Housebuilder Barratt to show strength as winning streak continues
Barratt Developments will report to the market this week with the housebuilder expected to continue its strong run of form and shrug off Brexit pressures hitting the wider property sector.
The group, the country’s largest housebuilder, will issue a trading update on Thursday and City analysts expect the firm to be buoyed by the UK’s housing shortage.
“Barratt’s been making hay while the sun shines, with affordable mortgages and the UK’s housing shortage boosting demand for homes,” according to Nicholas Hyett, equity analyst at Hargreaves Lansdown.
The Government’s Help to Buy initiative for first-time buyers, as well as the wide availability of mortgage finance, have also helped the firm’s performance in recent years and allowed it to mitigate Brexit uncertainty.
This is despite rivals such as Crest, Telford Homes and Bellway all sounding the alarm bell over Brexit.
Barratt shares have responded in kind, rising nearly 30% since the turn of the year to stand at about 593p.
But Mr Hyett cautioned that Brexit still has the potential to rear its head and upset the firm.
“The UK’s departure from the EU has the most ability to upset the apple cart, with peer Taylor Wimpey recently reporting higher-than-expected construction material costs as builders stockpile ahead of Brexit.
“Continued margin improvement has been at the forefront of Barratt’s strategy for a while, it would be a shame to see a spanner thrown in the works.”
Figures out earlier this month from Nationwide show that house prices have now been increasing by less than 1% annually for five months in a row.
The most sluggish regions by far have been London and the South East, where Barratt has been reducing exposure.
At half-year results in February, Barratt insisted it was in a strong position, despite Brexit.
The group posted a 7.2% rise in revenues to £2.1 billion in the six months to December 31, while pre-tax profits jumped 19.1% to £408 million.
Chris Millington, analyst at Numis, added: “We expect Barratt’s update to point to robust trading and positive and market conditions.
“We think the group will report broadly stable sales rates, modest price inflation and cost inflation in line with previous comments at 3-4%.
“In our view Barratt looks well placed in the context of the sector. We think Barratt remains the most attractive of the FTSE 100 housebuilders.”