Mindful Money’s weekly shares watch: Next, Barratt Developments & Morrisons

7th September 2015


Given the ongoing buoyancy being enjoyed by the UK’s property market, investors will want to hear Barratt Developments is keeping up with demand when it reports its full-year results on Wednesday.

Following its July trading update, brokers are anticipating that the results should bring few surprises, with attention potentially focused on any accompanying current trading comments.

The past 12-months alone has witnessed the FTSE 100 firm’s shares soar by 72% and for his part, Graham Spooner, investment research analyst at The Share Centre is currently calling the stock a ‘hold’.

He says: “The improving trend over the last few years has helped the company return to a net cash position for the first time since the financial crisis. Like many other companies in the sector, they plan on returning some of this to investors through special dividends. Investors should remember that the sector has held up well in the recent market turmoil.”

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers highlights that aided by increased completion volumes, a greater proportion of builds on higher margin land and underlying house price inflation, “management have guided to an estimated 45% increase in pre-tax profit to around £565m”, up from £390.6m last year.

Prior to the results, and given the already significant rise in the share price, the analyst consensus opinion currently signifies a ‘strong hold’.

Thursday sees High Street stalwart Next report its half-year results. Having already delivered better than expected first half sales at its July trading update – up 3.5% – the focus falls on profits and accompanying management outlook comments.

The group’s shares are up 5% over one year and by 1% over the last six months. Looking ahead to this week’s update, Bowman notes: “First half pre-tax profit is forecast to rise by around 5% to £342m, with management currently guiding towards full year sales in the range of +3.5% to +6%.”

Before the results, analyst consensus opinion denotes a ‘hold’, a sentiment Spooner echoes.

He says: “Shares in the high street clothes retailer have outperformed the market since its last trading update in July. At that stage it delighted the market by revealing better than expected sales in the first six months and raised its full year profit guidance.

“Investors will be keen to hear any update on full year expectations and will focus on the performance of the mail order business as well as the high street stores. Next is due to pay a special dividend in November and investors will be looking for news on any further special dividends to come.”

Morrison Supermarkets also reports its half-year results on Thursday. The troubled supermarket has seen its stock nosedive by 19% over the past six months and Bowman expects that a business assessment from new chief executive, David Potts, who joined back in mid-March, will lead the agenda.

Bowman says: “Evolution rather than revolution in the company’s strategy is broadly expected, with continuations of existing initiatives such as property disposals and the postponement of convenience store openings likely.

“First half pre-tax profit is expected to fall by around 30% to £125m, pressured by falling sales.”

Ahead of the announcement, and despite a near 20% decline in the share price over the last six months alone analyst consensus opinion continues to point towards a ‘sell’ however Spooner has faith and has labeled it a ‘hold’.

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