ii view: Busy Barratt still bullish

Housebuilder Barratt believes it has the resilience and flexibility to overcome current uncertainty.

Full-year results to 30 June 2019

• Revenue down 2.3% to £4.76 billion
• Gross margin up 2.1% to 22.8%
• Profit before tax up 8.9% to £909.8 million
• Total dividend including a 17.3p special dividend up 5.9% to 46.4p per share

Chief executive David Thomas said:

"It has been another outstanding year delivering a strong operational and financial performance. The Group's long-term investment in quality and operational excellence continues to drive margin improvements, alongside our highest number of completions for 11 years. As the only major housebuilder to be awarded a 5 Star rating for customer satisfaction for ten years in a row, we continue to lead the industry in quality and customer service.

"Whilst there is increased economic and political uncertainty, we begin the new financial year with a strong forward order book, balance sheet and cash position which we believe provides us with the resilience and flexibility to react to potential changes in the operating environment in FY20 and beyond. We maintain our focus on the delivery of operational improvements across our business, and our commitment to deliver the highest quality homes across the country."

ii round-up:

Housebuilder Barratt Developments (LSE:BDEV) builds nationally, employing over 6,000 people across six regions and 27 operating divisions. 

About two-thirds of its homes are three or four bed houses. Its brands are Barratts, David Wilson and Wilson Bowden.

For a round-up of these full-year results, please click here.

ii view:

A no-deal Brexit and the Bank of England's estimate of a possible 30% fall in house prices top the list of investor concerns. However, away from factors outside of its control, Barratt continues to report solid progress. In terms of current trading, net private reservations per site have remained firm, while forward sales in volume terms are up 2.1% year-over-year. 

For investors, shareholder returns across the housebuilding sector remain a core attraction. A one-year forecast dividend yield of over 7% is attractive in the current low interest rate environment, while a forward price earnings (PE) ratio of under 9 is hardly demanding. That said, until the uncertainty around Brexit is removed, and amid concerns around vulnerability this late in the economic cycle, investor caution appears justified.

Positives: 

• Gross profit margin is up 2.1% to 22.8%
• Focus on build quality and customer service compares well to some rivals
• Returning surplus cash to shareholders

Negatives:

• Brexit uncertainty overhangs the housing market
• Help to Buy scheme due to end in 2023
• Build costs rising

The average rating of stock market analysts:

Buy