FTSE 250 movers: Subsiding house builders undermine index

The FTSE 250 could not match the small rise of its blue chip neighbour index, falling 0.26% on Monday as its property and housebuilding stocks cast a shadow across the mid caps.

House builders on the FTSE 250, including Galliford Try, Crest Nicholson, Bellway, Redrow and Bovis Homes, all subsided between 7% and 3%, while estate agent website Rightmove also was caught up in the selling.

Galliford led the sector in the decline after it found itself caught up in the Edinburgh schools closure scandal, where 17 schools built under a £360m private finance initiative deal were closed by city officials due to safety fears over their construction.

The five high schools, 10 primaries and two special schools were built by the Edinburgh Schools Partnership (ESP), a consortium of Amey and Miller Construction and the Bank of Scotland.

Galliford Try bought Miller Construction in 2014. Edinburgh Council has said it will not be footing the bill for any remedial work to make the schools safe.

On the sector's wider decline, some analysts pointed to research that indicated developers may be forced to turn some luxury London residential projects into offices as falling demand for premium property meeting a record supply of luxury homes planned in the capital that is equivalent to more than double the size of the city’s Hyde Park.

Consulting firm Arcadis said plans in the pipeline amounted to 35,000 high-end properties, worth almost £77bn in the coming decade, 40% more than in 2014.

But many of the smaller builders are not so focused on the luxury market.

Motivation for some selling would have been sparked by a note from Shore Capital analyst Robin Hardy, who said the house builders’ four-year rally has now "largely run out of steam, valuations are generally fairly full and risks are beginning to increase".

He suggested there was more risk that the sector becomes a "value trap" and that the longer house price inflation floats up, the stronger this argument becomes, also suggesting new legislation may end the 'golden' conditions for the larger companies as the government looks to stimulate smaller builders by underwriting loans, allow them to access state-owned land that has a fully executable planning consent and deferring payment until after the house is sold.

However, undermining this theory somewhat, the ShoreCap man suggested taking profit directly from the larger cap stocks and rotating into the smaller stocks in the sector, which could be said to number some of the 250.

Among the risers, food producer Cranswick gobbled up Crown Chicken for £40m cash, funded from existing bank facilities.

Crown is an integrated poultry producer based in East Anglia, which breeds, rears and processes fresh chicken for supply into grocery retail, food service, wholesale and manufacturing channels.

Miners including Kaz Minerals and Evraz were lifted by firmer commodity prices in Asia and investors' belief that benign Chinese inflation data will soon prompt some action by Beijing.

Data out of China earlier showed the consumer price index rose 2.3% on the year in March, versus expectations for a 2.5% increase and in line with the previous month’s 2.3%.

FTSE 250 - Risers

Cranswick (CWK) 2,534.00p 16.19%
Kaz Minerals (KAZ) 157.00p 8.80%
Evraz (EVR) 99.25p 6.61%
Vesuvius (VSVS) 307.00p 6.12%
Amec Foster Wheeler (AMFW) 451.40p 3.77%
Drax Group (DRX) 298.30p 3.68%
NCC Group (NCC) 255.50p 3.40%
Acacia Mining (ACA) 296.80p 3.09%
CLS Holdings (CLI) 1,520.00p 2.98%
Hikma Pharmaceuticals (HIK) 2,145.00p 2.78%

FTSE 250 - Fallers

Galliford Try (GFRD) 1,300.00p -7.14%
Crest Nicholson Holdings (CRST) 510.00p -5.20%
Bellway (BWY) 2,446.00p -4.27%
Restaurant Group (RTN) 351.30p -4.02%
Dechra Pharmaceuticals (DPH) 1,176.00p -4.00%
Redrow (RDW) 371.00p -3.94%
Rightmove (RMV) 3,998.00p -3.71%
IP Group (IPO) 159.00p -3.64%
Bovis Homes Group (BVS) 861.00p -3.48%
Euromoney Institutional Investor (ERM) 865.00p -3.41%