BUSINESS LIVE: Travis Perkins names new CEO; Direct Line divi boost; Barratt to build fewer homes

Nationwide Building Society will scrap passbooks in their current form from the start of February 2025, This is Money can exclusively reveal.

A concerned staff member says it is starting the process of phasing out passbooks entirely, a move now confirmed by Britain’s biggest mutual.

Crest Nicholson is set to agree a sweetened £701.4million all-share takeover deal from larger rival Bellway, should the latter make a firm offer.

The combined group, should the deal go ahead, would be worth around £4billion, joining the likes of FTSE 100-listed heavyweights Barratt, Berkeley, Vistry, Taylor Wimpey and Persimmon in terms of market capitalisation.

The Crest-Bellway deal would concentrate the housebuilding sector into an even smaller handful of very large firms than seen currently.

The chief executive of one of Britain’s biggest fund managers has said a new government with a sizeable majority could help drive a revival in the country’s lacklustre stock market.

Liontrust Asset Management boss John Ions told shareholders on Wednesday that Labour’s victory in last week’s general election ‘should herald a period of stability that will be positive for financial markets’ as he also praised the party’s ‘pro-growth agenda’.

(PA) – South East Water has said it needs a cash injection from investors to stay afloat as it gears up for a key Ofwat ruling on its future spending plans.

The struggling water firm, which serves 2.3 million people across Kent, Sussex and Surrey, said it is “in discussions with lenders and shareholders regarding additional liquidity”.

The talks are at an “advanced” stage and bosses “expect” to raise the extra funding, but the company has not struck a deal on the investment.

“If it is not possible to raise the additional liquidity, the group and therefore company would not have sufficient liquidity for the going concern period,” it said in a results statement on Wednesday.

It added that “the risk that the funding will not be received constitutes a material uncertainty that may cast significant doubt on the ability of the group and company to continue as a going concern”.

South East Water is already on regulator Ofwat’s watch-list for financially at-risk companies, alongside Thames Water and other regional monopolies.

JD Wetherspoon char Sir Tim Martin has said his pub group is seeing a ‘gradual recovery’ of profits and sales, despite rising labour costs.

The pub chain posted like-for-like sales growth of 5.8 per cent for the 10 weeks to 7 July, despite unseasonably wet weather, meaning revenues are up 7.7 per cent sicne the start of 2024 on a like-for-like basis.

Travis Perkins has hired former Taylor Wimpey boss, Pete Redfern, as its next chief executive.

Redfern is replacing Nick Roberts, who is standing down after a five-year stint that proved to be a challenging period for Britain’s biggest building materials supplier.

Travis Perkins’ profits slumped by around 80 per cent to £38million last year as rising interest rates and cost-of-living pressures led to lower new-build housing and renovation demand.

The board of Crest Nicholson is set to recommend to shareholders a sweetened £701.4million all-share takeover deal from its bigger British housebuilding rival Bellway.

Should Bellway confirm a firm offer, the proposal will see Crest Nicholson’s shareholders will get 0.099 Bellway shares for each Crest share they own and a dividend of 4p per share.

It implies a value of 273p-per share and is Bellway’s third over the last four months. Its last proposal was worth 253p.

‘The Boards of Bellway and Crest Nicholson believe that there is compelling strategic and financial rationale for a combination of Bellway and Crest Nicholson.

‘The Revised Proposal would bring together the strength of each business with complementary brands to reinforce Bellway’s position as a leading UK housebuilder, while enabling Crest Nicholson shareholders to benefit from the scale of the combined business.

‘In addition, the Board of Bellway believes a combination would deliver significant operational benefits (including procurement synergies) and the ability to open dual outlets on at least 10 current and future Crest Nicholson sites with complementary brands to drive incremental volumes at attractive margins.’

Barratt Developments’ shares fell on Wednesday after the housebuilder lowered its annual homebuilding targets and saw average selling prices fall.

The group expects its homebuilding targets for fiscal 2025 to fall by up to 7 per cent, amid elevated mortgage rates and broader economic concerns.

London-listed stocks are trading higher this morning amid broad-based gains after a slew of corporate updates, while investors await Federal Reserve Chair Jerome Powell’s testimony to gauge the US central bank’s monetary policy path.

Travel and leisure stocks are up 0.9 per cent, pulled higher by SSP Group’s jump of 8.7 per cent after the restaurant operator stuck to its fiscal year forecasts.

