Are there any opportunities lurking in the construction sector?
Sector spotlight: construction
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.
Investment | Profits growth over 5 years; only showing companies which have seen profits increase. |
---|---|
Balfour Beatty | From loss-making to £138m profit |
Barratt Developments | 33% |
Boot (Henry) | 53% |
Breedon Group | 206% |
CRH | 31% |
Eleco | 250% |
Forterra | 57% |
Grafton Group | 52% |
MJ Gleeson | 46% |
James Halstead | 4% |
Kingspan | 45% |
Keller | -53% |
Michelmersh Brick | 117% |
Morgan Sindall | 102% |
Marshalls | 100% |
Norcros | 0% |
Persimmon | 54% |
Renew | 54% |
Sigmaroc | From loss-making to profit |
Steppe Cement | From loss-making to profit |
Taylor Wimpey | From loss-making to profit |
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.
Investment | Yield greater than 3% | Total Assets & liabilities £m |
---|---|---|
Barratt Developments | 5.37% | 3.10 |
Costain | 5.78% | 1.40 |
Galliford Try | 56.38% | 1.37 |
MJ Gleeson | 5.06% | 3.65 |
Kier | 6.62% | 1.24 |
McCarthy & Stone euros | 5.47% | 6.34 |
Persimmon | 8.94% | 3.65 |
Taylor Wimpey | 2.71% | 2.67 |
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.
Share price | 1,180p |
---|---|
2020 high | 1,350p |
2020 low | 1,120p |
Five year high | 1,380p |
All time high | 1,380p |
Change last 12 months | -7.45% |
Change last 5 years | 16.60% |
Change all time | 713.79% |
Market cap £m | 247 |
Yield | 1.47 |
P/E | 10.7 |
Revenue growth since 2015 | -18% |
Pre-tax profits growth | -46.77% |
Total assets/total liabilities £m | 9 |
Total assets/total liabilities £m | 8 |
Total current assets/current liabilities £m | 8 |
Net assets £m | 378 |
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.
Share price | 262p |
---|---|
2020 high | 293p |
2020 low | 189p |
Five year high | 310p |
All time high | 416p |
Change last 12 months | 15% |
Change last 5 years | 14% |
Change all time | -5% |
Market cap £m | 1,813 |
Yield | 0.8 |
P/E | 13.8 |
Revenue growth since 2015 | 5% |
Pre-tax profits growth | From loss-making to £138m profit |
Total assets/total liabilities £m | 1.4 |
Total current assets/total liabilities £m | 0.6 |
Total current assets/current liabilities £m | 0.9% |
Net assets £m | 1,377 |
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.
Share price | 541p |
---|---|
2020 high | 878p |
2020 low | 364p |
Five year high | 878p |
All time high | 878p |
Change last 12 months | -16% |
Change last 5 years | -12% |
Change all time | 366% |
Market cap £m | 5,515 |
Yield | 5.37 |
P/E | 7.4 |
Revenue growth since 2015 | 12% |
Pre-tax profits growth | 33% |
Total assets/total liabilities £m | 3.1 |
Total current assets/total liabilities £m | 2.6 |
Total current assets/current liabilities £m | 3.6 |
Net assets £m | 4,869 |
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.
Share price | 236p |
---|---|
2020 high | 342p |
2020 low | 185p |
Five year high | 342p |
All time high | 342p |
Change last 12 months | -6% |
Change last 5 years | -1% |
Change all time | 329% |
Market cap £m | 308 |
Yield | 2.16 |
P/E | 8.16 |
Revenue growth since 2015 | 116% |
Pre-tax profits growth | 53% |
Total assets/total liabilities £m | 3.3 |
Total current assets/total liabilities £m | 2.4 |
Total current assets/current liabilities £m | 3.1 |
Net assets £m | 318 |
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.
