Investment Column: Barratt subsides despite sturdy update

Centaur Media; Wilmington


Our view: Hold

Share price: 105.9p (-5.3p)

So far, we have been bearish on Barratt Developments, keeping away not so much because of the company, but because of the sluggish state of the housing market and what that means for sentiment around the stock.

That the mood among investors remains fragile was evidenced by the movement in the Barratt share price after the house builder issued its full-year trading update yesterday.

The company said it was set to return to "profitability before tax and exceptional refinancing costs", and reported some good numbers. Second-half total completions, it said, were in line with the performance last year, and private average selling prices were up by around 5 per cent.

In more good news, net debt stood at around £330m at the end of June, against £366.9m last year. Another highlight was the refinancing package that has been put in place, "providing the group with circa £1bn of committed facilities for 4 years".

So, why did the stock fall back? As some in the City noted, we suspect that at least some of the weakness was down to the outlook, indicated by the statement that "while we have seen greater stability in the second half, trading conditions remain challenging in some areas outside London and the South-east, where activity remains constrained due to the limited availability of mortgage finance."

Which brings us back to sentiment. There is no doubt that Barratt is among the most undervalued stocks in an already undervalued sector. And yes, long term, it has supportive fundamentals. But, as we have said before, unless credit begins flowing and the housing market shows some sustainable signs of life, we do not see how this stock will make any meaningful gains in the near term. We are, therefore, not minded to buy. But the company's positive performance does deserve credit, so we would hold.

Centaur Media

Our view: Buy

Share price: 51p (+5p)

If sightings of centaurs – the mythical half-man, half-horse creatures – are somewhat rare these days, so are those of media companies whose advertising revenues are booking double-digits gains. Yet, that's exactly what Centaur Media was offering yesterday when it put out a pre-close trading statement.

The group, which owns titles including Marketing Week, surprised analysts with news of a strong end to the year, saying profits would be at the top end of internal expectations.

Revenues are expected to grow 14 per cent, as both digital and print advertising revenues rose, the former far outperforming the latter in terms of growth over the second half. The events business is also doing well.

All this comes amid a restructuring of the company into three operating divisions. The rejig will include disposals, and will bring cost savings. Management is also targeting an expansion of margins.

The business, in other words, is on the right track. Moreover, it boasts a valuation of around 11 times forward earnings for next year, according to Altium. That is hardly expensive. In fact, given the positive update, it looks downright cheap.

Wilmington

Our view: Hold

Share price: 114.5p (-2p)

The market value of Wilmington, the professional business training specialist, has tumbled since its shares hit a 12-month high of 184p in January.

This is largely down to fears over the trading environment for its legal training arm, which has been hit by small and medium-sized companies cutting back on courses for conveyancing.

In a profits warning in May, Wilmington also said its print publishing unit had been finding the going tough, though it had continued to beef up its digital revenues. But in a pre-close trading update issued yesterday, the group sprang no new surprises and reassured investors that its performance for the year to 30 June is expected to be in line with hopes.

Wilmington also said the overseas expansion of its banking and finance businesses is "progressing well".

However, we note the company's caution regarding the UK and are not convinced that smaller clients will begin splashing cash on training soon. That said, the forward earnings ratio of 11 times, and the heights scaled by its shares recently, despite the downturn, suggests the lull will be temporary.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn