Record prof­its for Bar­ratt but clouds gather

An­a­lysts warn out­look grow­ing un­cer­tain

Yorkshire Post - Business - - FRONT PAGE - Ros Snow­don CITY ED­I­TOR @york­shire­post

Britain’s big­gest house­builder Bar­ratt De­vel­op­ments has posted a healthy rise in an­nual prof­its as it hailed an “out­stand­ing” year.

The group re­ported a 9 per cent rise in an­nual pre-tax profit to a record £835.5m. Rev­enue in­creased 5 per cent to £4.87bn.

How­ever, an­a­lysts warned that the out­look for house­builders is look­ing in­creas­ingly un­cer­tain as Brexit ne­go­ti­a­tions fal­ter.

Richard Hunter, head of mar­kets at in­ter­ac­tive in­vestor, said: “With in­ter­est rates now po­ten­tially set on an up­ward curve and the eco­nomic out­look in­creas­ingly un­cer­tain as Brexit ne­go­ti­a­tions fal­ter, the (house­build­ing) sec­tor is in the fir­ing line.

“In ad­di­tion, ris­ing con­struc­tion costs and the pos­si­bil­ity of any Gov­ern­ment with­drawal in its cur­rent quest to re­duce the hous­ing short­age in the UK cast long shad­ows. Any weak­ness in house prices is be­ing seized upon and de­spite Bar­ratt‘s protes­ta­tions, these fac­tors are preva­lent.“

Laith Kha­laf, se­nior an­a­lyst at Har­g­reaves Lans­down, said that while Bar­ratt’s re­sults were pos­i­tive, wor­ries about the hous­ing mar­ket per­sist.

“The mar­ket is wor­ried about three things which are out of Bar­ratt’s con­trol – Brexit, in­ter­est rates and Help to Buy,” he said.

“There are con­cerns that with­drawal from the EU may not be an en­tirely smooth ride, and that puts a damp­ener on stocks like Bar­ratt, which are plugged into the do­mes­tic economy.

“The Bank of Eng­land is rais­ing in­ter­est rates, al­beit slowly, but that’s a re­ver­sal of di­rec­tion from the last 10 years of mone­tary pol­icy.

“Fi­nally, the end of the Help to Buy scheme is hov­ing into view, and un­less the Gov­ern­ment ex­tends this in some form be­yond 2021, that spells the re­moval of a key lynch­pin in the new build prop­erty mar­ket.”

Bar­ratt said that com­ple­tions rose 1.1 per cent to 17,579, the high­est num­ber in a decade, and the av­er­age sell­ing price on com­ple­tion in­creased 5 per cent to £288,900.

Bar­ratt said mar­ket con­di­tions re­main good and the avail­abil­ity of at­trac­tive mort­gage fi­nance and the Gov­ern­ment’s Help to Buy scheme con­tinue to sup­port ro­bust con­sumer de­mand.

Chief ex­ec­u­tive David Thomas said: “The group has had an­other out­stand­ing year de­liv­er­ing a strong op­er­a­tional and fi­nan­cial per­for­mance, and our high­est vol­umes in a decade. As the UK’s largest house­builder, we are help­ing to ad­dress the coun­try’s hous­ing short­age – cre­at­ing jobs and sup­port­ing eco­nomic growth whilst con­tin­u­ing to lead the in­dus­try in qual­ity and cus­tomer ser­vice.”

The pos­i­tive com­ments come de­spite re­ports sur­fac­ing over the week­end that Help to Buy will be scrapped in 2021, as well as warn­ings from ri­val firms over Brexit.

Bar­ratt also an­nounced new medium-term op­er­a­tional tar­gets, in­clud­ing vol­ume growth of 3 to 5 per cent per year and a min­i­mum 25 per cent re­turn on cap­i­tal em­ployed.

For­ward sales rose 11.1 per cent to £3bn.

Mr Thomas added: “The group starts the new fi­nan­cial year in a good po­si­tion with a strong bal­ance sheet, healthy for­ward sales and ro­bust con­sumer de­mand sup­ported by a pos­i­tive mort­gage en­vi­ron­ment.”

Russ Mould, in­vest­ment di­rec­tor at AJ Bell, said: “The lat­est re­sults from the house­builders will do lit­tle to set­tle the ar­gu­ment be­tween bulls and bears over the sec­tor.”

17,579 The num­ber of com­ple­tions re­ported by Bar­ratt, the high­est in a decade.

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