Barratt reports a 16% hit to annual profit: ‘cracks are starting to appear’

September 06, 2023 09:57 AM PDT | By Invezz

Barratt reports a 16% hit to annual profit: ‘cracks are starting to appear’ — Image source: Invezz

U.K. house prices recently saw worst decline in 14 years

The residential property developer expects its margins to remain under pressure as the housing market continues to struggle. House prices in the United Kingdom were down 5.3% year-on-year in August – the largest annual decline in about 14 years, as per data from Nationwide.

On Wednesday, Barratt also reported a 16% annualised hit to its adjusted profit for the financial year ended June 30^th. Its revenue also inched up only 1.0% to 5.3 billion in the fiscal 2023. Still, experts at Peel Hunt wrote today:

Summer is traditionally a quiet period, which this year has been made worse by the volatility in the mortgage market. So, a bounce is probably a fair shout.

Home completions were down 3.9% in fiscal 2023

Barratt completed 17,206 homes in its recently concluded financial year – down from 17,908 in fiscal 2022. According to Charlie Huggins of Wealth Club:

Cracks are starting to appear in the housing market and while interest rates should be close to peaking, first time buyers remain under enormous pressure.

On the plus side, average selling price climbed in the recently ended year from £300,200 to £320,000 as per the press release. But Barratt Developments plans on keeping the hiring freeze from last year in place until the market picks up materially.

Its shares are down more than 12% versus their year-to-date high at writing.

Barrat Developments also slashed dividend today

As of August 27^th, Barratt had forward sales of 9,608 houses worth £2.44 billion in total – down significantly from 14,058 homes and £3.81 billion a year ago.

But the London-listed firm that partnered with Citra Living in June (read more) continues to expect completing up to 14,250 homes in FY24.

Its board declared 23.5 pence per share of final dividend today that capped the full-year payout about 9.0% below fiscal 2022 and said the surplus capital was being retained to maintain strength of the balance sheet. Reacting to it Richard Hunter – Head of Markets at Interactive Investor said on Wednesday:

The uncertain outlook is reflected in the shareholder return announcement. There will be no further share buybacks over the coming period, while the dividend has also been reduced.

The post Barratt reports a 16% hit to annual profit: ‘cracks are starting to appear’ appeared first on Invezz.

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