Market Report: House builders on road to recovery

MANY house builders and related stocks enjoyed solid performances yesterday, as two securities houses predicted house prices were close to turning the corner to recovery.

Analysts at Credit Lyonnais Securities said recovery would this year become established at the lighter end of the UK building market. UBS also said the housing market was off the critical list.

Credit Lyonnais estimates that housing starts in 1993 will increase by up to 15 per cent, accompanied by house price inflation of 2 per cent, which should rise to 5 per cent over the following two years.

But while house builders would experience strong profits growth, there would be further pressure on contractors as material and labour costs increased.

John Wriglesworth, an analyst at UBS, estimates that the number of unsold empty properties has fallen from 225,000 at the beginning of 1992 to around 150,000.

Credit Lyonnais recommends buying Bryant Group, up 1.5p to 139.5p, Persimmon, 1p firmer at 283p, Wilson Bowden and Wilson Connolly, both unchanged at 451p and 204p respectively.

Tarmac, the UK's biggest builder, gained 2p to 135p, Barratt Developments rose 5p to 145p, and George Wimpey also advanced 5p to 175p.

The favourable effect was also felt in the building materials sector. BPB, the plasterboard maker, increased 5p to 232p, Blue Circle, the cement group, climbed 11p to 254p, Marshalls, the builders' merchant, advanced 8p to 83p, and Redland, the roof tiles group, added 13p to 445p. RMC spurted 34p to 675p, also helped by the merger of its operations in eastern and western Germany.

Share prices generally ended the second leg of the long three-week account on a firmer footing, having been dragged down this week by hectic futures activity.

Trading, however, was subdued as many dealers made an early start to the bank holiday weekend. Volume turnover was 526 million, flattered by US buying late in the day.

The FT-SE 100 index reclaimed ground above 2,800, rising by 26.3 points to 2,813.1.

That advance was largely due to market makers tracking the FT-SE 100 futures contract for June, which attracted support at 2,818.

Some chartists said 2,810 for the FT-SE 100 index was likely to become the resistance level for the cash market.

Prices were also helped by a better overnight performance and a steady morning on Wall Street. A raft of bullish stockbrokers' circulars also helped to lift sentiment.

Sharelink, the execution-only stockbroker, said this week had been marked by strong buying by private clients regardless of the movements by the FT-SE 100 index. Clients, it added, had gone for recovery situations.

Brewers were lively on a James Capel sector review. Bass rose by 8p to 543p, Whitbread gained 9p to 474p, and Scottish & Newcastle added 6p to 465p.

Allied-Lyons, despite a cautious stance by Capel, put on 10p to 577p. There was renewed speculation that a merger of its Victoria off-licences with the Augustus Barnett chain, owned by Bass, would soon happen.

After some heavy treatment this week on financing concerns, Euro Disney rose 20p to 865p. The company has replaced John Forsgren, chief financial officer, with Michael Montgomery, treasurer of Walt Disney. Mr Forsgren becomes vice- chairman.

American interest and positive notes by analysts lifted BAT out of the doldrums. The shares improved 18p to 556p.

Takeover speculation continued to swirl around United Biscuits, pushing the price up 16p to 426p.

Reuters firmed 5p to pounds 12.59 following a round of presentations.

EFG, engaged in forestry management, is reorganising its boardroom and moving from the USM to a full listing. Lord Rees, non-executive chairman, is resigning. David Douglas-Home will act as non-executive chairman until 1994. Michael Gregory is joining as finance director. EFG also announced losses of pounds 4m for 1992/93, against a pounds 3m deficit for the previous 16 months. Shares fell 1p to 15p.

Allied Radio has sold Squire Sound & Light for pounds 1 to Keith Isaac, formerly the company's finance director. The company has also waived repayment of an inter- company loan of pounds 247,000. Squire, which supplies sound and lighting equipment to the discotheque and club industry, has made 'significant' losses over the past three years. Allied's depressed shares remained unchanged at 7p.

Adwest Group has formed a joint venture with the UK arm of the American owned Johnson Controls to develop and make seat reclining mechanisms. Johnson's automotive operations have worldwide annual sales of dollars 1.6bn. Customers include Rover, Ford, Toyota, Nissan, GM, VW, Mercedes Benz, BMW and Renault. Adwest rose 2p to 154p, just 1p shy of this year's high.