PUBLISHED TODAY, in its full year results Barratt Developments PLC reported total home completions increasing by 36.8% to 17,243 (2020: 12,604), just 3.4% below the 17,856 total completions achieved in 2019.
A gross margin of 21.0% (2020: 18.0%; 2019: 22.8%) was achieved with the adjusted gross margin recovering up to 23.2% compared to the pre-pandemic figure of 22.8% (2019) reflecting market strength and completion volume recovery.
The business continues to forecast build cost inflation of 4-5% despite the huge price rises of construction materials seen this year.
Cash reserves stand at 30 June 2021 of £1,317.4m, which the company says enables its growth plans.
Land reserves have recovered too, with £876.8m approved of operational land for purchase, equating to 18,067 plots – almost at 2019’s 18,448 plots – on 97 new development sites.
Barratt claims ‘industry leadership’ in the quality of its housing and customer service. For the 17th consecutive year the firm received more NHBC Pride in the Job Awards than any other housebuilder and the 12th consecutive year of receiving the HBF maximum 5 Star customer satisfaction rating.
David Thomas, Chief Executive of Barratt Developments PLC said: “We have made excellent progress this year thanks to the resilience, flexibility and hard work of our employees, sub-contractors and suppliers, who have also continued to deliver the highest standards of quality and service.
“We have begun the new financial year in a strong position and, whilst there are still uncertainties ahead, our strong balance sheet, forward order book visibility and construction activity to date all stand us in good stead.
“There is very strong demand for houses across the country and we play a crucial role in providing the high quality and sustainable homes this country needs. As we work towards our medium term target of growing completions to 20,000 homes a year, we are committed to doing so as the leading national sustainable housebuilder – building homes which have a positive environmental, social and economic impact today and into the future.”
Indications are that housing demand is slowing slightly after the end of Stamp Duty tax reductions as Barratts reservations per active outlet, per average week were 0.83 July-August, down on the average for the year of 0.94.
However, there are strong forward sales as at August 2021 with 15,734 homes, compared to last year’s 15,660 or 2019’s 13,064 at the same point in the year.
Barratt’s business model has a present capacity for 20,000 completions and its targeting wholly owned completions of 17,000-17,250 homes in the present financial year.
Barratt has established a Building Safety Unit to assess the construction of its multi-storey buildings in light of Government guidance on cladding and external wall systems.
In total, from 1 July 2017 to date, cladding remediation has cost the company £184.2m across both the Citiscape, external wall systems and associated reviews with a further £67.6m set aside to complete the work.
Share Value Comment
The final dividend per share of 21.9p was reached in August with an overall dividend for the financial year of 29.4p.
Joshua Raymond, Director at financial brokerage XTB comments: “”Barratt Developments share price fell close to 2% on Thursday after the homebuilder reported a 65.1% jump in profit before tax of £812.2m for the year ending 30 June 2021. This is a strong set of results for the period and shows clearly the firm benefited from the rebound in demand for homes from the pandemic.
“The somewhat muted 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. Shares have rallied more than 9% in the past 6 weeks. One thing to keep an eye on is net reservation rates, which has dipped 11.7% since the start of July compared to post lockdown at the start of the year, which may indicate a cooling of demand for the broader UK market.”