The hiatus in construction activity post-lockdown caused Barratt Developments’ (BDEV) completions to inevitably plummet, declining by more than a quarter over the 12-month period. However, like peers, the housebuilder has benefited from pent-up demand and the temporary rise in the stamp duty threshold, with average weekly net private reservations per active outlet in July and August surging ahead of the comparable period last year. On the same day the Nationwide House Price Index revealed that house prices had risen 3.7 per cent to a record high last month, Barratt also said that sales prices had remained firm in the wake of the pandemic.
However, management decided against following Persimmon’s (PSN) lead in reinstating shareholder payouts and said it would pay a dividend covered 2.5 times by EPS when “the time is right”. That is despite the balance sheet being sturdier than many others in the sector.
Admittedly net cash declined by more than half, but it still stood at £308m and management is targeting an increase to £550m by the end of next June. It is also aiming to bring down land creditors - payments conditional on purchased land getting to set development stages - to between 15 and 25 per cent of the land bank over the medium-term.
The housebuilder also set out targets to increase completions to between 14,500 and 15,000 in 2021 and tightly control working capital in order to increase its return on capital employed to 25 per cent, from 16 per cent last year, in the medium-term.
House broker Peel Hunt forecasts adjusted pre-tax profits of £655m and EPS of 53.7p for the year to June 2021, rising to £810m and 66.4p the following year.
BARRATT DEVELOPMENTS (BDEV) | ||||
ORD PRICE: | 539p | MARKET VALUE: | £ 5.40bn | |
TOUCH: | 538.4-539p | 12-MONTH HIGH: | 889p | LOW: 349p |
DIVIDEND YIELD: | NIL | PE RATIO: | 14 | |
NET ASSET VALUE: | 483p | NET CASH: | £308m |
Year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
2016 | 4.24 | 682 | 55.1 | 18.3 |
2017 | 4.65 | 765 | 61.3 | 24.2 |
2018 | 4.87 | 836 | 66.5 | 26.5 |
2019 | 4.76 | 910 | 73.2 | 29.1 |
2020 | 3.41 | 492 | 39.4 | nil |
% change | -28 | -46 | -46 | - |
Ex-div: | na | |||
Payment: | na | |||
*Excludes special dividends of 10p a share in 2015, 12.4p in 2016 and 17.3p in 2017, 2018 and 2019 |