Berkeley Group and Sirius Minerals

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“Investors are regaining confidence as evident by a 0.9% rise in the FTSE 100 to 7,669 on Wednesday. Miners, tobacco sellers and drug companies help top the leaderboard,” says Russ Mould, investment director at AJ Bell.

Berkeley Group

Berkeley becomes the latest housebuilder to sound caution over the state of the property market. This raises the question of whether the sector has now reached the peak of its earnings strength in the current cycle and for how long the housebuilders will continue to pay generous dividends.

“Berkeley ended April with £687.3m net cash balance which includes £400m cash above requirement. The fact that it hasn’t earmarked the excess money to be returned to shareholders and instead will keep it as back-up would suggest the company is worried about the state of affairs. Indeed, it says the money is being kept due to macro uncertainty.

“The change of tone from Berkeley from optimistic to cautious will have a negative read-across to housebuilders on the stock market. Berkeley’s chairman Tony Pidgley is seen as an authority on the market and for his company to become less bullish is a warning sign for the whole industry.”

Sirius Minerals

“Finding buyers for future polyhalite production may seem unexciting and just the course of doing business. However, for Sirius Minerals it is extremely important to keep signing new offtake deals for material that will be produced from its large mine in Yorkshire.

“Sirius needs more of these deals in order to convince banks to grant it project finance debt to fund the second stage of its financing requirements. News of a seven year supply deal with ITL Trading, one of the largest suppliers of fertiliser to Nigeria, is therefore a step in the right direction.

“Sirius, which is now a £1.5bn company and member of the FTSE 250 index, is set to create up to 1,700 construction jobs to help build Britain’s biggest mining project in the modern era. It will also create approximately 1,000 jobs in operations and a further 1,450 jobs in the supply chain. The mine hopes to start producing in 2021.”

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