Beazer ruffles City feathers

INVESTMENT COLUMN

Beazer's half-year figures to the end of December confirmed one thing - the housing market in the second half of 1995 was unremittingly awful. Beyond that, however, the former Hanson subsidiary's presentation produced more questions than answers.

Turnover slumped during the six-month period from pounds 204.5m to pounds 158.2m, a deliberate policy, the company said, of not chasing unprofitable sales. As a result pre-tax profits also slipped, from pounds 24.5m to pounds 18.5m, earnings per share fell to 4.6p (6.2p), still comfortably covering a full-year dividend of 2p (1.95p).

Maintaining an operating margin of 11.2 per cent was something of an achievement against a backdrop of volumes falling almost twice as fast as the market as a whole. Total completions reached 2,570 compared with 3,301 in the previous first half-year.

In fact doing so while the cost of the land under each house increased by pounds 600, incentives rose by pounds 500 and house prices were flat, was greeted with raised eyebrows by analysts who found it difficult to make the numbers add up.

Beazer claimed yesterday that it was in no need of a big acquisition to make up for its failure to pick up Ideal Homes, the Trafalgar House subsidiary for which it was pipped at the post by Persimmon.

But the bitterness it expressed at being shut out of that deal suggests that it feels uneasy about generating growth organically.

Despite ruffled feathers in the City yesterday, Beazer's shares actually edged up 2p to 175p, at which level, on the basis of forecast profits this year of pounds 45m and pounds 50.5m next, the shares stand on a prospective price/earnings ratio for calendar 1997 of 13.8.

That compares with a sector average of 13.4 and just 11 times earnings for Barratt in the same period.

Beazer has a strong balance sheet with net cash of pounds 29m and it pointed yesterday to better demand in the second half of its year as the Government cranks up the pre-election feel-good factor.

Even so, with the uncertainty of its acquisition ambitions, the shares are high enough.

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