Share price | 79p |
---|---|
2020 high | 99p |
2020 low | 63p |
Five year high | 99p |
All time high | 99p |
Change last 12 months | 29% |
Change last 5 years | 51% |
Change all time | 554% |
Market cap £m | 1,326 |
Yield | 0 |
P/E | 16.94 |
Revenue growth since 2015 | 192% |
Pre-tax profits growth | 206% |
Total assets/total liabilities £m | 2.4 |
Total current assets/total liabilities £m | 0.4 |
Total current assets/current liabilities £m | 1.1 |
Net assets £m | 839 |
Constain
Listed since: 1988
Constain builds smart infrastructure solutions.
Share price | 62p |
---|---|
2020 high | 195p |
2020 low | 34p |
Five year high | 458p |
All time high | 150,000p |
Change last 12 months | -61% |
Change last 5 years | -80% |
Change all time | -100% |
Market cap £m | 170 |
Yield | 5.78 |
P/E | -24 |
Revenue growth since 2015 | -27% |
Pre-tax profits growth | -121% |
Total assets/total liabilities £m | 1.4 |
Total current assets/total liabilities £m | 1.1 |
Total current assets/current liabilities £m | 1.3 |
Net assets £m | 158 |
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.
Share price | 3,054p |
---|---|
2020 high | 3,099p |
2020 low | 1,574p |
Five year high | 3,100p |
All time high | 3,157p |
Change last 12 months | 14% |
Change last 5 years | 62% |
Change all time | 554% |
Market cap £m | 23,887 |
Yield | 2.38 |
P/E | 14.79 |
Revenue growth since 2015 | 1% |
Pre-tax profits growth | 31% |
Total assets/total liabilities £m | 1.9 |
Total current assets/total liabilities £m | 0.5 |
Total current assets/current liabilities £m | 1.6 |
Net assets £m | 17,480 |
Elecosoft
Listed since: 1995
Elecosoft is a software and services provider.
Share price | 84p |
---|---|
2020 high | 92p |
2020 low | 47p |
Five year high | 92p |
All time high | 107p |
Change last 12 months | 6% |
Change last 5 years | 248% |
Change all time | 191% |
Market cap £m | 69 |
Yield | 0.36 |
P/E | 25.3 |
Revenue growth since 2015 | 67% |
Pre-tax profits growth | 250% |
Total assets/total liabilities £m | 1.9 |
Total current assets/total liabilities £m | 0.6 |
Total current assets/current liabilities £m | 1.0 |
Net assets £m | 18 |
Forterra
Forterra is a UK supplier of Heavy Building Materials for the Construction Industry.
Share price | 175p |
---|---|
2020 high | 371p |
2020 low | 165p |
Five year high | 371p |
All time high | 371p |
Change last 12 months | -37% |
Change last 5 years | -1% |
Change all time | -1% |
Market cap £m | 402 |
Yield | 2.28 |
P/E | 7.36 |
Revenue growth since 2015 | 29% |
Pre-tax profits growth | 57% |
Total assets/total liabilities £m | 1.9 |
Total current assets/total liabilities £m | 0.7 |
Total current assets/current liabilities £m | 1.3 |
Net assets £m | 156 |
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.
Share price | 102p |
---|---|
2020 high | 886p |
2020 low | 102p |
Five year high | 7,810p |
All time high | 1,867p |
Change last 12 months | -84% |
Change last 5 years | -94% |
Change all time | -86% |
Market cap £m | 114 |
Yield | 56.38 |
P/E | 56 |
Revenue growth since 2015 | 9% |
Pre-tax profits growth | -22% |
Total assets/total liabilities £m | 1.4 |
Total current assets/total liabilities £m | 1.1 |
Total current assets/current liabilities £m | 1.2 |
Net assets £m | 751 |
MJ Gleeson
Listed since: 1993
MJ Gleeson specialises in low-cost house building and strategic land promotion.
