US Edition Construction products supplier SIG warned yesterday that it was not immune to the collapse of the housing market as it revealed that full-year profits are set to be at the lower end of analysts' estimates of between £140m-£163m.
Chief executive Chris Davies said UK like-for-like sales were down about 6pc as builders halt new developments. He added new home starts are 50pc lower than last year and warned they could drop another 5pc-10pc next year.
"There has been a further marked change in sentiment in construction markets, resulting from and reflecting the massive upheaval in financial markets, which has occurred since mid-September," Mr Davies said.
Now is not a good time to be in the UK building industry. But SIG points out that almost half its business is in mainland Europe, where sales continue to grow.
Also, the group is hopeful other sectors it operates in, such as industry and power generation, will offset the worst of the housing slowdown. In total non-residential sales account for 55pc of revenue.
Mr Davies is also pinning his hopes on a huge public works programme. "The Government keeps hinting that it will accelerate its hospital and school-building future initiatives to help the economy," he said.
SIG is cutting 900 jobs, about 7pc of its total workforce, and closing 65 of its branches at a one-off cost of £19m to generate savings of £25m a year. But analysts are concerned that more may need to be done. SIG had £640m net debt as of June, which it is "aiming to reduce" but has not set any clear targets.
When the housing market recovers, SIG, which is Europe's leading distributor of insulation, should be well placed to benefit from increasingly strict green legislation. Mr Davies expects a tightening of European carbon emissions code to require homes and business to have an extra 20pc-25pc insulation from 2010.
The shares dropped 13pc yesterday, considerably below when Questor advised investors to buy them at 496p two months ago. We were burnt. With a 16pc yield, the shares look good value, but there are fears a dividend cut could be on the cards.
Once bitten, twice shy. Sell.
Care UK
235p unchanged
Questor says Buy
Care UK, the health and social care services provider, has long been seen as a defensive share, given its propensity to win Government contracts, coupled with the UK's ageing population.
Its latest results were in line with expectations, showing a 20pc rise in annual operating profits, coming at £36.4m. Pre-tax profits were just £1.6m – down from £14.5m, though this was because of previously stated impairment charges totalling £15.9m relating to an acquisition and the loss of a contract. Group revenues rose 24pc to £341.6m.
Care UK's social care activities make up about two-thirds of its overall revenue and include the operation of residential care homes. This should see a further steady revenue stream as some 70pc of its beds are contracted on a long-term basis to local authorities – these contracts typically running for 10 years.
Its healthcare business, which includes the operation of NHS walk-in clinics, should see even faster growth. It has seen a 73pc rise in revenues to £103.9m over the past year.
With both major political parties committed to promoting a more competitive marketplace for the provision of NHS services, expectations are that the private sector will benefit further from the NHS's estimated £100bn annual budget. The big question is how much will Care UK benefit?
Unsurprisingly, Care UK chief executive Mike Parish is optimistic. Whilst the healthcare business is already the leader in its particular market – making up approximately one third of group revenues – Mr Parish expects this figure to rise to about 50pc over the next couple of years.
The final dividend has just been increased by 11pc to 3.1p, payable on February 18. That makes it an attractive proposition considering the shares are currently trading at 7.4 times forecast earnings. Buy.
Business Post
275p -2¼p
Questor says Hold
As businesses strive to cut costs in every direction, its likely that Christmas cards will be replaced by season's greeting emails and fewer presents will be sent out in the post.
This would equate to bad news for Business Post, the UK parcel, mail and logistics company. Yesterday, the group admitted there is a "more challenging economic period" ahead but delivered some good news. Interim revenues rose 16.3pc to £194m, and it posted a pre-tax profit of £6m, up 25pc.
New business wins and further mail volumes from existing customers helped overcome a rise in fuel prices, which hit the parcels division.
Ahead of the downturn, Business Post has decided to focus on longer-term contracts in areas less directly exposed to the economy, such as mail and specialist services. It is launching a string of new products, such as "iMail" – a next-day mail service allowing customers of any size to electronically transmit mail items, which will be printed at Business Post's mail centres.
Times are going to be tough, but investors should wait out the Christmas period and see if these new innovations will bring good news.
Hold.