Barratt performs beyond expectations in second half of 2020

Barratt Developments plc has announced in its trading update for the second half of 2020 that it had a “strong delivery, ahead of expectations,” in a year blighted by the pandemic.

The first quarter of the company’s 2020/21 financial year saw “strong underlying demand supplemented by pent-up demand from the initial national lockdown, the introduction of the stamp duty holiday, and the March 2021 end of Help to Buy,” it said. The firm reported a successful “first half” of the six-month period, launching 63 new sites, which exceeded its expectations.

Barratt said that this solid quarter was expected to “sustain the ongoing recovery in completion volume in FY21 and beyond.” It reported 9,077 completions (including 378 JV completions), which was up 9.2 per cent on the same period in 2020. The firm commented: “This growth benefitted from both the elevated level of work in progress carried into the new financial year, and our higher opening forward sales position due to the initial national lockdown delaying completions.”

The company had moderated expectations for its future outlook with the pandemic continuing to be a threat, expecting a lower level of completions in the second half of the 2020/21 financial year. This “reflected the reduced level of work in progress carried forward at December 2020 compared to June 2020 and, as a result, a greater reliance on construction activity in the half year ahead.”

Barratt’s update figures showed that forward sales were at 5,104 at the end of 2020, versus 5,350 at 30 June. This represented a 4.7 decrease over the half period.

In the period, Barratt approved purchase of 5,635 plots on 35 new sites in “attractive geographical locations that meet our hurdle rates.” It commented: “We are now seeing a greater range of land buying opportunities come to market and have a good pipeline of offers accepted on additional sites.” The firm continued to target an owned land bank of around 4.5 year duration.

Barratt chief executive David Thomas commented: “Despite the ongoing challenges presented by the pandemic, we are confident that our operating performance and strong financial position provide us with the resilience and flexibility to respond to the operating environment this financial year and beyond.”

The housebuilder’s “total average selling price (ASP) increased by 1.1 per cent to approximately £283,000, with the private-only ASP up 2.2 per cent, “reflecting both a positive mix impact and underlying house price inflation.” Barratt was named Large Housebuilder of the Year at the Housebuilder Awards 2020, for the second year in a row.

David O’Brien, equity analyst at Goodbody commented: “Barratt has issued a very strong trading update this morning. The key highlights are the strength of completions, and resulting cashflow generation. Entering H2 Barratt are over 90 per cent sold for 2021 which is a very strong position to be in.”