Barratt Developments – Feeling The Market Slowdown

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  • Full-year revenues were up 1.0% to £5.3bn
  • Underlying operating profit fell 18.2% to £862.9m
  • Total home completions declined 3.9% to 17,206

Barratt Developments Earnings

“Barratt Developments PLC (LON:BDEV), the country’s largest housebuilder and sector bellwether, issued a largely unsurprising set of full-year results. Rate rises throughout the year have pushed up borrowing costs for buyers, making mortgage affordability much more difficult. Add to the mix the closure of the Help to Buy scheme and the fallout from the fiscal event back in September 2022 and you’ve got a potent cocktail, which saw Barratt’s net private reservation rates fall by around a third last year. All of this translated to a steep decline in underlying operating profit.

But it’s not all doom and gloom. Build cost inflation looks set to ease to mid single-digits this year. And a sharp reduction in land spend last year more than offset the share buyback programme, helping to keep Barratt’s net cash position broadly flat at a mighty £1.1bn. That provides plenty of flexibility to smooth out any future bumps in the road.

With interest rates set to remain higher for longer, consumer confidence and spending will continue to come under pressure this year, and it could be a while before momentum really picks back up again. Barratt’s valuation’s already trading well below the long-term average, so the market slowdown looks well priced in.”

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Article by Aarin Chiekrie, equity analyst at Hargreaves Lansdown