Stock Watch

Strong foundations to help Barratt’s share price?

CMC Markets

When Barratt Developments released its pre-close trading update in July, the company painted a fairly positive picture for its full-year numbers. ‘Cautious optimism’ was discussed, and the Barratt share price rose 7.7% on that news. Nevertheless, it’s not been the easiest few months for the housebuilder.

Covid-19 takes a toll on Barratt’s share price

Reaction to the Covid-19 shutdown and its impact on the construction industry caused Barratt’s share price to drop 30% in March. Completions were down for the full-year from 17,856 in 2019 to 12,604 this year, largely down to the shutdown in the final quarter of the year.

Despite these closures taking an obvious toll on the industry in April and May, all Barratt sites were reopened and functioning by 30 June.

Strong foundations to help Barratt’s share price?

Barratt’s full-year order book has remained strong, with forward sales well-ahead of last year’s 11,419 at 14,326, at a value of £3.25bn, up from £2.604.1bn a year ago. Overall selling prices were more or less in line with last year’s levels, with the total selling price at £280,000, only slightly above 2019’s £274,400.

Barratt announced in March that it would be cancelling the interim dividend of 9.8p per share, blaming the “uncertainties caused by Covid-19”. However, at the same time it claimed to “recognise the importance of dividends”, and mentioned that there would be considerations before the full-year results were announced, which could be something to look out for in the September release.

There was also a voluntary 20% pay-cut for some executive staff, aimed at helping the company during the worst of the lockdown.

Government initiatives offer hope

UK chancellor Rishi Sunak’s initiative on stamp duty will no doubt have eased some of the concerns in the construction industry. With a stamp duty holiday for properties up to £500,000 until 31 March 2021, the market has seen significant movement with buyers and sellers across the country looking to take advantage of the new scheme. A recent Rightmove survey has suggested that August was the busiest month in over a decade in terms of sales agreed, up 20% on the previous record high.

The closures caused by the Covid-19 pandemic lockdown may impact Barratt’s ability to keep up with this new demand

The company has also expressed gratitude for the job retention scheme that allowed it to furlough over 5,500 employees during the height of the pandemic. The company has announced that it plans to repay all the furlough money used to pay its employees, who received full pay until 31 May. This figure will be somewhere around £25m

The Barratt share price still sits 75% higher than in 2013, when the Help To Buy scheme was first introduced. The sector will have one eye on the planned end of that scheme, which starts in 2021 before being fully phased out in 2023.

The company releases its latest results on Wednesday 3 September. What will this mean for the Barratt share price?


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