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Barratt surprises investors with enhanced dividend payouts Barratt to pay out more to shareholders despite London sales slump
(about 2 hours later)
One of Britain’s biggest housebuilders has surprised shareholders with an enhanced cash payout, despite its decision to cut prices on some of its most expensive homes in London amid waning demand.One of Britain’s biggest housebuilders has surprised shareholders with an enhanced cash payout, despite its decision to cut prices on some of its most expensive homes in London amid waning demand.
Brushing aside any uncertainty over the Brexit vote, Barratt Developments said it was sufficiently confident in the outlook for the housing market to extend its capital return plan, including special dividend payments of £175m in November 2017 and November 2018.Brushing aside any uncertainty over the Brexit vote, Barratt Developments said it was sufficiently confident in the outlook for the housing market to extend its capital return plan, including special dividend payments of £175m in November 2017 and November 2018.
Pretax profit in the first half rose almost 9% to £321m, beating analysts’ expectations and helping to drive shares 2% higher, making Barratt one of the biggest risers on the FTSE 100 on Wednesday. Pre-tax profit in the first half rose almost by 9% to £321m, beating analysts’ expectations and helping to drive shares 2% higher, making Barratt one of the biggest risers on the FTSE 100 on Wednesday.
The company also increased the interim dividend by more than a fifth to 7.3p a share for the six months to 31 December. Clyde Lewis, an analyst at Peel Hunt, described the improved payout as “a nice surprise”.The company also increased the interim dividend by more than a fifth to 7.3p a share for the six months to 31 December. Clyde Lewis, an analyst at Peel Hunt, described the improved payout as “a nice surprise”.
Late last year Barratt cut prices on some of its most expensive homes in central London. It said demand for its £1m-plus properties had increased since it lowered their prices.Late last year Barratt cut prices on some of its most expensive homes in central London. It said demand for its £1m-plus properties had increased since it lowered their prices.
The company has reached a build and sale agreement with an undisclosed institutional investor on 118 apartments at a development close to Vauxhall tube station in south London, where units cost on average £800,000 to £900,000. It leaves Barratt with a further 300 homes to sell on the site.The company has reached a build and sale agreement with an undisclosed institutional investor on 118 apartments at a development close to Vauxhall tube station in south London, where units cost on average £800,000 to £900,000. It leaves Barratt with a further 300 homes to sell on the site.
Under a build and sale arrangement, a housebuilder usually sells at a reduced price but avoids the cost and uncertainty of running show homes and offices from the new development. “We believe it de-risks the Nine Elms site for us,” said David Thomas, Barratt’s chief executive.Under a build and sale arrangement, a housebuilder usually sells at a reduced price but avoids the cost and uncertainty of running show homes and offices from the new development. “We believe it de-risks the Nine Elms site for us,” said David Thomas, Barratt’s chief executive.
He said demand was good for properties under £600,000, both in the capital and across the UK. Thomas pointed out that London accounts for about 10% of Barratt’s business in terms of completions. It has about 20 sites in the city, and 360 elsewhere in the UK.He said demand was good for properties under £600,000, both in the capital and across the UK. Thomas pointed out that London accounts for about 10% of Barratt’s business in terms of completions. It has about 20 sites in the city, and 360 elsewhere in the UK.
“Overall the housing market is very strong. We’ve seen a really strong start to the new calendar year, a record forward order book and strong consumer demand. Our confidence in the business going forward is reflected in the improved and extended capital return plan.”“Overall the housing market is very strong. We’ve seen a really strong start to the new calendar year, a record forward order book and strong consumer demand. Our confidence in the business going forward is reflected in the improved and extended capital return plan.”
Economists have warned that 2017 is likely to be a tough year for consumers, with households budgets squeezed by a combination of rising inflation and weak wage growth. However, Thomas said a shortage of homes in the UK and low mortgage rates were helping to underpin demand.Economists have warned that 2017 is likely to be a tough year for consumers, with households budgets squeezed by a combination of rising inflation and weak wage growth. However, Thomas said a shortage of homes in the UK and low mortgage rates were helping to underpin demand.
Sales completions fell almost 6% over the first half of Barratt’s financial year to 7,180, dragged lower by London, where completions more than halved to 367 from 842. Outside the capital, completions hit a nine-year high of 6,813. Sales completions fell by almost 6% over the first half of Barratt’s financial year to 7,180, dragged lower by London, where completions more than halved to 367 from 842. Outside the capital, completions hit a nine-year high of 6,813.
Barratt said it expected completions to rise in the second half of the year with record forward sales as of 19 February, up 17% at £3bn.Barratt said it expected completions to rise in the second half of the year with record forward sales as of 19 February, up 17% at £3bn.
“The higher dividend pushes the yield on the shares to over 7%. With little sign of the feared post-Brexit slowdown materialising as yet, the shares should continue to look attractive to income chasing investors,” said George Salmon, equity analyst at Hargreaves Lansdown.“The higher dividend pushes the yield on the shares to over 7%. With little sign of the feared post-Brexit slowdown materialising as yet, the shares should continue to look attractive to income chasing investors,” said George Salmon, equity analyst at Hargreaves Lansdown.