(qlmbusinessnews.com via uk.businessinsider.com – – Thur, 5th Sept 2018) London, Uk – –
Biggest UK housebuilder benefits from help to buy but warns of slow growth this year
Britain’s biggest housebuilder has shrugged off the tough housing market to report record annual profits of £910m, although it warned sales growth this year would be slower than expected.
Barratt reported an 8.9% rise in pre-tax profits to £909.8m for the year to 30 June, with sales surging to an 11-year high and margins improving. It announced a special dividend of 17.3p a share.
The company, the UK’s largest housebuilder by sales, sold 17,856 new homes last year, up from 17,579 the previous year. Sales in London were flat but rose outside the capital and in Scotland. The average selling price dropped to £274,400 from £288,900 as the company continued to shift away from central London to focus on the outer boroughs and areas such as Milton Keynes.Advertisement
Barratt has benefited from the government’s help-to-buy scheme, which accounted for 40% of sales. Its rival Persimmon, another major beneficiary of the taxpayer-funded programme, caused outrage in February when it made a profit of £1.09bn in 2018, the biggest ever made by a UK housebuilder, with nearly half of its sales coming from help to buy.
David Thomas, Barratt’s chief executive, said government schemes aimed at helping first-time buyers had been “enormously helpful to the market”. The first, Home Buy Direct, was launched by the Labour government in 2009, followed by FirstBuy in 2011 and help to buy in 2013, in which the government provides a guaranteed interest-free loan to homebuyers. Housebuilders have also benefited from affordable mortgages at a time of low interest rates.
Housebuilding collapsed during the financial crisis but has recovered, to 165,090 in England last year, although it is still far below the levels needed to solve Britain’s housing crisis.
The new-build housing market has been remarkably resilient, despite the increasing threat of a no-deal Brexit, and Thomas was sanguine about the outlook.
“If you look at the period over the last three years since the referendum, customer demand has been very strong, there is lots of eligibility, including help to buy,” he said. “So far we’ve not seen a reduction in consumer appetite.”
He welcomed the extension of the help-to-buy programme until 2023 and expressed confidence that lenders would fill the gap with affordable mortgages thereafter.
The housing market has been dragged down by Brexit uncertainty, which has deterred many from buying and selling and led to falling house prices in London and south-east England.
Barratt is forecasting that sales volumes will grow by 3% this year, the bottom end of its targeted 3% to 5% range. It has a forward order book of just below £3bn, down from £3.05bn this time last year. Shares in the company fell 5% initially, and later traded down 3.5% at 600p. City analysts are predicting pre-tax profits of about £880m this year, down from last year.
The company’s gross margin rose to 22.8% from 20.7% last year. The firm has reduced costs by cutting the number of house types it offers from more than 200 in 2016, to about 20 for Barratt, and 20 for its upmarket David Wilson brand. It has also changed the design, for example by reducing the pitch of its roofs to save money.
By Julia Kollewe