In contrast to the housebuilders, who have had a torrid time this month, construction materials firms are enjoying a positive run of form as demand for their products continues to grow unabated.
Results today from brick maker Ibstock (IBST) and door and window manufacturer Epwin (EPWN:AIM) both met a favourable response from investors with gains of as much as 4% and 6% respectively.
That follows positive updates and a similar share price response from rival brick maker Brickability (BRCK) and paving maker Marshalls (MSLH) earlier this week.
ROBUST DEMAND
Ibstock said it expected revenues for last year to rise almost 30% to more than £400 million on what it called ‘robust demand trends’.
Thanks to adept management of supply chain constraints and cost inflation, it also said it expected EBITDA (earnings before interest, taxes, depreciation and amortization) and cash flow generation to be ahead of its previous forecasts.
Looking to 2022, the firm said it was ‘encouraged by the strength of the ongoing recovery in the construction industry and the resilience of demand from our house builder and merchant customers’.
In a similar vein, Brickability raised its EBITDA forecast for the year to March citing ‘sustained positive momentum and optimism within the UK housebuilding sector with demand for the group's product offering building throughout this year and expected to continue into the new financial year’.
Marshalls posted a 26% increase in sales for the year to December thanks to price rises and strong underlying market demand, so much so that the business ‘has been experiencing trading volumes that are outperforming the Construction Products Association's growth forecasts’.
Finally, Epwin reported a 37% increase in 2021 sales thanks to price increases, small acquisitions and ‘the ongoing strength of demand in the RMI (repair, maintenance and improvement) market’, and raised its pre-tax profit guidance despite supply chain issues and cost pressures.
SAFE AS HOUSES
While the RMI market continues to boom as consumers invest in their homes, the new build market is also seeing unprecedented demand due to the lack of affordable housing geared towards modern living.
According to recent figures from the Halifax building society, the average house price rose by 9.8% last year to just over £276,000. That means an increase in value of more than £24,500 in just 12 months, which is the biggest annual rise in almost 18 years.
Data on new build sales typically take longer to process and therefore take a while to show up on Land Registry records. However, data for last September shows the average new build house cost just under £360,000, 2.9% more than in August and a whopping 21.7% more than September 2020.
