UK homebuilder Barratt sees return to profit growth by 2026
FY adj PBT 385 mln stg vs market view of 365 mln stg
July 1-Aug. 25 reservation rate 0.58 units vs 0.42 year ago
Shares in FTSE 100 builder down 2.3% in morning trade
Rewrites through, adds CEO comment in paragraphs 1, 2 and 5, sector context in paragraphs 3 and 4, analysts' comment in paragraph 8
By Aby Jose Koilparambil
Sept 4 (Reuters) - British homebuilder Barratt BDEV.L posted a smaller-than-expected decline in annual profit on Wednesday, but said the recovery in the UK housing market is in its "early days" and it doesn't see profit growth until fiscal 2026.
The UK housing market outlook has turned more optimistic than it was three or six months ago, but demand continues to be sensitive to mortgage affordability, CEO David Thomas told Reuters.
The first UK interest rate cut last month, in over fouryears was seen as a near-term boost for the housing sector, where affordability concerns have forced builders to slash homebuild targets and warn on profits.
Homebuilders could also benefit from the new Labour government's push for aggressive planning reforms .
"We have seen a significant uplift in terms of reservation trends, but we are also flagging that we do not expect outlet numbers to recover until the autumn of 2025," Thomas said.
Barratt said its average weekly net private reservations per outlet for July 1-Aug. 25 were 0.58 units, versus 0.42 homes in the year-ago period.
Its shares were down 2.3% in morning trade amid a broader market dip .FTSE. .L
With fewer homes being sold at lower prices, less cash has come through the front door, and the outlook for the new financial year was disappointing too, said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
Barratt is set to complete its proposed 2.52 billion pound acquisition of smaller rival Redrow RDW.L after the UK's competition regulator last monthsaid remedial measures offered by the parties may be accepted.
The homebuilder saidits adjusted pre-tax profit fell more than 56% to 385 million pounds ($504.7 million) for the year ended June 30, and this was higher than the LSEG average analysts' estimate of 365 million pounds.
Its FTSE 100 .FTSE peers Persimmon PSN.L and Taylor Wimpey TW.L forecast annual housebuilding numbers towards the upper end of their guidance range.
($1 = 0.7628 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Sherry Jacob-Phillips and Sharon Singleton
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