FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.
Is the UK property market still a one-way bet? For housebuilders not seeking to change it too much – by doing anything as rash as building loads more houses – it would seem so. Bellway, unlike overambitious rival Bovis, did not seek to overdo things in the latter half of 2016, building 4,462 homes in the six months to January 31 – a 6 per cent increase. That was more properties than Bovis but at a lower growth rate. And much slower than its 21 per cent increase in land investment.
This morning, Bellway showed the benefits of slow and low supply: revenue up 6 per cent to £1,1bn and pre-tax profit rising 9 per cent to £247.6m. Return on capital employed fell 250 basis points but was still 25.1 per cent. Crucially – unlike Bovis, which sacrificed build quality for growth – Bellway expects to retain its status as “a five star housebuilder”, one of only two to achieve this accolade. It plans to carry on at a steady pace in 2017: increasing homes sold by 5 per cent.
Is the UK property market still a one-way bet (2)? For a European property investor changing its entire business model – by doing something as rash as selling its Dutch and German holdings – one would hope so. Hansteen Holdings has decided to change the way it will do things in 2017 by selling it continental portfolios to Blackstone and M7 Real Estate for almost €1.3bn – leaving it as a play on post-Brexit UK property. That news came yesterday. And so it brought forward its results, which had been due this morning.
These showed that normalised total profit increased by 4 per cent £66m, although IFRS pre-tax profit fell to £120m from £171m previously. But net asset value per share increased by 18 per cent 124p and the normal dividend increased 12 per cent. Selling up in Europe now presents the prospect of a return of cash proceeds to shareholders.
Is the North Sea still a good bet? EnQuest thought so in January – it agreed to buy a stake in a mature North Sea oilfield from BP, in an example of the broader trend for oil majors to transfer assets to smaller operators and private equity. EnQuest said it would acquire an initial 25 per cent stake in the Magnus oilfield, located 160km north east of the Shetland Islands, for $85m, with an option to buy the remaining 75 per cent holding for $300m.
This morning, however, it showed some of the challenges it faced in 2016. Revenue and other operating income fell 6 per cent to $850m, including the effect of oil price hedges, as its realised oil price fell from $72 to $64.
However, chief executive Amjad Bseisu noted that 2016 also saw “the successful restructuring of our balance sheet, designed to strengthen EnQuest’s liquidity position, to reduce the level of its cash debt service obligations and to enable it to bring the Kraken development onstream.”
It now expects The Kraken development to come onstream under budget and on track for its first oil in Q2 2017. Production is set to increase, in line with guidance, to a range between 45,000 Boepd and 51,000 Boepd for the full year – dependent on the timing of Kraken first oil.
And is a bet still worth a bet? 888 Holdings said last year that it was still looking for transformational deal in the coming months – despite some high profile failures to complete mergers and acquisitions. A consortium of 888 and Rank Group abandoned a £3bn takeover approach for William Hill, a year after 888 rebuffed an offer from William Hill over price. Gibraltar-based 888 was also outbid in its attempt to buy Bwin.party by GVC, the owner of Sportingbet.
In August, chief executive Itai Frieberger said: “We are not under pressure [but] a deal at some point and in some structure will happen… In our industry, we are by far the leaders in terms of our technology. These are assets that any other operators will kill for.”
This morning, he preferred to focus on organic growth. Revenue rose to $520.8m, up 18 per cent on a constant currency basis, with casino bets up 26 per cent and sports bets up 58 per cent. As a result, pre-tax profit leapt 82 per cent to $59m.
Mr Frieberger preferred to note that:
These strong results demonstrate the truly outstanding underlying momentum in the business. In addition, the Group’s strong free cash flow and confidence in the outlook has enabled the Board to propose a 25% increase in total dividend for the year… The Board continues to see a number of significant growth opportunities for 888 both in new and existing markets and we look forward to another exciting year of progress.
And, finally, Fever-Tree – the successfully IPO-ed maker of premium tonic water and, as such, ruiner of good gin – has more than doubled its profit, after “exceptional” performance in the UK.
Pre-tax profits increased 104 per cent to £34.3m on a 73 per cent rise in revenues, to £102.2m. It is now looking to take a larger chunk of the wider mixer market. Expect a comeback for Bitter Lemon.