Although its profit increased, the housebuilder said customers still faced mortgage affordability challenges and a higher cost of living, which had affected buyer demand.
David Thomas, chief executive of Barratt Developments, said: “Whilst we expect that the backdrop will continue to be difficult over the coming months, we are a resilient business with a strong balance sheet and an experienced management team.
“We remain committed to building the communities that our customers want to live in – delivering high-quality, sustainable homes at competitive prices to help address the country’s housing crisis and drive long term, sustainable growth for our business.”
It also posted a gross profit of £1.1bn, down from £1.3bn last year.
The housebuilder said the fall in profitability reflected the drop in customer demand as well as house price inflation “running below build cost inflation”.
Barratt said next year, it would focus on increasing revenue through incentives and sales to the private and social housing sectors.
It added: “This will be supported by a highly selective approach to land buying whilst continuing to lead the industry on sustainability.”
As of 27 August this year, its forward order book stood at 9,608 homes at a value of £2.4bn. This is down against the previous year, when its forward order book totalled 14,058 homes at a value of £3.8bn.
Reduced housing delivery
Barratt completed 17,206 homes in its full year, only slightly down on the previous year’s 17,908.
The housebuilder said this 3.9 per cent reduction was the result of lower reservations in the second half of its financial year following the closure of the Help to Buy scheme and the rise in mortgage interest rates after the mini Budget. It closed the year with a reservation rate of 0.55, compared to 0.81 last year.
It said a “modest recovery” in consumer confidence and improved mortgage rates had helped to better the reservation rate between January and May this year, but this had recently reduced again.
When looking at current market conditions, Barratt said it was targeting between 13,250 and 14,250 home completions for 2024.
As well as managing its build activity and costs, Barratt said it would attempt to control its indirect cost base and be efficient. Following the mini Budget, it implemented a recruitment freeze which saw its headcount fall by six per cent between September 2022 and June 2023.
Caroline Silver, chair of Barratt Developments, said: “Looking ahead, we recognise that there are significant macro-economic headwinds, most notably the continuing inflationary pressures and the resulting interest rate environment which is impacting mortgage affordability and availability in the UK, as well as economic growth, employment and consumer confidence and spending.
“We are in a strong position to deal with these challenges with a proven operational team, a prudent net cash balance and a solid forward sales position. The experienced senior management team are responding to market conditions by driving revenue through the efforts of our sales teams across the country with the focused use of incentives, as well as diversification to secure sales in the private rental sector.”
