Barratt Developments: Housebuilder blames mortgage misery for plummeting profits
Barratt Developments warned that customers are struggling with mortgage affordability and hikes in living costs as the group revealed a 16.2 per cent slide in adjusted profit before tax for the full year to June.
The number of homes the company built also declined 3.9 per cent during the term to 17,206, as a series of interest rate hikes by the Bank of England made buyers cautious.
It follows a warning put out by the company weeks ago that the total home completions will be in the range 13,250 to 14,250 in 2024, another drop from the 16,500 and 17,000 figure chief David Thomas outlined following the fall out from the mini-budget in September.
“Whilst there remains a clear need for increased housebuilding in the UK, short-term demand has been impacted by mortgage affordability challenges,” Barratt said.
Revenues for the year rose slightly by one per cent to £5.3bn and the group said it was trading in line with market expectations.
The company’s share price slid 1.95 per cent this morning following the news.
“The UK house price correction currently unfolding is shaking the foundations of Britain’s biggest house builder,” Yanmei Tang, analyst at Third Bridge, said.
“The big question for Barratt is how it will deploy its cash war chest. Decisions on what to deploy and where to save are going to define its medium term future.”
“Our experts are not optimistic about Barratt’s profit margins in 2024 even though building costs seem to have plateaued,” she added.
“Barratt has a strong track record in sales volume, but this gearing now presents a problem. Their land bank is also notably shorter than that of its competitors, which gives less margin.”