Financial Trading Blog
Stock of the day 11/07/2016 – Barratt Developments PLC
Having spent most of the year bouncing between £5 and £6 Barratt was in for a rather sickening drop on the day of the referendum results. The stock plunged nearly 23% in one trading session, losing over a pound per share in value. Its misery didn’t end there, the post-Brexit property sector pain leading Barratt to a 23 month low of £3.26; it now sits at a current trading price of £3.87 (IT-Finance.com, 11/07/2016.
Yet in the run up to this referendum ruckus Barratt Developments had put together a string of solid trading updates, aided by the government’s Help to Buy scheme. January saw the company reveal a 9.4% rise in properties build and sold in the back half of 2015, with a 10.8% jump in average selling price to £254,000. February then provided a fuller look into the state of Barratt’s finances in the first half of its fiscal year, with the firm filing a 25% increase in dividend to 6p per share following a tremendous 40% surge in pre-tax profit to £295 million off the back of a 19% rise in revenue to £1.88 billion.
(Source: IT-Finance.com 11/07/2016)
In May Barratt continued to strike a similarly bullish tone, with a 9.7% rise in forward sales to £2.8 billion as the company stated that ‘market conditions remain strong, with the group trading positively since the start of the calendar year’. More important were CEO David Thomas’ comments on the then-potential Brexit, warning that a vote to leave would lead to ‘even more pressure in terms of skills shortages’ and that Barratt would ‘much prefer that the UK stays within the EU’.
Of course that potentiality is now an effective certainty, meaning Barratt Developments will be forced to give more time to the Brexit in Wednesday’s update. Alongside the banking sector the UK property stocks have really suffered in the past fortnight or so, and Thomas will have to address investors’ concerns, even if it is too soon to properly assess the long-term impact. In terms of actual data, analysts are expecting Barratt to remain on track to hit £4.1 billion in full year sales (a near 8% increase) alongside adjusted pre-tax profits of £677 million.
Barratt Developments PLC has a consensus rating of ‘Hold’ with an average target price of £5.89.
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