Builder is bullish after strong half-year results
THE boss of Barratt Developments said the housebuilder is on course to build a growing number of homes in the coming months after putting out strong half-year results.
Chief executive David Thomas said the firm hoped to put up more than 18,000 homes this year on the back of a current build rate of 341 homes a week.
Barratt erected 8,067 homes in the second half of 2021 – 1,000 fewer than the second half of 2020 when it was playing catch-up following the initial lockdown.
The Coalville housebuilder said sales for the half-year were down about 10 per cent year-on-year at £2.25 billion, while pre-tax profits were pretty stable at £432.6 million.
The figures come after it was revealed the average UK house price hit a record high of £276,759 at the start of 2022 after increasing by about £24,500 over the past year.
But with household budgets under pressure from surging living costs, Halifax bank said it is likely the pace of house price growth will slow considerably over the next year.
Barratt expects build cost inflation of about 6 per cent this year and said the average Barratt private sales price is now £327,400 – up from £312,000 two years earlier.
Mr Thomas said: “We have delivered an excellent first half and the strong rebound in our construction activity means we now expect to complete more than 18,000 homes, ahead of previous expectations and pre-Covid levels.
“This increase in construction activity has not affected our focus on our customers, on quality and service and on acting in a responsible and ethical way.
“We continue to work hard to lead the industry in building the highquality sustainable homes and developments the country needs.”
Analysts said Barratt was bullish despite the looming threats of inflation potentially stifling the economy along with the cladding scandal affecting much of the housing market.
Walid Koudmani, market analyst at financial brokerage XTB, said: “The company expects this positive performance to continue throughout 2022 and despite some uncertainty surrounding the global economic environment, the general market situation appears to favour such optimistic performance.
“It remains to be seen if the company will manage to successfully implement its strategy or if it will encounter issues driven by record inflation and potential supply chain disruptions.”
Russ Mould, investment director at stockbroker AJ Bell, said: “It’s been a tough time of late for the housebuilders with investors taking fright at moves by the government to get them to pay a greater share of the cladding repair costs required to meet fire safety standards.
“The combination of this factor with growing fears the buoyancy in the housing market will deflate sooner rather than later has seen billions wiped off market valuations.
“Barratt’s first half results are helping to mend some of the damage, with the company sitting on an extremely generous cash buffer to help it meet any extra expenses on the cladding side while still maintaining returns to shareholders and investing in areas such as land acquisition.
“The company has done a decent job of managing the impact of rising build costs with a limited impact on profitability so far.
“Critically Barratt is also bullish on the outlook, raising guidance for the number of completions for the current year above pre-pandemic levels.
“What goes up, must come down at some point and while there are drivers for the housebuilding sector, like the requirement for more space and people moving out of urban centres, growth is likely to slow at some point.”