Precious metal miners have advanced 1.2 per cent as gold prices steadied ahead of a crucial US inflation report.

Homebuilders are the biggest laggards on the index, declining 1 per cent with Barratt Developments down 3 per cent to the bottom of the FTSE 100 index. Barratt has forecast an up to 7 per cent fall in its homebuild targets for fiscal year 2025.

Investor focus is now on the second day of Powell’s Congressional testimony. He stated on Tuesday that a rate cut would not be appropriate before the Fed gains more confidence in cooling inflation.

The comments come ahead of crucial US consumer price index figures and Britain’s GDP numbers, both due on Thursday.

Bank of England’s chief economist Huw Pill is also scheduled to speak at the UK’s Asia House think tank later today.

Elsewhere, Travis Perkins has climbed 2.6 per cent after the construction firm named Pete Redfern as its next CEO.

IAG tops the FTSE 100, gaining 3.2 per cent, after Morgan Stanley upgraded the British Airways owner to Overweight from Underweight.

Direct Line Group is planning to pay out roughly 60 per cent of its operating profits as regular dividends, as its new boss works to revive the insurer’s fortunes.

Revealing a ‘refreshed strategy’ ahead of its annual general meeting on Wednesday , Direct Line told investors it will soon launch its motor insurance brand on price comparison websites.

Direct Line also plans to exit or stop investing in original equipment manufacturer affinity motor partnerships and other personal lines businesses, and instead focus on home, commercial direct and rescue, outside of motor insurance.

Keir Starmer has appointed Matthew Pennycook as Labour’s new housing minister in the Ministry of Housing, Communities & Local Government.

With the party having already announced a raft of ambitious house building plans, he already has plenty on his to-do list.

The head of the world’s largest oil company said internal combustion engines will be around for a ‘very, very long time’ as it invests in a new London-based firm.

‘It will be incredibly expensive for the world to completely stamp out, or do without internal combustion engines,’ Yasser Mufti, executive vice president at Saudi Aramco, told the Financial Times as his firm took a 10 per cent stake worth £580million in Horse Powertrain.

Derren Nathan, head of equity research at Hargreaves Lansdown:

‘JD Wetherspoon has shrugged off the poor summer weather. While last month’s retail sales suffered in the UK, the rain hasn’t deterred visitors to the Group’s 801 pubs. Like for like growth has accelerated from the 5.2% in the third quarter to 5.8% so far in the final three months. An England semi-final and, fingers crossed, final at the Euros this week could provide a final flurry before the year closes out.

‘These numbers don’t just happen by themselves. Wetherspoon consistently outperforms its peers and continues to invest in measures to improve serving times and the customer experience. That’s helped it to mitigate an inflationary led assault on its cost base.

‘The estate has continued to shrink as it surrenders underperforming units, but the opening of watering holes at travel hubs like Waterloo shows a focus on the three Ls: location, location, and location.

‘At the last check, guidance was looking to meet the top end of expectations, which equated to pre-tax profit of around £75mn. That language has softened to “in-line”.

‘The range has narrowed a little with the mid-point at £71.9mn and the top end at £72.9mn but it’s unlikely the market will see this as a downgrade. The Group looks in good shape, and with inflation less of an issue than it has been, there’s an improving outlook for the bottom line.’

Dyson is axeing nearly a third of its UK workforce in a shake-up blamed on ‘increasingly fierce and competitive global markets’.

The vacuum-cleaner maker, founded in 1991 by inventor Sir James Dyson, will cut around 1,000 of its 3,500 jobs in Britain.

Anthony Codling, head of equity research for European housebuilding and building materials at RBC Capital Markets:

‘Barratt’s performance this year is testament to its efficient operations. It is a very well-oiled machine that is able to make the most out of challenging markets.

‘That said, in our view its short landbank strategy can hold it back, and whilst we see improving market conditions in the year ahead Barratt expects its volumes to be lower.

‘It can build homes very well, it just doesn’t have the land on which to build them. The FY2025 volume guidance today is c.7% below consensus.

‘The potential acquisition of Redrow should address the landbank issues, and may cover over this issue, but it will bring its own integration challenges. In our view, there are less complicated ways to play the recovering UK housing market.’

J D Wetherspoon has reported slower sales growth for the 10 weeks of the fourth quarter, hurt by cost pressures in labour and some raw materials.

The group, which owns and operates pubs across the UK and Ireland, posted a 5.8 per cent rise in like-for-like sales for the 10 weeks to 7 July, compared to 11 per cent a year ago, which included more bank holidays.