Share price | 690p |
---|---|
2020 high | 990p |
2020 low | 534p |
Five year high | 990p |
All time high | 990p |
Change last 12 months | -14% |
Change last 5 years | 53% |
Change all time | 360% |
Market cap £m | 396 |
Yield | 5.06 |
P/E | 11.19 |
Revenue growth since 2015 | 76% |
Pre-tax profits growth | 46% |
Total assets/total liabilities £m | 3.6 |
Total current assets/total liabilities £m | 3.4 |
Total current assets/current liabilities £m | 3.8 |
Net assets £m | 203 |
Grafton Group
First Listing: 1999
Grafton Group have national and regional positions in the Merchanting, Retailing and Mortar manufacturing markets.
Share price | 682p |
---|---|
2020 high | 985p |
2020 low | 371p |
Five year high | 985p |
All time high | 985p |
Change last 12 months | -10% |
Change last 5 years | -4% |
Change all time | 34,000% |
Market cap £m | 1,634 |
Yield | 0.95 |
P/E | 13.62 |
Revenue growth since 2015 | 7% |
Pre-tax profits growth | 52% |
Total assets/total liabilities £m | 1.9 |
Total current assets/total liabilities £m | 0.7 |
Total current assets/current liabilities £m | 1.8 |
Net assets £m | 1,362 |
Ibstock
Listed since: 2015
Ibstock is a brickmaker, and supplier of bricks.
Share price | 171p |
---|---|
2020 high | 322p |
2020 low | 148p |
Five year high | 322p |
All time high | 322p |
Change last 12 months | -28% |
Change last 5 years | -14% |
Change all time | -14% |
Market cap £m | 703 |
Yield | 1.86 |
P/E | 10.6 |
Revenue growth since 2015 | 14% |
Pre-tax profits growth | -5% |
Total assets/total liabilities £m | 2.5 |
Total current assets/total liabilities £m | 0.5 |
Total current assets/current liabilities £m | 1.6 |
Net assets £m | 464 |
James Halstead
James Halstead plc is a major international group of companies that manufacture commercial, contract and consumer flooring.
Share price | 528p |
---|---|
2020 high | 570p |
2020 low | 365p |
Five year high | 570p |
All time high | 570p |
Change last 12 months | 2% |
Change last 5 years | 27% |
Change all time | 2012% |
Market cap £m | 1,184 |
Yield | 2.65 |
P/E | 29 |
Revenue growth since 2015 | 12% |
Pre-tax profits growth | 4% |
Total assets/total liabilities £m | 2.6 |
Total current assets/total liabilities £m | 2.1 |
Total current assets/current liabilities £m | 2.8 |
Net assets £m | 133 |
Kingspan
Listed since: 1996
Kingspan offer high-performance insulation and building envelope solutions.
Share price | 63p |
---|---|
2020 high | 64p |
2020 low | 39p |
Five year high | 64p |
All time high | 64p |
Change last 12 months | 34% |
Change last 5 years | 185% |
Change all time | 4,032% |
Market cap £m | 11,438 |
Yield | 0.21 |
P/E | 31 |
Revenue growth since 2015 | 50% |
Pre-tax profits growth | 45% |
Total assets/total liabilities £m | 2.0 |
Total current assets/total liabilities £m | 0.7 |
Total current assets/current liabilities £m | 1.7 |
Net assets £m | 2,120 |
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.
Share price | 74p |
---|---|
2020 high | 149p |
2020 low | 68p |
Five year high | 1,485p |
All time high | 2,438p |
Change last 12 months | -9% |
Change last 5 years | -95% |
Change all time | -60% |
Market cap £m | 120 |
Yield | 6.62 |
P/E | -0.47 |
Revenue growth since 2015 | 3% |
Pre-tax profits growth | Losses widened |
Total assets/total liabilities £m | 1.2 |
Total current assets/total liabilities £m | 0.7 |
Total current assets/current liabilities £m | 2.3 |
Net assets £m | 519 |
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.
