Barratt: Costs increasing amid shortages

BARRATT has hailed soaring annual profits but said there had been a recent dip in buyer demand as beneficial elements such as the stamp duty holiday drew to a close.

The housebuilder, which has sites across Scotland, posted a 65.1 per cent surge in pre-tax profits to £812.2 million for the year to June 30 as completions jumped 36.8% to 17,243.

It said sales were catching up with pre-pandemic levels, with completions just 3.4% below 2019, although profits remain 10.7% below those seen two years ago.

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This is being driven by more expensive materials due to wider industry supply issues, as well as skilled labour shortages pushing worker wages higher.

The UK’s lorry driver shortage is also pushing up logistics costs, although the firm stressed it was able to secure deliveries when needed albeit at higher prices.

The group said private reservations since the year end were 11.7% lower than levels seen in 2020-21 following the June 30 stamp duty holiday deadline south of the Border and changes to Help to Buy.

READ MORE: Barratt sells out across Scotland at ‘several’ sites

It added that forward orders were strong, at 15,734 homes worth £3.9 billion as at August 22, up from £3.7bn a year ago.

The group said private reservations since the year end were 11.7% lower than levels seen in 2020-21, at 0.83 per active outlet per average week, following the June 30 stamp duty holiday deadline south of the Border and changes to Help to Buy.

Barratt said: “The prior year comparative was a particularly active period, reflecting both pent-up demand following the national lockdown, as well as increased Help to Buy reservation activity ahead of the changes which would remove access to Help to Buy for existing homeowners.”

It also said that as part of its green push it is collaborating with other housebuilders to research packaging waste at its manufacturing and supply source and to establish a baseline across its supply chain, in partnership with Zero Waste Scotland and Valpak.

HeraldScotland: Barratt Developments Plc. Source: London Stock ExchangeBarratt Developments Plc. Source: London Stock Exchange

Annual results also confirmed an £81.5m bill for cladding safety works in the wake of the Grenfell Tower disaster, taking its total hit so far since 2017 to £184.2m.

It cautioned it expects another £40m over the financial year ahead for fire safety works as it assesses high rise buildings it constructed and works needed to support leaseholders and residents.

Despite the recent easing back in reservations, Barratt said it still expects to see wholly-owned completions of between 17,000 and 17,250 homes in 2021-22, putting it on track for its long-term target of 20,000 a year.

The group unveiled a final dividend payout of 21.9p a share, bringing the full-year payout to 29.4p, up from 29.1p in 2019, with the group halting dividends last year due to the pandemic.

David Thomas, Barratt chief executive, said that the “strong balance sheet, forward order book visibility and construction activity to date all stand us in good stead”.

Joshua Raymond, director at financial brokerage XTB, said that the share price reaction “tells more of a story that these results had been priced into its shares already after the firm reported in July that yearly profits would be slightly higher than consensus”.

Andy Murphy, director, Edison Group, said: “The balance sheet ended the period in a very strong position with net cash of £1.3bn, up from £308m last year.”

He said Barratt has “started the current year robustly” and forward sales are also strong.

Shares closed down 4.5%, or 33.4p, at 709.4p.

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992