Construction shares this week

The construction and building materials sector struggled last week, as poor performances from contractors, housebuilders and materials companies dragged the average share value down 2% to 3720.

As always, there were some notable exceptions, and Galliford Try was the star performer. Shares in the company rose 6.7% to 75.25p at the end of the week as the City showed its approval of its latest acquisition – chartered surveyor Pentland, for up to £2.8m.

Galliford Try is a relatively small company with a market capitalisation of about £170m. But it has impressed the City in recent months by bucking the trend among housebuilders and showing that it has a product that is still in demand from UK househunters. It might only build about 850 homes a year, but the fact that they are individually designed, rather than churned out as identical properties, has appealed.

In the full year to the end of June, Galliford’s margins increased in both the housing and construction divisions, pushing profit up 16%. A string of contract wins in construction has not hindered the share price either, which has risen steadily over the past year, and especially in the past six months.

Gleeson was another of last week’s winners, with a rise of 5% to 323p. This in a week when it announced that an annual loss of £13.2m had been incurred because of its building division, which has now been sold to a management team led by managing director Martin Smout.

The rise in share price suggests the City is convinced that the disposal was a step towards better risk analysis and future profitability.

Among the worst performers in the sector were glass maker Pilkington, which was down 6.3%, and builders merchant Travis Perkins, which fell 5%. The housebuilders did not fare well either. Most experienced modest falls, although contractor and housebuilder Kier continued its strong run and increased 1.5% to 1081.

In the support services sector, Atkins rose 2.2% to 704p, Amec dropped 5.2% to 345.25p and Jarvis fell 7.3% to 82.25p.

Overall, construction outperformed the All-Share Index, which dropped 2.2% to 2686.