Shares in London were buoyant on Wednesday around midday, as housebuilder Persimmon’s disappointing annual profit result was offset by positive trading for mining stocks in the FTSE 100.
The FTSE 100 index was up 68.21 points, 0.9%, at 7,944.49. The FTSE 250 was up 74.48 points, 0.4%, at 19,977.76, and the AIM All-Share was up 1.02 points, 0.1%, at 860.39.
The Cboe UK 100 was up 0.8% at 794.87, the Cboe UK 250 up 0.5% at 17,526.36, and the Cboe Small Companies up 0.5% at 14,166.22.
The pound was quoted at $1.2042 at midday on Wednesday in London, down compared to $1.2118 at the equities close on Tuesday. The euro stood at $1.0660, up against $1.0613. Against the yen, the dollar was trading at JP¥135.54, down compared to JP¥136.11.
Stocks in London were boosted by some positive data on the factory sector in China.
Survey results showed that China’s factories returned to growth in February, amid the loosening of pandemic restrictions.
The Caixin manufacturing purchasing managers’ index rose to 51.6 points in February from 49.2 in January. Crossing over the 50-point no-change mark, it shows the sector is now in a state of modest growth. The latest reading on the strength of China’s factory sector was better than the market consensus forecast of 50.2, as cited by FXStreet.
On the back of this news, London’s mining stocks were on the rise. Notably, Rio Tinto was up 4.3%, Antofagasta up 4.0%, Anglo American up 3.9%, and Glencore up 3.0%.
On the other side of the FTSE 100 index, news of lower house prices drove down blue-chip housebuilders, with Barratt Developments shedding 2.9%, and Taylor Wimpey 3.0%.
In the UK, house prices fell 1.1% on an annual basis in February, according to Nationwide, with prices also seeing the sixth consecutive monthly fall.
The Nationwide house price index fell 1.1% on an annual basis in February, compared to the 1.1% rise seen in January.
On a monthly basis, prices fell 0.5% in February from January, slowing slightly from a 0.6% decline in January from December. It was the sixth consecutive monthly decline in UK house prices.
The average price of a house in UK was £257,406, down from £258,297 in January. House prices in February were 3.7% below their August peak.
‘Welcome to a new era of chaos for the housebuilders. Falling property prices and rising costs means profits are being squeezed and that will cause earnings in the sector to slump,’ said AJ Bell analyst Russ Mould.
‘It’s right to be cautious as the latest figures from Nationwide show house price growth has turned negative for the first time since June 2020. Higher mortgage costs, worries about job security, pressure on household finances from broader inflation and concerns about the economic outlook have created a cocktail of problems for people looking to move house and that‘??s caused a ripple effect in the property market.’
Persimmon was the worst FTSE 100 performer at midday on Wednesday, losing 8.8%.
The York-based housebuilder said annual revenue rose 5.7% to £3.82 billion in 2022 from £3.61 billion in 2021.
Pretax profit fell 24% to £730.7 million from £966.8 million, however.
The profit contraction reflects a £275.0 million increase in Persimmon’s provision for building safety remediation, which relates to flammable cladding.
Persimmon proposed a 60 pence final dividend, which will be the only payout for 2022 and less than half of 125p paid in total for 2021.
Looking ahead, Persimmon said its current outlet network would imply 8,000 to 9,000 legal completions in 2023, but it is too early for any certainty. Margins could be hit by around 500 basis points by lower average selling prices and cost inflation, with another 800 basis point hit from reduced volumes and increased sales incentives and marketing costs.
Chair Roger Devlin said: ‘We will inevitably see a sharp fall in the number of completions as well as a decline in profitability as a consequence of the nationwide diminution in demand for housing arising from higher mortgage rates and challenging economic circumstances.’
Elsewhere on the FTSE 100, Weir Group gained 7.0%.
The Glasgow-based mining technology company said revenue in 2022 jumped 28% to £2.47 billion from £1.93 billion in 2021. Revenue came in ahead of company-compiled consensus of £2.36 billion.
Pretax profit improved 40% to £260.2 million from £209.5 million, while adjusted operating profit climbed by a third to £395 million, topping consensus of £379 million.
‘The value creation opportunity for Weir is compelling. The mining industry is playing a crucial role in meeting the twin demands for decarbonisation and economic growth, resulting in multi-decade demand growth for critical metals,’ Chief Executive Officer Jon Stanton said.
