Barratt sees strong rise in forward sales as housing market grows

11th Nov 2015 07:18

(ShareCast News) - Housebuilder Barratt said total forward sales, including joint ventures, rose by 20.7% to £2.5bn in the 19 weeks to 8 November.Net private reservations per week were up 12.5% to 261 with a sales rate of 0.70 net private reservations per active site per week against 0.63 last year, it added.A high rate of sales and a large jump is the forward order book is is typical for a first-quarter update, analysts said.Chief executive David Thomas said the company said it was "on track to deliver further good progress" in in the full year."There is good consumer demand for our homes across the country, supported by a positive economic backdrop. With demand outpacing supply, we are committed to helping address the existing undersupply in the market," he said in a trading statement ahead of the company's annual meeting on Wednesday."The outlook is positive and we are driving towards our full year 2017 targets of at least a 20% gross margin and at least a 25% return on capital employed.""Against the backdrop of a significant structural shortage of new homes in Britain, we have made a strong start to the year. Operationally the business is performing well with strong sales, good control of input costs and continued land investment."Thomas added that it had recruited 250 new apprentices, graduates and trainees to deal with its skills shortage.Analyst Robin Hardy at Shore Capital said BDEV was another housebuilder to have continued the sector trend of positive trading updates reflecting a still positive macro environment, but a Q1 position is unlikely to map across to full year figures.While the private order book value is up 21%, he noted volume being up 8% suggested London has been relatively more active on sales and these sales are for much longer delivery."No mention of underlying house price movements but costs are again guided to +3-4% which is likely to net off the benefits off much of any sales price increases. Again typical of a Q1 update, it is too early in the year to review forecasts so we stick with our PBT of £669m which is in line with the body of consensus."Hardy said the issue with the volume house builders remained one of valuation rather than performance and we still see that despite a drop of 15% since the recent high on 25 September the shares are still fully valued.Consensus sell-side recommendations lean towards the negative with now two 'sell' ratings, eight at 'hold' and five analysts saying 'buy'.Analysts at broker Whitman Howard noted that Barratt's shares and those of its peers have been hit by growing concerns that the valuation cannot withstand any slowdown in house price inflation within an environment of rising costs, with the bear case resting on the impact of a regulatory shock to mortgage lending."In our view, such input seems at best misdirected and, realistically, unwarranted. While the market may take some time to work that one out, the house builders continue to post positive statements. After falling by over 10% in the last month, Barratt's valuation (on our forecasts) is compelling. It remains one of our key plays in the sector - a sector which retains our confidence in its medium term growth prospects."At 1120 GMT, shares in Barratt were down 2.6% at 560.5p.