Housebuilder Barratt Slumps 6%

Published in Company Comment on 12 September 2012

Pre-tax profit may be up 159%, but the share price continues to languish.

Barratt Developments (LSE: BDEV) -- the company behind the Barratt Homes, David Wilson Homes and Ward Homes housebuilding brands and the commercial property business Wilson Bowden Developments -- is currently down over 6%, despite announcing a 159% jump in pre-tax profits in its annual results for the year ending 30 June 2012, released this morning.

Group revenues increased by 14.1% for the full year, at £2,323.4m, and operating margin was up to 8.2%, compared with 6.6% for the year ending 30 June 2011.

Mark Clare, group chief executive, commented:

"With a rapidly improving performance across the Group we have made substantial progress in achieving our objectives of rebuilding profitability and reducing overall indebtedness.

"In the year, we have achieved a 14.1% increase in revenues, a 1.6% increase in operating margins before operating exceptional costs, a 159.3% increase in pre-exceptional pre-tax profits and we have almost halved our net debt. Despite continued uncertainty surrounding the wider UK market and constrained levels of mortgage finance, we expect to make further good progress in 2012/13 with more than half of our completions forecast to be delivered from recently acquired higher margin land."

Barratt's share price has enjoyed fitful movement over the past few years -- almost 360% up on its nadir of July 2008, but barely changed from what it was in February of that year. And progress will have to exceptional for it to recover to anything like the levels of 2007, from which it's currently down just over 80%. Given the drop this morning, it doesn't seem like the market is convinced about Barratt's immediate prospects.

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> Jon doesn't own shares in Barratt Developments.

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SevenPillars 12 Sep 2012 , 10:11am

It could simply be the case of there being a lot of good news in the price already. It was around 113p at one stage back in June, recent high of 174p.

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