Weir lifted its annual payout by 38% to 32.8 pence per share from 23.8p. It lifted its final payout by 57% to 19.3p.
Looking ahead, the company said: ‘We begin 2023 with a record order book and positive conditions in mining markets, where high levels of activity, coupled with miners’ focus on sustainable operations, are driving demand for our after-market spares and brownfield original equipment solutions. In 2023, we therefore expect to deliver growth in constant currency revenue, profit and operating margin.’
On the FTSE 250, Aston Martin jumped 11% after it hailed its ‘strongest order book in many years’. It was the top FTSE 250 performer of the morning.
The luxury carmaker’s revenue rose 26% to £1.38 billion from £1.10 billion, though its pretax loss widened to £495.0 million from £213.8 million. Its bottom-line was hurt by a non-cash foreign exchange charge of £156 million amid a revaluation of dollar debt. Its foreign exchange charge in 2021 totalled just £12 million.
Aston Martin said it was profitable in the final quarter, however, reporting pretax profit of £16.3 million and swinging from a £25.2 million loss. Fourth quarter revenue rose 46% on-year to £524.3 million.
Stroll said the company is on track to meet its target of generating annual revenue and adjusted earnings before interest, tax, depreciation and amortisation of £2 billion and £500 million, respectively, by 2024/2025.
For 2023, it expects to deliver 7,000 wholesale units, a rise of 9.2% from 2022’s 6,412. Last year’s outcome was a 3.8% improvement from 6,178 in 2021.
It expects to grow its adjusted Ebitda margin to around 20%, from 13.8% in 2022, which itself was an improvement from 12.6% in 2021. In the fourth quarter alone, its adjusted Ebitda margin climbed to 21.1% from 18.3% a year prior.
On AIM, Inland Homes lost 22%.
The brownfield site developer, housebuilder and regeneration specialist said its chair, Simon Bennett, alongside other non-executive directors have resigned with immediate effect.
Inland said it has become aware of ‘certain related-party issues’ of which its board was not informed at the relevant times.
Bennett will stay on as a director for a maximum of two weeks in order to fulfil the minimum number of directors, while the company arranges permanent appointments. It noted that should the process take longer than two weeks, Inland risks the suspension of trading in its shares. Inland, however, maintained that this is an ‘unlikely’ scenario.
It currently intends to re-appoint one of its founders and former CEO Stephen Wicks to the board, following due diligence checks.
This is after Bennett’s resignation, alongside two non-executive directors, will currently reduce the number of Inland Homes board directors from four to one, below the minimum requirement of two directors.
Elsewhere in UK news, shop price inflation accelerated to a record annual rate of 8.4% in February, as food prices rose 15% from a year before, according to data from BRC-NielsenIQ.
Shop price annual inflation accelerated to 8.4% in February, from 8.0% in January. This was above the three-month average of 7.8% and brought shop price growth to a new record.
Annual food inflation quickened to 14.5% in February, from 13.8% in January, while non-food inflation worsened to 5.3% from 5.1%.
Month-on-month, overall shop price inflation picked up to 0.8% in February, from 0.7% in January.
‘Shop price inflation rose to another record high as retail prices across the board continued to react to the impact of soaring energy bills, higher running costs and tougher trading conditions brought about by the war in Ukraine,’ said Helen Dickinson, chief executive of the British Retail Consortium.
Meanwhile, the UK manufacturing sector remained in contraction in February, according to survey data, though production rose for the first time in eight months.
The S&P Global/CIPS UK manufacturing purchasing managers’ index rose to 49.3 points in February from 47.0 in January. This was slightly ahead of a previous flash estimate of 49.2.
The reading stayed below the 50-point mark that separates growth from contraction for the seventh month in a row. However, it was the best reading during that period.
Production in manufacturing improved for the first time in eight months, with signs of improving client demand, and new orders rising in consumer and investment goods.
In European equities on Wednesday, the CAC 40 in Paris was up 0.4%, and the DAX 40 in Frankfurt was up 0.5%.
Stocks in New York were called higher. The Dow Jones Industrial Average is called up 0.2%, the S&P up 0.3%, and the Nasdaq Composite up 0.4%.
Brent oil was quoted at $82.78 a barrel at midday in London on Wednesday, down from $83.50 late Tuesday. Gold was quoted at $1,835.82 an ounce, up against $1,827.19.
Still to come on Wednesday’s economic calendar, there is a US manufacturing PMI reading.
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