Barratt (BDEV Stock) share price declines, despite strong full-year profit increase

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Barratt Development’s share price has been gradually declining, after its April peaks, and although we rebounded from 6-month lows in July, we are still a long way from its pre-pandemic peaks.

Since those July lows, stocks have slowly risen, but there are signs that the current rebound may start to falter, as various tax breaks begin to end, with today’s numbers pushing a bit further. early weakness.

Across the housing sector as a whole the numbers have been better than expected, today’s Barratt figures paint a fairly decent picture of the UK housing market, not so much for their performance over the years. of the past year, but in the context of the outlook for 2022.

House price growth this year has been strong in large part due to the stamp duty holiday due to end this month, but there are fears that the removal of this tax measure could slow demand and prices start. to lower. Demand also tends to slow down during the winter months in any case, which could also lead to slower sales and prices.

In July, Barratt improved its forecast for adjusted pre-tax profit for the current year, with today’s figures confirming that the total number of homes completed increased 36.8% year-on-year to 17,243, slightly below 2019 levels of 17,856.

Revenue, on the other hand, was above 2019 levels, rising 1% to £ 4.81 billion, although margins have yet to fully recover. In 2019, they stood at 22.8%, and after dropping to 18% in 2020, they improved to 21%, while operating margins are still down 200 basis points to 16.9% .

Average selling prices edged up to £ 288.8k, largely thanks to the London market which saw average prices climb to £ 325.5k.

Pre-tax profits were £ 812.2million, up 65% from a year ago, but down 10.7% from 2019 levels, while the dividend was raised to 29.4 pence from 29.1 pence in 2019. The company also released £ 3.5million from its loan loss. reserves, having set aside £ 8.2m in 2020.

In terms of outlook, forward sales are well above last year’s and 2019 levels, with 15,734 homes and a total value of £ 3.94 billion.

Management’s expectations are that the volumes of homes completed in 2019 will return by 2022, but the company has indicated that uncertainty over Covid-19 is a key risk to its forecast.


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