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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Barratt Developments PLC    BDEV   GB0000811801

BARRATT DEVELOPMENTS PLC

(BDEV)
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Berkeley's bumper 1 billion pound payout gives UK housebuilders a lift

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01/22/2020 | 04:44am EST
FILE PHOTO: A builder working for Taylor Wimpey on a construction site in Aylesbury

Housebuilder Berkeley plans to more than double investor returns to 1 billion pounds ($1.3 billion) over the next two years while ramping up output, signalling increased confidence in the UK market and lifting its shares more than 5%.

British house prices, which weakened with the rest of the economy after the 2016 Brexit referendum, last month rose more than 1% in annual terms for the first time in 12 months, according to mortgage lender Nationwide.

However, it also said that continuing uncertainty over the UK's departure from the European Union is likely to weigh on the market again this year.

Referring to Berkeley's investor payout pledge, broker Peel Hunt said the confidence to return this additional cash comes from the company's 20 long-term sites now in construction as well as the recent UK election result, which strengthened the government of Brexiteer leader Boris Johnson.

Shares in Berkeley rose 5.7% to 5,472 pence by 0834 GMT, leading London's blue-chip index and also lifting rivals Persimmon, Barratt Development and Taylor Wimpey.

Berkeley, which operates primarily in London, Birmingham and southern England, said that about 500 million pounds will be returned to shareholders in March 2020 and a further 500 million pounds a year later.

Beyond that, the company said it intends to make annual returns of 280 million pounds in half-yearly instalments of 140 million pounds through share buybacks or dividends.

The company, which undertakes major brownfield regeneration projects in London and the South East, said it has bought a number of sites since the end of the financial crisis and a number of these are now in or beginning production.

Berkeley is in the process of bringing forward 25 large residential-led developments and has begun construction on 20 new sites over the past 18 months, it added.

These sites typically deliver between 1,000 and 5,000 homes and their development can take up to 30 years to complete. 

"Since 2016 ... Berkeley has been mindful of the volatile operating environment and has been cautious in its investment," the company said. 

"In light of the progress made in bringing forward its new sites, and its assessment of the prevailing operating environment ... Berkeley has reviewed its net cash position and future requirements."

The company said it has increased its net cash position to more than 1 billion pounds from 107.5 million pounds since 2016.

"The right way to think about today's surprise announcement is that this represents the return of a precautionary cushion that is no longer required and it does also signal improved confidence in the market," said Liberum analyst Charlie Campbell.

By Noor Zainab Hussain

Stocks mentioned in the article
ChangeLast1st jan.
BARRATT DEVELOPMENTS PLC -0.11% 869.8485 Delayed Quote.16.61%
BERKELEY GROUP HOLDINGS PLC 0.15% 5332 Delayed Quote.9.57%
EURO / BRITISH POUND (EUR/GBP) 0.06% 0.8328 Delayed Quote.-1.77%
PERSIMMON 0.68% 3251 Delayed Quote.19.85%
TAYLOR WIMPEY 0.00% 231.7 Delayed Quote.19.86%
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Financials (GBP)
Sales 2020 4 957 M
EBIT 2020 939 M
Net income 2020 752 M
Finance 2020 581 M
Yield 2020 5,42%
P/E ratio 2020 11,7x
P/E ratio 2021 11,5x
EV / Sales2020 1,66x
EV / Sales2021 1,59x
Capitalization 8 834 M
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Mean consensus OUTPERFORM
Number of Analysts 18
Average target price 822,29  GBp
Last Close Price 870,60  GBp
Spread / Highest target 12,0%
Spread / Average Target -5,55%
Spread / Lowest Target -19,6%
EPS Revisions
Managers
NameTitle
David Fraser Thomas Group Chief Executive Officer & Executive Director
John Murray Allan Non-Executive Chairman
Steven John Boyes Group Chief Operating Officer & Executive Director
Jessica Elizabeth White Chief Financial Officer & Executive Director
Richard John Akers Senior Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
BARRATT DEVELOPMENTS PLC16.61%11 509
D.R. HORTON, INC.17.18%22 645
DAIWA HOUSE INDUSTRY CO.,LTD.-0.66%20 167
SEKISUI HOUSE, LTD.4.22%14 984
PERSIMMON19.85%13 320
PULTEGROUP20.34%12 605