More on Barratt
Barratt
Barratt, the housebuilder, reported continued improvement to margins and profits for the first half of 2005. The company is a housebuilder and sells around 14,000 houses a year.
Barrat’s latest trading statement of for the half year to December 2004 looks positive, with the company expecting to report increased numbers of completions as well as better margins and profits. The rate of growth is slower than last year, as would be expected in current market conditions.
UK completions increased to 6,866 units, up 2%, at an average selling price of around £165,000, an increase of approximately 2% on the same period last year. The company reported an average selling price of £166,000 in the year to June 2004.
The order book at end December was approximately £800m (2003: £757m), which the company says is a new record although the they achieved forward sales of £880m in June 2004 and £1bn in July.
More significantly private completions (ie sales to individual buyers) were down 8% at 5,610 units, although at a higher average selling price of around £179,000 (up 6% on last year). Social housing completions took up the slack with numbers more than doubling to 1,256 units. The average selling price of social housing units was £105,800 for the half year, up 18% on last year.
Barratt says that the forward order book together with the completions this year amounts to 80% planned sales, which means there should be little difficulty in meeting the earnings estimates this year. Numbers will be bolstered by an anticipated 50% increase in social housing sales.
The breadth of the company’s operations (both in geographic and price terms) does provide some protection from a regional slowdown but our view is that the market as a whole will decline in the medium term.
The stock is trading at a prospective PE of 5.1× (on the current price of 588p) which is at the lower end of the sector and the yield of 3.9% is reasonable.
Random picks: Balfour Beatty | Burren Energy | Catlin | Electrocomponents | Greggs | Lloyds TSB | Premier Foods | Yell | Resolution | Halfords