Barratt Developments (LON:BDEV) posted a 9.2% increase in full-year pre-tax profit to £835.5 million – meeting the company’s guidance. Revenue and gross margin increased by 4.8% and by 0.7% respectively.
House completions ticked up by 1% to 17,579 – the highest in a decade. The average selling price rose by 5% to £289,000. The house builder said that one third of the properties it sold were classified as ‘affordable’, and this underlines the housing bubble in the UK.
That being said, demand remains robust and the company has a healthy order booked lined up, as forward sales are up 11.1%. The final dividend was increased by 4.7% to 17.9p, bringing the total dividend to 43.8p, up 5% on the year. The company is well positioned to continue to improve its future performance. Barratt Developments expressed concern about Brexit, and said it will monitor the supply of skilled workers – which is one of the largest problems facing the construction sector.
The home builder had a strong start to the year as it posted record first-half profit, and this morning’s announcement confirmed the company continued with its positive run. In the first six months of the year, pre-tax profit rose by 6.8% and revenue jumped by 9.5%. In mid-February, total forward sales were up 2% so demand is clearly strong.
Last month, the Bank of England (BoE) hiked interest rates for the first time since the credit crisis. The BoE governor, Mark Carney, issued a guidance that we can expect one rate hike per year for the next few years. In the near-term, the higher borrowing costs are unlikely to dampen appetite for houses, but the medium-term outlook could be impacted by it because private debt levels are high.
According to Nationwide, UK average house prices on a monthly basis fell by 0.5% in August – its largest drop in six years. On an annual basis, average house prices are up 2%, and that compares with the 2.5% growth in July. The cooling of house prices will also be a factor for Barratt as there is a growing sense that the intense phase of the housing boom is over.
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