Barratt income dive after firm completes 3,000 fewer houses

Barratt Developments’ profits plunged by three-quarters last year after it completed construction on over 3,000 fewer homes.

The FTSE 100 company, which recently bought fellow housebuilder Redrow, saw its pre-tax profits slump by 75.8 per cent to £170.5million in the year ending June.

It finished building 14,004 properties during the period, compared to 17,206 in the previous 12 months, although this was at the upper end of the firm’s forecast range.

Earnings: Barratt Developments, which recently bought fellow housebuilder Redrow, saw its pre-tax profits slump by 75.8 per cent to £170.5million in the year ending June

Consequently, the Leicestershire-based firm’s turnover declined by 21.7 per cent to £4.2billion.

Barratt said the drop in new home-builds reflected the weaker private forward order book entering the financial year and smaller average outlet numbers.

Britain’s housing sector has suffered a significant slowdown over the past two years owing to higher interest rates and widespread cost-of-living pressures.

Mortgage rates were exacerbated by former Prime Minister Liz Truss’s controversial ‘mini-budget’ causing a brief collapse in home purchases and a massive withdrawal of mortgage deals from the market.

While home borrowing costs have improved, Barratt anticipates building only 13,000 to 13,500 new houses during the current fiscal year amid a continued fall in average outlets.

David Thomas, chief executive of Barratt, said: ‘Demand continues to be sensitive to mortgage affordability, and reduced land buying activity during the past two years has had a near-term impact on the number of outlets we are operating from.

However, he added: ‘We are well-positioned to meet the strong underlying demand for new homes of all tenures in the UK.

‘We welcome the Government’s proposed reforms of the planning system as one of the key levers to increase housebuilding, drive economic growth and tackle the chronic undersupply of high-quality, sustainable homes.’

The newly-elected government has promised to construct 1.5 million new properties over five years, partly by developing on lower-quality ‘grey belt’ land and recruiting more planning officers.

Only 183,610 new homes were completed across the UK in the 12 months to March, according to Office for National Statistics figures released last week.

Barratt expects to build about 23,000 homes per year and attract over £7billion in annual turnover following its acquisition of Redrow, which the Competition & Markets Authority is currently probing.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘The deal should get the final green light from the regulator by mid-October. 

‘This will create a major force in the sector, and if the combination can streamline joint operations and deliver the new homes as expected, there’s plenty of opportunity for profits to rebound over the coming years.’ 

Barratt Developments shares were 1.7 per cent down at 511p on mid-Wednesday morning.