In the financial year ending 30 June 2024, Barratt Developments, the UK’s largest housebuilder, reported a substantial decline in revenue and pre-tax profits, attributed to a challenging market environment.
- Barratt’s revenue plummeted by £1.15 billion, reflecting a 22 per cent decrease from the previous year, impacting overall financial performance.
- Pre-tax profits saw a drastic fall of 76 per cent, dropping to £170.5 million due to decreased home completions and pricing pressures.
- The company experienced an 18.6 per cent reduction in home completions, despite achieving their forecasted target.
- Senior executives of Barratt remain cautiously optimistic, citing strong demand and potential government reforms as positive indicators for future recovery.
Barratt Developments has experienced a significant downturn in its financial results for the year ending 30 June 2024. The company’s revenue fell by £1.15 billion, marking a 22 per cent reduction from the previous financial year. This substantial decrease has been linked to challenging market conditions, characterised by lower home completions and reduced average selling prices, which have collectively strained the company’s financial performance.
The pre-tax profit of Barratt plunged by 76 per cent to £170.5 million, a stark decline that illustrates the tough landscape the firm navigates. Additionally, the pre-tax profit margin dwindled to 4.1 per cent, accentuating the impact of site-based fixed costs and escalating build cost inflation. Despite these challenges, Barratt managed to reach the upper end of their expectations in home completions, although the total number fell by 18.6 per cent to 14,004.
Net cash for the group decreased by 19 per cent, totalling £868.5 million. In an attempt to present a clearer picture of their operational efficiency, Barratt offers an adjusted pre-tax profit figure, which excludes significant costs such as the £192 million allocated for remediating legacy buildings and £22.4 million in acquisition-related expenses. This adjusted figure shows a 57 per cent drop, landing at £385 million.
David Thomas, Barratt’s chief executive, acknowledged the housing market’s difficulties, citing sensitive mortgage affordability and reduced land acquisition over recent years as factors influencing current performance. Nevertheless, he highlighted the company’s strategic positioning to address strong demand for new homes across the UK. Thomas also expressed support for proposed governmental planning reforms aimed at boosting housebuilding and addressing housing shortages.
Julie Palmer, a partner at Begbies Traynor, provided an external perspective, noting the year’s challenges for housebuilders like Barratt while recognising the emerging prospects for recovery. She pointed to favourable macroeconomic conditions, such as potential interest rate cuts and declining building cost inflation, as factors that could support the firm’s sustainable growth. However, she cautioned that uncertainties, particularly regarding a potential £2.5 billion merger with Redrow and pending policy changes, still linger over the sector.
The results underscore the tough market conditions but indicate potential recovery opportunities for Barratt through strategic adjustments and external factors.
