Barratt's forward sales slump by more than half

Barratt Developments (BDEV) ended last year with a bang. In its results for the six months to 31 December, revenues and profits jumped despite another bang rumbling in the distance – the pull-back in house prices. They are in their longest period of decline since 2008 with some experts predicting they will have fallen 10 per cent by the end of 2023.

This is already hurting Barratt. Forward sales slumped 31 per cent by volume and 35 per cent by value when compared with the same point last year (end-January), underlining that the company’s next set of results will not be as rosy. The phased reduction of its dividend cover from 2.25 last financial year to 1.75 by 2024, as well as its reduced dividend payment for this half-year period, is a recognition from Barratt of the rocky road ahead. Bad news for income investors who should expect less going forward.

On fire safety, Barratt insists there will be no more costs to pay “should it sign the proposed contract” which the government unveiled at the end of last month. Developers have been given a deadline of 13 March to sign or face “significant consequences”. The company gave some cause for optimism when it said it had seen “early signs of improvement” in January trading. It’s net private reservation rate (per active outlet per week) rose ot 0.49 last month, up from 0.3 in the final six weeks of 2022. That uptick helped spark a mini-rally in housebuilder shares, but Barratt’s strong results need to be understood in the context of the challenges ahead. Hold.