After a rough time for the housebuilding sector, driven by fears over the bill for cladding repairs, Barratt Developments (BDEV) initially helped lift the mood on Wednesday morning with a strong set of first half results.
However the shares, up more than 3% early on, drifted back to near parity at 627.8p despite an uptick in first-half profit as rising home prices offset the impact of a fall in completions.
It seems lingering concerns about the impact on the housing market of cost of living pressures and rising interest rates plus fears over just how large the bill for dealing with cladding fire safety issues might be, after the UK Government determined developers should foot more of the bill, saw initial market enthusiasm fade away.
For the six months ended 31 December, pre-tax profit rose 0.6% to £34.5 million while revenue fell 9.9% to £2.25 billion.
Total home completions fell 11.1% to 8,067, reflecting the ‘unusually high completions in HY21 due to Covid lockdown dislocation and a return to the more normal seasonal phasing of completions across our fiscal year,’ the company said.
Private average selling prices rose 5% to £327,400.
The company said it was now on track to deliver total home completions of 18,000 to 18,250 in the current financial year, an increase of 250 homes on previous guidance and in excess of the total home completions delivered in the 2019 financial year.
STRONG FORWARD SALES
Net private reservations per active outlet per average week for January were 0.90, 16.9% above the 0.77 rate in the equivalent period in 2021.
Forward sales as at 30 January 2022 stood at 15,736 homes, up from 14,289 homes at a value of £4.1 billion, up from £3.43 billion with 11,362 homes of these total forward sales either exchanged or contracted. The company is also sitting on more than £1 billion of net cash.
Director at research house Edison Andy Murphy commented: ‘Barratt remains focused on quality and customer service and achieved more HNBC Pride in the Job Awards than any other builder for the 17th year. It also completed the award winning Z House, a unique zero carbon concept house aimed at showcasing the future of sustainable living.
‘The outlook is encouraging too... it has also announced the phased reduction of dividend cover from 2.5x, to 2.25x in FY22, 2.0x in FY23 and 1.75x in FY24. This last point is likely to be taken well by the market despite interest rate worries that persist at the moment.’
