Barratt Developments announces £200m share buyback and increases dividend as Britain’s biggest homebuilder posts record annual profits
- Barratt also raised its recommended final dividend to 25.7 pence per share
- The FTSE 100 group posted record adjusted profit before tax of £1.05 billion
- Low mortgage rates and undersupply have boosted the UK housing market
Barratt Developments has announced a share buyback program worth up to £200m as its chief executive hailed a “year of fantastic progress”.
Leicestershire-based Barratt, Britain’s biggest homebuilder, told investors it had hired Credit Suisse to initially buy up to £50m this year before completing the remaining purchase amount by the end of June 2023.
The group has also raised its recommended final dividend to 25.7p per share after more than four times increasing payments to shareholders to £337m in the last financial year.
Barratt’s release of its annual results comes as figures from the Halifax Bank showed that average house prices in the UK rose to a record £294,260 in August
Strong demand for new build properties combined with rising prices helped the FTSE 100 company post adjusted pre-tax profit of £1.05bn in the 12 months to 30th June.
The construction of 17,908 homes was completed during the period, just above pre-pandemic levels as the UK property market continued to be impacted by low mortgage rates and chronic slack.
These factors helped push the average selling price of Barratt houses to the £300,000 mark, as did the temporary stamp duty holiday and Britons’ growing desire to live in more spacious homes.
CEO David Thomas said: “This has been a year of fantastic progress, with completions recovering to pre-pandemic levels and outstanding productivity at our sites.”
Barratt’s release of its full-year results came as figures from Halifax Bank showed that average house prices in the UK rose to a record £294,260 in August, up 11.5 per cent on a year earlier.
This came despite the Bank of England raising interest rates for the sixth straight month last month in response to rising inflation.
Drop: Barratt Developments shares are down 44 percent year-to-date
Even as housing costs continue to rise, analysts are predicting that the worsening cost-of-living crisis affecting UK consumers will ultimately have an impact on the property market.
Richard Hunter, Interactive Investor’s Head of Markets, said: “Rising interest rates could hurt consumer confidence and there are also some signs of a slowdown in the property price market.
“The withdrawal of the Help to Buy program in its current form could also affect demand, although mortgage availability remains high.
“Higher energy bills for households, which could get some relief from the new prime minister, is also a bugbear at the moment, as is the broader inflationary environment.”
Barratt said economic uncertainty contributed in part to the private net reservation rate per location falling to 0.60 from early July to late August, down from 0.70 in the corresponding pre-pandemic period.
Still, the company is targeting another 18,400 to 18,800 home completions this fiscal year, while its backlog of £3.81 billion is about the same as August 2021.
Shares in Barratt Developments fell 0.9 per cent to 418.5 pence on Wednesday morning, meaning their value is down around 44 per cent year-to-date.
