The Barratt Development share price had been gradually sliding lower, after its peaks in April, and although we rebounded from 6 month lows in July we still remain some way short of its pre-pandemic peaks.
Since those July lows the shares have been on a slow move higher, however there are signs that the current rebound might be starting to run out of steam, as the various tax breaks start to come to an end, with today’s numbers prompting a little bit of early weakness.
Across the housing sector, by and large the numbers have been better than expected, with today’s numbers from Barratt painting a fairly decent picture of the UK housing market, not so much for how well they’ve done this past year, but in the context of the outlook going forward into 2022.
House price growth this year has been strong largely as a result of the stamp duty holiday that is due to end this month, however there are concerns that the removal of this tax measure could well see demand slow and prices start to fall back. Demand also tends to slow in the winter months in any case, which could also prompt a slowdown in sales and prices.
In July Barratt upgraded its adjusted full year profit before tax forecasts for the current year, with today’s numbers confirming that total home completions rose by 36.8% year on year to 17,243, only modestly below 2019 levels, of 17,856.
Revenues, on the other hand were higher than 2019 levels, rising 1% to £4.81bn, although margins haven’t quite recovered as of yet. In 2019 these were at 22.8%, and after dipping to 18% in 2020, these have improved to 21%, while operating margins are still 200bps lower at 16.9%.
Average selling prices rose modestly to £288.8k, largely driven by the London market which saw average prices rise to £325.5k.
Profits before tax came in at £812.2m, up 65% from last year, but down 10.7% from 2019 levels, while the dividend was raised to 29.4p from 29.1p in 2019. The company also released £3.5m from its loan loss reserves, after setting aside £8.2m in 2020.
In terms of the outlook, forward sales are well above last years and 2019 levels, with 15,734 homes, and a total value of £3.94bn.
Management expectations are that 2019 volumes of home completions will return by 2022, however the company did point to uncertainty over Covid-19 as a key risk to its forecasts.
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