MARKET REPORT: Berkeley Group shares suffer

Britain’s housing market has been booming throughout the pandemic, but that didn’t help Berkeley Group’s shares yesterday. 

The housebuilder was the biggest faller on the FTSE100 after flagging delays in procuring materials since the end of the Brexit transition arrangement, and changing sales times on some of its developments due to the pandemic. 

Covid appears to have had little impact on Berkeley so far. For the financial year, ending in April, the company expects to generate a similar profit to the £504m it made a year earlier. And forward sales are expected to be above £1.7billion by then, taking the firm into next year in a strong position. 

Berkeley Group added that the fundamentals of its market were still strong – low interest rates were encouraging customers to take out mortgages, and its key areas of London and the South East were displaying an ‘enduring attraction’. 

But the company is holding back the marketing of some of its sites for later release, when lockdown ends, which will take the value of reservations down by 20 per cent in this financial year. 

Analysts at Peel Hunt were cautious about how demand in London would develop, given that lockdown had prompted more people to move out of the City. 

Investors were also nervous, and shares slid by 5.8 per cent, or 266p, to 4306p. Despite Berkeley’s woes, the FTSE100 managed to end the day up 0.36 per cent, or 24.51 points, at 6761.47, topping off a second consecutive week of gains. 

It was propped up by banks, which were boosted by news that the economy had shrunk 2.9 per cent in January – much less than experts had feared. Barclays rose 3.6 per cent, or 6.34p, to 180.6p, Natwest was up 2 per cent, or 3.75p, to 190.65p, and Lloyds Bank climbed 1.8 per cent, or 0.71p, to 41.21p. 

The FTSE250 index of mid-sized companies didn’t manage to hold onto its gains, sliding 0.12 per cent, or 26.63 points, to 21,506.47. 

It was given a helpful leg-up by Tullow Oil, which rocketed 10.2 per cent, or 5.62p, to 60.82p on the back of a positive broker note from Morgan Stanley. Analysts at the bank were hopeful that Tullow is in a good place to benefit if the price of oil continues to climb this year. 

But listed investment funds including the Polar Capital Technology Trust, the Allianz Technology Trust and Baillie Gifford US Growth Trust were weighing on the index. Those trusts are heavily exposed to tech stocks in the US, such as Tesla and Google parent Alphabet, which have been flying in recent years. 

But turmoil in the US bond market has brought them some way back down to earth. Bond yields in the US – effectively the interest rates they pay – have been going up, indicating traders think broader interest rates may soon be on the rise. 

And rising interest rates bring down the value of expensive stocks, because it means investors will be able to put their money in safer assets like bonds and still get a decent return. Polar Capital Technology slid 3.8 per cent, or 85p, to 2130p, Allianz Technology slipped 3.2 per cent, or 90p, to 2740p, and Baillie Gifford US Growth edged down 2.7 per cent, or 9p, to 321p. 

At the smaller end of the market, business rescue experts Begbies Traynor shot up 10.1 per cent, or 10.5p, to 114.5p after raising £22m from investors to fund its latest acquisition. 

Investors were so keen to buy in to the company, which is working as the administrator of Wigan Athletic Football Club, that it was able to offer the shares at 105.5p – even more than the 104.8p they had been trading at on Thursday. 

And ten-pin bowling company Hollywood Bowl fell 5.2 per cent, or 13p, to 237p after raising £30m from investors.