Boris Johnson’s Conservative government announced a new, Help to Build scheme late last week. The new proposal is meant to help Britons get onto the property ladder amid the increase in house prices outstripping wage growth. So, here are three FTSE shares that I think stand to gain from this new programme.

Grafton

Grafton (LSE: GFTU) is a FTSE 250 constituent, and could be a beneficiary from the Help to Build scheme. This is because, unlike Help to Buy, the new initiative won’t directly benefit property developers such as Barratt and Taylor Wimpey. The loan is only available for houses built by self-builders and custom builders. As the scheme is set to last until 2026, the group could end up benefiting from a long-lasting tailwind.

Grafton is a builders merchant that sells all sorts of goods required to build a house. These include building materials, timber, decor, DIY items, and pipes. Its manufacturing segment only accounts for 5% of its revenue, so I expect the business’ distribution segment to fair better from the new builds. Not to mention, its history of producing healthy profit margins makes it an attractive stock for me to purchase. However, it’s worth noting that the current cost-of-living crisis could hamper sales figures.

Breedon

Breedon (LSE: BREE) is the UK’s largest independent construction materials firm. It is listed on the FTSE AIM index. The company produced a combine 31.6m tonnes of cement and aggregates in 2021. But more importantly, the board expects further growth this year.

Constructing a new house typically uses more than a 100 tonnes of cement and aggregates. Therefore, I expect the Help to Build scheme to act as a tailwind for the FTSE firm. That being said, Breedon’s revenue doesn’t just stem from building houses. It paves roads and builds other infrastructure as well. Given how well the S&P Global/CIPS UK Construction Purchasing Managers Index (A measure of how well the construction sector is doing) has been performing, Breedon shares could improve in the long term. Its share price also currently trades at a decent price-to-earnings (P/E ratio) of 13, so I see this as a buying opportunity for me.

Dunelm

Inflation continues to run rampant. Thus, new home owners will be looking for bargains in furniture. Thankfully, FTSE 250 staple Dunelm (LSE: DNLM) provides exactly that. Its everyday necessities have an average price of £6, while its furniture has a low average price of £120.

Management has stated its goal of bringing better value proposition to its customers too. This is evident as Dunelm introduced more entry price products and promotional buys, which should entice more customers and purchases.

The retailer still has to compete with IKEA though, as its competitor offers cheaper products in certain categories. That being said, consumers still seem to prefer shopping at Dunelm. This is due to its excellent customer service, such as cheaper deliveries. On that account, as long as Dunelm can maintain its competitive prices and good customer service, I see it being one of the few FTSE shares riding the tailwinds of the new Help to Build scheme.

The post 3 FTSE shares I’m buying with the Help to Build scheme! appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

By the time you consider fading tax relief and increasing costs, as well as the possibility that dizzying home price growth may not be a thing of the past, I reckon that investing in stocks has become a much more attractive way to make your money work for you. It’s why I have chosen equity markets over the chance to become a landlord myself.

I would consider a better, albeit indirect, way to play the property market is via buying into Grafton Group Units (LSE: GFTU). The business distributes building materials to trade customers, and because Britain needs to double-down on homebuilding in the coming decades, I’m tipping profits here to keep rising.

Even if you’re fearful over Brexit and how this could dent homes demand and thus build rates in the years ahead, I reckon that Grafton is a great share to buy. Why? Well the retailer is also a  major player in Ireland as well as the Low Countries, territories which are also suffering from chronic homes shortages and whose economic prospects aren’t overshadowed by political upheaval like that of the UK.

Profit are booming

Latest financials underlined just why I believe the FTSE 250 firm’s such a great investment right now. Revenues across the group rose 9% in 2018 to a shade under £3bn, Grafton citing the “benefit from exposure to the fast-growing Irish and Dutch markets and from strong underlying demand fundamentals in the UK market.”

