Barratt Developments builds bright full-year results

Housebuilder and property developer Barratt Developments posted its annual results for the year to 30 June on Wednesday, with total completions rising 5.3% to 17,319.

The FTSE 100 firm reported revenue of £4.24bn, up 12.7%, with profit from operations growing 15.9% to £668.4m.

Its operating margin improved by 0.5 percentage points to 15.8%, with a profit before tax up 20.7% to £682.3m and basic earnings per share rising 21.1% over the prior year to 55.1p.

Barratt’s private average selling price rose 10.4% to £289,000, which the board said predominantly reflected mix.

“The strong operational and financial performance in FY16 reinforces the progress we have made over the last few years as does our disciplined volume growth,” said Barratt chief executive David Thomas.

“This was underpinned by our fast asset turn model and our industry leading customer service and construction excellence.”

Over the 12 months, Barratt enjoyed a 27.1% return on capital employed, up 3.2 percentage points, with net cash at period end of £592m, an improvement of £405.5m.

Looking at the current year, the firm’s board said it has made a positive start, with net private reservations per active outlet per week from 1 July of 0.75, against 0.71 a year ago.

Total forward sales, including joint ventures, were up 4.1% year-on-year at £2.42bn as at 4 September.

“Barratt starts the new financial year in a good position with a strong balance sheet, good forward sales and an experienced management team,” Thomas explained.

“Whilst we continue to monitor market conditions closely, current trading trends are positive, and I remain confident in the fundamentals of the housing sector and of our business.”

Investors weren't immediately impressed by the results, however, with the company's stock down 1.18% at 501p at 0940 BST, after initially spiking to 515p after markets opened.

Analysts at Shore Capital put the drop down to disappointment around the dividends.

"A number of observers are likely to have been expecting an extension to the three year capital return programme (the last scheduled payment is at the end of 2017) especially with so strong an apparent balance sheet.

"However, there is no extension and what the capital return policy will be after 2017 remains speculative."