Barratt FY profits slump on Covid lockdown as special divi scrapped

Full year profits at house builder Barratt almost halved and a special dividend scrapped as the coronavirus lockdown hits sales in the fourth quarter, although it reported a sharp rise in completions in the new year as restrictions were eased.

The company on Wednesday said pre-tax profits fell 45.9% to £491m with completions falling by a third to 12,604. No dividend was declared and a special payout of £175m which would have been payable in November was scrapped.

Barratt said total forward sales including joint ventures at August 23 stood at 15,660 homes compared to 13,064 a year ago. The housing market has improved since sites reopened and the government implemented tax breaks.

“The increased activity levels are being stimulated by a combination of pent-up demand, the stamp duty holiday and an understanding that Help to Buy will only be available to first time buyers and regional home price caps will exist from April 2021,” the company said.

Barratt was hit as sites were forced to close when the government ordered a lockdown at the end of March. It said Covid-19 had resulted in "significant additional costs" of £74.3m, including £45.2m making its sites safe.

The company also warned that lenders were tightening rules for mortgages on the back of increased loan defaults in a sharp recession with the scheduled end of the controversial Help to Buy scheme next March.

"The restriction and removal of Help to Buy will exacerbate this. It is important that lenders and the government consider what further options are available to help potential first time buyers who want to purchase their own home," Barratt said.

Richard Hunter, head of markets at interactive investors, said Barratt's shares had risen by 38% since March but this did not "mask the damage inflicted by the pandemic in total" with a price decline of 20% over the last year.

"By the same token, Barratts is now looking to make up for lost time wherever possible and there are already some hopeful signs. In the meantime, the company is held in high regard by investors and the current market consensus of the shares as a strong buy will likely hold firm,” he said.