Adjusted pre-tax profit rose 20% to £188.4m last year, but this wasn’t only down to its soaring top line. The Dublin firm’s efforts to supercharge margins are also paying off handsomely and as a consequence, operating profit margin at group level  boomed by 60 basis points to 6.6% in 2018, putting it further towards Grafton’s medium-term target of 7%.

Those improving margins have also improved the company’s reputation as a colossal cash machine. Cash flow generated from operations of £209.2m last year remained stable from 2017 levels, and its ability to chuck out the readies is enabling it to keep delivering some brilliant acquisitions as well. 2018 saw the business snap up London-based decorating specialist Leyland SDM for £82.4m, the majority of whose outlets can be found in the more affluent parts of the capital like Kensington and Notting Hill.

Payouts to continue rising!

It’s no surprise that Grafton’s bright outlook and exceptional cash generation prompted it to raise the full-year dividend for 2018 by an impressive 16%, to 18p per share, keeping its progressive dividend policy going nicely (annual payouts have risen 67% over the past five years).

And City analysts believe that, supported by a predicted 7% earnings rise in 2019, payouts will rise again to 18.3p per share. Yields bigger than Grafton’s forward figure of 2.4% can be found, sure, but few appear as rock-solid (the estimated dividend is covered 3.5 times by forward earnings) or in as good a shape to keep raising annual rewards at the same stratospheric rate. I consider Grafton to be an exceptional income stock to buy today, and particularly for those looking to play the property markets.

The post Forget buy-to-let! I’d rather buy this FTSE 250 property stock and its growing dividends appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The firm had just updated the stock market about challenging market conditions and lower revenues for the trading year just gone. I said I don’t want to be holding the shares of any cyclical business if a recession is on the way, so it felt safer for me to avoid SIG’s shares.

Good trading

Today, we have an update from a company trading in the same sector, called Grafton Group (LSE: GFTU), and the commentary reads rather differently. The firm distributes building materials to trade customers in the UK, Ireland, the Netherlands and Belgium. It’s also the “market leader” in the DIY retailing market in Ireland and, on top of that, it’s the “largest manufacturer” of dry mortar in the UK, which means the firm has a few more strings to its bow than SIG, although operations are all highly cyclical in nature, and around 85% of overall operating profit comes from merchanting with just 9% from manufacturing and 6% from retailing.

You might have heard of some of the firm’s trading brands in the UK, such as Selco, Buildbase, Plumbase, Leyland SDM, MacBlairand CPI EuroMix. The Grafton set-up overall includes some 675 branches across all trading areas, so it’s a sizeable enterprise and therefore, another useful barometer to help us gauge conditions at the ‘coal face’ of the European economy, even though around 70% of revenue derives from the UK.

The update covers trading for the year to 31 December and constant currency revenue grew 8.4% compared to the prior year. Meanwhile, average daily like-for-like revenue increased by 4.3%. The directors said in the report that “the rate of growth moderated in November and December following above trend growth in September and October.”  But that’s as close as Grafton gets in its update to the rather negative impression about trading conditions I got from SIG. Indeed, Grafton expects earnings before interest tax and amortisation (EBITDA) for 2018 to be “ahead of the top end of analyst expectations,” which sounds bullish.

A positive outlook

Chief executive Gavin Slark said in the update that Grafton’s “cash generative businesses, strong balance sheet and low level of net debt support our development strategy for the year ahead.” The wording in the update betrays no sign of any doubts in the outlook, and City analysts following the firm expect a mid-single-digit percentage increase in earnings next year.

The share price is perky today, but despite the well-covered dividend yield and the positive outlook, I’m still reluctant to take on the single-company risk that comes with a cyclical operator like this in what looks like a mature stage of the current cyclical upswing in the economy. There may not be an imminent recession coming, but just as with SIG, I’m avoiding shares in Grafton and would rather spread my risk by investing in an index tracker fund, which would provide diversification because of the large number of enterprises making up the index the tracker follows.

