Barratt Developments’ chief executive has warned that it will take at least two more years for the new home market to recover. The UK’s largest housebuilder is cutting back on land purchases and pausing share buybacks in order to conserve cash.
The FTSE 100’s earnings have been affected by a decline in home sales due to high mortgage rates.
David Thomas said on Wednesday that there is no evidence to suggest that volume will increase by 2025. He added: “You have clearly lower reservation rates, but we will also see a reduction in site numbers.” “If we do not have sites, we will not be able to sell houses.”
Barratt announced on Wednesday that, for the moment, it will not be buying back its own shares in order to conserve cash and weather the current property slump. It returned £200mn last year to investors. The group announced earlier this year that it would reduce its land purchases in order to cope with the turmoil on the property market.
The housebuilder posted £705.1mn (£705.1mn) in pre-tax profits for the year ending June 30. This is a drop of almost 10% compared to the previous financial period.
Barratt has built 17,206 houses in this period, which is 702 less than the previous financial year. The company said that it had sold 49% of its privately-owned, wholly-owned homes at the end August, down from 60% the year before.
The S&P Global/Cips Construction Purchasing Managers’ housebuilding subindex, which measures activity in the sector , fell to 40.7 in July. This is the second lowest level since May.
Thomas stated that the company has reduced its headcount from 2022 by 6 percent and will maintain a hiring ban in most cases. However, it will make an exception for trainees, apprentices, and graduates despite “reduced recruitment”.
Aynsley LAMMIN, an analyst at Investec said that the group’s cautious attitude toward preserving cash is “sensible”, given the macroeconomic backdrop. He added that this would allow the group to be reactive when a rebound in home sales comes.
The results were in line with expectations, and followed the announcement by the housebuilder that in July there had been a sharp decline in demand of new homes over the last financial year. Barratt stated at the time, that the first-time buyer was hit by rising borrowing costs and the end of the Help to Buy scheme.
The group has also reduced its total ordinary dividend by 8.7 percent, or 33.7 pence per share.
Barratt shares fell by 2 percent in the early morning trading of Wednesday before recovering slightly later in the day.