The Week Ahead: Barratt & Next

Published in Investing on 9 September 2011

The depressed construction sector is in the news next week, along with some retail updates.

Attention will turn towards the still-limping housing industry next week, with full-year results from a couple of housebuilders on Wednesday, and another construction sector update on Thursday.

A trading update from Barratt Developments (LSE: BDEV) in July told us of a return to pre-tax profitability this year, although it will be a modest one. Recent forecasts suggest that the current price of approximately 75p will place the shares on a P/E of 27. But that's not especially meaningful for this first year back to profits, and 2013 forecasts drop that to 12.

We should also be expecting net debt to have fallen to around £330m, down from £367m the year before, and the lowest it's been since the crash.

It's not just houses

Housebuilding accounts for only a quarter of the business of the smaller Galliford Try (LSE: GFRD), and it's generally in much better shape because of it. A strong July trading update told us things were in line with pretty positive expectations.

While earnings per share will still be down on pre-slump levels, the 423p share price should represent a P/E of about 14, falling to around 9 on 2013 forecasts. There's a 3.7% dividend expected, rising to 5.2% next year, and the company has net cash. Sounds like it's worth a look to me.

Thursday brings us full-year results from Kier Group (LSE: KIE), which really only does a small amount of business in the housing market -- most of its work is in general construction and related services.

After a strong trading update in June, we're expecting EPS close to historical levels and a decent dividend payment, and there's going to be significant net cash on the books too. At the current share price of around 1,135p, we're looking at a P/E of under 9 and a dividend yield of more than 5%.

With my current bullish outlook on the Construction sector, I reckon Kier is the pick of this trio.

A retail update

In the world of retail, we've got a few interesting interims coming up, with a half-time report due from fashion stalwart Next (LSE: NXT) on Wednesday. After an earlier trading statement confirmed things were going according to plan, we should be expecting a modest rise in earnings and dividends, giving us a P/E and dividend yield of approximately 9.7 and 3.8% respectively.

Based on that trading update I reckoned Next shares are good to go for now, and I expect next week's figures will reinforce my opinion -- even though fellow Fool Tony Reading remains unconvinced.

Kingfisher (LSE: KGF), best known in the UK for its ownership of B&Q and Screwfix, will provide us with interim figures on Thursday, and they look like they'll be be pretty decent. A modest rise in EPS should extend the recent 3-year run of earnings growth, and there should be a very well covered dividend that's getting close to pre-cut levels -- it should be about 3.5% of the current share price of around 225p.


We'll get a trading update from Associated British Foods (LSE: ABF) on Monday. With its ownership of the Primark clothing chain, it's not just a foodie, but has something in common with Next too. But it's not offering the same rewards as Next, with a dividend yield of less than 2.5% expected on a share price around the 1050p level -- and there should still be a fair bit of debt on the books.

Hilton Food Group (LSE: HFG) will publish its interim on Tuesday, and we'll be looking at a pretty steady and reliable company. In the meat packing business, and supplying a number of major European outlets, including the UK's Tesco (LSE: TSCO), Hilton has turned in steadily growing profits and dividends right through the days of economic woe. And a 5th straight year of growing earnings and dividends is expected, with a twice-covered 4% forecast.

Notable announcements next week:

Monday: Pan African Resources, InternetQ, Waterlogic, Associated British Foods

Tuesday: Abcam, Ashmore Group, Town Centre Securities, BrainJuicer Group, Charlemagne Capital, Hilton Food Group, IG Group Holdings

Wednesday: Barratt Developments, Brooks Macdonald Group, CPL Resources, Galliford Try, Hargreaves Services, RSM Tenon Group, M. P. Evans Group, Next, Surgical Innovations Group

Thursday: Centaur Media, Dunelm Group, Kier Group, Amiad Filtration Systems, Brightside Group, Elektron Technology, Kingfisher, Kesa Electricals

Friday: Asian Citrus Holding, Uniq, Work Group, DTZ Holdings

Fool comment on this week's news:

> The Motley Fool owns shares in Tesco.

Share & subscribe


The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.


There are no comments yet - why not be the first?

Join the conversation

Please take note - some tags have changed.

Line breaks are converted automatically.

You may use the following tags in your post: [b]bolded text[/b], [i]italicised text[/i]. All other tags will be removed from your post.

If you want to add a link, please ensure you type it as as opposed to

Hello stranger

To add your own comment, please login.

Not yet registered? Register now.