Share price | 614p |
---|---|
2020 high | 876p |
2020 low | 445p |
Five year high | 1,082p |
All time high | 1,280p |
Change last 12 months | 4% |
Change last 5 years | -42% |
Change all time | 380% |
Market cap £m | 443 |
Yield | 5.47 |
P/E | 20.67 |
Revenue growth since 2015 | 11% |
Pre-tax profits growth | -53% |
Total assets/total liabilities £m | 1.4 |
Total current assets/total liabilities £m | 0.8 |
Total current assets/current liabilities £m | 1.4 |
Net assets £m | 397 |
Michelmersh Brick
Listed since: 2004
Michelmersh Brick manufactures and sells handmade and machine-made clay facing bricks and roof tiles.
Share price | 100p |
---|---|
2020 high | 130p |
2020 low | 84p |
Five year high | 130p |
All time high | 128p |
Change last 12 months | 11% |
Change last 5 years | 7% |
Change all time | 61% |
Market cap £m | 94 |
Yield | 1.15 |
P/E | 10.65 |
Revenue growth since 2015 | 86% |
Pre-tax profits growth | 117% |
Total assets/total liabilities £m | 2.7 |
Total current assets/total liabilities £m | 0.7 |
Total current assets/current liabilities £m | 2.0 |
Net assets £m | 76 |
McCarthy & Stone
Listed since: 2015
Developer and manager of independent living and retirement communities McCarthy & Stone.
Share price | 73p |
---|---|
2020 high | 158p |
2020 low | 40p |
Five year high | 277p |
All time high | 277p |
Change last 12 months | -48% |
Change last 5 years | -65% |
Change all time | -65% |
Market cap £m | 393 |
Yield | 2.6 |
P/E | 8.49 |
Revenue growth since 2015 | 10% |
Pre-tax profits growth | -53% |
Total assets/total liabilities £m | 6.3 |
Total current assets/total liabilities £m | 5.4 |
Total current assets/current liabilities £m | 5.9 |
Net assets £m | 769 |
Marshalls
Listed since: 1988
Marshalls makes and supplies concrete, clay, natural stone, garden and patio products for the home improvement and home building markets.
Share price | 625p |
---|---|
2020 high | 876p |
2020 low | 519p |
Five year high | 868p |
All time high | 868p |
Change last 12 months | -2% |
Change last 5 years | 95% |
Change all time | 1057% |
Market cap £m | 1,251 |
Yield | 0.75 |
P/E | 21.3 |
Revenue growth since 2015 | 40% |
Pre-tax profits growth | 100% |
Total assets/total liabilities £m | 2.1 |
Total current assets/total liabilities £m | 0.8 |
Total current assets/current liabilities £m | 1.3 |
Net assets £m | 295 |
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.
Share price | 1,148p |
---|---|
2020 high | 1,970p |
2020 low | 1,060p |
Five year high | 1,970p |
All time high | 1,970p |
Change last 12 months | 2% |
Change last 5 years | 42% |
Change all time | 571% |
Market cap £m | 528 |
Yield | 1.83 |
P/E | 7.27 |
Revenue growth since 2015 | 20% |
Pre-tax profits growth | 102% |
Total assets/total liabilities £m | 1.4 |
Total current assets/total liabilities £m | 1.0 |
Total current assets/current liabilities £m | 1.1 |
Net assets £m | 396 |
Norcros
Listed since: 2007
Norcros is a Supplier of high quality and innovative bathroom and kitchen products.
Share price | 155p |
---|---|
2020 high | 305p |
2020 low | 120p |
Five year high | 305p |
All time high | 703p |
Change last 12 months | -27% |
Change last 5 years | -9% |
Change all time | -78% |
Market cap £m | 125 |
Yield | 2 |
P/E | 11.4 |
Revenue growth since 2015 | 45% |
Pre-tax profits growth | 0% |
Total assets/total liabilities £m | 1.4 |
Total current assets/total liabilities £m | 0.8 |
Total current assets/current liabilities £m | 2.4 |
Net assets £m | 104 |
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.
