- Barratt sees profit above estimates
- Investors focus on outlook instead
- New Bellway offer for Crest Nicholson
Stock prices usually rise when a company raises its earnings guidance, but in the case of housebuilder Barratt Developments (BDEV) the market looked straight past the upgrade to focus on the outlook and didn’t particularly like what it saw in terms of home completions.
The shares fell 13p or 2.7% to 478p, undoing most of the gains of the last few days as the housebuilding sector rallied on hopes the new Labour government would free up more land for development.
PROFIT TO TOP FORECASTS
For the year to the end of June 2024, total home completions were at the upper end of Barratt’s guidance range at 14,004 although that was still a long way below the 17,206 homes delivered in the previous financial year due to the ‘challenging’ economic backdrop.
First-half completions were down 28%, but during the second half that decline slowed to a more modest 8.7% as reservation activity improved.
Average selling prices were down by 6.4% to £344,000, although excluding the private rental sector and registered providers of social housing prices were down just under 5% to £355,000.
Chief executive David Thomas said the firm had delivered ‘a strong operational performance’ and adjusted pre-tax profit would be slightly ahead of previous expectations.
Thomas went on to say the proposed combination with Redrow (RDW) – assuming it received regulatory approval – would create ‘an exceptional UK housebuilder’.
BUT OUTLOOK DISAPPOINTS
However, at the end of June, forward home sales – a key performance indicator – were just 7,239 at a value of £1.9 billion compared with 8,995 and a value of £2.2 billion a year earlier.
The net private reservation rate – another closely-watched metric – was 0.58 homes per active sales outlet per week compared with 0.55 the previous year, which was an improvement but not on the scale investors had anticipated.
As a result, for the year to June 2025, the firm said it expected to deliver between 13,000 and 13,500 new homes, or in other words less than it did in the last financial year and barely more than it did before the pandemic.
CREST BID BATTLE RUMBLES ON
Meanwhile, the bidding frenzy around smaller builder Crest Nicholson (CRST) moved up a gear this week as affordable housebuilder Avant Homes – backed by activist investor Elliott Advisors – made an all-share offer, followed by a renewed approach from Bellway (BWY).
According to press reports, the Avant offer was pitched at around 300p per share, a 20% premium to Bellway’s initial 253p per share offer, but the Newcastle-upon-Tyne developer has responded this week with an improved offer which at the time of writing values Crest Nicholson at 273p per share.
The Crest Nicholson board admits there is a ‘compelling strategic and financial rationale’ for combining with Bellway and has said the revised offer is ‘at a value it would be minded to recommend unanimously to shareholders’, so this could be the end of the story unless Avant comes back with a more compelling offer.
Crest Nicholson shares climbed 5p or 2% to 244p while Bellway shares eased 30p or 1.3% to £25.48.
