Barratt predicts 40% rise in trading profit in first half

Aaron Morby 12 years ago

Britain’s biggest house builder delivered strong profit and turnover growth in the first half of the year.

Barratt said it expected operating profit to be up by around 40% at £61m, driven by a focus on costs and high margin land being built out.

The firm also saw total completions rise 7% to 5,198 units, helping turnover rise 8% to £950m in the first half of the year, according to a trading update.

Private completions grew most strongly, up 9% at 4,028 while social housing completions slipped to 1,089 homes.

A 4% rise in average selling price for private homes also helped to contribute to a rise in operating margin from 5% to a more respectable 6.4%, although still low for the sector.

Mark Clare, group chief executive said: “This has been yet another six months of good progress for our business despite the wider economic uncertainty.

We have delivered a further substantial increase in profits, brought debt in below expected levels and are starting the second half with a much stronger forward order book.”

Group net debt rose slightly to £550m compared to last year but is expected to fall to £350m by the year-end in June.

Clare welcomed the Government’s new housing strategy.

He said: “The New Build Indemnity scheme is potentially the most important aspect, as it focuses on enabling customers to secure up to 95% loan to value mortgages which is significantly above current limits available for the new build sector.

“If the scheme is successfully implemented, it will substantially reduce the customer deposit required and be more cost efficient than shared equity products.  Good progress is being made in its detailed implementation which is likely to see first completions in the Spring.

He also added that FirstBuy, the Government backed equity share product, would remain an important sales tool.

“We have made good progress in using our initial allocation of £24.9m (1,400 units) and this success has been recognised by the Homes and Communities Agency through an additional award of £7.0m (437 units).”

The new Government housing strategy was also expected to bring about a substantial release of surplus Government land for housing through the ‘build now pay later’ initiative.

Clare said: “The group is well positioned to capitalise on this programme, as a result of its track record in successfully securing public land that has been released through the Delivery Partner Panel.

To date, Barratt has won six bids for more than 1,200 units with a gross development value of £270m and is also at an advanced stage of tendering for a further seven projects.

Barratt said it also expected to submit a bid for funding from the £420m Get Britain Building Fund.  This offers funding loans to kick start sites that have either stalled or have not started for economic reasons.

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