If you look at the profit and loss relating to companies in the construction and materials sector, you will find two-thirds of companies have seen profits grow over the last five years.

In fact, I am looking at 28 companies for this piece, a number I derived by taking all companies listed as falling into this sector by The Share Centre and excluding companies valued at less than £50 million. One company scraped into the list, with a valuation of exactly £50 million, meaning that by the time you read this, if its share price has fallen, it will have fallen out of my criteria for inclusion.

But you have to draw the line somewhere. I am not saying that companies worth less than £50 million are not necessarily worth investing in. Still, such companies are usually seen as high risk and maybe are only for investors with good knowledge of the company or a very particular reason to invest in it.

In fact, of the 28 companies, 20 have seen profits grow over the last five years.

In many cases, however, share prices peaked some time ago.

The 2008 crisis hit the sector, while the rise of online shopping has deepened its troubles.
But the Covid-19 crisis is likely to leave a much bigger mark than the 2008 crash.

Remote working is here to stay, sure post-Covid, many workers will return to offices, but I would be astonished if we ever see a return to what it used to be like. More meetings will be conducted remotely, too — forever.

Linked with that, the Covid crisis is seeing an acceleration towards online shopping.

The combination of the rise in remote working and acceleration in the adoption of online shopping will have a devastating effect on high streets. City centres may well suffer a hollowing out effect, as we see a reversal of a trend that has been centuries in the making — the rural to urban transformation may come to an end.

These developments will hit commercial property hard — very hard.
As for retail property (the housing market), this is a difficult one to call, especially in the UK, where the demand often seems to defy common sense.

Property prices in city centres should be adversely affected. In theory, remote working may lead to increased demand for property away from cities.

But, the post-Covid period will also witness extremely high unemployment for some time. In such circumstances, it is hard to see the housing market flourish, and I suspect all home builders will suffer a knock as a result, although builders that focus on more rural areas may not do so badly.

In the longer term, the decline in demand for physical retail and office space should free up space for residential property. The UK property market may not be characterised by lack of land to build on for much longer. This change in the availability of space for building on may harm house prices, but support house builders.

That leaves infrastructure. A few months ago, with the government seemingly hell-bent on stimulating the economy by boosting infrastructure, I would have said the conditions were right for construction companies focusing on this area.

The rise of remote working may adversely affect the need for enhanced physical infrastructure, but I suspect that the government is too wedded to the idea to change track. I still think this will be a good decade for infrastructure.

Dividends

It is worth noting that many companies in this sector are good dividend payers. But will such elevated dividends be practical post-Covid? We may get a partial answer to this question by looking at balance sheets. Here is a list of high dividend payers in the construction and materials sector, alongside the ratio of their assets to liabilities.

Value

Finally, it might also be worth contrasting net asset values with market caps. Here is list all companies in the sector which have higher net asset values than market capitalisation — perhaps suggesting the companies in question are undervalued. But to draw a conclusion look at other data too.

• Abbey
• Boot (Henry)
• Kier
• McCarthy & Stone euros
• Steppe Cement

The Share Centre has buy or hold recommendations on some construction and materials companies including as follows:

Buy

• Breedon Group
• CRH
• Morgan Sindall

Hold

• Barratt Developments
• Taylor Wimpey
• Persimmon

And so, here is each company.

Abbey

Listed since: 1995

Abbey is an AIM-listed property developer focusing on the UK, the Republic of Ireland and the Czech Republic. Back in March if cancelled its dividend and last December announced a fall in interim profits.

Balfour Beatty

Listed since: 1995

Balfour Beatty is the second biggest construction company in the UK and the fifteenth biggest in the world and was responsible for building the largest proportion of the M25 motorway. Focuses on international rail, road, utility systems and buildings markets.

Barratt Developments

Listed since: 1988

Barratt Developments develops residential and non-residential properties mainly in the United Kingdom under the brands, Barratt Homes, David Wilson Homes and Ward Homes.

Boot (Henry)

Listed since: 1993

Boot (Henry) is a UK-focused commercial development and land promotion company. It holds a land bank and targets both private and public sector clients by buying or selling investment properties and providing constructors with plant equipment. It also refurbishes and constructs buildings. It focuses on the North East and Midlands.

Breedon Group

Listed since: 2010

Breedon Group operates around 60 quarries, 26 asphalt plants, 200 ready-mixed concrete plants, 2 cement import terminals and three concrete block plants.

Constain

Listed since: 1988

Constain builds smart infrastructure solutions.

CRH

CRH manufactures and supplies of a wide range of materials across Europe and America, for the construction industry, including cement, concrete, aggregates, asphalt/bitumen and bricks. There are also joint ventures in Asia.

Elecosoft

Listed since: 1995

Elecosoft is a software and services provider.

Forterra

Forterra is a UK supplier of Heavy Building Materials for the Construction Industry.

Galliford Try

Listed since: 1988

Galliford Try provides essential buildings and infrastructure across the country, it has public and private sector clients and has regional housebuilding businesses that specialise in individually designed developments across the South of England and the Eastern Counties.

MJ Gleeson

Listed since: 1993

MJ Gleeson specialises in low-cost house building and strategic land promotion.

Grafton Group

First Listing: 1999

Grafton Group have national and regional positions in the Merchanting, Retailing and Mortar manufacturing markets.

Ibstock

Listed since: 2015

Ibstock is a brickmaker, and supplier of bricks.

James Halstead

James Halstead plc is a major international group of companies that manufacture commercial, contract and consumer flooring.

Kingspan

Listed since: 1996

Kingspan offer high-performance insulation and building envelope solutions.

Kier

Listed since: 1996

Kier is a UK building and civil engineering contractor also specialising in private house building, facilities management, property development and the PFI.

Keller

Keller is a ground engineering specialist. It prepares the ground for projects and provides solutions to ground engineering problems. The company has a global presence in Europe, North America and Australia. 

Michelmersh Brick 

Listed since: 2004

Michelmersh Brick manufactures and sells handmade and machine-made clay facing bricks and roof tiles. 

McCarthy & Stone 

Listed since: 2015

Developer and manager of independent living and retirement communities McCarthy & Stone.

 

Marshalls 

Listed since: 1988

Marshalls makes and supplies concrete, clay, natural stone, garden and patio products for the home improvement and home building markets. 

Morgan Sindall

First listing: 1988

Morgan and Sindall is a construction group with nine subsidiary companies operating in affordable housing, construction, fit-out and infrastructure services.

Norcros

Listed since: 2007

Norcros is a Supplier of high quality and innovative bathroom and kitchen products. 

Polypipe Group

Listed since: 201

As the name suggests, Polypipe is a manufacturer of plastic piping systems, for use in the residential, commercial and civil infrastructure sectors. 

Persimmon

Listed since: 1988

Persimmon's is a well known housebuilder.

Renew

Listed since: 1999

Renew provide essential engineering services to maintain and renew critical infrastructure networks.

Sigmaroc 

Listed since: 2016

Sigmaroc is AIM-quoted company that invests improves and integrates companies within the construction materials space in Europe.

Steppe Cement

Listed since: 2005

Construction materials producer in Kazakhstan. Steppe Cement's cement production facilities consist of two dry kilns, and four mothballed wet kilns. It is the leading cement manufacturer in Kazakhstan using the dry method which utilises fewer resources.

Taylor Wimpey

Listed since:1988

Taylor Wimpey is a well known housebuilder with developments across the UK.

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These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees