Barratt sees profits soar, but flags dip in demand and rising costs

Housebuilding giant Barratt Developments has seen annual profits soar nearly two-thirds higher, but revealed rising build costs and a dip in recent buyer demand following the stamp duty deadline.

Barratt posted a 65.1 per cent surge in pre-tax profits to £812.2m for the year to June 30

Barratt posted a 65.1 per cent surge in pre-tax profits to £812.2m for the year to June 30 as completions jumped 36.8 per cent to 17,243.

It said sales were catching up with pre-pandemic levels, with completions just 3.4 per cent below 2019, although profits remain 10.7 per cent below those seen two years ago.

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The group said since the year end, which also marked the end of the full stamp duty relief, private reservations were 11.7 per cent below those seen in the full-year, at 0.83 per active outlet per average week.

But Barratt said: "It should be highlighted that the prior year comparative was a particularly active period, reflecting both pent-up demand following the national lockdown, as well as increased Help to Buy reservation activity ahead of the changes which would remove access to Help to Buy for existing homeowners."

It added that forward orders were strong, at 15,734 homes worth £3.9 billion as at August 22, up from £3.7 billion a year ago.

Barratt also said it was seeing build costs rise, currently by between 4% and 5%, with materials more expensive due to wider industry supply issues, as well as skilled labour shortages pushing worker wages higher amid a booming sector.

"Reflecting the ongoing strength of the market, we continue to see increases in build costs, currently running at between 4% and 5% and we now expect build cost inflation will be within this range for full-year 2022," it said.

Annual results confirmed a £81.5 million bill for cladding safety works in the wake of the Grenfell Tower disaster, taking its total hit so far since 2017 to £184.2 million.

It cautioned it expects another £40 million over the financial year ahead for fire safety works as it assesses high rise buildings it constructed and works needed to support leaseholders and residents.

Despite the recent easing back in reservations, Barratt said it still expects to see wholly-owned completions of between 17,000 and 17,250 homes in 2021-22, putting it on track for its long-term target of 20,000 a year.

The group unveiled a final dividend payout of 21.9p a share, bringing the full-year payout to 29.4p, up from 29.1p in 2019, with the group halting dividends last year due to the pandemic.

David Thomas, chief executive of Barratt, said: "We have begun the new financial year in a strong position and, whilst there are still uncertainties ahead, our strong balance sheet, forward order book visibility and construction activity to date all stand us in good stead."

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James Mitchinson