Housebuilder Barratt Developments has seen revenues soar above pre-pandemic levels after it sold more homes at higher prices amid a booming property market.
Camilla Canocchi www.thisismoney.co.uk
Revenues for the full-year to the end of June came in at £4.8billion, which is a 40 per cent increase compared to 2020 and also 1 per cent higher than 2019.
Pre-tax profits at the FTSE 100 company also rose 65 per cent to £812.2million compared to last year, although they remain some 11 per cent below 2019 levels.
Boss David Thomas said there was a ‘very strong demand for houses across the country’
The surge in profit and revenue comes as house prices leapt this year thanks to a mix of rising demand, stamp duty holiday and low mortgage rates,
Barratt saw the average selling price for private homes soar to around £325,000, from £310,600 in 2020 and £312,00 in 2019.
The most recent Nationwide house price index reported the average house price across the UK had risen 11 per cent to £248,857 in the year to August.
Barratt completed the sale of some 17,243 homes, which is an increase of 37 per cent from 2020 but still around 3 per cent below 2019.
And it said it plans to increase the number of home sales in the current fiscal year to pre-pandemic levels wholly owned completions allaying concerns about a cooling housing market.
The group is targeting between 17,000 and 17,250 sales in the current financial year, with an additional 750 joint-venture completions, which would take the total above the 17,856 home sales completed in 2019.
Chief executive David Thomas said there was a ‘very strong demand for houses across the country’, leaving the company on on track to hit its long-term target of 20,000 a year.
Forward sales – a key housing metric for homes to be delivered and paid for at a later date – as of the end of August stood at £3.94billion, against £3.71billion in 2020 and £3billion in 2019.
However, it also said it was seeing build costs rise, currently by between 4 per cent and 5 per cent, with materials more expensive due to wider industry supply issues, as well as skilled labour shortages pushing worker wages higher amid a booming sector.
Annual results confirmed a £81.5million bill for cladding safety works in the wake of the Grenfell Tower disaster, taking its total hit so far since 2017 to £184.2million.
The group unveiled a final dividend payout of 21.9p a share, bringing the full-year payout to 29.4p, up from 29.1p in 2019, with the group halting dividends last year due to the pandemic.
Barratt shares were down 2.9 per cent to 721p at 1pm.
Nationwide said the average house price has risen close to the £250,000 mark, but that remains considerably below Barratt’s average sales price
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said the fall in shares is probably down to a lack of detail about shareholder returns.
‘All the signs in Barratt’s results are that the housing market remains robust,’ he said.
‘Despite the progress the market seems disappointed with the results, and we suspect that’s down to limited detail about additional shareholder returns. The group exited the last financial year with over £1.3bn in net cash.
‘A good portion of that is earmarked for helping the group reach 20,000 completions a year, but with land purchases already approaching that level that still leaves some surplus.
‘Still, with a dividend yield north of 5 per cent, profits back on track and end markets that look robust despite the recent housing boom, Barratt’s weathered the storm well, coming out of the pandemic with solid foundations on which to build.’