LONDON MARKET OPEN: Barratt Caution Leads Housebuilders Downward

Wed, 13th Jul 2016 07:34

LONDON (Alliance News) - Stocks in London opened lower Wednesday, with housebuilders back amongst the fallers, as Barratt Developments said it is preparing for the greater uncertainty following the UK's referendum on European Union membership.

The FTSE 100 housebuilder said it expects to post a 20% increase in pretax profit for its recently ended financial year, on rises in both sales volume and the prices of those houses sold, but said it was "too early" to assess the impact of the UK's vote to leave the European Union.

Barratt said it expects to post a pretax profit of GBP680.0 million for the year ended June 30, a 20% increase from the GBP565.5 million reported a year earlier, after its total completions for the year rose 5.3% to 17,319 from 16,447 and the average selling price of these rose 10.6% to GBP260,000 from GBP235,000.

The housebuilder said it has traded well throughout the year, with good consumer demand seen across its regions, although it noted some increased uncertainty in the higher-value London market.

The company noted that forward sales, including joint ventures, fell slightly, by 0.5% to GBP1.76 billion from GBP1.77 billion, and said it was "mindful" of the greater uncertainty facing the UK economy following the EU referendum.

"Following the EU referendum, it is too early to say what the impact of the uncertainty facing the UK economy will be. The sector continues to receive focused government support, mortgage availability is good and there remains an undersupply of new homes," Barratt Chief Executive David Thomas said.

The stock was the worst performer in the FTSE 100, down 2.4%, together with peers Persimmon, down 1.9%, Taylor Wimpey, down 1.8%, and Berkeley Group, down 1.8%.

The FTSE 100 was down 0.3%, or 18.27 points, at 6,662.42. The FTSE 250 was slightly higher at 16,813.24 and the AIM All-Share was up 0.1% at 721.85.

In Europe, the CAC 40 in Paris was up 0.4% and the DAX 30 in Frankfurt was down 0.1%.

In Asia Wednesday, the Japanese Nikkei 225 index continued its run of gains, ending up 0.8%. The Shanghai Composite closed up 0.4% and the Hang Seng in Hong Kong is up 0.6%.

Burberry Group shares were up 2.1% after the luxury fashion designer reported growth in revenue in the first quarter of its financial year, benefiting from the weak pound, and upped its guidance for full-year profit. But the company warned about revenue measured at constant currencies.

Burberry said retail revenue in the three months ended June 30 grew by 4% year-on-year to GBP423 million, but within this, comparable sales declined by 3% in what Burberry described as a "challenging external environment".

The company said all three global regions of Asia, the UK and US experienced a low single-digit percentage comparable sales decline, due to persisting underlying cost-inflation pressures.

In the first half ending September 30, Burberry now expects wholesale revenue at constant exchange rates to fall by over 10% year-on-year, although full-year reported adjusted retail/wholesale profit should benefit by about GBP90 million if exchange rates remain as they are now.

Discount retailer Poundland Group said it has reached an agreement with South African furniture retailer Steinhoff International Holdings for Steinhoff to buy Poundland.

Under the terms of the offer, Poundland shareholders will receive 222 pence in cash for each Poundland share, comprising 220 pence in cash per share and Poundland's final dividend of 2p per share for its financial year ended March 27.

This values Poundland at approximately GBP597 million, and represents a premium of 40% to Poundland's 158.25p closing price on June 13, which was the last business day before Steinhoff first bought Poundland shares, and a premium of 13% to Poundland's 196p closing price on Tuesday. On Wednesday, the stock was up 13% at 221.00p and the best performer in the FTSE SmallCap index.

Tools, equipment and plant hire services company Speedy Hire said it has seen a positive start to the year, after having lowered overhead costs, and it now anticipates full-year results slightly ahead of its previous expectations.

Speedy Hire said revenue in the first quarter of its financial year, ended June 30, was slightly ahead of the same period a year earlier. The company said it was following "a disciplined approach to bidding" and has retained "a number of "major framework contracts" since the start of its financial year.

"It is too early to assess with any degree of certainty what impact the EU referendum result will have on the group's end markets but, to date, there has been no deterioration in trading," Speedy Hire added.

The stock traded up 9.6%, the second best performer in the FTSE SmallCap index.

JD Wetherspoon reported growth in sales in the 11 weeks to July 10 and in the 50 weeks to the same date, as it prepares to close its current financial year.

The pub company said total sales in the 11 weeks grew by 3.8% year-on-year, while rising by 5.5% in the 50 weeks. Like-for-like sales increased by 4% in the 11 weeks and by 3.4% in the 50 weeks. Full-year operating margin before exceptional items and before a GBP3.8 million property gain is expected to be around 6.8%, compared with 7.4% last year.

Wetherspoon has opened 13 news pubs in the financial year, sold 29 and closed 11. It expects to have opened 16 new pubs by the end of the year, booking around GBP13 million in exceptional, non-cash losses due to the pub disposals and closures. The stock was up 4.2%.

In the economic calendar, the Bank of England's credit conditions survey is released at 0930 BST, eurozone industrial production is at 1000 BST, and US MBA mortgage applications are at 1200 BST. The Energy Information Administration's crude oil stocks are at 1530 BST, and the Beige book on the US economic situation is at 1900 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1