The FTSE traded lower midday despite rallying straight after opening as a series of updates kept housebuilder shares under pressure.

Crest Nichols falls almost 7%

Shares in construction firm Crest Nicholson fell almost 7% to 414.9 after the company said that its margins will most likely be at the bottom of its previous guidance because of rising construction costs and a slower housing market. In May the company warned that it was forced to offer more sales incentives to potential buyers of the homes at the more expensive end of the range which started to hit its profit margins.

Data about house buying and mortgage approvals over the last two months has been indicating a slowdown in the UK house market that will keep companies in this sector under pressure, a situation that is unlikely to change given that the Bank of England is only just holding back from raising interest rates.

Bellway shares fall despite positive trading update

This would also explain why shares in property developer Bellway declined 2.7% to 3,317 despite the company’s latest trading update showing that there has been continued strong demand for its homes and that it was on track to sell over 10,000 homes for the full year for the first time ever. Bellway said that the average selling price for its homes was over £280,000 and is anticipating an operating margin of around 22%.

Bovis Homes group, which is up 35% on the year, traded down 2.75% today at 1,238.50. FTSE 100-listed Berkeley Group and Barratt Developments were down 2.58% at 4,195 and 2.59% at 564.10, respectively.

Boohoo revenues up 53%, shares down 3.27%

Ironically, online fashion retailer Boohoo.com also saw a 3.27% drop in its share price to 213.10, possibly undeservedly so. Boohoo’s revenue in the last quarter increased 53% year-on-year. Of the total quarterly revenue of £183.6 million around £110.7 million came from UK sales, an increase of 49% on the year.

Once the dust settles, however, Boohoo should actually do much better. Although high street retailers have been struggling to keep sales growing this year all of them reported that their on-line businesses generated more growth than any other parts of the business. Even when the ability of UK consumers to spend declines online sales perform much better than high street sales. Boohoo is well positioned to capture more demand.

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Commodities and Shares Editor
12th June 2018
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