More on Barratt
Barrat: FY2006 trading statement
House builder Barrat expects to report growth in sales and profits for the year to June 2006.
The company succeeded in increasing total completions slightly (up by 1.8% to 14,601) but at a lower average selling price (£165,800, down 3.7% on 2005). The company attributed the fall in average selling price to a change in sales mix with a higher proportion of low-cost units being sold.
Private completions were 5.5% lower at 11,899, while the average selling price remained barely unchanged at £182,800. Low-cost social housing completions rose 53.5% to 2,702, at an average selling price of £90,500, down 11% due to changes in geographic mix.
The company admitted that it had to spend larger sums on incentives and marketing costs in order to maintain sales but had compensated for this by tighter control of overhead and building costs.
The company has expressed some confidence in its outlook citing a 9% increase in the order book at the year end.
We have noticed an improvement in the housing market in the first six calendar months of the year. The company hopes that a benign outlook on interest rates will make this sustainable but pessimists point out that with houses prices at their highest level for several years a crash seems imminent – with a range of factors from higher interest rates, lower consumer spending and high prices likely to trigger it.
The share trades at 940p, on a prospective PE (2007 earnings) of 8x, with a yield of 3.6%.
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