Barratt back with a bang

Barratt was previously targeting an 18 per cent return on capital by 2016, but this has been achieved two years early and a new target of at least 25 per cent has been set for 2017. The second issue - dividends - has also been addressed. As well as a fourfold increase in the payout for the year to end-June, special payments of £400m are proposed for the three years to 2017. Adding in ordinary dividends and Barratt expects to return 96p a share over the next three years.

The driver behind this impressive performance comes from a 9 per cent rise in completions to 14,838 and a 13 per cent jump in average selling prices to £219,900. A majority of the price increase reflects a change in the product mix. Higher margin family home construction has been increased while, outside London, the proportion of apartments built fell from 21.5 per cent of output to 17.4 per cent.

The quality of the land bank continues to improve, too, with completions from newly acquired high-margin land up from 49 per cent to 65 per cent. That figure is expected to have risen to 95 per cent by 2017 as well. Given that the return on the capital invested in the £3.8bn-worth of land purchased since 2009 stands at over 39 per cent, that overall target of 25 per cent by 2017 looks achievable as older land rolls off the books.

Broker Numis Securities expects adjusted pre-tax profit for 2015 of £551m, giving EPS of 44.7p.