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FTSE 100: Barratt misses building target as costs soar

Shares in the FTSE 100 housebuilder fell on Thursday. Photo: Reuters/Peter Nicholls
The share price of the FTSE 100 housebuilder fell on Thursday. Photo: Reuters/Peter Nicholls

Housebuilder Barratt Developments (BDEV.L) reported fewer home completions than expected in fiscal 2022 as supply chain disruptions and building costs take its toll.

Britain's largest hoomebuilder said it completed 17,908 homes in the 12 months to 30 June, below the 18,000 to 18,250 homes it forecast in February. That was up from 17,243 a year earlier and back to pre-pandemic levels.

Shares in the FTSE 100 (^FTSE) group dropped nearly 4% after it said build cost inflation had hit 10%, up from around 6% during the period.

Despite this, the group expects full-year underlying profits to be "slightly ahead" of expectations, hinting that it could return cash to shareholders.

Barratt also benefited from the house price boom as average private selling prices jumped to £341,000 from £325,500, adding it saw annual house price inflation of around 8% on private reservations.

The company now expects pre-tax profits of between £1.05bn and £1.06bn for the year, slightly ahead of forecasts, with house sales expected to grow by between 3% and 5% in the coming year.

Chief executive David Thomas, said: "While there are clearly macroeconomic uncertainties ahead, the housing market remains robust, our forward order book is strong and we have the resilience and flexibility to react to changes in the operating environment."

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The end of the stamp duty holiday, the wind down of the Help to Buy programme, supply chain blockages and the cladding issue have all weighed heavily on the sector.

Danni Hewson, financial analyst at AJ Bell, said: "House prices may have risen rapidly enough to cover these higher costs so far but Barratt, like its peers, is running just to stand still in terms of profitability and there is a significant risk that raw material and labour costs continue to grow.

"At least, unlike Persimmon (PSN.L), it is not being forced to downscale its volume targets just yet, suggesting its relationships with suppliers, procurement strategy, simplified build process and attractiveness as an employer are paying off."

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