The UK’s biggest homebuilder saw a slump in pre-tax profits for the year to June after setting aside cash to repair legacy properties, despite revenues exceeding £5billion for the first time.
Shares in Barratt fell as it reported full-year 2022 pre-tax profit of £642m, down 21%, and said trading in recent weeks had been down sharply from the same period last year.
Barratt said private bookings per site per week in the two months to August 28 were 0.60, well below the 0.82 recorded at this time last year, and below the 0.70 recorded before the pandemic.
He said the drop “reflects the limited availability of homes for anticipated occupancy, given our strong order book, as well as heightened macro-economic uncertainty.” The company said it was currently 55% forward-sold for the year, down from 59% at the same time last year.
However, Barratt’s revenue reached £5.27billion, up 9.5%, and chief executive David Thomas hailed a ‘year of fantastic progress’ for the business, with adjusted profit – without factor in one-off items, including the huge write-downs needed to pay for building security works – up almost 15% to a record £1.05bn.
The company surpassed its pre-pandemic completion level for the first time, selling 17,908 homes, and said it was on track to increase it to between 18,400 and 18,800 next year “on basis of current market conditions.
The company’s gross margin fell from 23.2% to 24.8%, and it launched a program to return £200m of “excess” cash to shareholders.
Barratt’s statutory profit figures were rocked by a £408m write-down related to ‘costs associated with inherited properties’ during the year, including £396m related to costs needed to meet outstanding obligations. under the government-agreed recoating pledge, under which homebuilders agreed to repair all legacy properties dating back 30 years without resorting to public funds.
See also: Barratt boss talks Gove over £3bn levy plan
See also: Simon Clarke appointed housing secretary
The company said its margin increased as house price growth outpaced construction cost inflation over the past year, but construction costs were now rising 9-10%, and it expected them to continue to do so until June 2023, while he expected house price growth to be “moderate”.
Barratt Chairman John Allan said: “Macroeconomic uncertainties remain, including around household energy costs and elevated inflationary pressures, changes in interest rates and the resulting impacts on employment. , wage growth, house prices, spending and consumer confidence.
“As a business, we also face the prospect of higher taxation, the ongoing challenges of building cost inflation and the withdrawal of purchase assistance, which will close for new reservations at the end of October 2022.”
Barratt shares, which are valued at over £4bn, fell just over 1.1% in early trading.