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Barratt developments and UK construction industry stocks


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I've done well out of construction sector stocks, and so for example I am sitting on a lovely 55% profits with Barratt. I've noticed the shares are coming down a bit, and I can't decide if I should top slice or top up! The stock when ex dividend recently (34.4p), so that's part of the fall. The sector as a whole was dragged down because Persimmon gave a bit of a negative outlook in it's recent update.

 

I thought 'd recheck the numbers for Barratt as it is their AGM and trading update on 15 Nov 2017. I'd be interested to hear people's views, either on Barratt, the sector or how to value house builders properly.

 

This is all from the Full Year Results published 06 Sep 2017

 

For 2017
- Pre-tax profit £765.1M
- Total completions including JV’s (plots) 17,395
At 30 June 2017:
- Net cash £723.7M (£784.4M cash and equiv - £73.9M debt)
- Net assets £4,322.2M

Total assets £6,612.1M
- Current assets 5,477.9M
-- Net current assets of £3188M

A couple of ratios I quick like to use are (using Market cap of £6.43B)
MCAP / Pre-tax profits = 8.4
MCAP / NCAV = 2.01

So on these numbers, Barratt (still) looks good value to me.

Forward sales
3 September 2017 £2,749.9m, 12,160 plots (avg £226143)
4 September 2016 £2,416.5m 11,364 plots (avg £212645)

Other guidance
Proposed dividend
- Year to November 2018 42.7 pence per share
- We expect to have low levels of average net debt throughout the year and FY18 year-end net cash to be around £500m

I can't find much else in the way of forward looking guidance in the report, but it is 180 pages so no doubt I've missed some nuggets.

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  • 2 weeks later...

Barratt down around 3% today, on as far as I can see the consultation on greater powers for compulsory purchase of land. Have I missed something else?

 

5.10 Increasing housing density in urban areas – To ensure that our brownfield and scarce urban land is used as efficiently as possible, the government will consult on introducing:

  • minimum densities for housing development in city centres and around transport hubs, with greater support for the use of compulsory purchase powers for site assembly
  • policy changes to support the conversion of empty space above high street shops
  • policy changes to make it easier to convert retail and employment land into housing
  • a permitted development right to allow commercial buildings to be demolished and replaced with homes

 

They seem content to stoke demand though, with the removal of SDLT for first time buyers.

 

The real issue they aren't addressing is still the shortage of skilled workers in the construction industry. It's all very well using compulsory purchase, but then who's going to build on the land.

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