Barratt Developments made a profit before tax of £423m in the six months to 31st December 2019, the first half of its 2020 financial year. This was up 3.7% on the £408m profit made in the same period the year before. It would have high but for £17.8m of provisions related to the Grenfell Tower fire.
Half-year revenue was up 6% to £2.27bn (2019 H1: £2.13bn).
The only blip was that the operating margin slid 60bps from 19.2% to 18.6%
The result s show the group’s highest half-year home completions since 2007, with 8,314 total completions, up 9.1%.
The board said that Barratt was on track for 3-5% growth in wholly owned completions for the full year to June 2020.
Chief executive David Thomas said: "We have achieved a strong first half performance, delivering continued volume growth and making good progress against our medium term targets. We have made a good start to our second half and with substantial net cash, a well-capitalised balance sheet and strong forward sales, the outlook for the full year is in line with our expectations.”
After the 2017 Grenfell Tower fire, Barratt carried out a review of all of its current and legacy buildings where it has used cladding. It has since incurred and accrued an additional £7.0m of costs for work involved at legacy properties associated with removing and replacing cladding. Barratt denies liability but felt it should ‘do the right thing’ and step up to avoid leaseholders being financially clobbered (or worse).
“Approved Inspectors signed off all of our buildings, including the cladding used, as compliant with the relevant Building Regulations during construction and on completion” chief executive David Thomas says.
He added: “In addition to removing and replacing cladding at one bespoke development constructed in 2001, further works have been required for which we have also provided voluntary assistance, with total costs associated with this development of £10.8m.”
Modern methods of construction (MMC)
While Barratt is not in the prefab business, it is continuing to increase its use of components made offsite, such as timber frames and roof cassettes.
In June 2019, it acquired Oregon, one of its timber frame suppliers. Its core English house types have now been designed for Oregon timber frames and the first frames on English sites have been erected during the back half of 2019. Barratt expects to deliver more than 800 timber frames from Oregon to its building sites by the end of June.
David Thomas said: “We are committed to increasing the number of homes we build using MMC [modern methods of construction] to increase efficiency and to help mitigate the challenges posed by the shortage of skilled workers within the industry. We continue to develop, trial and implement MMC, building and selling 17.6% of homes in the first half using timber frame or large format block (2018: 14.6% homes built and sold using timber frame, large format block or light gauge steel frame). We also use offsite manufactured ground floor solutions and roof cassettes. In FY19, we achieved our 2020 target of 20% of home completions using MMC a year ahead of schedule and set a new target to use MMC to build 25% of our homes by 2025.”