Good afternoon. This is your midday market update from City AM.
Ibstock has been the worst performer on the FTSE 250 today. The stock was down around 12 per cent by mid-morning – meaning it has now shed half its value since the start of the year.
That follows an update from the British brickmaker in which it made no effort to masquerade the scale of the difficulty it was facing.
“‘Trading conditions deteriorated sharply during the third quarter, with weakness continuing into October,” boss Joe Hudson said.
The Leicestershire-based business said it cut third-quarter production volumes by a fifth in response to slowing demand, adding that its pre-tax earnings would take a £6m hit compared to previous forecasts.
“The drop in sales volumes in the third quarter is genuinely alarming,” said AJ Bell investment director Russ Mould.
“Earnings were already heading in the wrong direction as far as the market’s concerned in the first half, and it looks like things are getting worse as the second half draws on…ultimately it has very little control over its trajectory.”
What accounts for Ibstock’s woes? Brickmaking and housebuilding are energy-intensive industries, and the surge in oil prices since February will have been a major drag on the company’s profitability.
But the firm makes no bones about another big headwind: government policy.
“The introduction of the Your First Home support scheme represents a welcome and potentially meaningful intervention for the UK housing market…[but] the delay to its introduction until April 2027 is disappointing and has put additional pressure on near-term demand,” Ibstock said.
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The brick short
The delayed government First Home scheme comes after the Office for Budget Responsibility warned housebuilding levels were set to fall for the next three years, cutting overall completions between now and 2030/31 by some 200,000 and eliminating all hope that Labour could still hit its 1.5m new homes target.
The fiscal watchdog named the building safety levy, new biodiversity regulations and higher rates of corporation taxes among government measures which have actively slowed housing delivery.
“These policy developments have increased the cost, complexity, and timescales associated with residential development,” its report said.
Concerns over the sector have triggered a steep sell-off over the past week, from which few firms have been immune.
Ibstock is now the second-most shorted stock in the UK with a 12.9 per cent short interest, data from Research Tree suggests, while housebuilders Vistry and Crest Nicholson occupy the top and seventh spots, with 16.7 per cent and 8.1 per cent short interest respectively.
The bull case is that energy prices subside in the new year and the rollout of the First Home scheme kicks off a genuine housebuilding boom. But many in the market are unconvinced.
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