Barratt Developments share price is likely to remain under pressure as the group will not press ahead with a special dividend of £175 million that was payable in November 2021.
The company confirmed that when the timing is right it will introduce a dividend policy based on a dividend cover of 2.5 times earnings.
Covid-19 impacts Barratt's share price
The pandemic impacted the business, as well as Barratt's share price, greatly and revenue fell by 28% to £3.4 billion. Pre-tax profit tumbled by 45% to £491.8 million. Forward sales are £3.7 billion, up 22% on the year, and the company confirmed that demand is very strong.
In early July, Barratt issued a trading update that covered the full year, but it wasn’t too detailed. The lockdown had a terrible impact on the group as construction work ground to a halt. Annual completions were 12,604, which was a 29% fall. The average selling price was a touch higher on the year as it increased to £280,000. The order book is healthy as it is 14,326, which is a 25% rise. It has been common for house building firms to have experienced a fall in completions, but at the same time, have a large increase in their order book. It seems that a large portion of their work has been pushed back into next year. The firm said it was ‘cautiously optimistic’ in relation to its outlook.
The company is in good shape in terms of financing as its cash balance stood at more than £300 million, and it has access to £700 million in credit. In addition to that, the builder is eligible to access the Bank of England-sponsored Covid Corporate Finance Facility, but given its situation it seems unlikely that it will need to tap into those funds.
Almost two months ago, Rishi Sunak, the Chancellor of the Exchequer, lifted the stamp duty threshold on property purchases from £125,000 to £500,000. This should help Barratt as their average selling price is £280,000. The property market has experienced a ‘mini boom’ according to the property portal Rightmove, as there was a record number of transactions from mid-July into early-August, and prices rose too. Updates from Nationwide and Halifax have also shown that prices increased recently.
Barratt's share price recovers from March lows
The Barratt Development share price hit an all-time high in February, just before the pandemic set-in. It endured a brutal sell-off when traders became gripped by fear because of the health crisis. It has managed to recover roughly 30% of the ground that it lost during the pandemic-related decline.
Recently, the Barret Development share price has been range bound, and a break below the 480p area should point to further losses, while a move above the 580p zone, should pave the way for additional gains.