Housebuilding giant Barratt Developments has seen annual profits soar nearly two-thirds higher but revealed rising build costs and a dip in recent buyer demand following the stamp duty holiday deadline.
Barratt posted a 65.1% surge in pre-tax profits to £812.2 million for the year to June 30 as completions jumped 36.8% to 17,243.
It said sales were catching up with pre-pandemic levels, with completions just 3.4% below 2019, although profits remain 10.7% below those seen two years ago.
Shares in the group fell 3% amid Barratt’s caution over higher build costs, which it said are currently running at between 4% and 5% and are likely to continue at that rate over 2021-22.
This is being driven by more expensive materials due to wider industry supply issues, as well as skilled labour shortages pushing worker wages higher amid a booming sector.
The UK’s lorry driver shortage is also pushing up logistics costs, though the firm stressed it was able to secure deliveries when needed albeit at higher prices.
Speaking to the PA news agency, chief executive David Thomas said while rising house prices have so far outstripped inflation, a more muted market may only just cancel out build cost hikes over the year ahead.
He said the group is “not expecting any significant improvement” in profitability, but added “we’re very focused on growth”.
The group said private reservations since the year end were 11.7% lower than levels seen in 2020-21, at 0.83 per active outlet per average week, following the June 30 stamp duty holiday deadline and changes to Help to Buy.
But Barratt said: “The prior year comparative was a particularly active period, reflecting both pent-up demand following the national lockdown, as well as increased Help to Buy reservation activity ahead of the changes which would remove access to Help to Buy for existing homeowners.”
It added that forward orders were strong, at 15,734 homes worth £3.9 billion as at August 22, up from £3.7 billion a year ago.
Annual results also confirmed an £81.5 million bill for cladding safety works in the wake of the Grenfell Tower disaster, taking its total hit so far since 2017 to £184.2 million.
It cautioned it expects another £40 million over the financial year ahead for fire safety works as it assesses high rise buildings it constructed and works needed to support leaseholders and residents.
Despite the recent easing back in reservations, Barratt said it still expects to see wholly-owned completions of between 17,000 and 17,250 homes in 2021-22, putting it on track for its long-term target of 20,000 a year.
The group unveiled a final dividend payout of 21.9p a share, bringing the full-year payout to 29.4p, up from 29.1p in 2019, with the group halting dividends last year due to the pandemic.
Mr Thomas said: “We have begun the new financial year in a strong position and, whilst there are still uncertainties ahead, our strong balance sheet, forward order book visibility and construction activity to date all stand us in good stead.”