Barratt balances sales price pressure

The question is to what extent efficiency improvements and volume growth can continue to support this margin expansion. As expected, a reduction in the average sales price – which fell 5 per cent to £274,000 – weighed on revenue. The group has been raising the proportion of affordable housing completions and is increasingly looking beyond London, where price growth has stagnated relative to the national average. By the end of June, the housebuilder had just 18 wholly-owned private homes left to legally complete in the capital and 262 units under its two joint ventures, although 85 per cent of the latter were forward sold.  

Land creditors reduced to 31.3 per cent of the land bank, from 33.6 per cent, as management closed in on its target to reduce land creditors to between 25 and 30 per cent of the land bank this year. That is expected to result in lower average cash balances, although a special capital return to shareholders is still planned in November 2020. The average supply of owned land rose to 4.7 years, ahead of the 3.5 years management is targeting as it seeks to improve return on capital employed.      

Analysts at Peel Hunt forecast adjusted pre-tax profits of £920m and EPS of 74.1p for the year to June 2020, from £910m and 73p in the prior year.