Housebuilding giant Barratt Developments was on a high yesterday after it hailed the largest number of completions since the financial crisis and record forward sales.
In a trading update, the group said total completions were on course to reach 17,350 for the full year, the highest level since 2008, while total forward sales were up 13 per cent to a bumper £3.2 billion.
Doubts over the disruption Brexit might cause are disappearing into the rear-view mirrorGeorge Salmon
It expects full-year pre-tax profits to come in at the top end of estimates, between £675 million and £733m, as the industry continues to recover from the economic downturn, fuelled by strong demand and record low mortgage rates and competition among lenders.
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Barratt chief executive David Thomas said it had been a strong period “both operationally and financially” for the group.
He told investors: “Market conditions remain good, with the group delivering a strong performance since the start of the calendar year.
“Increased competition within the mortgage market has resulted in wide availability of attractive mortgage finance which, alongside Help to Buy, continues to support the very strong consumer demand.
“This strong demand has helped drive volumes and we are on track to deliver circa 16,650 wholly owned completions for the full year. This, alongside circa 700 joint venture completions would result in 17,350 total completions, the highest total in nine years.”
The firm rolled out 46 new developments over the period and plans to secure some 17,000 plots in the current financial year, compared to 24,387 in 2016. It said the overall sales rate had ticked up to 0.8 from 0.78 in 2016, while net cash is expected to come in ahead of expectations at £600n by 30 June on the back of “strong trading and the timing of land and working capital payments”.
Shore Capital analyst Robin Hardy, who has a “hold” recommendation on the shares, described the update as “surprisingly strong”.
He noted: “The difference is primarily in the number of units expected to be sold: previous guidance had been for a ‘modest’ increase in units which has meant on previous guidance and performance around 2-3 per cent but the hard numbers in this statement indicate around 5 per cent.
“It’s not clear if the group had been under-guiding previously or whether there has been a strong surge in sales so far in 2017. Either way, we will have to raise our forecast for 2017.”
George Salmon, equity analyst at Hargreaves Lansdown, said: “The good news keeps coming for Barratt shareholders in 2017.
“February saw the group tack another year of special dividends onto its already generous plans, and now management has told analysts to raise their expectations for profits this year, as growth is ahead of schedule. Conditions certainly look favourable for the builders at present.
“On the whole, doubts over the disruption Brexit might cause are disappearing into the rear-view mirror, while low interest rates and numerous government schemes, including Help to Buy and the Lifetime Isa, continue to lend support.”
But he added: “Of course, conditions won’t stay so favourable forever.”