Builder's bottom line benefits from recent rise in selling prices

Housebuilder Barratt Developments yesterday said operating profits were likely to more than double after a strong end to its financial year.

The group has benefited from cost controls and an 18 per cent jump in average selling prices in the second half of the year, primarily due to a greater mix of house sales than a year earlier.

It said profits for the year to June 30 will be ahead of expectations but added that the outlook was likely to remain challenging as a result of restricted mortgage availability and economic conditions.

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An increase in the number of sales outlets, rather than higher sales rates, means it expects growth of between five per cent and 10 per cent in completions in 2011.

"Our focus will remain on optimising price and not pursuing volumes," Barratt added in a trading update.

The company, which trades as Barratt and David Wilson Homes, said it legally completed the sale of 11,377 properties in the year to June 30, including 6,324 in the second half of the period.

The average selling price rose 11 per cent to around 174,000 and should help operating profits to reach at least 85m, compared with 34.2m a year earlier.

Shares improved by more than three per cent, although

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Hargreaves Lansdown analyst Keith Bowman said the stock had underperformed the wider FTSE 250 Index in recent months.

He added: "Mortgage availability remains constrained, with new FSA proposals potentially adding to the difficulty, while changes in planning regulations and the uncertainty created by pending public spending cuts provide further hurdles."

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