The UK’s largest housebuilder, Barratt Developments, pushed up pre-tax profits by 12 per cent in the year to June, boosted by a rise in the prices consumers are prepared to pay for its homes.
Pre-tax profit at the FTSE 100 group reached £765m on revenues of £4.56bn, up 9.8 per cent on the year before and in line with analysts’ expectations. That was aided by an 8 per cent rise in the average price for Barratt’s private homes to £313,000.
However, the group’s housebuilding volumes were almost flat, rising 0.4 per cent to 17,395 during the year — its highest figure in nine years — with a prediction of “modest” growth in the coming year.
In common with other housebuilders, Barratt ramped up the number of homes it completed as the economy improved, with volumes up 65 per cent in six years. But the increases are starting to level off, despite government pressure to push up build rates.
David Thomas, chief executive, said he expected completions to increase 3 to 5 per cent annually in the coming years, with rises limited by the capacity of Barratt’s operations.
“The reality is that we have to balance the quantity of homes we deliver against the quality of homes that we deliver. We’re very focused in terms of the quality of build,” he said.
Barratt is proposing a final dividend of 17.1p a share, up 39 per cent from a year earlier, plus a special dividend of 17.3p a share, both to be paid in November; this would bring the total dividend payouts for the full year to 41.7p a share, an increase of 36 per cent.
Mr Thomas said the company had seen “very strong current trading” since the new financial year began, with “good consumer demand and a very positive mortgage environment”.
House price growth in the broader market was moderating, but Barratt said it would aim to further boost margins. “High house price inflation can cause the market to overheat, and therefore we see that something more moderate is a positive,” added Mr Thomas.
George Salmon, equity analyst at Hargreaves Lansdown, said: “Most of the downwards pressure on prices is coming from the top end of the housing market in the south-east, not the more affordable properties the builders are typically concerned with.
“At this end of the property ladder, demand remains strong and the government’s Help to Buy scheme continues to lend support.”
“Nonetheless, investors should remember that . . . the combination of low interest rates and favourable government policy can’t last for ever.”
Housebuilders are awaiting news on whether the government’s Help to Buy equity loan scheme, which enables people to buy newly built homes with deposits of only 5 per cent, will continue beyond its current scheduled end date of 2021. The scheme currently supports 35 per cent of Barratt’s overall sales.
The group’s shares were down 3.4 per cent in early trading.