Barratt profit near halved by covid-19

Britain’s biggest housebuilder, Barratt, suffered a major drop in turnover and profit in the year to June 30 as a result of covid-19, according to its annual results released today.

Revenue dropped by 28%, from £4.6bn to £3.4bn, and completions were down by almost a third, falling from 17,856 to 12,604. 

Profit before tax fell by 46% from £909.8m to £491.8m, while the company’s cash flow has taken a hit, dropping from £765.7m to £308.2m.

However, the firm described current trading since the year end as “encouraging”, with 0.94 private reservations per site per week in the new financial year, up from just 0.68 last year.

In addition, it said completed sales this year so far were up 62% on the same period last year, with increased activity levels “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.” 

In the year to June 2021, it said, it now expected to complete between 14,500 and 15,000 sales, a big increase on this year, but still well below the 17,856 reported in the 2019 accounts.

The company was forced to shut down its sites in March, during what is normally the peak of its work in progress. Sites remained closed in England and Wales until May, and those in Scotland did not start to reopen until June.

The direct costs of coping with lockdown and reopening sites amounted to £45.2m, with a further £29.1m of costs incurred because of “the expected increase in site durations due to covid-19.”

Barratt furloughed 85% of its staff but due to its “resilient” financial position decided in July 2020 to return £26m of government furlough cash received.

The company did not pay out any dividends to its shareholders last year and “given the unprecedented impact of covid-19 and the importance of a resilient balance sheet, it will no longer propose the FY21 special dividend of £175m which would have been payable in November 2021.”

David Thomas, chief executive at Barratt, said: “While covid-19 has had a significant impact on our results, our priority has been to keep our people safe, mitigate the effect of the pandemic on our business and be able to emerge from the crisis in a resilient position.”

He added: “Although uncertainties remain, all of our sites are operational, we are seeing very strong consumer demand and our robust financial position means we enter the new financial year with cautious optimism.”

But John Allan, chairman, Barratt, warned of the wider impact on the economy from the pandemic.

“It is likely that there will be an increase in unemployment in the coming months as businesses continue to be impacted. The full extent of the economic impact being caused by covid-19 is yet to become fully clear, and there remains uncertainty regarding the outcome of the ongoing negotiations regarding the UK leaving the EU,” he said.

On a more positive note, Allan said the “long term impact of the pandemic on people’s choices and priorities will be an increase in demand for the high quality homes that we provide as consumers look for more space both indoors and outdoors.”