Macroeconomic worries have pushed down valuations for housebuilders by around 10 per cent on average since the start of the year. Barratt Developments (BDEV) hasn't escaped the sector-wider markdown, which may seem curious given it has delivered record first-half profits. So, this might be an attractive entry point given it now trades on a forward price earnings ratio of nine, with a price/net asset value ratio of 1.5 against 1.7 for the sector – the shares are also on a prospective yield for the year to June 2018 of 7.7 per cent.
Barratt has addressed earlier criticisms about paying out special dividends instead of building its land holdings by virtually doubling land purchases to £641m and opening a new division in Cambridgeshire, one of the fastest-growing regions in the south-east of England. A total of 13,263 plots were acquired, taking the owned and controlled land bank total to 83,617 plots, equivalent to five years’ supply.
There was a modest uptick in the operating margin to 17.9 per cent, although the improvement would have been greater but for the tough conditions in the high-end London market. Outside London, average selling prices on private sales rose 5.5 per cent to £301,700 and by 8.2 per cent on affordable homes to £124,700.
Analysts at Peel Hunt are forecasting adjusted pre-tax profit for the year ending June 2018 of £818m and EPS of 65.8p (from £765.1 and 61.3p in 2017).
BARRATT DEVELOPMENTS (BDEV) | ||||
ORD PRICE: | 567.6p | MARKET VALUE: | £5.75bn | |
TOUCH: | 567.4-567.8p | 12-MONTH HIGH: | 688p | LOW: 492p |
DIVIDEND YIELD: | 4.5% | PE RATIO: | 9 | |
NET ASSET VALUE: | 421p | NET CASH: | £166m |
Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016 | 1.82 | 321 | 25.9 | 7.3 |
2017 | 1.99 | 343 | 27.1 | 8.6 |
% change | +9 | +7 | +5 | +18 |
Ex-div: | 19 Apr | |||
Payment: | 18 May |