Analysts and investors will be on the lookout for signs that Barratt Developments is not on track to meet its construction goals when the company announces its latest performance on Wednesday.
Arratt has announced that it will complete between 16,000 and 16,250 apartments this year, an increase of more than a twentieth compared to the previous year. But worries are also creeping in on the booming British property market.
“We are excited to see if the group is still on track to deliver on this guidance,” said Laura Hoy, Hargreaves Lansdown equity analyst.
“If these goals are achieved, the volume of completions for the full year would still be around 9% below the 2019 level, so a failure would be a disappointment.”
She said investors can get some insight into the company’s performance by tracking weekly average private reservations per active outlet. This is a “window into future demand,” said Ms. Hoy.
“If Barratt continues to increase its reservation rate from last year as well as pre-pandemic levels, it bodes well for the future,” she said.
AJ Bell experts Russ Mold and Danni Hewson said a cloud on the horizon could be the cost of renovating siding on tall buildings after the Grenfell disaster.
The company has allocated £ 163million since 2018 to help solve a Croydon development issue, they said.
They added, “Barratt has traditionally made no comment on profitability on this trade update, but if so, current consensus analysts are forecasting a pre-tax profit of £ 819m, up from £ 492m in 2019-20.
“Earnings peaked at £ 910 million in 2018-19, but analysts expect a return to that level in the fiscal year that is just beginning.”
The housing sector has been spurred on by the price boom in recent months. Most recently, MJ Gleeson said the average price of one of his homes rose 11.4% in the year to the end of June.
However, MJ Gleeson and Barratt sell to quite different segments of the market. Averaging £ 283,500 in sales, Barratt’s homes are significantly more expensive than MJ Gleeson, who brings in just over £ 145,000.
On Thursday, Persimmon, one of the UK’s largest construction companies, said its revenues had increased above pre-pandemic levels. 7,406 apartments were completed in the first six months of the year, only around 180 fewer than in the same period of the previous year.
In the first half of 2020, completions fell to 4,900.
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