Shares round-up: two post-election stock market winners
A couple of companies that had fared well since Labour swept to power last week have issued updates to the market. City writer Graeme Evans reports ‘excellent value’ and an attractive yield.
11th July 2024 14:06
by Graeme Evans from interactive investor
Two post-election stock market winners went separate ways today after construction firm Galliford Try Holdings (LSE:GFRD) and low-cost homes builder MJ Gleeson (LSE:GLE) delivered year-end updates.
The regulated and public sector-focused Galliford Try rose 21.7p to 293.7p, taking gains since Friday to 15%, after it forecast revenues and underlying profits above City estimates.
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Reviewing the update, house broker Panmure Liberum lifted its price target to 415p and flagged the “exciting” potential of infrastructure opportunities in the water industry.
Gleeson shares fell back 12p to 577p, cutting the post-election improvement to 9% after it said that half-year sales in its Homes division had been steady but less vigorous than expected.
It highlighted deferred expectations around interest and mortgage rate cuts and said demand for new homes should strengthen once the Bank of England begins loosening policy.
Focused on the North of England and the Midlands, the company aims to ensure that a material proportion of its homes are affordable to a couple earning the National Living Wage.
Across the year to 30 June, Sheffield-based Gleeson said its Homes delivered a robust performance by growing the number of completions by 2.8% to 1,772.
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Gleeson’s other division, which identifies and promotes land through the residential planning system in southern England, sold four sites in the year.
With the timing of the general election leading to the deferral of a major disposal into the new financial year, the division’s operating profit of about £2 million is below market expectations.
Chief executive Graham Prothero expects the division to complete a number of significant land disposals in the months ahead, while he is also excited by Gleeson Homes securing its first partnerships deal with a third party.
He is also ready for Gleeson to play its part helping the UK get much needed affordable homes.
The former Vistry Group executive added: “We welcome the chancellor’s comments regarding mandatory housing targets, planning reform and other measures to substantially increase the supply of new homes.
“There is much to do if aspiration is to become reality, but the determination that we have seen since the election to get things done marks a positive change in approach.”
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Peel Hunt, which has a “Buy” recommendation and price target of 590p, said the 2024 performance was broadly in line with its expectations.
It added: “With a more stable political backdrop and a slight economic tailwind, the business looks well placed in our view to grow into the medium term, with scope to significantly increase outlets and volumes.”
On Galliford Try, the broker said the 2024 performance pointed to earnings 8% higher than it had expected. Meanwhile, prospects are underpinned by an order book worth £3.8 billion and revenues visibility for 2025 at 92%.
The shares are up 30% this year, but Peel Hunt thinks they still offer “excellent value” on 12 times 2025’s forecast earnings and with a 4% yield.
The FTSE All-Share construction and infrastructure specialist is now focused on health, education, defence, custodial, highways and environment projects, having offloaded its Linden Homes and Partnerships operations to Vistry Group (LSE:VTY) at the start of 2020.
Its 2030 growth strategy targets include a divisional margin target of 4%, revenues growth to more than £2.2 billion and sustainable dividends through earnings cover of 1.8 times.
Panmure Liberum believes the “great challenges” facing the water industry, such as droughts and pollution, should present a major opportunity.
It added: “The problem for water companies (and indeed the supply chain) is to handle the large volume of expected work. Galliford can potentially add more capability through strategic partnerships and bolt-ons, in our view.”
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