Big drop in order book as Barratt hit by uncertainty
House builder Barratt Developments said the first half of the financial year has seen a marked slowdown in the UK market, but insisted the business remains “fundamentally strong, both operationally and financially”.
It said the market was hit by political and economic uncertainty during the period, with rapid shifts in the mortgage market also shaking buyer affordability and confidence.
The total forward order book (including JVs) as at 31 December 2022 fell to 10,511 homes from 14,818 for 2021 at a value of £2,544.4m compared to £3,794.3m in the previous period.
However, should the usual seasonal improvement not occur and trading remain at recent levels, the group expects to deliver in the range of 16,000 to 16,500 homes.
David Thomas, chief executive, said: “We have delivered a strong operating performance for the six months to 31 December 2022. This was possible because of our significant forward order book at 30 June 2022 and the tremendous efforts of our employees, sub-contractors and supply chain partners.
“The first half of the financial year has however seen a marked slowdown in the UK housing market.”
Russ Mould, investment director at AJ Bell, said: “The biggest surprise from Barratt Development’s very gloomy statement is that it’s taken this long for collapsing confidence in the housing market to show up fully in its numbers.
“While the extreme dislocation in the mortgage market which followed the mini-Budget can be characterised as a one-off event, higher borrowing costs for purchasers are here to stay.
“The big drop in Barratt’s order book reduces visibility but should not come as a shock. When people are being warned house prices are going to fall by double digits in percentage terms, why wouldn’t they put off any purchase and wait and see if their dream home becomes a bit more affordable.
“Barratt just needs to wait and see how bad things get. The company at least has a strong balance sheet to provide a buffer against weak trading and reward investors for their patience with dividends.”
Barratt also announced that Caroline Silver will succeed John Allan as chair on 6 September. Sharon White has decided to step down as a non-executive director after nearly five years on the board.
Ms Silver is currently chairwoman of PZ Cussons, a position that she will leave on 31 March. She is also a non-executive director at Tesco.