9th Feb 2022 17:01
(Alliance News) - It was a positive day for Barratt Developments PLC, raising its guidance for annual home completions on the back of steady profit, but fears of an eventual peak in demand have started to emerge, with a slowdown in house price growth and rising costs of living.
For the six months ended December 31, the Leicestershire-based property developer said pretax profit edged up 0.6% to GBP432.6 million through a higher operating margin, more than offsetting a 9.9% drop in revenue year-on-year to GBP2.49 billion as the company returns to more normalised levels of trading.
Also, as a result of this, underlying operating profit for the first half dropped 11% to GBP449.9 million from GBP505.2 million.
"The hot housing market is providing the steam to help Barratt Developments power ahead with a strong order book with forward sales up 10% on last year. However, underlying operational profits have drifted lower, as inflation starts to bite and the number of completions reduced as demand began to normalise from pent-up demand from the last period," said Susannah Streeter of Hargreaves Lansdown.
Total home completions for the period were down 11% to 8,067, reflecting an unusually large amount of completions in the prior year due to the disruption from Covid-related lockdowns.
Looking ahead, Barratt now expects to complete between 18,000 to 18,250 homes, including joint venture completions, in the full year, provided there is no further pandemic-related disruption.
This is 250 homes higher than previous guidance and up from 17,243 in financial 2021. It would also would be higher than pre-Covid levels. Completions in financial 2019 were 17,856 before dropping to 12,604 in the Covid-hit 2020.
Also, in the second half to date, the group recorded a 6.2% rise in net private reservations per week. Total forward sales from the end of January were 15,736 homes, up 10% from the previous year, at a value of GBP4.11 billion, up 17% year-on-year from GBP3.43 billion.
"There seem to be little sign of a cooling off in demand just yet, with net private reservations per active outlet rising by almost 17%," Streeter added.
"Barratt Developments is certainly making hay while the sun shines as first timers rush to get onto the ladder and other buyers trade up for bigger homes, desperate for more space to meet new hybrid work needs. But with indications that house price growth has slowed, there are still concerns this buoyant book of orders will start to thin out, particularly as the cost of living squeeze intensifies and rate rises come in quick succession."
On Monday, data from mortgage lender Halifax showed that on an annual basis, the Halifax UK house price index rose by 9.7% in January, the same pace as in December. However, the latest reading missed the market forecast, cited by FXStreet, for an 11% increase.
UK house prices rose 0.3% month-on-month in January, slowing sharply from 1.1% in December. This print missed the market estimate of 0.7%.
Shares in Barratt Developments closed 0.9% higher at 633.40 pence in London on Wednesday.
By Dayo Laniyan; [email protected]
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