Bottom Line: Barratt set for another burst of speed

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BARRATT's full-year figures yesterday were above expectations, gearing lower than expected and margins heading smartly in the right direction. But regular readers of this column will remember that the story was much the same six months ago, since when the shares have fallen 30 per cent.

High land, labour and raw material costs combined with flat house prices have sent the City into a tizzy about margins. In a highly cyclical business like housebuilding it is difficult to buck the sector's trend.

After last year's stunning run a pause for breath was more than called for, but with prospective multiples now back in single figures the time has arguably come for second thoughts.

Sir Lawrie Barratt has done a fine job since he returned to his desk three years ago. Debts have tumbled from pounds 205m in 1991 to just pounds 10m, the troublesome southern region is back in the black and sales are running 16 per cent ahead of a year ago.

The balance sheet is in fine fettle, new house designs are selling well and Barratt's expertise in buying previously used land has kept its cost to 21 per cent of expected selling price, a good ratio.

Analysts believe that will translate into profits of pounds 52m to June 1995 and pounds 68m the following year. The prospective p/e, at 179p, of 9 falling to 7 is a big discount to the market multiple of 12 times 1995 earnings. Buy.