The post Does this company’s trading update mean that there isn’t a recession coming imminently? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Sweat and hard graft

The FTSE 250 flyer, which has a market cap of £1.87bn, has just reported another positive set of results, with revenue up 9% to £1.3bn, or 6% in constant currency. Adjusted operating profit before property profit rose 19% to £77m. It also reported strong organic growth in its Irish Merchanting, Woodie’s DIY and Mortar Manufacturing businesses, while increasing scale and profitability at its Netherlands merchanting business.

Strong cash generation has reduced net debt from £95.7m to £80.2m year-on-year, leaving gearing at just 7%. Grafton has invested £68.6m in acquisitions and capital expenditure as it looks to expand the business, and has also treated investors by increasing the dividend 11%. Chief executive Gavin Slark reports all geographies contributing to double-digit growth in profits and earnings per share in the first half and said Grafton is well placed to deliver its full-year expectations.

Brexit bother

It has also delivered five consecutive years of double-digit earnings per share (EPS) growth but there are signs this could slow, with forecasters anticipating 5% in 2017 then 8% in 2018. Brexit is the main concern, given that the UK supplies more than two-thirds of group revenues.

That may explain its undemanding valuation of 15.4 times earnings despite the growth spurt. The yield is a forecast 1.9%, which may not be spectacular but as we have seen, management policy is progressive. Grafton should be on your watchlist in case we get news on the UK’s future EU relationship. At that point, it could fly again.

Life is life

Life insurance and pension provider Chesnara (LSE: CSN) has also issued its latest half-yearly report this morning with investors hoping it will sustain recent strong momentum, that has seen its share price rise 15% in a year and 105% over five years. So far, markets seem happy, with the share price up 3% this morning.

Chesnara’s speciality is buying up portfolios of insurance policies and managing them until they’ve expired. It currently administers over a million life and pension policies worth around £7.5bn and continues to add to its portfolio, recently completing the acquisition of Legal and General Nederland, now rebranded as Scildon, which created £65.4m of economic value (EcV). The group’s total EcV now stands at £700.4m, up from £602.6m on 31 December 2016.

Capital value

Today’s results also show Chesnara posting IFRS profit before tax of £51.6m, up from £200,000 one year ago, which includes a better-than-expected £20.7m gain on the Legal and General Nederland acquisition. The underlying core operating profit of £16.6m easily beats last year’s £9.5m. The group solvency ratio is steady at 143%, and the company remains well capitalised.

Chesnara, whose market cap is £584m, increased its interim dividend by 2.9%. Its forward yield is now a handsome 5.3%, with solid cover of 1.7. Today’s forecast valuation of just 11.3 times earnings may now be a good entry point. 

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Science In Sport (LSE: SIS) moved 3% higher on Thursday, and within striking distance of February’s summit around 96p per share, following the release of perky trading numbers.

The protein powder play announced that sales jumped 28% in the six months to June, to £8.27m, with its e-commerce enjoying growth of 78% across all of its markets. The London business also reported growth in all of its retail channels in the period.

Chief executive Steven Moon commented that “we have had a strong start to the year in a difficult market, and have made very good progress, particularly when many of our competitors continue to face growth challenges.”

He celebrated the huge investment Science In Sport has made in international markets as well as in its online proposition, the success of which has been highlighted by today’s terrific results.

And Moon struck a confident tone looking ahead, noting that “we have good momentum and together with our healthy innovation pipeline, we expect to have a strong second half.”

Sprinting on

The City expects it to remain lossmaking for some time yet however, although the bottom line is expected to keep on improving as revenues steadily rise. Losses of 4p per share are predicted for 2017, narrowing from 6.2p last year. And further progress, to 2.1p, is estimated for 2018.

Sports nutrition is clearly big business, as underscored by a report released this week by Mintel which showed that more than a quarter of all Britons now take protein and energy supplements in a bid to acquire ‘the body beautiful.’

And Science In Sport is putting itself in the frame to lasso this surging demand through its huge investment drive. I reckon the fitness giant could be one to watch in the years ahead.

Build a fortune

Grafton Group (LSE: GFTU) is a share that the Square Mile believes should continue to deliver solid earnings growth.

