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LONDON MARKET MIDDAY: Civitas Social Housing jumps on takeover offer

9th May 2023 12:14

(Alliance News) - Stock prices in London were lower at midday on Tuesday, as investors look ahead to a UK interest rate decision on Thursday and talks to avert a US government debt debacle.

The FTSE 100 index was down 35.58 points, 0.5%, at 7,742.80. The FTSE 250 was down 123.34 points, 0.6%, at 19,329.16, and the AIM All-Share was down 0.90 of a point, 0.1%, at 827.89.

The Cboe UK 100 was down 0.5% at 774.63 and the Cboe UK 250 was down 0.7% at 16,943.45, whilst the Cboe Small Companies was up 0.1% at 13,539.01.

Housebuilders were in focus on Tuesday morning, after a report from Halifax showed UK house prices lost ground last month.

The average UK house price fell by 0.3% month-on-month in April, following a 0.8% rise in March, Halifax said. This marks the first fall in house prices after three consecutive months of growth, the mortgage lender said.

The typical UK property now costs GBP286,896, compared to GBP287,891 a month earlier.

The annual rate of house price growth slowed to a marginal 0.1% from 1.6% in March.

"House price movements over recent months have largely mirrored the short-term volatility seen in borrowing costs. The sharp fall in prices we saw at the end of last year after September’s 'mini-budget' preceded something of a rebound in the first quarter of this year as economic conditions improved," said Halifax Mortgages Director Kim Kinnaird.

The latest figures indicate a "more steady environment", Kinnaird said, despite cost of living concerns and the impact of higher interest rates.

Among house builder shares, Berkeley Group was down 2.6%, Persimmon down 1.6%, and Taylor Wimpey down 1.2%. In the wider property sector, British Land was down 2.8% and Land Securities down 2.2%.

Later this week, on Thursday at midday, the Bank of England will announce its latest interest rate decision.

Markets are expecting another quarter percentage point hike in an attempt to bring down inflation. If this is the case, it will mark the twelfth consecutive rate rise by the BoE's Monetary Policy Committee.

Inflation in the UK came under scrutiny once again on Tuesday, as new numbers showed UK retail sales increased last month, though there were more signs of consumers being hurt by rising prices.

According to the British Retail Consortium, sales rose 5.1% on-year in April. This compares to a 0.3% fall a year prior and is in line with the average growth rate over the past three months.

On a like-for-like basis, sales increased 5.2% year-on-year last month, topping the three-month average rise of 5.0%. In April 2022, sales had fallen 1.7% year-on-year on a like-for-like basis.

BRC Chief Executive Helen Dickinson said: "While retail sales grew in April, overall inflation meant volumes were down for both food and non-food as customers continued to adjust spending habits."

Still to come on Tuesday, there is a key political meeting to head off a US debt default by lifting the national debt ceiling.

The White House gathering involves US President Joe Biden, House Speaker Kevin McCarthy and Senate Republican leader Mitch McConnell.

Raising the borrowing limit, normally routine, has been a contentious issue for the past several years, with congressional Republicans such as McCarthy and McConnell pushing for spending curbs and a smaller budget deficit in exchange for lifting the ceiling.

Stocks in New York were called to open lower. The Dow Jones Industrial Average was called down 0.3%, while both the S&P 500 index and the Nasdaq Composite were called down 0.4%.

In European equities early Tuesday afternoon, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 0.3%.

The pound was quoted at USD1.2624 at midday in London, flat compared to USD1.2628 at the equities close on Friday. The euro stood at USD1.0984, down against USD1.1016. Against the yen, the dollar was trading at JPY134.90, firm on JPY134.88.

On the FTSE 100, JD Sports Fashion was up 1.8%,

The Lancashire-based sportswear retailer said it is in exclusive talks to buy smaller European peer Courir for an enterprise value of EUR520 million, including EUR195 million in assumed net debt.

Courir is a France-based footwear and apparel retailer with 313 stores across six European countries. Out of 313 Courir stores, 191 are in France, with 24 in Spain and 22 in Belgium. The company in 2022 recorded a pretax profit of EUR47.4 million and revenue of EUR609.8 million.

"We expect further M&A to follow – JD is keen to continue its expansion into most of its current territories and Courir fits the bill. The balance sheet is of course very strong, and we expect more of the same," said Peel Hunt's Jonathan Pritchard.

On the FTSE 250 index, Victrex lost 8.1%, making it the worst performer of the morning.

The polymer maker's pretax profit fell to GBP39.1 million from GBP43.6 million a year prior. Victrex explained that profit fell due to lower volumes, cost inflation and targeted investment. Sales volumes fell by 14% to 1,941 tonnes from 2,264 tonnes.

Victrex declared an interim dividend of 13.42 pence per share, unchanged year-on-year.

"Our first half performance was driven by strong pricing, an improved sales mix and currency, with revenue up 1%, despite a softer macro-economic environment, resulting in weaker volumes, compared to a record financial 2022," said Chief Executive Officer Jakob Sigurdsson.

Looking ahead to financial 2023, ending September 30, Victrex expects pretax profit to be in line with financial 2022's GBP87.7 million.

Marshalls shares shed 9.2%, as its outlook was hurt by lower building levels.

The West Yorkshire-based natural stone and concrete manufacturer said its revenue for the four months that ended April 30 was GBP227 million, up 12% from GBP202 million a year prior. This includes the benefit of its acquisition of Marley Group in April last year, Marshalls said.

On a like-for-like basis, however, revenue fell by 14% due to a reduction in new house building, an uncertain economic climate, and "continued weakness" in private housing repair, maintenance and improvement activity.

Looking ahead, Marshalls said trading in the year to date has been "weaker than originally anticipated" due to a challenging economic climate. It expects full-year results to be lower than its original forecast.

Elsewhere, Civitas Social Housing received a takeover offer by investor CK Asset Holdings.

CK Asset offered 80 pence per share, a 44% premium to Civitas's closing price of 55.4p per share last week Friday, valuing the the healthcare real estate investment trust at around GBP485 million.

Civitas Social Housing shares jumped 43% to 79.17p each around midday.

Explaining its proposal, CK Asset said: "CKA believes that Civitas' position as one of the leading social housing providers in the UK, and its social impact and earnings profile, are complementary to its investment criteria, and make for a suitable strategic fit," adding that it anticipates Civitas "to maintain its position as one of the leading social housing providers benefitting vulnerable tenants in the UK."

Brent oil was quoted at USD76.28 a barrel at midday in London on Tuesday, up from USD74.94 late Friday. Gold was quoted at USD2,030.45 an ounce, up against USD2,013.19.

By Sophie Rose, Alliance News reporter

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