Chairman of JD Wetherspoon Tim Martin said: ‘The gradual recovery in sales and profits, following the pandemic, has continued in the current financial year.

‘Total sales are, again, at record levels, with fewer pubs.

‘Sales per pub are approximately 21% higher than pre-pandemic levels, which has helped to compensate for the very substantial increase in costs.

‘For example, compared to the 2019 financial year, labour in this financial year has increased by approximately £164 million, energy by £28 million, repairs (also affected by labour costs) by £38 million and interest (excluding IFRS 16 interest) by £16 million.

‘Notwithstanding these cost pressures, the company continues to endeavour to “widen the moat” by investing in areas such as beer gardens, staff rooms, above-bar glass racks and improved beer dispense systems.’

Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club:

‘Lower home completions, lower profits and legacy property charges of almost £200million mean 2024 will not go down as a vintage year for Barratt Developments.

‘The year ahead is also likely to present challenges with the group guiding to another fall in completions.

‘That said, there are reasons to think the industry may now be past the worst.

‘Recent falls in mortgage rates suggest lenders are starting to loosen the purse strings, a trend that could accelerate once interest rates start to be cut. This is good news for potential home buyers.

‘Planning reforms laid out by the new Labour government could, if successfully implemented, lead to a significant increase in new homes built, providing a much-needed boost for the industry. And the proposed combination with Redrow could mean Barratt is uniquely placed to take advantage, and provide potential for cost savings.

‘For now though, caution remains the watch word. Many first time buyers remain locked out of the housing market. Until interest rates are meaningfully cut, it is hard to see that changing.’

Barratt Developments expects to build up to 7 per cent fewer homes during its 2025 fiscal year, as elevated mortgage rates and broader economic concerns hold back recovery in Britain’s housing sector.

The housing sector is optimistic of a dynamic shift in homebuilding policy under the new Labour government, mainly to tackle planning-related issues, at a time a delay in interest rate cuts have tempered hopes of a fast-paced recovery.

Barratt, one of the biggest homebuilders in the UK in terms of output and revenue, said it expects to build 13,000-13,500 homes in the current fiscal year.

The company said it built 14,004 homes in the year ended 30 June, at the upper end of its outlook range.

The FTSE 100 builder also forecast profit slightly above its expectations for the 2024 fiscal year.

Direct Line Group is planning to pay around 60 per cent of its operating profits as regular dividend, the insurer told investors this morning as part of a refreshed strategy ahead of its AGM.

The gorup, which will also launch its eponymous motor insurance brand on price comparison websites, will exit or stop investing in original equipment manufacturer affinity motor partnerships and other personal lines businesses.

It will now focus on home, commercial direct and rescue outside of motor insurance.

Adam Winslow, who took over as the CEO of Direct Line earlier this year, is tasked with reviving the struggling insurer’s fortunes at a time when regulators are tightening scrutiny of the sector and shareholders are looking for management to unlock value as a standalone company.

‘Putting our strongest brand, Direct Line, on price comparison websites, where 90% of consumers shop, means we will be shaking up the motor insurance market once again,’ Winslow said in a statement.

Shares in Indivior hit a three-year low after dropping one of its schizophrenia drugs and warning profits will be worse than hoped.

The pharma company, whose shares still trade in London despite it shifting its primary listing to New York last month, will stop sales of its Perseris medicine because it said the monthly injection is ‘no longer financially viable’.

While Indivior will continue to supply the drug for patients ‘for the foreseeable future to avoid disruption to patient care’, it will stop marketing the product and has cut 130 jobs.

Travis Perkins has named the former chief executive of Taylor Wimpey Pete Redfern as its next boss, succeeding Nick Roberts who will step down from the construction materials group after five years at the helm.

Redfern, who was CEO of Taylor Wimpey until 2022, will join when Roberts departs on 16 September.

Travis Perkins has also named Geoff Drabble, currently chair of DS Smith, as its new chair designate.

Redfern said: ‘It is a privilege to become the next Chief Executive Officer of Travis Perkins.

‘In addition to my time as a Non-Executive Director, I have operated as both a customer of, and a supplier to the Group and have a strong sense of its inherent potential.

‘My initial focus will be on implementing and adding to the actions already underway to improve operational execution and increase the focus on efficiency and cash generation, whilst also starting to develop the Group’s strategy for the years ahead.’