Barratt Developments’ shares rise as housebuilder beats profit targets
The housebuilder delivered a strong set of results of the year despite flagging house price growth.
Barratt Developments’ shares rose after the company said it would beat profit targets.
For the year ended June 30, Barratt sold 17,579 homes, up from 17,395 the year before, which the housebuilder said was its highest number of completions in 10 years.
Profit before tax is expected to come in at £835 million, up 9% from £765.1 million, and beating market expectations of £812 million.
In early morning trading, Barratt’s shares were up 2.61% or 12.6p to 495.6p.
The value of Barratt’s forward order book rose 1.5% from £2.14 billion to £2.18 billion, representing 10,155 plots.
The average selling price of a Barratt home was around £289,000 over the year, up from £275,200 in the prior year, with affordable housing making up around a fifth of sales.
David Thomas, Barratt’s chief executive, said: “It has been a very good year for the group both operationally and financially with strong customer demand for our high quality new homes across our business.
“We begin the new financial year with a healthy forward order book, a strong cash position and a continued focus on delivery of operational improvements across our business.”
Robin Hardy, analyst at Shore Capital Markets, said that while Barratt was beating expectations, there was reason to remain cautious about the housebuilder’s outlook.
“Prices are weakening across the market, with the rate of price inflation now below 2%, which means that rising construction costs cannot be recovered,” he said.
“Barratt remains more vulnerable to price deflation than most of its peers because its margins are much lower.”
Barratt’s results come after housebuilding giants Persimmon and Bovis Homes signalled robust conditions in the new-build market as they reported higher first-half sales and prices.
However, house price growth has been sluggish, with Halifax reporting that prices remained “broadly flat” In June, edging up by 0.3% month-on-month.