14th Jul 2022 15:38
(Alliance News) - Barratt Developments PLC said it delivered an "excellent" year on Thursday, boasting strong customer demand for homes despite build cost inflation.
AJ Bell analyst Danni Hewson said that the property developer's latest update is indicative of both the opportunities and challenges facing the sector right now.
"On the one hand demand still seems robust, and Barratt is back building homes at pre-pandemic volumes with units selling faster than expected. On the other it is becoming far more costly to do so and under-resourced planning departments are acting as an impediment to growth."
Barratt said total home completions returned to pre-pandemic levels, with 17,908 homes completed in the financial year ended June 30, up 3.9% from 17,243 homes the year before.
It also noted strong nationwide demand throughout the year, with net private reservations per active outlet per week at 0.81 compared to 0.78 the previous year.
These positive figures led the Leicestershire-based firm to expect adjusted pretax profit in the range of GBP1.05 billion and GBP1.06 billion for the financial year ended June 30.
This is marginally ahead of current market consensus expectations of GBP1.048 billion, and up from the GBP919.7 million achieved in financial 2021.
The resilient demand was encouraging given research from The Royal Institution of Chartered Surveyors on Thursday showed property professionals saw fewer new inquiries from UK house hunters in June.
Some 27% of professionals reported a fall in interest from potential buyers, marking the third month in a row that interest from new buyers slipped.
Commenting on the resilient demand for Barratt, Matt Britzman, equity analyst at Hargreaves Lansdown, said it was a "testament to the ongoing resilience of the private house buyer, seemingly undeterred by a drop in real income as inflation and a cost-of-living crisis start to take their toll."
Barratt said it experienced total build cost inflation of about 6% in financial 2022, in line with previous guidance. However, due to the escalating energy costs and fuel cost inflation, it is now experiencing total build cost inflation of between 9% and 10%.
Looking forward, the housebuilder said it recognised significant macro-economic uncertainties but added, based on current market conditions and assuming no material disruption to its supply chain partners, it expects to grow total home completions in line with medium term growth target of 3% to 5%.
"Barratt's doing all it can to make hay while the sun shines, with a significant increase in the value of land buying last year – propped up by a very healthy net cash position on the balance sheet," said Matt Britzman.
Shares in Barratt Developments were down 1.7% at 457.40 pence on Thursday afternoon in London.
By Heather Rydings; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Barratt Developments