Window shoppers raise Barratt hope
DEALS and discounts have helped to attract more potential home buyers to Barratt Developments sites in a market the housebuilder said was "as tough as anyone can remember".
The Newcastle group, which has been offering price discounts and deals on stamp duty, said visitor levels were up approximately 7.5% on last year since the start of September.
But the group’s interim management statement for the 19 weeks to November 9 pulled no punches.
The builder, which in September posted a 68% slump in annual pre-tax profits to £137.3m, pointed to poor consumer confidence, restrictions on mortgage availability and further pressure on pricing and revealed a forward order book standing at £817.7m – 43% down on the same period last year. The group has cut more than 1,000 jobs this year because of the downturn.
Barratt expects its average selling price to have fallen by 15% to 20% by the end of the year compared to its peak in July 2007, squeezing operating margins.
This continued pressure on pricing is expected to result in further write-downs to land and work in progress before the end of December.
The group also expects more write-downs against the assets of Wilson Bowden Developments, the rival builder it bought for £2.2bn last year, because of the lack of available finance and further tightening of the commercial property market.
Barratt is only investing in land where it is contractually obliged to do so and says its total spend on land for the financial year is likely to be below the £568m it announced at the start of September. It currently has around six years’ supply in its landbank.
Chief executive Mark Clare said: “Conditions in the housing market are now as tough as anyone can remember. Against this backdrop, Barratt’s focused sales effort has enabled us to deliver robust sales volumes, in-line with management expectations.”
Collins Stewart stockbrokers said Barratt faced a difficult time as its competitors copied its low pricing and high sales volume approach. Analyst Imran Akram said the increase in visitor numbers could be down to seasonal changes in consumer behaviour.
“We believe Barratt will need to keep cutting prices to tempt those visitors to actually buy,” he said. “The group’s large debt burden, growing price pressure and more competition from other builders all make this a very difficult operating environment.”
