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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Shares in housebuilders have become hot property in recent months. With the new Labour government reintroducing mandatory targets for local councils and pledging measures to help build around 90,000 social homes a year, the UK “could see the biggest housebuilding boom since the 1960s”, says RBC Capital Markets analyst Anthony Codling.
But this is easier said than done. Codling points to supply chain challenges, with the UK currently only capable of producing enough bricks for 220,000 homes a year. Government data also shows that the UK’s construction workforce continues to shrink as older workers retire. The industry employed 2.04mn people at the end of June, a decline of almost 400,000 since the first quarter of 2019.
Still, with falling interest rates also likely to contribute to a potential housebuilding recovery from next year, it’s understandable that the FTSE 350 Household Goods & Home Construction index has risen by 40 per cent over the 12 months
Some have done better than others. The UK’s biggest housebuilder, Barratt Developments, is up 21 per cent and Taylor Wimpey’s large land bank has helped push its shares up 41 per cent. But the biggest gainers have been companies with the greatest exposure to social and affordable housing — MJ Gleeson is up 60 per cent and Vistry has risen by 75 per cent. The latter’s Partnerships arm works directly with councils and housing associations on a profit share basis — a model that is latterly being copied by competitors.
Getting in on this act will take time, but so will the anticipated uplift in profits from higher rates of activity. So it’s hardly surprising that Browning West has trimmed its Vistry stake. The Los Angeles-based activist, whose founder Usman Nabi sits on Vistry’s board, sold over £276,000 worth of shares. It remains the company’s biggest shareholder, though, with a stake of around 8.4 per cent.
Spectris bosses buy in
Analysts have found it hard to hold a consistent opinion on Spectris of late. In January, HSBC downgraded the scientific instruments business to a “hold”, only to bump it back to a “buy” in May. Meanwhile, Shore Capital put the FTSE 250 company on a “sell” in February before later shifting back into neutral territory.
A lot of the toing and froing relates to the strength of demand for Spectris’s high-tech instruments. Conditions in its end markets have been soft, particularly in China where there has been a “significant reduction in battery development” and “subdued trading in pharmaceuticals”, it said at the end of last month in its half-year results. Those figures revealed a 10 per cent fall in like-for-like sales and a sharp contraction in its operating margin, not helped by the rollout of a new payment system.
However, management said the group was still on track to achieve its full-year forecasts and predicted that market conditions would improve in the second half.
Steps taken by directors may have further reassured shareholders. On August 5, chief executive Andrew Heath, together with his wife, bought 10,000 shares for just over £280,000. On the same day, chief financial officer Derek Harding bought 2,000 shares for £57,000, and chair Mark Williamson and non-executive director Nicholas Anderson each bought roughly £20,000 worth of stock.
Spectris’s share price has yet to show much sign of improvement, however, having fallen by over a fifth since the start of the year. The company now trades on a price/earnings ratio of 15.4, compared with its five-year average of 18.8. Analysts at HSBC think the risk/reward balance has turned positive given the share price drop, and predicted that earnings momentum would build for the rest of the year and into the first quarter of 2025.