Barratt Developments posts massive 75 per cent profit increase

Guy Bentley
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Barratt in bullish mood (Source: Getty)

The figures

Barratt Developments' half-year results will make cheerful reading for the company's shareholders. Pre-tax profit at the company climbed 74 per cent, while total completions rose 12.5 per cent. Basic earnings per share were also up 78.9 per cent.

Why it's interesting

Barratt enjoyed a booming 2014 with stronger profits, and shareholders were treated to a fourfold increase in dividends. The housebuilder expects the good times to keep on coming, albeit at a slower rate. Its share price has soared over the past few years, boosted by record low-interest rates and government schemes to boost the housing market like Help to Buy.

However, it hasn't all been smooth sailing for Barratt. Last week, brokers Jefferies cut its rating along with a host of rivals. Overall, the sentiment of Barratt and its competitors remains bullish, with 10 out 19 ratings putting the company at "buy" and eight at "hold".

The Bank of England has taken action to tighten up on mortgage lending, and the number of approvals has fallen. Barratt is confident it can prosper in the new environment as the changes affect mainly the upper end of the housing market having little impact on Barratt. The group has benefited from the falling cost of materials and labour.

What Barratt said

Barratt chief executive Mark Clare:

Our investment programme and the improvements to the business have driven a significant step up in our financial performance in the past year, including a 75 per cent increase in profit before tax. Our disciplined approach to land investment, delivering high quality homes and driving efficiency across the business, means we are well on our way to hitting our FY17 targets of a gross margin of at least 20 per cent and a return on capital employed of at least 25 per cent

In short

Barratt is upbeat and has had a strong start to 2015, with 279 net private reservations per week in the last eight weeks. Total forward sales as of 22 February were up 17.5 per cent. Barratt is in good health: barring any unforeseen factors, the group has every reason to be confident in the coming months.

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