Barratt Shares Drop as Developer Declines to Pay 2012 Dividend

Barratt Developments Plc (BDEV), the U.K.’s largest homebuilder by volume, said it won’t pay an annual dividend after posting its first full-year profit since 2008. The shares fell the most in four months.
Net income was 67.4 million pounds ($108.3 million) compared with a loss of 13.8 million pounds a year earlier after margins widened and debt was cut, London-based Barratt said in a statement today. Revenue rose 14 percent to 2.32 billion pounds and the operating margin widened to 8.2 percent from 6.6 percent as the company built on land bought at discounted prices.
Barratt was forecast to pay investors 0.7 pence a share, according to Bloomberg Dividend Forecasts that account for earnings and options prices. The company last paid a dividend in 2008. Dividend payments may resume next year if the U.K.’s residential real estate market remains stable, Barratt said in the statement.
“There is ongoing economic uncertainty in the U.K. market and as such we do not expect to see significant growth in customer demand over the next year,” Chairman Bob Lawson said in the statement.
Barratt fell as much as 6.8 percent, the most since May, and was down 10.1 pence to 159.6 pence as of 9:25 a.m. in London trading. The company has gained 72 percent this year, giving it a market value of 1.56 billion pounds.
‘Somewhat Disappointing’
Not paying a dividend this year “may be taken as somewhat disappointing by more optimistic commentators,” said Charlie Campbell, an analyst for Liberum Capital Ltd., by e-mail. He reiterated his buy recommendation for the stock.
The homebuilder completed 12,637 homes in the 12 months through June compared with 11,078 a year ago. The average selling prices of its properties rose 1.2 percent to 180,500 pounds as Barratt focused on houses rather than apartments.
“Further progress on margin improvement and debt reduction is effectively hardwired into the business,” Group Finance Director David Thomas said in a conference call. “A greater proportion of our sales are now coming from higher margin land that we’ve acquired in recent years.”
Around 35 percent of its completions were built on land with high margins, Barratt said in the statement. That’s expected to rise to more than 50 percent next year and surpass 80 percent by 2015, Thomas said on the call.
Forward sales were up 35.5 percent to 366.9 million pounds. The company acquired 578.1 million pounds of land, totaling 12,085 plots, it said in the statement.
Net debt was 167.7 million pounds as of June 30 compared with 322.6 million pounds a year earlier. Barratt plans to have paid its debts by June 2015, Thomas said.