Berkeley defies the London opinion polls; Aviva stubs it out

Berkeley Group, the London focused housebuilder, appears to be the beneficiary of the latest electoral phenomenon: the “Shy First-Time Buyer”. If the general election of 2015 was all about “Shy Tories” – voters too embarrassed to tell pollsters they loved George Osborne – then this month’s vote was all about “Shy FTBs”: Labour voters who secretly loved Mr Osborne’s Help To Buy scheme.

According to mortgage lenders, the average age of a first time buyer in London is now 34. But YouGov found that 55 per cent of all 30-39 year olds voted Labour – and an Ipsos Mori poll for the Evening Standard revealed that London’s thirtysomethings admitted their true voting intentions only in the last days of the campaign.

Berkeley proved a winner either way, though. Help To Buy Scheme incentives helped to offset a slowing housing market in the capital – protecting a big increase in Berkeley’s full-year profitability.

Pre-tax profit for the 12 months to April 30 came in at £812.4m – a year-on-year increase of 53 per cent. Revenues were 33 per cent higher at £2.72bn.

This was despite the value of property reservations coming in 25 per cent lower than in the year before, largely because of a slowdown around another national poll: the EU referendum. Berkeley said this decline has now been fully reversed, and more stable market conditions meant reservation cancellation rates were back to normal levels.

In the period, Berkeley sold 3,905 homes, up from 3,776 last year, at an average selling price of £675,000, up from £515,000.

While many expected the top end of the London market to remain difficult, analysts at Peel Hunt had forecast that the cheaper end would continue to trade well thanks to increased use of Help To Buy.

Nevertheless, Berkeley played down the scheme’s impact, saying:

Sales continue to be split broadly evenly between owner occupiers and investors and include just 157 Help to Buy reservations.

Still, that represented a 63 per cent rise on 2016. It warned of a bigger political factor in future:

There is a recognised skills gap in the UK construction workforce and it is hard to predict how build costs will be affected by Brexit as approximately half of London’s site labour comes from the EU. This needs to be addressed by a combination of continued access to EU labour, skills training and innovation in construction if the industry is to achieve its medium term production aspirations.

Overall, though, Berkeley said its “unrivalled land bank”, net cash of £285.5m and forward sales of £2.74bn meant it could reiterate its guidance of delivering at least £3bn of pre-tax profit over the five years to 2021, assuming normal market conditions continue.

If Britain’s politicians – with the exception of one – have woken up and smelt the coffee, fewer have done so at Whitbread’s Costa chain.

Like-for-like sales growth at Costa Coffee fell to just 1.1 per cent in the 13 weeks to June 1, down from 2 per cent in the full year. And even the full year performance was caveated with a warning about “a tougher consumer environment than last year”.

Whitbread’s latest update reports that group like-for-like sales rose 2.9 per cent in the period, as its Premier Inn hotels continued to win market share thanks to 9,000 new rooms – delivering total sales growth of 9.2 per cent. Premier also launched a personalised business to business booking platform that helped to maintain more lucrative direct bookings at 94 per cent of sales. And, despite the increase in capacity, total UK occupancy in the first quarter was up year-on-year to 79.2 per cent.

Costa Coffee sales grew 8.7 per cent in total, thanks to 300 net new installations of Costa Express during the quarter and a good performance in the expanding travel and drive thru channels.

Chief executive Alison Brittain said:

We have had a good start to the year, with first quarter sales growth of 7.6%, in line with our expectations. Our continued drive to grow and innovate in our core UK businesses, focus on our strengths internationally and build capabilities to support long-term growth, combined with our ongoing cost efficiency programme, gives us confidence that we will make further good progress this year.

Costa also opened its new Roastery last month, giving it capacity to grow over the next 20 years. If only the aroma could waft as far as Downing Street.

Meanwhile, every politician’s favourite corporate target, energy supplier Centrica, is trying to tap into a popular trend: the generation of power at a smaller local and community level.

This morning, the owner of British Gas said it is offloading two large gas power plants for £318m in cash, as part of chief executive Iain Conn’s strategy to focus on businesses and consumers as well as smaller “peaking” plants that provide power during periods of very high demand.

Nowadays, the installation of solar panels on the roofs of homes and businesses plus new technologies such as battery storage threaten the traditional model of large, centralised power plants.

Centrica is selling its Langage and South Humber Bank combined cycle gas turbine (CCGT) power stations, which together have a capacity of 2.3 gigawatts, to a UK arm of EPH, the Czech power company that already owns a number of sites in the UK. The deal is expected to complete in the second half of this year.

And, finally, Aviva no longer needs to be shy about its tobacco habit – it is stubbing it out altogether. Last night, the UK insurance group said it will sell all of its tobacco holdings.

In doing so, Aviva joins a growing number of big investors with plans to quit for good. Axa promised to get rid of its tobacco investments last year, and more recently Scor and the Irish sovereign wealth fund have agreed to do the same.

Aviva had about £1bn of investments in the industry. It said its shareholdings have almost all been sold, while its bond investments will be left to run off.

Aviva’s divestment only affects securities that it manages on behalf of its own shareholders – it will continue to invest in tobacco on behalf of third parties.

Tobacco Free Portfolios, a pressure group, estimates that $4bn has been divested from tobacco by financial institutions around the world in recent years.

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