Barratt Developments (BDEV) joins the long list of housebuilders enjoying the current buoyant market, and erased another recession scar by reinstating the interim dividend. This is in accordance with a target, achieved two years ahead of time, to cover dividend payments three times over by post-tax earnings. Analysts at Deutsche Bank are forecasting adjusted pre-tax profits of £376m and EPS of 30p for the full year, which implies a payout of about 10p a share.
There was also solid progress in addressing the other reason for Barratt's relatively lowly rating: the return on capital employed, which was lifted from 9 per cent to a more respectable 14.2 per cent. The improvement was supported by a 19 per cent increase in completions to 6,195, and a 14 per cent rise in average selling prices to £211,200, achieved mainly by shifting the build mix towards family homes. Combined with the use of cheaper land, higher house prices had a galvanising effect on margins at the operating level, rising from 8.5 per cent to 11 per cent.