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House builders fall as investors bank profits

Investors bank profits on Barratt Developments and Berkeley as builders strike cautious tone over future growth.

 
House builders fall as investors bank profits

Shares in house builders have fallen after Barratt Developments (BDEV) cautioned investors to expect only 'modest' growth next year, while rival Berkeley (BKGH) said the London property market was continuing to feel the effects of the Brexit vote.

Barratt Developments was the biggest faller on the FTSE 100, dropping 3.4% to 603.5p, despite reporting a 12.1% jump in full-year profits to £756.1 million and a 10.3p final dividend, taking the annual payout to 24.4p, up by a third on last year's payment.

But the builder said it expected to deliver only 'modest growth in wholly owned completions' next year, and with the shares up 30% so far this year, some investors banked profits.

Shore Capital analyst Robin Hardy, who rates the shares a 'sell', said current trading looked 'OK but no fireworks'. 

'We remain cautious of Barratt on valuation grounds,' he said. 'There is still a lack of growth ambition here, total debt is too high, there is a material amount of profit from leasehold sales that is unlikely to recur, returns are too poor and the scope for margin expansion still feels limited into a slower market environment.'

The shares weighed on the FTSE 100 and other house builders. The UK blue-chip index was down 43 points, or 0.6%, at 7,331, with Taylor Wimpey (TW) dropping 1.4% to 196.2p and Persimmon (PSN) down 17p at £26.02.

Among 'mid-cap' stocks, Berkeley was down 2.7% as the builder flagged ongoing uncertainty in the property market sparked by the rexit vote in a trading update.

Berkeley said it was on track to deliver its targets, but warned that 'the London market continues to be adversely impacted by both uncertainty around the terms and implications of Brexit and the changes in recent years to stamp duty land tax and mortgage interest deductability'.

Vectura (VEC) was the biggest faller on the FTSE 250, down 11.4% at 96.6p, as the pharmaceutical group reported a 70% rise in losses, to £41.3 million for the six months to June.

Among the risers, Micro Focus (MCRO) jumped to the top of the FTSE 100, up 7.3% at £23.68, as the company reported a jump in margins at the software division of HP Enterprise, which it took control of last week.

3 comments so far. Why not have your say?

Jamie D via mobile

Sep 06, 2017 at 11:02

Micro Focus bought the software division of Hewlett Packard. Enterprise, not the whole company...

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Daniel Grote - Citywire

Sep 06, 2017 at 11:10

Sorry Jamie, I've corrected that now.

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Broomtree

Sep 06, 2017 at 18:24

My understanding of he divi for Barratt is 17.1p regular + 17.3p special so not sure how you get your figures?

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