PLC (LON:BDEV) is expected to have weathered the Brexit storm, having said it sees annual profits beating market forecast. The housebuilder reports its full year results on Wednesday.
In a detailed trading update in July, the group said pre-tax profit in the year to 30 June is anticipated to increase to £765mln from £682.3mln, ahead of analysts’ estimates of £699mln-£740mln.
Home completions reached the highest level in nine years at 17,395, compared to 17,319 last year.
The average selling price of homes grew 5.9% to £275,000 from £259,000, as demand remained strong on low borrowing costs and the Help to Buy government scheme.
“The market will be interested to hear if average selling prices have continued to rise and whether market conditions in London remain weak,” said Graham Spooner, investment research analyst at The Share Centre.
Berkeley blue chip boost
Berkeley Group Holdings PLC (LON:BKG), which was promoted back to the FTSE 100 in the index’s latest quarterly reshuffle, will update on the market on Wednesday with a trading statement.
At its full year results in June, the group posted a 53% rise in pre-tax profit to £812mln, a 3.4% increase the number of homes sold to 3,905 and a 31% rise in average selling prices to £675,000.
It said forward sales at the year-end were down 16% but earnings for the current year were set to be at least level with last year.
Berkeley repeated its earnings guidance for at least £3bn of pre-tax profit in the five years to April 2021 but cautioned about greater uncertainties going forward.
Chairman Tony Pidgeley said: "Brexit and wider global macro instability impact both confidence and sentiment and will result in constrained investment levels."
New Bovis boss to deliver
Bovis Homes Group PLC (LON:BVS) is expected to announce its strategy to overhaul the business under new chief executive Greg Fitzgerald alongside its interims on Thursday.
Fitzgerald, the former chairman of Galliford Try PLC (LON:GFRD), has replaced chief executive David Ritchie who left earlier this year following a surprise profit warning.
Ahead of the official figures, Bovis outlined its first half performance in a trading update in July, reporting a decline in home completions and sales in line with its reduced expectations.
“While the rest of the housebuilding sector has been enjoying some incredibly benign market conditions, Bovis has somehow managed to bungle it,” said Hargreaves Lansdown.
“It has struggled to contain cost inflation, been unable to address a shortage of skilled labour and had to compensate customers for delivering sub-standard properties at the end of it all.”
Redrow resilient
In contrast, sector-peer Redrow PLC (LON:RDW) has achieved strong trading performance and expects to report a 22% increase in full year pre-tax profits to £306mln on Tuesday.
In its last trading update, Redrow unveiled a record order book and said it saw a further increase in legal completions and average selling prices.
Liberum put Redrow on its list of preferred housebuilders in its latest note on the sector in July, repeating a ‘buy’ rating and saying it thinks the company’s growth prospects are undervalued.
The broker has forecast pre-tax profit of £315mln, compared to £250mln last year, on an increase in sales to £1.6bn from £1.3bn.
Halfords hanging on
Aside from the housebuilder fest, a trading update from bikes to car parts retailer Halfords Group PLC (LON:HFD) will also attract attention on Tuesday.
The firm is still waiting on a new CEO, after incumbent Jill McDonald announced that she would be leaving to head up the Clothing, Home & Beauty division of Marks & Spencer Group PLC (LON:MKS) in October, but its performance should be good.
Analysts at UBS expect Halfords to report a strong first-quarter, benefitting from a late Easter boost, forecasting growth in like-for-like sales of 4.5% for its Retail business.
READ: Halfords up as 7.5% drop in annual profits proves touch better than expected
In a preview, they pointed out that the four week April period including Easter is likely to have seen like-for-like sales growth above 10%, though this will amortise over the following 16 weeks of the 20 week period.
The analysts noted that the weather has been mixed over the period with sunny spells at the beginning helping cycling but high rainfall in August likely to have been unhelpful, although given the weak pound there may have been a bigger benefit from UK ‘staycations’.
They expect to see cycling like-for-likes up 6%, car maintenance up 4%, car enhancement up 2%, but Autocentres down 2%.
Acquisitions key for DS Smith
Mid cap packaging firm DS Smith PLC (LON:SMDS) will also issue a trading update on Tuesday.
UBS analysts expect limited detail, however, with no actual numbers to be released, but they look for an update on the recent US acquisition of Interstate.
READ: DS Smith expands in America with US$920mln acquisition of 80% of Interstate Resources
The analysts also expect the group to highlight a price recovery on the back of recent paper price rises.
In its full year update in July, DS Smith reported revenue of £4.781mln and operating profit of £443mln with management commenting then that the current year had started well.
EnQuest results overshadowed
Second quarter results from FTSE 250-listed oil group EnQuest PLC (LON:ENQ) on Thursday are still likely to be overshadowed by last week’s production update, which highlighted problems at its Kraken field in the North Sea and cut production targets.