While difficult trading conditions are expected to see profits slow from the double-digit increases of recent years, the FTSE 250 star is expected to keep firing with increases of 3% and 8% in 2017 and 2018 respectively.

As a consequence, Grafton deals on a forward P/E ratio of 14.9 times, roughly in line with the value yardstick of 15 times.

The Dublin firm saw revenues soar 6.2% at constant currencies, or 9% at actual rates, in the six months to June, it advised earlier this month. A strong performance and new branch openings at its Selco arm helping to lift profits in Britain 4% higher.

But Grafton has really put the pedal down on foreign shores. In Ireland, like-for-like turnover soared 10.6% in the first half, the company noting that “the recovery in the residential and commercial new build markets [had] gathered pace.” And in The Netherlands, like-for-like revenues jumped 38.1% thanks to a resilient Dutch economy and a healthy housing market.

The company is not without its share of risk, of course, given the prospect of a sharp cooldown in the UK economy. Indeed, chief executive Gavin Slark commented that “while we remain optimistic on the medium-term outlook for the UK, we are cautious about the shorter-term impact of current uncertainty and pressure on real incomes which may temper growth in spending on housing RMI.”

Still, I am confident Grafton’s impressive progress on the continent and robust market positions should keep earnings on an upward bent.

The post 2 stocks that savvy growth hunters should consider appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes

Share pickers took reassurance from Greggs’ full-year financials in February when the firm advised that total sales chugged 7% higher in 2016, to £894.2m, and that like-for-like sales rose 4.2%.

Chief executive Roger Whiteside cautioned that all may not be plain sailing looking ahead, however, warning that “the UK consumer outlook is more challenging than we have seen in recent years, with industry-wide pressures emerging in commodities as well as labour costs.”

Still, investors bought into the Greggs head honcho’s belief that “we are confident of making further progress as we implement our plan to grow Greggs as a contemporary food-on-the-go brand.”

Growth picture getting better

The pie and pasty specialist has been a reliable growth generator in recent years, although bottom-line expansion has cooled more recently and a fractional rise is forecast for the current year. And current City forecasts result in a P/E ratio of 17.6 times that tops the widely-considered value benchmark of 15 times.

Having said that, I believe Greggs’ initiatives to get earnings chugging higher again make it worthy of a premium rating. The baker’s multi-year programme to tap into the food-on-the-go market is paying dividends, with refreshments to its menus — like the introduction of new coffee blends and deluxe sandwich ranges — going down a storm with hungry shoppers. And Greggs’ extensive store refurbishment programme is also attracting people through its doors in vast numbers.

The number crunchers certainly believe in the effectiveness of such measures, and earnings growth is expected to rev higher again from 2018 when a 7% rise is anticipated. And I reckon Greggs should dish up chunky profits increases in the longer term too.

Build a fortune

The earnings outlook over at building materials giant Grafton Group (LSE: GFTU) is also getting better thanks to robust trading conditions at home and abroad.

The investment community is becoming increasingly-attracted to the company’s improving revenues outlook, and Grafton has subsequently seen its share price rise 36% since the start of the year. The FTSE 250 play is now dealing at levels not seen since July 2015.

Although the market remains competitive in the UK, Grafton still saw revenues shoot 12% higher during 2016 to a record £2.5bn. Not only do the company’s Selco trade stores continue to outperform their peers in Britain, but the retailer is also benefitting from a favourable building environment in Ireland and the Netherlands. Indeed, Grafton saw daily underlying revenues across the Irish Sea alone shoot 13.9% higher during January and February.

Like Greggs, the City expects earnings expansion to slow at Grafton in the more immediate future, and expansion of 3% is chalked-in for 2017.

But this figure still creates a very-reasonable P/E ratio of 15.3 times. And profits growth is expected to gain a head of steam from 2018 — an 8% rise is currently forecast by the abacus bashers. I reckon Grafton has what it takes to keep on charging higher.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.