Barratt builds profits despite a weak market

The UK’s biggest housebuilder by volume said forward sales at the end of 2011 were up 8.1 per cent on a year ago at £698.1m.

Operating profits for the six months to the end of December are expected to be about 40 per cent up on a year ago at £61m. Revenues have increased around eight per cent to £950m, with Barratt selling 5,198 homes, versus 4,832 a year earlier.

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

“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.”

Earlier this week York-based Persimmon said it expects underlying annual profits to surge by about 50 per cent, hitting the top end of City expectations for between £130m and £148m.

The housing market remains subdued but stable as potential buyers are put off by rising unemployment, European sovereign debt concerns, stagnant wages, higher bills and fears of further house price falls.

Barratt operated from around 400 sites at the end of December. It plans to open about 20 Yorkshire sites during 2012, including in Hull, Howden, Whitby, Castleford and Wakefield. The sites will create close to 2,000 new homes.

The housebuilder has taken advantage of Government tools to stimulate building, such as shared equity schemes. It said 19 per cent of its completions, some 972 sales, used a shared equity product, down from 28 per cent a year ago.

“Clearly there is ongoing uncertainty in the UK housing market as a result of economic concerns. However, we have a strong forward sales position and we believe the implementation of the new government-backed 95 per cent mortgage indemnity scheme will have a positive effect on the market,” said finance director David Thomas.

Net debt was £550m at the end of December, and Barratt guided the market to expect it to fall more sharply than expected to £350m by the end of June.

The group’s average selling price rose three per cent to £181,000.