Barratt says homes market is "still challenging"
Sep 8 2010 By John Hill
HOUSEBUILDER Barratt Developments has said that the UK housing market is "still challenging", despite reducing its pre-tax losses and nearly trebling operating profits.
The Newcastle firm said its operating profits for the year to the end of June were up to £90.1m from £34.1m in 2009. It reduced its pre-tax losses for the year to £162.9m, down from £678.9m in 2009, and said it made a profit of £15.5m in the second half before tax and exceptional items.
Average selling prices increased by 10.9% during the year and by 17.8% in the first half of the year, compared to the same point in 2009. Forward sales were up to £591.7m on June 30, a 27% increase over the £464.3m in the last period, and this total had further grown to £847.1m by Sunday September 5.
However, chairman Bob Lawson said that the company had focused on increasing its margins on reduced volumes in a bid to drive its growth.
He said: "During the year conditions in the housing market in Britain steadily improved. Nevertheless, by historic standards the market remained difficult and activity levels continued to be extremely low in terms of the number of house buyers and sellers.
"The key restriction on the industry remains the availability of mortgage finance. Whilst there was some improvement during the year, the lack of availability of suitable higher loan to value products continued to restrict the new build sector where customer deposits have traditionally been lower.
"With demand continuing to be constrained, the industry responded by opening fewer sites and controlling stock better. Whilst the improved balance between supply and demand has stabilised prices, it has done little to address the nation’s fundamental housing shortage which in the longer term will underpin the sector’s growth."
He added the company had taken steps to strengthen its balance sheet, aided by a rights issue that raised gross proceeds of £720.5m. Consumer demand and the lack of mortgage availability had prompted it to shift its housing mix more in the direction of houses than flats, and it had focused on increasing its portfolio of potentially-profitable land.
Group chief executive Mark Clare said: "Whilst the outlook for the UK housing market is still challenging, our priority remains optimising prices rather than volume and securing high quality land that will continue to drive our margin recovery."