As a result of that, questions have again been raised about the group’s balance sheet. And investors will be hoping for more clarification on the situation especially with regard to production targets for 2018.
ECB on hold
Away from corporate news, the main focus will be on the latest European Central Bank Council meeting outcome on Thursday.
Deutsche Bank is not expecting any policy announcements by the ECB although a quantitative easing exit step is expected in the next few months, with concern about the market overshooting suggesting the exit signal could be weak in September.
In a preview, the German bank’s analysts said: “We believe the ECB will leave the current rhetorical framework – ‘confidence, patience, persistence and prudence’– largely intact in September while adding a mild verbal warning that the EUR exchange rate is ‘important’ to growth and inflation.”
They added: “Rather than signal exit in advance, we think the ECB strategy will be to wrap the exit decision in dovishness when it is announced in October.”
Significant events expected on:
Monday September 4:
Finals: Dechra Pharmaceuticals PLC (LON:DPH)
Interims: Amryt Pharma PLC (LON:AMYT), Curtis Banks Group PLC (LON:CBP), Highland Gold Mining Ltd. (LON:HGM), Johnson Service Group PLC (LON:JSG), Michelmersh Brick Holdings PLC (LON:MBH), Tax Systems PLC (LON:TAX)
Economics: UK construction PMI report
US Labor Day holiday
Tuesday September 5:
Trading update: Halfords Group PLC (LON:HFD), DS Smith PLC (LON:SMDS)
Finals: Craneware PLC (LON:CRW), A&J Mucklow Group PLC (LON:KLW), Mattioli Woods PLC (LON:MTW), Redrow PLC (LON:RDW)
Interims: 888 Holdings PLC (LON:888), Alpha Fx Group PLC (LON:AFX), Cairn Homes PLC (LON:CRN), Dalata Hotel Group PLC (LON:DAL), EU Supply PLC (LON:EUSP), Gamma Communications PLC (LON:GAMA), Lighthouse Group PLC (LON:LGT), Stadium Group PLC (LON:SDM), Spectra Systems Corporation (LON:SPSY), Vipera PLC (LON:VIP)
Traffic figures: International Airlines Group PLC (LON:IAG); Ryanair PLC (LON:RYA)
Economics: UK services PMI report; US factory orders
Wednesday September 6:
Trading update: Berkeley Group PLC (LON:BKG)
Finals: Barratt Developments PLC (LON:BDEV), Diurnal Group PLC (LON:DNL), McCarthy & Stone PLC (LON:MCS)
Interims: Faron Pharmaceuticals PLC (LON:FARN), Harworth Group PLC (LON:HWG), Loopup PLC (LON:LOOP), PPHE Hotel Group PLC (LON:PPH), Somero Enterprises Inc (LON:SOM), Vectura Group PLC (LON:VEC), WANdisco PLC (LON:WAND), Xaar PLC (LON:XAR)
Traffic figures: easyJet PLC (LON:EZJ)
Economic data: BRC UK shop price index; US balance of trade; US ISM non-manufacturing report
Thursday September 7:
Finals: Ashmore group PLC (LON:ASHM), CPL Resources PLC (LON:CPS), Frontier Developments PLC (LON:FDEV), Go-Ahead Group PLC )(LON:GOG), McBride PLC (LON:MCB), Redde PLC (LON:REDD)
Interims: Biffa PLC (LON:BIFF), Bovis Homes PLC (LON:BVS), Brady PLC (LON:BRY), CentralNic Group PLC (LON:CNIC), EnQuest PLC (LON:ENQ), Filtra Group Holdings PLC (LON:F LTA), Gama Aviation PLC (LON:GMAA), Hunters Property PLC (LON:HUNT), International Public Partnerships Limited (LON:INPP), Molins PLC (LON:MLIN), ProPhotonix PLC (LON:PPIX) Sanne Group PLC (LON:SNN)
FTSE 100 ex-dividends: Admiral Group PLC (LON:ADM), Antofagasta PLC (LON:ANTO), BHP Billiton PLC (LON:BLT), CRH PLC (LON:CRH), ConvaTec Group PLC (LON:CTEC), Glencore PLC (LON:GLEN), Land Securities PLC (LON:LAND), RSA Insurance PLC (LON:RSA), Shire PLC (LON:SHP), Standard Life Aberdeen PLC (LON:SLA)
Economics: ECB interest rate decision; Halifax UK house price index; US weekly jobless claims
Friday September 8:
AGMs: Greene King PLC (LON:GNK), Ortac Resources Ltd. (LON:OTC)
Economics: UK industrial, manufacturing production; UK balance of trade