Barratt set for the FTSE 100

Friday, Nov 21 2014 by
5
Barratt set for the FTSE 100

UK housebuilder Barratt Developments was kicked out of the FTSE 100 in September but looks set to return in the next index review in December.  Any company which rises to 90th position or above by market value is automatically added to the FTSE 100.  Barratt has a capital return plan which is set to payout 89.3p in the three years to November 2017.

In terms of a return to the FTSE 100 and at the close of the 20th of November Barratt was the 82nd largest FTSE All-Share company.  As such it is highly likely that the company will be in 90th place or higher come the index review in December.

The capital return plan will return a fifth of the current share price (450p) but is skewed towards the end of the next three years.  In the year to November 2015 a total of 24.2p a share is set to be paid followed by 29.3p the following year and then 35.8p in the year to November 2017.

The focus on returning capital highlights that Barratt Developments is focusing on returns rather than growth.  In the year to June 2014 the return on capital was 19.5% but the group is targeting a return on capital of over 25% by the year to June 2017.

Barratt Developments lifts its return

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Barratt Developments had net cash of £73.1m at June 2014 – the first net cash position for eight years – which compares to net debt of £25.9m in June 2013.  The move into net cash is a significant turnaround with net debt having been £322.6m as recently as June 2011.

Turning to trading and in the year to June 2014 completions came in at 14,838 which was up 8.6% on the year before and compares to 11,171 completions in the year to June 2011.  The target for the year to June 2015 is 15,000 completions in the year and then 16,000 in the year to June 2016.

Growth in completions is set to go hand in hand with a shift to higher returns and as such Barratt is set for significant profits growth.  While revenue in the year to June 2014 increased by 21.1% to £3.16bn the group profits before tax double to £390m.  

Basic earnings per share came in at 31.2p and the ordinary dividend for the year was 10.3p which compares to a dividend of only 2.5p the year before.  …

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Barratt Developments PLC is a holding company. The Company is principally engaged in acquiring and developing land, planning, designing and constructing residential property developments and selling the homes, which it builds throughout Britain. The Company operates in two segments: Housebuilding and Commercial developments. Its housebuilding segment operates through approximately six regions and approximately 30 operating divisions delivering over 17,319 homes. Its Commercial developments are delivered by Wilson Bowden developments. It purchases land in targeted locations and designs homes for its customers using standard house designs. Its brands include Barratt Homes, David Wilson Homes and Barratt London. Its Barratt Homes brand focuses on making homes. Its Barratt London brand portfolio offers apartments and penthouses in Westminster to riverside communities in Fulham. Its David Wilson Homes brand offers home design and specification, and focuses on developing family homes. more »

LSE Price
631.6p
Change
-0.1%
Mkt Cap (£m)
6,436
P/E (fwd)
8.9
Yield (fwd)
7.3



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1 Comment on this Article show/hide all

PhilH 22nd Nov '14 1 of 1

Thanks for the article. This one has just popped up on one of my screens.

High quality, Strong momentum in terms of price and EPS upgrades, good growth forecasts with a low PEG, good debt profile, strong yield that is well covered.

I'll be buying if it breaks £4.50 particularly given that it will get an extra momentum push if it does qualify for the FTSE 100 as the trackers will be forced to buy. This is a Naked Trader type play, but I'd be looking to buy this stock over £4.50 anyway.

Thanks again for the article.
Phil

P.S. I have a price target of £5.77 (+30%) based on Point & Figure price targets (which isn't for everyone)

Professional Services: Sunflower Counselling
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