Barratt Developments plc Ordinary 10p (BDEV)

Company overview

Barratt Developments PLC is one of the largest residential property development companies in the United Kingdom. The Company's principal activities include acquiring and developing land, planning, designing and constructing residential property developments and selling the homes it builds. The Company's homebuilding business trades under the Barratt Homes, David Wilson Homes and Ward Homes brands. It has been listed on the London Stock Exchange since 1968 and is a constituent of the FTSE 250 index.

HL Comment (14 September 2011)

As with the wider house building industry, the group's full year results (14September 2011) continued to see recovering fortunes being announced. Operating profit before exceptional items increased by 50pc to £135m, with the full year operating margin improving to 6.6pc (4.4pc:2010). Cost containment remained a major emphasis, whilst adjustments in the build mix – a move away from flats to houses - was largely responsible for an increase in the average sale price (£198,900 against £185,200 in 2010). The group's finances continued to be improved, with net debt declining to £322.6m (2010: £366.9m) as at 30 June 2011, while a refinancing package was successfully negotiated, providing the group with £1 billion of committed facilities.

Negative Points

• Management outlook comments continued to highlight still constrained mortgage availability, along with broader dependency on economic recovery.
• Although much reduced, group debt is still higher than rivals such as Persimmon.
• With UK government borrowing still extremely elevated in historical terms, already detailed spending cuts and tax increases are slowly being implemented.
• Bank of England assistance to the banking wholesale market, a major source of mortgage finance over recent years, is due to be removed come 2012.

Positive Points

• Trends at the company continue to improve, aided by historically low interest rates.
• Management noted that for the first 11 weeks of the current financial year, it had achieved average net private reservations of 183 per week, 10.2pc above the same period last year. On a per active site basis this equated to a private sales rate of 0.49 (2010 equivalent period: 0.48).
• Costs continue to be targeted, whilst a change in the product mix has raised the average sales price. Recently acquired land – down from peak prices – is assisting the profit margin.
• A concentration on cash generation since early 2008, in tandem with a major fund raising exercise, has allowed a significant reduction of group debt - net debt declined to £322.6m (2010: £366.9m) as at 30 June 2011.
• Speculation with regards to the Bank of England implementing additional economic stimulus has recently grown.

Consensus

On balance, market consensus opinion currently denotes a buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
30-06-2011	2,035.40	(11.50)	(1.40)	42.30	n/a	n/a	n/a	n/a
30-06-2010	2,035.20	(162.90)	(14.50)	n/a	n/a	n/a	n/a	n/a
30-06-2009	2,285.20	(678.90)	(135.90)	n/a	n/a	n/a	n/a	n/a
30-06-2008	3,554.70	137.30	25.00	0.50	n/a	(1.00)	12.23	32.20
30-06-2007	3,046.10	424.80	75.67	8.10	1.20	7.00	23.40	3.60