What You Need To Know About Barratt Developments

  • Feb 12, 2019 GMT
  • Team Kalkine
What You Need To Know About Barratt Developments

Company Overview: Barratt Developments Plc was incorporated in the year 1958; headquartered at Coalville, the United Kingdom. Barratt Developments was founded by Greensitt Bros and the business control was transferred to Sir Lawrie Barratt. It is one of the largest UK based residential property builder and has business operations spread across six geographical regions and 27 operating divisions. Company engages in obtaining planning consents, acquiring land and build the best quality  homes in places where people aspire to live. It has the intent to deliver the best house building for its customers that are useful to build. The company made both private and affordable homes and delivered 17,579 new houses. Residential price point ranges from £70,000 to more than £1m. It is a part of the FTSE 100 Index and trades at London Stock Exchange.

The company has a market capitalisation of 5.71 billion GBP. Core business activities include land acquiring, developing and selling premium quality properties such as apartments, penthouses and communities. Barratt Developments deals majorly in three brands- Barratt Homes, David Wilson Homes and Barratt London brands.

Financial Performance (Source: Company Research, Thomson Reuters)

Group’s ROE has been around 15% and is still below the industry median of 18% and the gross margin also needs to inch up to the industry median. On the other hand, EBITDA and operating margins have been better than the industry medians.

Key Financial Performance Highlights

On y-o-y basis, 2018 revenue from house-building surged by 5% to £4827m and commercial developments decreased by 22% to £47.8m. At the end of 2018, the secured order book stood at £1,628m (+0.1% y-o-y), representing 7,136 homes driven by new construction contracts signed in the amount of £4m in compared to £52m previous year.

Relative Valuation Metrics (Source: Company Research, TR)

Key Updates

In the UK, the homebuilder's performance increased from the previous year in terms of net cash generation, operational profit and a series of tailwinds serve to benefits their numbers. Barratt Developments is generally seen as being the pick of the bunch, considering key performance metrics. While the side-effects from Brexit, the homebuilding sector will always be a target for the bears as uncertainty is continuously zooming up.

If the economic downturn spreads rapidly, then the performance of this sector will be down drastically because the customers will not invest in the property space.

Dividend Scenario

The company has gradually announced the interim dividend of 9.6 pence per share (interim dividend for period ending Dec 2017: 8.6 pence per share). It will be paid on 7 May 2019 to all its shareholders on the register dated 12th April 2019.

Stock Performance

At the time of writing, the stock was trading at GBp 574.20, up by 1.99% as at 11 February 2019. 52 week high or low of the stock is GBp 577.2/ GBp 430.00. 1-year return for the stock is 6.98%.

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