Barratt profits set to slump, but mini housing boom boosts outlook

Housebuilding giant Barratt Developments is set to reveal tumbling annual profits on Wednesday after seeing a slump in the number of homes built amid the lockdown.

But the outlook is expected to be more rosy thanks to a mini-boom being seen in the housing market after the Chancellor’s stamp duty holiday and a frenzy of pent-up demand.

Barratt said last month it had seen the number of new homes built in the year to June 30 drop by nearly a third to 12,604 due to the lockdown – the lowest figure since 2011.

Average selling prices also dropped slightly to £311,000 from £312,000 a year earlier.

All its operational sites reopened by June 30, after having been closed for several months, and it said customers had flocked back to sales centres.

But it admitted at the time that reservation levels had yet to return to normal.

Chris Millington, an anlayst at Numis Securities, is expecting Barratt’s full-year figures to reveal a profits drop of around 45%.

Barratt posted pre-tax profits of £909.8 million for the previous year.

Mr Millington said: “We expect investors to primarily focus on current trading, particularly following the robust recent update from Persimmon, productivity levels and any commentary on the dividend.”

Nationwide’s latest house price report – also on Wednesday – will likewise be eyed keenly for an indicator of the market’s recent performance.

Nationwide and Halifax reported month-on-month rises in July of 1.6% and 1.7% respectively, confirming the surge in demand since lockdown restrictions eased, with the market reopening in May and Rishi Sunak’s stamp duty cut sending activity surging.

Russ Mould, investment director at AJ Bell, said the market is expecting Barratt’s profits to rebound by some 8% to 10% in the new financial year, given its assurances that forward orders remain robust at some £3.2 billion.

“That juicy forward sales book gives some visibility on future trading, although the issue of Help to Buy’s narrowed scope from April 2021 when it will be for first-time buyers only, with regional price caps and then its planned expiry in 2023 continues to loom,” he said.

The bounce-back being seen in the market is also not expected to last once the stamp duty cut comes to an end in January amid mounting job losses and consumer uncertainty due to the pandemic.

Will Ryder, equity analyst at Hargreaves Lansdown, said: “The outlook is much more uncertain… especially as restrictions on evictions and the furlough scheme come to an end.”