Britain’s biggest housebuilder on the up

Analysts have warned of headwinds within the sector. Picture: Michael Gillen
Analysts have warned of headwinds within the sector. Picture: Michael Gillen
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Housebuilding giant Barratt Developments is on track to beat its profit targets after solid sales figures.

Releasing a trading update, the group – Britain’s biggest housebuilder by sales – said it had seen the highest number of completions in a decade.

Profit before tax for the year to the end of June is expected to come in at £835 million, up 9 per cent from £765.1m, and beating market expectations of about £810m.

The value of Barratt’s forward order book rose 1.5 per cent from £2.14 billion to £2.18bn, representing 10,155 plots.

The average selling price of a Barratt home was about £289,000 over the year, up from £275,200 in the prior 12 months, with affordable housing making up around a fifth of sales.

Completions totalled 17,579 for the year, up from 17,395 previously, marking the strongest performance in ten years.

Chief executive David Thomas said: “It has been a very good year for the group both operationally and financially with strong customer demand for our high quality new homes across our business.

“As we celebrate our 60th anniversary we have delivered our highest number of completions in a decade, reinforcing our position as the UK’s largest housebuilder.”

He added: “We begin the new financial year with a healthy forward order book, a strong cash position and a continued focus on delivery of operational improvements across our business. Across the country we are building much-needed new homes, creating jobs and supporting economic growth.”

Robin Hardy, an analyst at Shore Capital Markets, said that while the group was beating expectations, there was reason to remain cautious about its outlook.

“Prices are weakening across the market, with the rate of price inflation now below 2 per cent, which means that rising construction costs cannot be recovered,” he noted.

“Barratt remains more vulnerable to price deflation than most of its peers because its margins are much lower.”

Barratt’s results come after housebuilding rivals Persimmon and Bovis Homes signalled robust conditions in the new-build market as they reported higher first-half sales and prices.

However, house price growth has been sluggish, with Halifax reporting that prices remained “broadly flat” In June, edging up by 0.3 per cent month-on-month.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “It’s been a bumper year for Barratt, but cooling conditions in the property market mean the path ahead looks more challenging than it has done for some time. House price growth is moderating, and interest rates look like they might be going up soon too.

“Mortgage payments aren’t going to become unaffordable overnight, and the government is still handing out free money as part of its Help to Buy loan scheme, but some of the tailwinds which have been propelling profits in the housebuilding sector look like they may be slowly abating.

He added: “While profits might be at their highest for a decade, the share price is around 30 per cent lower than its peak in the second half of last year.”