Contrasting picture as housebuilders look to maintain strong foundations
● Both Barratt and Redrow report rise in sales but offer contrasting outlooks
Two of Britain’s best-known housebuilders gave contrasting outlooks on trading yesterday amid concerns that an economic slowdown will dent demand.
Barratt Developments reported a rise in its half-year sales and profits as it continues to shrug off Brexit pressures hitting some parts of the property market. The housebuilding giant posted a 7.2 per cent rise in revenues to £2.1 billion for the six months to the end of December, while pretax profits leapt 19.1 per cent to £408 million.
Barratt, which operates across the UK, said demand continues to be supported by the Help to Buy scheme for first-time buyers, as well as the wide availability of “attractive” mortgage finance.
However, rival builder Redrow warned that Brexit uncertainty had started to eat into its sales, even as it revealed record half-year profits.
The group reported a 9 per cent rise in sales to £970m for the same half-year period, while pre-tax profit nudged up 5 per cent to £185m.
But the firm also cautioned that sales were “negatively affected” towards the end of the calendar year as a result of the “political uncertainty surrounding Brexit” and the effect of high stamp duty tax.
Richard Hunter, head of markets at Interactive Investor, said: “In normal circumstances, the housebuilders’ performance of late would have been met with a warm round of applause, as cash generation, operational efficiencies and a series of tailwinds serve to benefit their numbers. Within this, Barratt is generally seen as being the pick of the bunch.
“However, all is not normal. Of course, the largest thorn in the side remains Brexit. The possibility of a sharp economic downturn in the worst case scenario hangs over the sector despite its performance, and regardless of the best efforts of the companies themselves
“Further out, some of the measures which have been introduced to stimulate the housing market may be withdrawn and the possibility of rising interest rates would harm the sector.”
David Madden at CMC Markets UK noted: “Barratt Developments posted a solid set of first-half numbers.
“The sector has experienced higher material and wages costs in recent years, and it is a credit to Barratt that they managed to improve operating margins. The homebuilder confirmed that forward sales increased by 7.3 per cent, and the full-year outlook remains in line with the board’s expectations. “Redrow announced respectable first-half figures.”