Barratt Developments Shares Fall as Homebuilder Warns of Economic Headwinds

By Scott Kanowsky 

Investing.com -- Shares in Barratt Developments (LON:BDEV) edged down on Wednesday after the U.K. homebuilder warned of rising building cost inflation and a cooling housing market in its upcoming fiscal year.

In a statement released in its annual results, Barratt warned that the price of construction materials will grow by between 9% and 10% in 2023 after an increase of 6% in 2022.

Chairman John Allan flagged that broad economic headwinds face the company, particularly around growing household energy costs and soaring consumer prices. Allan added that recent interest rate hikes have also led to subsequent impacts on employment, wage growth, and spending.

Barratt expects British house prices to moderate over the coming months as well.

The company said, its total forward sales for its 2023 fiscal year remain strong, even though they declined slightly to 55% of private wholly-owned home completions as of August 28, down from 59% in the prior period.

Jefferies analysts described the figure as "reassuring" after a slowdown in sales over the summer. The number of buyers reserving active outlets each week - a measure of the firm's sales rate - slumped to below pre-pandemic levels for the period to August 28.

"In part, this reflects limited availability of homes for early occupation, given our strong forward order book, as well as heightened macro-economic uncertainty," Barratt said.

Meanwhile, revenue for the year ended on June 30 grew by 9.5% year-on-year to £5.27B, while adjusted profit before tax rose by 14.7% to £1.05B.

Analysts at Citi said the full-year results, as well as Barratt's forward bookings, increased its confidence in the 2023 outlook despite fears over a potential economic downturn.