Barratt Developments profit jumps, volume growth seen at lower end of guidance

Barratt Developments reported a 9% increase in annual profit before tax on Wednesday but cautioned that volume growth would be towards the lower end of its medium-term target range in FY20.

The housebuilder reported a profit before tax of £909.8m for the year ended 30 June, slightly below the £910m guidance given in the company's 10 July trading update, as its operating margin improved from 17.7% to 18.9%, helping to offset lower sales prices.

Overall revenue dropped by 2% to £4.8bn and the company announced a final dividend of 19.5p per share, up from 17.9p last year, as well as a special dividend of 17.3p. The total dividend increased by 6% to 46.4p.

The FTSE 100 group completed 17,856 new homes during the year, its best achievement for 11 years, as wholly-owned completions increased by 2.6%.

Based on current market conditions, Barratt said it expects to grow volume towards the lower end of its medium-term target range of 3% to 5% in FY20, in line with current market expectations.

Chief executive David Thomas said: "Whilst there is increased economic and political uncertainty, we begin the new financial year with a strong forward order book, balance sheet and cash position which we believe provides us with the resilience and flexibility to react to potential changes in the operating environment in FY20 and beyond. We maintain our focus on the delivery of operational improvements across our business, and our commitment to deliver the highest quality homes across the country."

Shore Capital said profits had been a fraction below guidance of £910m and that the key objective for the company will be to be able to make progress against the stiffening headwinds impacting the housing market, with analysts suggesting that the sector's margins are peaking rather than being ready for further growth.

"We see no reason to change our fair value of 520p for Barratt and still believe the shares have become over-bought, driven by an overly-bullish tone in the July update that has not really been borne out in these figures. We remain at 'sell' and believe that as the shares had become priced for perfection and have not quite measured up, they look expensive against the sector and we still would advocate looking at a switch out.."

At 1055 BST, the shares were down 2.6% at 606.20p.