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(Alliance News) - With a vaccine against Covid-19 appearing tantalisingly close, the divergent impact that the virus pandemic has had on property companies so far was laid bare on Tuesday.
While housebuilder Persimmon followed Taylor Wimpey in reporting booming orders and sales following the lifting of the spring lockdown in the UK, office and retail property developer Land Securities continues to suffer from restrictions and the exodus from city centres.
Land Securities reported a sharp drop in interim revenue, leading to a widened pretax loss.
In the six months to September 30, Landsec's pretax loss widened to GBP835 million from GBP147 million a year before. The real estate investor recorded a valuation deficit of GBP945 million in the first half compared to GBP368 million a year before.
Revenue dropped 49% to GBP115 million from GBP225 million. Like-for-like net rental income fell 10%.
Land Securities NAV per share ended the half at 1,068p, down 9.6% from 1,182p at March 31.
Chief Executive Mark Allan said: "While today's results clearly show the impact of the pandemic on our business, Landsec remains in a fundamentally strong position. Together, the high quality of our portfolio and low leverage of our balance sheet provide a solid foundation for executing our growth strategy and creating value for all stakeholders. This strength also means we have been able to take a proactive and responsible approach to the challenges of Covid-19, supporting our communities and customers."
Allan believes Landsec is "well placed to capitalise on opportunities as they emerge", particularly in the London office market.
"The investment market for high-quality London office assets, such as those owned by Landsec, has remained robust throughout the pandemic and there is little sign of that interest waning. Access to this liquidity, coupled with the acquisition and development opportunities that are likely to arise as a result of increased obsolescence of older office stock, as well as the long-term need for urban mixed use regeneration, mean there will be ample opportunity for Landsec to create significant value," he added.
Landsec shares were up 3.2% early Tuesday, while Persimmon was down 0.2%. However, Landsec is down by a third so far in 2020 and Persimmon just under 3%
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 6,207.90
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Hang Seng: up 1.1% at 26,301.48
Nikkei 225: closed up 0.3% at 24,905.59
DJIA: closed up 834.57 points, 3.0%, at 29,157.97
S&P 500: closed up 1.2% at 3,550.50
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GBP: up at USD1.3174 (USD1.3131)
EUR: flat at USD1.1818 (USD1.1815)
Gold: up at USD1,885.00 per ounce (USD1,853.81)
Oil (Brent): flat at USD42.46 a barrel (USD42.46)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 CET Germany ZEW indicator of economic sentiment
0855 EST US Johnson Redbook retail sales index
1000 EST US IBD/TIPP economic optimism index
1000 EST US job openings and labour turnover survey
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The unemployment rate in the UK rose to 4.8% for the quarter ending September 30, the National Statistics Office said, in line with expectations. The UK unemployment rate was 0.9 percentage point higher than a year earlier and 0.7 percentage point up from the second quarter of 2020. For July to September 2020, an estimated 1.6 million people were unemployed, up 318,000 on a year before and up 243,000 on the previous quarter. The annual increase was the largest since December 2009 to February 2010, and the quarterly increase was the largest since March to May 2009. The UK employment rate was estimated at 75.3%, 0.8 percentage points lower than a year earlier and 0.6 percentage points lower than the previous quarter.
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Retail sales in the UK climbed in October, though growth slowed from a month earlier, despite consumers stocking up as Covid-19 restrictions tightened. According to the British Retail Consortium-KPMG sales monitor, sales surged 4.9% annually in October, in-line with three-month average climb, and ahead of the average 12-month rise of 0.7%. In October 2019, sales fell 0.3%. On a like-for-like basis, UK retail sales jumped 5.2%, after falling 0.9% a year earlier. In September, total UK retail sales rose 5.6% and were 6.1% higher like-for-like. "October saw another month of strong sales growth, with food, gifts and loungewear high on peoples' shopping lists. Tightening restrictions across the UK and speculation towards the end of the month of an England-wide lockdown prompted customers to stock up on home comforts and food supplies," BRC Chief Executive Helen Dickinson said.
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A coronavirus vaccine could start being distributed by Christmas after a jab developed by pharmaceutical giant Pfizer cleared a "significant hurdle". UK Prime Minister Boris Johnson said initial results suggested the vaccine was 90% effective at protecting people from Covid-19 but warned these were "very, very early days". The announcement from Pfizer and its vaccine partner BioNTech was hailed by scientists as a significant breakthrough in the fight against coronavirus. It came with England less than a week into Lockdown 2.0, while Wales eased up from a firebreak lockdown on Monday. Richard Vautrey, chairman of the British Medical Association's GP committee in England said practices would "stand ready" to deliver the vaccine, with clinics potentially running from 8am-8pm, seven days a week. Deputy Chief Medical Officer Professor Jonathan Van-Tam told a Downing Street press conference he was "hopeful" there would be "some vaccine by Christmas".
