Barratt 42% ahead but discounts worry market

BY TOM STEVENSON

Deputy City Editor

The market was resolutely unimpressed by a strong set of interim figures from Barratt, the housebuilder, focusing instead on prospects for margins as the company continues to drive for volumes in the face of flat selling prices.

The shares, which have already fallen from a high of 288p at the beginning of last year, fell a further 14p to 171p.

Barratt surprised analysts by announcing sales growth since the beginning of 1995 of 16 per cent. That compared with a 12 per cent decline at Wilson Connolly, which announced figures earlier this week, and caused worries about the discounts Barratt is having to give to achieve the improvement.

Despite warning that the housing market slowed during the six months to last December, Barratt was able to report a 42 per cent increase in interim pre-tax profits to £16.1m. After a 32 per cent jump in earnings per share the half-time dividend was up a quarter to 2.5p.

Sir Lawrie Barratt, who came out of retirement four years ago after the company plunged more than £100m into the red, said the second half would continue to be difficult. He criticised the Government's unhelpful attitude to the housing market, which had been hit by rising interest rates, reductions in mortgage interest tax relief and cut-backs in housing income support.

To combat those pressures, and remain on track to complete 8,000 houses a year by June 1996, Barratt had introduced a two-year fixed rate mortgage deal and expanded its part exchange scheme.

Despite thinking the mark-down had been overdone, most analysts trimmed their forecasts for Barratt this year and next, with about £46m expected this time and between £55m and £60m in 1996. That means the shares, trading on a p/e of only 8, are rated substantially lower than the rest of the market.

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