September 5, 2017

Pegler’s market report – 05.09.17: Mixed housing data and a reshuffle for the UK’s leading index

As published in the Brighton Argus (05.09.17) Business section under the title Pegler’s Market Report:

Mixed housing data and a reshuffle for the UK’s leading index

UK house prices fell again in August, providing further evidence of a cooling property market and slowing economy. Nationwide Building Society said that the average price of a home was 0.1% lower at £210,495. However, mortgage lending data painted a mixed picture as house purchases were at a 16-month high. The Bank of England said 68,700 mortgages for house purchases were approved in July compared with 65,300 in June. Re-mortgage approvals were also up from 44,800 in June to 46,200.

Investors hoping for clear guidance on interest rates and quantitative easing from the annual get-together of global central bankers at Jackson Hole were disappointed. In key speeches, Janet Yellen, Chair of the US Federal Reserve, and Mario Draghi, head of the European Central Bank, avoided talking about interest rates and QE and concentrated on financial regulation and free trade instead.

Royal Mail crashed out of the leading index of the UK’s largest 100 companies in the latest quarterly reshuffle, receiving the axe after drifting 16pc this year as falling marketing mail and persistent pension problems began to bite. As expected, troubled doorstep lender Provident Financial is the other blue-chip casualty after its shares nosedived 66pc following its second profit warning of the summer, leaving its market capitalisation well short of the requirements. As of Sept 18, UAE-based healthcare provider NMC Health and housebuilder Berkeley Group will take up their places on the blue-chip index.

Convenience chain McColl’s has recorded a 31pc lift in sales after a boost from its acquisition of 298 Co-operative shops earlier this year. The retail chain said that it had completed integrating the new stores by the middle of July, which had helped to bolster the business. Like-for-like sales were up largely driven by 0.7pc growth at its 1,300 convenience stores and 0.3pc at its 350 older newsagent shops. McColl’s recently signed a new supply deal with Morrisons in a move that will resurrect the Safeway brand and mean the convenience chain will benefit from the supermarket’s fresh food offer and bigger purchasing power with consumer giants.

Frankie & Benny’s owner, the Restaurant Group, reported a 30.4pc drop in underlying first-half pretax profit, as slowing consumer spending weighed on sales. The restaurant chain is also facing increased competition from food-focused pubs and a drop in visitors to retail shopping parks, where many of its outlets are located. The company has continued to put the brakes on any expansion plans until it can at least verify its brand and location strategy as “sufficiently robust”. However, its shares jumped as faith builds in a possible turnaround story.

Finally, Aston Villa midfielder Jack Grealish will live long in the memory at Ladbrokes Coral, according to the bookie’s interim results. Apparently Grealish’s 89th minute equaliser against Brighton to hand Newcastle United the Championship title cost the company £1.5m alone.

By David Pegler, Brighton Capital Management