Barratt profits plummet after company completes 3,000 fewer homes than the previous year

Barratt Developments’ profits fell by three-quarters last year after it completed construction of more than 3,000 fewer homes.

The FTSE 100 company, which recently bought homebuilder Redrow, saw its pre-tax profits fall 75.8 per cent to £170.5m in the year to June.

Construction was completed on 14,004 properties during the period, compared with 17,206 in the previous 12 months, although this figure was at the upper end of the company’s forecast range.

As a result, the Leicestershire-based company’s turnover fell by 21.7 per cent to £4.2 billion.

Barratt said the fall in new home builds reflected a weaker forward private order book at the start of the financial year and a smaller average number of retail outlets.

The UK property sector has suffered a significant slowdown over the past two years due to rising interest rates and general pressures on the cost of living.

Mortgage rates were exacerbated by former Prime Minister Liz Truss’s controversial “mini budget”, leading to a brief collapse in home purchases and a mass withdrawal of mortgage transactions from the market.

While mortgage borrowing costs have improved, Barratt anticipates only 13,000 to 13,500 new homes will be built in the current financial year amid a continuing fall in average prices.

David Thomas, chief executive of Barratt, said: ‘Demand remains sensitive to mortgage affordability, and lower land purchase activity over the past two years has had a short-term impact on the number of outlets we operate.

However, he added: “We are well positioned to meet the strong underlying demand for new homes of all tenures in the UK.

“We welcome the Government’s proposed reforms to the planning system as one of the key levers to increase housing construction, boost economic growth and address the chronic shortage of high-quality, sustainable housing.”

The newly elected government has promised to build 1.5 million new properties over five years, partly by developing on lower-quality “grey belt” land and hiring more planning officers.

Just 183,610 new homes were completed across the UK in the 12 months to March, according to Office for National Statistics figures released last week.

Barratt expects to build around 23,000 homes a year and attract more than £7bn in annual turnover following the acquisition of Redrow, which the Competition and Markets Authority is currently investigating.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘The deal is expected to receive the final green light from the regulator in mid-October.

“This will create significant strength in the sector, and if the combination can streamline joint operations and deliver new homes as expected, there is plenty of opportunity for earnings to recover in the coming years.”

Barratt Developments Stock were down 1.7 percent at 511 pence by mid-morning on Wednesday.