Barratt Developments sees FY profit at top end of market expectations

Housebuilder Barratt Developments said it expects pre-tax profit for the full year 2017 to be at the top end of current analyst estimates of between £675m and £733m and that completions will hit their highest level in nine years, coming in at around 17,350.

In a trading update for 1 January to 7 May, the company said total forward sales including JVs were at record levels, up 13% as at 7 May to £3.2bn.

Barratt said market conditions remain good and the group has delivered a strong performance since the start of the year. Increased competition within the mortgage market has led to a wide availability of attractive mortgage finance which, along with the Help to Buy scheme, continues to support very strong consumer demand.

Chief executive David Thomas said: "This has been another strong period both operationally and financially for the Group. We remain firmly committed to delivering industry leading build quality and customer service, recognised by the award of the Home Builder Federation's maximum five star customer satisfaction rating for the eighth consecutive year.

"Our controlled approach to growth means we are on track to deliver 17,350 completions in the year, the highest number of completions in nine years. This, combined with the strong market backdrop, means we now expect full year profit before tax to be at the top of the range of current analyst estimates."

Barratt said it remains on track to achieve its target of a minimum return on capital employed of 25% and is still focused on delivering 20% gross margin for full year 2017.

George Salmon, equity analyst at Hargreaves Lansdown, said: "The good news keeps coming for Barratt shareholders in 2017. February saw the group tack another year of special dividends onto its already generous plans, and now management has told analysts to raise their expectations for profits this year, as growth is ahead of schedule.

"Conditions certainly look favourable for the builders at present. On the whole, doubts over the disruption Brexit might cause are disappearing into the rear-view mirror, while low interest rates and numerous government schemes, including Help-to-Buy and the Lifetime ISA, continue to lend support."

Salmon added that while conditions won’t stay so favourable forever, a solid-looking balance sheet and continued improvements in operational efficiency should mean Barratt is well placed to make hay while the sun shines.

At 1100 BST, the shares were up 4% to 620p.