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Ben Bailey - Another Builder's Profits Warning

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LONDON (AFX) - House builder Ben Bailey PLC posted an 18 pct fall in pretax

profits for the six months to June 30, blaming the recent slowdown in the UK

housing market.

The company said pretax profits dropped to 6.17 mln stg from 7.54 mln while

operating profits fell 8.7 pct to 7.67 mln stg from 8.4 mln despite a 22 pct

increase in turnover to 45 mln stg from 37 mln.

Looking ahead, chairman Richard Bailey said: "The present subdued market

conditions will continue to affect margins and any improvement will be dependent

upon a return of customer confidence, possibly driven by a reduction in interest

rates."

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Guest Time 2 raise Interest Rates

Business market report by Mickey Clark. London Standard.

Despite the expected move towards cheaper money this week, broker Dresdner

Kleinwort Wasserstein is warning of further pain for housebuilders.

It says that during the past month housebuilders have veered from predicting earnings growth to warning of falling margins, volumes and profits.

"The downgrades have just begun and we now have negative or neutral recommendations on most of the stocks in our universe," it added.

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I find it incredible that even with a pullback in the market that these builders are already suffering profits wise, just how well are they being run, do they have any level of cost control like the vast propertion of the rest of the private sector or have they become fat and lazy companies who only know how to make money when the sticker price of their output product goes up at double digit rates?

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I'm calling the peak for builders right here, coinciding with the strong rally in the FTSE we've seen in the last 3 months.

If you look at the charts for BDEV, BVS etc in the last crash, they didn't stop climbing until the 2nd half of 1990, by which time the market was well knackered. Sometimes it just takes time for the market to wake up to the gravity of the situation after a 10 year bull run.

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BDEV is cash generative, trades on less than 8 times earnings and has a well covered 5% divi - not shorting material imho.
I'm calling the peak for builders right here, coinciding with the strong rally in the FTSE we've seen in the last 3 months.

If you look at the charts for BDEV, BVS etc in the last crash, they didn't stop climbing until the 2nd half of 1990, by which time the market was well knackered. Sometimes it just takes time for the market to wake up to the gravity of the situation after a 10 year bull run.

So BDEV is good shorting material now then? What a difference a few days make! :rolleyes:

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So BDEV is good shorting material now then?  What a difference a few days make!  :rolleyes:

Haha. Well I didn't say that exactly, but I think the whole sector is looking toppy now (famous last words). There's other shares I would rather short. :)

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Haha. Well I didn't say that exactly, but I think the whole sector is looking toppy now (famous last words). There's other shares I would rather short. :)

Toppy to anyone with a brain but this is the stockmarket we're talking about! I hope you're right though.

I'can't do the rapid response type spreadbetting. All I can do is look for stocks that will be substantially lower in 3/4 months time and stick a tenner on them.

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They don't actually sell many houses each year.

Their financial statements don't look too cluttered.

This stock would be worthy of investigation for shorting.

The cost line is going up. Revenue line is debatable. We know prices are going to be flat to negative growth from here and with more volume(sales) may come through at the cost of heavy incentives. margin squeeze.

If prices falls become more evident to the sheep out there. Sales will die no matter what incentives you give. Profits could reasonably plunge.

Have not looked at balance sheet and cash flow. but if you spending on beefing up your land bank - guess they pay on the margin as well. cash flow metrics may worsen as well.

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  • 334 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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