Barratt working with suppliers ahead of Brexit

6th Feb 2019 07:08

(Sharecast News) - Barratt Developments grew profits 19% in the first half of its trading year as Britain's largest housebuilder said it was in a "strong position" in spite of the uncertainty around Brexit.Completing 7,622 homes during the six months to 31 December, a 4% increase on the year before, the FTSE 100 group increased revenue 7% to £2.1bn, growth far in excess of the full-year analyst average forecast for growth of 1%. Profit before tax of £408m was up from £355m a year ago.With earnings per share up 21% to 32.7p, well ahead of the City expectation for 29.5p, and net cash swelling 134% to £387.7m, the half-time dividend was increased 12% to 9.6p per share, representing one third of the expected ordinary dividend for the full year.Furthermore, on top of the £175m special payment pencilled in for November this year, the company announced another £175m special return for next year too.Chief executive David Thomas said: "Operating efficiencies are delivering improved margins and our controlled and disciplined business model means we have a high-quality land bank, strong forward sales, excellent financial position and efficient cash flow generation."Whilst we continue to monitor market conditions closely, current trading is in line with our expectations and we are confident of delivering a good financial and operational performance in FY19."He said that the group's "strong position" amid the increased levels of uncertainty from Britain's departure from the EU came from its strong balance sheet, total forward sales as at 3 February up 7% to £3.02bn and an experienced management team."Our strong financial foundation provides us flexibility to take appropriate action where necessary. Given the uncertainties arising from the way in which the UK will depart from the EU, we have worked with our suppliers on continuity of supply of non-UK manufactured components, including product specification reviews, their holding additional inventories and review of logistic routes to seek to mitigate the potential for disruption."First-half net private reservations of 0.64 per active outlet per week were down slightly on the 0.68 from a year before, and had fed into a rate of 0.74 for the first few weeks of the second half to date.Shares in BDEV, having in December fallen to their lowest level in more than two years, continued their recent rally with a gain of nearly 3% on Wednesday to 561.7p.Barratt, said analysts Morgan Stanley, is the cheapest of the large UK housebuilders in its coverage, trading on a 1.5 times tangible book value, "with more room than peers to improve margins and returns, in our view"."We note that Barratt, and the overall UK housebuilding sector, now trades on less than 9x trailing P/E, despite the strong bounce in share prices in January; and that with near-record levels of cash on the balance sheet. House price growth momentum has been slowing, but historically these P/E levels would imply EPS decline 1 year forward, which contrasts strongly with the double digit growth delivered by Barratt today."