Share price | 437p |
---|---|
2020 high | 619p |
2020 low | 395p |
Five year high | 616p |
All time high | 619p |
Change last 12 months | 5% |
Change last 5 years | 57% |
Change all time | 68% |
Market cap £m | 996 |
Yield | 0.92 |
P/E | 17.55 |
Revenue growth since 2015 | 16% |
Pre-tax profits growth | -11% |
Total assets/total liabilities £m | 2.1 |
Total current assets/total liabilities £M | 0.4 |
Total current assets/current liabilities £m | 1.4 |
Net assets £m | 361 |
Persimmon
Listed since: 1988
Persimmon's is a well known housebuilder.
Share price | 2,629p |
---|---|
2020 high | 3,261p |
2020 low | 1,546p |
Five year high | 3,261p |
All time high | 3,261p |
Change last 12 months | 30% |
Change last 5 years | 35% |
Change all time | 152% |
Market cap £m | 8,385 |
Yield | 8.94 |
P/E | 9.85 |
Revenue growth since 2015 | 26% |
Pre-tax profits growth | 54 |
Total assets/total liabilities £m | 3.6 |
Total current assets/total liabilities £m | 3.3 |
Total current assets/current liabilities £m | 4.1 |
Net assets £m | 3,258 |
Renew
Listed since: 1999
Renew provide essential engineering services to maintain and renew critical infrastructure networks.
Share price | 442p |
---|---|
2020 high | 568p |
2020 low | 335p |
Five year high | 568p |
All time high | 568p |
Change last 12 months | 12% |
Change last 5 years | 34% |
Change all time | 152% |
Market cap £m | 347 |
Yield | 2.6 |
P/E | 14.93 |
Revenue growth since 2015 | 15% |
Pre-tax profits growth | 54 |
Total assets/total liabilities £m | 1.5 |
Total current assets/total liabilities £m | 0.7 |
Total current assets/current liabilities £m | 0.8 |
Net assets £m | 92 |
Sigmaroc
Listed since: 2016
Sigmaroc is AIM-quoted company that invests improves and integrates companies within the construction materials space in Europe.
Share price | 43p |
---|---|
2020 high | 52p |
2020 low | 23p |
Five year high | 52p |
All time high | 52p |
Change last 12 months | 63% |
Change last 5 years | 450% |
Change all time | 450% |
Market cap £m | 109 |
Yield | 0 |
P/E | 47 |
Revenue growth since 2015 | 99900% |
Pre-tax profits growth | from loss-making to profit |
Total assets/total liabilities £m | 2.0 |
Total current assets/total liabilities £m | 0.4 |
Total current assets/current liabilities £m | 1.0 |
Net assets | 102 |
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.
Share price | 23p |
---|---|
2020 high | 37p |
2020 low | 19p |
Five year high | 41p |
All time high | 375p |
Change last 12 months | -18% |
Change last 5 years | 10% |
Change all time | 152% |
Market cap £m | 50 |
Yield | 13 |
P/E | 6.85 |
Revenue growth since 2015 | -15% |
Pre-tax profits growth | from loss-making to profit |
Total assets/total liabilities £m | 3.0 |
Total current assets/total liabilities £m | 1.0 |
Total current assets/current liabilities £m | 1.8 |
Net assets £m | 63 |
Taylor Wimpey
Listed since:1988
Taylor Wimpey is a well known housebuilder with developments across the UK.
Share price | 142p |
---|---|
2020 high | 236p |
2020 low | 101p |
Five year high | 236p |
All time high | 704p |
Change last 12 months | -13% |
Change last 5 years | -23% |
Change all time | 152% |
Market cap £m | 5,164 |
Yield | 2.71% |
P/E | 6.88% |
Revenue growth since 2015 | 38% |
Pre-tax profits growth | From loss-making to profit |
Total assets/total liabilities £m | 2.8 |
Total current assets/total liabilities £m | 2.7 |
Total current assets/current liabilities £m | 4.4 |
Net assets £m | 3,307 |
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees