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Earnings

Barratt share price slips back despite big jump in full-year profit

Barratt share price: a Barratt construction site in London

The Barratt Developments share price had been gradually sliding lower after its highs in April, and although it rebounded from six-month lows in July, Barratt's share price still remains some way short of the pre-pandemic peaks.

Is the Barratt share price running out of steam?

Since those July lows, the Barratt share price has been on a slow move higher, however there are signs that the current rebound might be starting to run out of steam, as the various tax breaks start to come to an end, with today’s numbers prompting a little bit of early weakness.

Across the housing sector, by and large the numbers being reported have been better than expected, with today’s results from Barratt painting a fairly decent picture of the UK housing market; not so much for how well they’ve done this past year, but in the context of the outlook going forward into 2022.

House price growth this year has been strong largely as a result of the stamp duty holiday that is due to end this month, however there are concerns that the removal of this tax measure could see demand slow and prices start to fall back. Demand also tends to slow in the winter months in any case, which could also prompt a slowdown in sales and prices.

Completions rise as profit jumps

In July, Barratt upgraded its adjusted full-year profit-before-tax forecasts for the current year, with today’s numbers confirming that total home completions rose by 36 8% year-on-year to 17,243, only modestly below 2019 levels of 17,856.

Revenues, on the other hand, were higher than 2019 levels, rising 1% to £4.81bn, although margins haven’t quite recovered as of yet. In 2019 these were at 22.8%, and after dipping to 18% in 2020, have improved to 21%, while operating margins are still 200bps lower at 16.9%.

Average selling prices rose modestly to £288,800, largely driven by the London market which saw average prices rise to £325.500.     

Profit-before-tax came in at £812.2m, up 65% from last year, but down 10.7% from 2019 levels, while the dividend was raised to 29.4p from 29.1p in 2019. The company also released £3.5m from its loan loss reserves, after setting aside £8.2m in 2020.

In terms of the outlook, forward sales are well above last year's and 2019 levels, with 15,734 homes, and a total value of £3.94bn. Management expectations are that 2019 volumes of home completions will return by 2022, however the company did point to uncertainty over Covid-19 as a key risk to its forecasts.

The Barratt share price is currently down 7.20p (0.90%) at 735.60p.


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