Barratt Developments is ready to weather potential challenges in 2020, according to chief executive David Thomas, who presented a “strong” set of half year results today.
He said the housing giant, based in Coalville, north west Leicestershire, had “resilience and flexibility to react” regardless of what happens with the transition away from the EU.
The business completed 8,314 new homes in the second half of 2019 – 9.1 per cent up on a year earlier and the highest for more than a decade.
Overall revenues for the six months were up 6.3 per cent to almost £2.3 billion, while pre-tax profits grew 3.7 per cent to £423 million.
Mr Thomas said: “We have achieved a strong first half performance, delivering continued volume growth and making good progress against our medium-term targets.
“We have made a good start to our second half and with substantial net cash, a well-capitalised balance sheet and strong forward sales, the outlook for the full year is in line with our expectations.
“We will continue to lead the industry in quality and service as we deliver the high quality homes and developments the country needs, creating jobs and supporting economic growth across England, Scotland and Wales.”
Barratt was founded in 1953 when Sir Lawrie Barratt built his first four-bedroom home in Newcastle upon Tyne.
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The business now includes Barratt Homes, David Wilson Homes and Wilson Bowden Developments.
Meanwhile Redrow Homes announced a “robust performance” for the same six month period, despite a 14 per cent drop in legal completions to 2,554.
Pre-tax profits dropped 15 per cent year-on-year to £157 million and revenues dropped 10 per cent to £870 million.
Redrow did reveal an 18 per cent rise in private net reservations, though, up to £936 million.
John Tutte, its executive chairman, said: “The wider housing market continued to be affected by political uncertainty around Brexit and during the run-up to the general election.
“This had an impact on the time taken to close new homes’ sales, particularly where extended chains were involved.
“Notwithstanding this, the group achieved a record number of private reservations in the six months to the end of December with the value of reservations up 18 per cent at £936 million.”
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Analysts said things could be looking up for housing under the new Government.
Russ Mould, investment director at stockbroker AJ Bell, said: “The housebuilding sector has a lot more pep since December’s general election delivered a dose of political certainty and that is reflected in today’s respective half year results from Barratt Developments and Redrow.
“Barratt wins out between the two.
“Robust first half volume growth helped to boost confidence in its ability to hike full year completions between 3 per cent and 5 per cent a year over the medium-term.
“Impressively the company has been able to increase its margin despite a fall in average selling prices as it delivers new product ranges and there looks to be a chance for full year estimates to be moved upwards off the back of these numbers.
“Investors will also be pleased to see the company’s generosity with special dividends extended into 2021 – reflecting its continuing strong net cash position.
“Redrow enjoyed a somewhat less successful first half, with revenue and earnings down by double digits. This reflects guidance for a stronger weighting than usual to the second half.
“Such a situation may provoke a little nervousness as there is a risk if the expected level of home completions don’t come through then it could be forced into a profit warning.
“However, recent trading has been reassuringly robust and the company signalled its confidence in the outlook with a healthy increase in the dividend.
“Some eyebrows may be raised at the departure of executive chairman John Tutte, who only moved from the CEO’s seat to replace founder Steve Morgan less than a year ago.
“Current chief operating officer Matthew Pratt will become CEO once Tutte retires, suggesting the company is aiming for stability and continuity with its corporate succession plan.
“The changes will also complete a transition to a more conventional board structure.”
David Madden, an analyst at CMC Markets, said Barratt would also be looking for good news from next month’s budget.
He said: “The company has benefited greatly from the help-to-buy scheme, and it is banking on further assistance from Westminster, especially on the back of the Tory party win at the back end of last year.”
Barratt’s growth was driven in part by a strong performance in Cambridgeshire and outer London, it said.
The company also took a £17.8 million hit from having to remove cladding from older buildings.
Cladding was thrown into the spotlight after it was found to be a major cause why more than 70 people were killed in London’s Grenfell Tower in 2017.
The government later said that any cladding on buildings more than 18 metres high must be re-examined to see if it was safe, even if it passed under previous regulation.