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Key parts of Johnson's controversial Brexit legislation have been rejected by the Lords. Peers moved to strip controversial clauses from the UK Internal Market Bill that would enable ministers to break international laws. The Lords voted 433 to 165, majority 268, to reject law-breaking powers after fierce criticism by Tory former leader Michael Howard and Tory ex-chancellor Ken Clarke. The government immediately responded by insisting it would not back down.
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Italy's central bank on Monday warned clients of UK-based financial institutions of the looming year-end Brexit transition deadline. With the completion of the UK's withdrawal from the EU on December 31, British financial intermediaries - such as banks, payment institutions and electronic money institutions - will no longer be able to operate in Italy based on the principle of mutual recognition. As such, the provision of banking and financial services by these intermediaries are considered to be "unlawful" after the year-end, unless they have been newly authorised in Italy based on the rules in force from January 1. The Bank of Italy "on a number of occasions" has called on UK-based intermediaries to plan necessary actions to prepare for Brexit in an orderly fashion and to inform their Italian clients of the effects on existing relationships.
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BROKER RATING CHANGES
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GOLDMAN SACHS RAISES NEXT PLC TO 'BUY' ('NEUTRAL') - TARGET 7600 (6500) PENCE
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BARCLAYS RESUMES GREGGS WITH 'OVERWEIGHT' - TARGET 1890 PENCE
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BARCLAYS RESUMES DOMINO'S PIZZA WITH 'EQUAL WEIGHT' - TARGET 350 PENCE
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COMPANIES - FTSE 100
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Persimmon said it continues to perform robustly, saying it is currently on course to deliver a good result for 2020. Persimmon said it saw a strong third quarter, supported by "firm selling prices" and "resilient demand for new-build homes". Average private weekly sales rates per site for the period was 38% ahead of 2019. The firm is fully sold up for the current year and about GBP1.36 billion of forward sales reserved beyond 2020, up 43% on last year's GBP950 million. "Trading through the summer weeks was robust, with sales rates remaining strong thanks to good availability of homes at an advanced stage of construction," Persimmons said. It added: "Demand for new homes has remained resilient despite the continued challenges surrounding the Covid-19 pandemic, the UK economy and the uncertainty relating to the nature of the UK's future global trading arrangements." Persimmon also declared a second interim dividend of 70p per share, which together with the interim dividend of 40p per share paid in September, replaces the previously postponed 110p per share final dividend declared for 2019.
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Support services firm DCC said its first half was "very robust, despite revenue slipping 19%. In the six-month period to September 30, DCC's revenue fell 19% year on year to GBP5.92 billion from GBP7.31 billion. Adjusted operating profit grew 8.3% to GBP176.1 million, driven by 9.2% growth in its DCC Retail & Oil business. DCC upped its interim dividend by 5.0% to 51.95p. "Whilst the first half of the financial year is seasonally less significant, the strong performance demonstrates the resilience and agility of our business model. It also highlights the essential nature of the Group's products and services and the benefit of the diversity of the Group's operations, in terms of sectoral focus, customer and supplier breadth and geographic mix," Chief Executive Donal Murphy said. Murphy noted DCC's trading has improved since the summer
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A GBP5 billion claim, thought to be one of the largest in English legal history, brought by more than 200,000 claimants against mining giant BHP Group over a deadly dam collapse in Brazil, was thrown out by the High Court on Monday. The failure of the Fundao dam, which held waste from an iron ore mine in Minas Gerais state in south-eastern Brazil, killed 19 people and sent more than 40 million cubic metres of toxic waste into the Doce River. Lawyers representing almost 202,000 Brazilians, as well as hundreds of businesses, two dozen municipal governments and 15 churches, sought to take legal action against BHP over the fatal disaster. But, following a two-week preliminary hearing in July, a High Court judge ruled that the claim was a "clear abuse of process" which should be thrown out of court. Justice Turner said that, because there were ongoing civil proceedings in Brazil over the collapse of the dam, an English judge would be left with a task "akin to trying to build a house of cards in a wind tunnel".
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Tuesday's Shareholder Meetings
Pacific Horizon Investment Trust PLC - AGM
Harvest Minerals Ltd - AGM
Gulf Marine Services PLC - GM re Seafox resolutions for director changes
Mid Wynd International Investment Trust PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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