2nd Sep 2020 08:30
(Alliance News) - Barratt Developments PLC on Wednesday said Covid-19 "significantly" reduced completion volumes, increased costs and hit profit, but has moved into the new financial year with "cautious optimism".
Shares in the FTSE 100-listed housebuilder were 5.8% higher in London on Wednesday morning at 532.80 pence each - among the top performers in the blue-chip index.
In the year to June 30, Barratt's pretax profit almost halved to GBP491.8 million from GBP909.8 million.
Barratt blamed the "unprecedented disruption" caused by the pandemic, which hit sales and build in the fourth quarter.
Revenue dropped 28% to GBP3.42 billion from GBP4.76 billion. Total completions plunged 29% to 12,604 from 17,856.
Barratt noted its gross margin fell to 18.0% from 22.8%, following GBP74.3 million of Covid-19 costs.
As a result of falling profit, the housebuilder has cancelled its dividend, believing it is better to be focused on "maintaining its disciplined approach both growing completion volumes and investing in attractive land opportunities".
It will also no longer propose its financial 2021 special dividend of GBP175 million.
Barratt noted it will look to reinstate its dividend "when the time is right".
Chief Executive David Thomas said: "While Covid-19 has had a significant impact on our results, our priority has been to keep our people safe, mitigate the effect of the pandemic on our business and be able to emerge from the crisis in a resilient position. Although uncertainties remain, all of our sites are operational, we are seeing very strong consumer demand and our robust financial position means we enter the new financial year with cautious optimism."
In terms of current trading, Barratt said it has seen a substantial increase in home completion volumes in the eight weeks to August 23, which were up 62% compared to the prior period at 1,439 homes due to "pent up demand". Barratt also noted "strong" forward sales at August 23 with 15,660 homes, with a value of GBP3.71 billion.
Net private reservations per active outlet per average week from July 1 through to August 23 have been ahead of the prior year at 0.94.
Thomas added: "We are now renewing our focus on our medium term targets, on leading the industry in quality and service and on supporting jobs and economic growth by building the homes the country needs."
Also on Wednesday morning, Nationwide showed UK house price growth picked up to 3.7% in August from 1.5% in July. On a monthly basis, house prices rose by 2.0% in August, after taking account of seasonal factors, following a 1.8% rise in July.
Robert Gardner, Nationwide's chief economist said: "House prices have now reversed the losses recorded in May and June and are at a new all-time high. The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.
"This rebound reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing. Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown."
By Paul McGowan; [email protected]
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