Housebuilder Barratt to deliver profit ‘slightly ahead’ of expectations despite challenging conditions
In a trading update covering the year to June, Barratt said that total home completions were at 14,004. Although this was down on 17,206 last year, it was still at the "upper end" of the firm's guidance.
Housebuilder Barratt Developments said that it expects to perform “slightly ahead” of market expectations when it delivers its full year results.
In a trading update covering the year to June, Barratt said that total home completions were at 14,004. Although this was down on 17,206 last year, it was still at the “upper end” of the firm’s guidance.
Net private reservations per week at its active outlets was at 0.58, up from 0.55 last year, including contributions from the private rental sector and providers of social housing.
Barratt noted that it had seen an improving reservation rate throughout the year as mortgage rates have eased, but noted “underlying private sales activity has remained sensitive to mortgage availability and affordability”.
Adjusted profit before tax is anticipated to be slightly ahead of previous expectations, although lower than last year.
“During another year of economic and political uncertainty, we have delivered a strong operational performance, reflecting the exceptional work of our employees, sub-contractors and suppliers, and their commitment to delivering high quality homes that people want to live in,” David Thomas, chief executive, commented.
Looking forward, total sales at the end of June was 7,239 at a face value of £1.9bn, down from £2.2bn at the same point last year but in line with expectations.
Over the year ahead the firm expects to complete between 13,000 and 13,500 homes, which was below market consensus.
Shares fell 2.3 per cent on Wednesday morning.
“Whilst we see improving market conditions in the year ahead, Barratt expects its volumes to be lower,” Anthony Codling, analyst at RBC said. “It can build homes very well, it just doesn’t have the land on which to build them,” he added.
Barratt is currently in the process of merging with smaller rival Redrow. The deal was approved by both sets of shareholders back in May but the merger is currently under review by the Competition and Markets Authority (CMA).
The review is expected to be decided on 8 August. Barratt said it is “co-operating fully with their enquiries”.
Mark Crouch, analyst at investment platform eToro, said the acquisition “will provide diversification for the business supporting a wider array of property offerings and will further strengthen what is already a robust balance sheet.”
Barratt is expected to be one of the winners of the new Labour government as it attempts to push forward with plans to increase housebuilding.
Earlier this week, Chancellor Rachel Reeves re-instated mandatory housebuilding targets while Angela Rayner, the deputy Prime Minister, wrote to local authorities asking them to find ‘grey-belt’ land for construction.
“We welcome the new Government’s urgency and focus on housebuilding and reform of the planning system as key to both unlocking economic growth and tackling the chronic undersupply of new homes,” Barratt said.
“We look forward to working with Government and wider stakeholders to address supply side constraints and deliver the new homes, of all tenures, the country needs,” the firm added.
