Elevation gives Berkeley a lift
CHAMPAGNE corks popped in the Cobhambased boardroom of Berkeley Group after the upmarket housebuilder moved to join the Footsie elite.
The shares celebrated promotion by closing up 75p to 3359p, which took it’s market valuation up to £4.6bn. Co-founder and chairman Tony Pidgley, who helped to set the company up in 1976 and floated it on the USM in 1984, earned £23.3m last year and will now be the second-highest-paid Footsie executive behind WPP’s Sir Martin Sorrell who took home a jaw-dropping £43m.
Pidgley is considered in the trade to be a property guru as he called the top of the housing market in the early 1990s and mid2000s. He made the headlines in 2003 when he fought off an acrimonious £1bn takeover bid from his own son, Tony Jnr, who apparently had been working on a deal for almost a year before it was leaked in the Press. Berkeley now joins the other Footsie house-building champions Barratt Developments, 11.5p better at 635p, Persimmon, up 41p at 2083p, and Taylor Wimpey, 2.2p dearer at 198.2p.
Buyers returned to the sector after an upbeat report on house prices by Barclays. Analyst Jon Bell believes UK house prices are likely to keep rising, and the pace of this could surprise on the upside. When adjusted for inflation, real UK house prices are now about 16pc below their 2007 peak. High levels of consumer confidence and strong mortgage approval bodes well and average mortgage rates remain at or close to all-time lows. Each additional 1pc of house-price inflation adds 100 bps to housebuilders’ gross margins.
Redrow, 4.8p up at 477.1p, is Bell’s top pick in the sector.
Interest rate- sensitive sectors such as housebuilders and properties are obviously hopeful that UK rates will stay put until early next year. Bank of England boss Mark Carney has said that any rise will remain solely dependent on how UK economic data develops over the coming months and will not be a knee jerk reaction to the situation in China.
Yet there are some of the opinion that should the Fed raise rates in the US for the first time in a decade later this month – and that’s a possibility should tomorrow’s crucial US jobs figures prove to be a lot weaker than expected – it would not be long before the UK followed suit. The Fed next meets on September 16-17.
The Footsie regained some composure after Tuesday’s sell-off. It rallied 103 points before neurotic traders took profits and it drifted to close only 24.77 points better at 6083.31. Wall Street rebounded 293.03 points to 16,351.38, encouraged by fresh intervention from China brokers to support its market and calm nerves which have been ripped to shreds in recent days.
Selling by tracker funds following its relegation to the FTSE 250 dragged industrial engineer Weir Group 12p lower to 1343p to stand 53pc below its July 2014 high. Continuing to reflect growing fears that a weakening Chinese economy will hit demand for commodities, Glencore slumped 10.7p more to an all-time low of 122.8p.
Hikma Pharmaceuticals advanced 97p to 2322p as Barclays became the latest to sing the praises of the £1.7bn acquisition of Roxane Laboratories, the US generic drugs arm of Germany’s Boehringer Ingelheim. The deal makes it the sixth-largest firm by revenue in the US generics market. The broker’s target price is 2760p.
Food wholesaler Booker gained 11.1p to 179p after the CMA decided not to refer the proposed £40m acquisition of Budgens/ Londis from the Musgrave Group to a Phase 2 investigation.
A Deutsche Bank sell recommendation ahead of third-quarter sales figures on September 15, left online grocer Ocado 16.7p down at 330.3p. The broker reckons that if Amazon Fresh does launch in London this month, it expects it to have an impact on Ocado’s fourth-quarter sales growth.
Positive interim results including a 30pc rise in the dividend to 0.65p and expectations of further trading improvements helped workwear supplier Johnson Services edge up a penny to 92.5p. Investec says the group looks an attractive play.
Motif Bio rose 6.25p to 60.75p. Buyers appeared on hearing it has appointed Westwicke Partners as its investor relations adviser in the US ahead of a planned roadshow for its flagship antibiotic iclaprim which has been allowed to move onto Phase III trials by the US Food & Drug Administration.
Ariana Resources firmed 6.3pc or 0.05p to 0.86p after reporting construction has commenced at the Red Rabbit gold project in Turkey.
Velocys fell 1.75p to 86.25p despite a Numis recommendation. It followed the announcement that the manufacture of full-scale FT reactors for ENVIA Energy’s Oklahoma City GTL project is complete. ÷ SELLERS left support services group Diploma 55.5p down at 660p. It came after a disappointing trading statement which showed growth in the first three quarters of the year had been sluggish because of a slowdown in activity in the oil and gas industry. Cutbacks there have hit its North American seals business. Chief operating officer Iain Henderson will leave in January and won’t be replaced. May’s high was 916.5p.