London-listed builder exits ‘challenging’ housing sector after property market slowdown
A top listed construction firm has pulled out of the UK’s “challenging” housing sector after a slump in demand for new homes across the country.
FTSE 250 firm Kier told shareholders on Tuesday that it is pulling all capital out of the residential property sector in a bid to “de-risk” its portfolio.
The group’s pre-tax profit from its property arm fell by a quarter to £9.1m in the year to June, owing to a “challenging backdrop” and “macro-economic turbulence”.
The firm said it is pulling all capital out of housing in a “controlled” way, and will instead focus all of its efforts on government infrastructure partnerships.
“Kier’s core businesses are well aligned to the government and regulated industry spending commitments to invest in UK infrastructure, with these core markets remaining resilient throughout past political and economic uncertainties,” it said.
The group said 90 per cent of its contract revenues come from the public sector and regulated firms, adding that it is listed as a “strategic supplier” to the government.
Kier said it is “well aligned” with Labour’s “spending commitments to invest in UK infrastructure”.
The firm said it expects to see “significant revenue growth” from water, energy, defence and healthcare projects in the coming few years.
The UK’s listed housebuilders have endured a turbulent year to date, as the Iran war pushes up supply costs and the higher mortgage rates caused by the conflict stifle demand for new homes.
UK house prices fell in the year to August, marking the first annual drop in nearly three years. The mortgage rate hikes caused by the Middle East conflict have added an extra £18,400 onto the deposit of the average UK homebuyer, according to Zoopla.
Housebuilders have urged Andy Burnham to tackle the affordability issues facing first-time buyers by slashing stamp duty or rolling out a new help-to-buy scheme.
The government has said it plans to build 1.5m homes by the next general election but housing secretary Angela Rayner admitted on Sunday that this is a “stretch target”.
‘Challenging’ housing market
As Kier Group swerved away from housebuilding, another London-listed firm delivered a reminder of the “subdued” environment facing the sector’s top companies.
Also on Tuesday, MJ Gleeson fell to a pre-tax loss amid a “subdued” housing market, prompting the housebuilder to cut its dividend and slow its landbuying.
The London-listed builder posted a £2.7m pre-tax loss in the year to June and cut its dividend from 11p to five pence per share.
“Recognising that this subdued market may not improve anytime soon, we are focused on managing the business as efficiently as possible and taking a prudent stance on cash,” the group told shareholders.
“The board has also taken the view that the dividend should reflect the challenging environment, proposing a lower final dividend in line with our capital allocation policy,” it said.
But the housebuilder pointed to its number of homes sold – up 9.8 per cent to 1,968 – as evidence that it is in a “much stronger position to manage through the challenging market environment” than in recent years.