Barratt Developments expects full-year results to be “modestly” ahead of forecasts

The housebuilder has made “good progress” on driving margin improvements, while it has also managed to keep a lid on costs, something its peer Taylor Wimpey recently said it had struggled with

Barratt Developments PLC (LON:BDEV) now thinks this year’s results will be “modestly” ahead of expectations following a “strong” start to the new year.

Demand for new homes has been propped up in recent years by the Help to Buy scheme – or Help to Profit as some detractors call it – as well as cheap mortgages.

But the FTSE 100 housebuilder, along with the rest of its peers, has seen build costs spiral over that timeframe. Only last month, rival Taylor Wimpey PLC (LON:TW.) warned it has been struggling to keep a lid on its cost base.

Despite this, Barratt said today it had made “good progress” on driving margin improvements throughout its business, including making “further refinements” to its housing ranges. It is adamant these changes allow it to keep costs low without affecting the quality or design of its homes.

Bosses still expect build costs to rise by between 3-4% this year, although the margin improvements mean full-year results should be “modestly above the board’s previous expectations”.

Forward sales on the rise

Trading more generally has been “strong”, with reservation rates holding steady so far in 2019 at 0.79 per site per week, compared with 0.80 this time last year.

At £3.37bn, forward sales were also robust (May 18: £3.29bn). Barratt added that cash generation remains strong and it expects to end the year with net cash of between £600-650mln.

“Trading since the beginning of the year has been strong, the outlook for the year is modestly ahead of our previous expectations and we are encouraged by our continued progress in driving operating efficiencies through the business,” said chief executive David Thomas.

“Whilst we continue to monitor the market closely, we are confident of delivering a good financial and operational performance in FY19.”

Source – Proactive Investors