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Barratt points to a tentative, yet uncertain, recovery

Given the circumstances, the housebuilder delivered a reasonably positive trading update, but uncertainties linger
July 6, 2020

On balance, shareholders in Barratt Developments (BDEV) would have felt more reassured than alarmed by the housebuilder’s year-end trading update.

IC TIP: Hold at 520p

Completion volumes contracted by 29 per cent from the prior year figure covering the period from 22 March to 30 June, with 82 per cent of the 12,604 completions registered before the imposition of the government lockdown measures. Yet Barratt closed out its trading year with a forward order book of £3.25bn against £2.60bn in FY2019.

The group has witnessed an increase in online traffic, site visitors and net reservations since the government eased industry restrictions midway through May, though it concedes that “the medium term impact [of the virus] on the new homes market remains uncertain and will only become clearer over the coming months”.

The lockdown has placed strain on the balance sheet and the group has suspended its land buying activities for the time being. Land creditors have fallen by 17 per cent to £800m, with 44 per cent due for payment in the first half of FY2021. It ended the year with £305m in net cash, against £766m a year earlier, together with access to a £700m undrawn revolving credit facility, and eligibility to access funding under the Covid Corporate Financing Facility.