Jefferies stays at 'buy' on Barratt Developments after upbeat guidance

Analysts at Jefferies retained their 'buy' recommendation and 669.0p target price for shares of Barratt Developments following the release of its full-year results and its guidance for the year ahead.

Normalised earnings before interest and tax had printed at £71m for the back half of the financial year, against the £131m that the broker had penciled-in.

But that included £74.3m of costs linked to Covid-19, which was similar to Taylor Wimpey, they said.

Furthermore, guidance for the next financial year included 14,500-15,000 completions (Jefferies: 13,839) and management also stood by its forecast for medium-term gross margins on land purchases in excess of 23%.

Jefferies had anticipated gross margins reaching 22.5% only by financial year 2023.

So too, the retail property developer had guided towards a return on capital employed of greater than 25% (Jefferies: 19.2%).

Absent on the other hand was any guidance for net cash at year end 2021.

Yet Jefferies believed that in fact left room for a potential upside surprise as work-in-progress aligned better with sales.

Jefferies was forecasting net cash of £790m at the end of the year and a regular dividend payout of 21.1p per share.