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

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.