Thursday, 27 February 2014

Giving and taking (and taking leave)

Lots of results today - Barratt, Redrow and Kier - and a couple of unexpected news flashes - Grenville Turner of quoted estate agency group Countrywide to step down as CEO (and stay as non-exec Chairman) ... and Costain to raise £75m (and bringing results forward).

In summary, housebuilders remain in clover, with volumes, prices, margins and orders all heading north and returning capital, in varying degrees. Barratt, which had a lot of ground to make up on more distributive rivals paying a higher proportion of earnings as dividend (one-third versus an anticipated one-sixth). Redrow introducing dividend after long drought. This follows expansive special dividend pledges from Berkeley, Persimmon and Taylor Wimpey. It should boost return on capital, but implies builders believe value-enhancing opportunities in land market will start dwindling, best guess over the next two years.

Going the other way was Costain, which today asked shareholders for another £75m. This was not to patch up any black holes - results, which had to be brought forward, showed a 10% improvement in PBT, on sales up 3% and a 25% expansion of the order book - but to bolster its balance sheet to continue to attract top clients, invest in new opportunities and fund the less cash-positive (but attractive) partnering type contracts it has been targeting.

Kier's Chief Executive Paul Sheffield used the hybrid construction-services group's interim results to bid what many investors think is a surprisingly early farewell, but with a 96% increase in operating profits (34% like-for-like, stripping out the May Gurney acquisition, all seems to be well.

(Both Costain and Kier saw cash pressured by working capital changes inherent in the less risky new forms of working; time my show that smaller companies chasing lower margin, riskier work just to maintain cashflow may be storing up problems for the future.)

Countrywide's high profile chief executive Grenville Turner will be moving to the non-executive chairman role; interim chairman David Watson was particularly  bullish announcing FY results: "we fully expect the UK housing recovery to continue and anticipate that we can deliver the highest ever levels of Group profitability in 2014".

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