Housebuilders continue to build on very solid market foundations that show no signs of shaking. Share prices have risen markedly over the last 12 months, prompting some to suggest the best has already past, but there could be more to come if the Budget next week delivers extra support. BDEV is up c30% in the last 12 months.

Barratt Developments (BDEV) reported a very strong start to the year, which it notes is supported by a ‘positive market backdrop’. It’s easy to sound like a record on repeat but it’s hard to overegg the importance of cheap mortgages, low unemployment, lack of supply and Help to Buy. Overreliance on Help to Buy may be the concern as we approach the Budget if the Chancellor fails to extend or enhance the scheme.

Total forward sales including joint ventures were up by 8.4% to £2,876.0m from the same period in 2016 (£2,654.3m).This works out at 12,843 plots against 11,733 plots a year before.  Barratt’s wholly owned forward sales were up by 7.1% to £2,642.1m (2016: £2,466.1m), which works out at 11,963 plots, against 11,035 plots last year.

Forward sales average selling prices therefore look a touch weaker, down from c£226k to around £223k which is a modest concern overall.

On land purchases, Barratt remains pretty cautious as it focuses on more disciplined volume growth and clears the hurdles of 20% gross margin and 25% ROCE. Plot purchases dipped by about 25% last year but it expects to pick up the pace again in 2018, targeting 20,000 plots. Today’s update shows it’s halfway there already with 9,498 plots added so far.

Crest Nicholson (CRST) also reported a strong 12 months to the end of October. Of note, forward sales are up 13.6% on last year at £391.4m, with units +12.6% to 1,997.

Following Persimmon’s call for action, management laid down a challenge to the government ahead of the Budget on planning. Some support for housebuilders is already anticipated but it’s doubtful if the government is proposing anything radical.

For Cobham (COB), a trading update without a profits warning is something to remark on. For over a year we had about one a quarter.

Today management said performance in the first ten months of 2017 has been largely as expected as it continues to implement far-reaching turnaround plans.

But it repeated the cautious tone from August by saying ‘there remains a range of potential outcomes for full year performance’.  To be fair there is often a lot of trading activity in the final two months of the year, but you would be forgiven for thinking management should have a little more visibility. Nevertheless, this is early days in the turnaround. Broadly positive - shares +2.6% in early trading.

Finally, Wizz Air (WIZZ) has made its intentions for growth loud and clear with the order of 146 new Airbus aircraft. These won’t be in service until 2025 but it’s a signal of the kind of growth that management expects. The new aircraft will cost a cool $17bn, but management expects to get a discount on that. However expect net debt to rise and investors may be a little nervous about cost with shares down just shy of 1% in early trade. CEO József Váradi says it’s a ‘game-changer’ for the airline and brings its total orders to 282 aircraft.

Even if these were to replace all the existing 87 Airbus aircraft in operation it would amount to a trebling in the fleet. Wizz’s focus on relatively immature markets is paying off and today’s order suggests even loftier ambitions. It of course does not bode especially well for the problem of overcapacity in the market.


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