HOUSEBUILDER Barratt Developments expects to report a "substantial improvement" in operating profits for the year after sales rates turned to "normal levels".
The Newcastle firm said yesterday that it was “comfortable” with analysts’ estimates of a £130m operating profit for this year after, representing a significant increase on the £90.1m profit it announced last year.
The UK’s third largest housebuilder by market value said that it now expects to complete around 11,000 homes in the year to June 2011, down slightly from last year’s figure.
The firm did say that it was seeing a greater take up at its current developments, and that it was continuing to shift its focus from flats to houses, including larger family homes, which was helping to drive profits.
The firm is also looking to slow the growth of its landbank, acquiring 1,696 plots of land for £78.8m so far this year, compared with 6,078 plots for £318m during the second half of 2010.
However, this has not prevented the firm from pushing forward with its new-build programme, which includes a series of new developments in the North East, including sites at Chester-le-Street, Consett, Coxhoe, Lambton, Spennymoor, Stockton and Washington, which will provide 1,250 new homes in the region.
Increased demand has also resulted in increased prices, with its private houses priced up by 4% to around £192,000.
Chief executive Mark Clare said: “We are encouraged by the improvement in market conditions we’ve seen since the start of 2011, following a challenging autumn period.
“Our strategy for recovery is progressing well and we continue to expect a substantial increase in operating profit in our second half.
“The snow we experienced at our sites during the start of the year was challenging. However, the good weather we have had since then has seen site visits increase and has resulted in strong sales rates. For example houses at our new development in Lambton have been selling at the rate of one each week, which is well above the national average.”
One of the key announcements in the statement was the completion of a debt refinancing package, which will provide the group with around £1 billion of facilities to May 2015, with some of these extending as far as 2021.
The firm said it was positive about the Government’s announcement in the Budget of a First Buy scheme, which will see the Government and housebuilders jointly provide a 20% loan to top up first-time buyers’ own deposit of 5%. However, Clare did say that the market continues to be hampered by strict lending criteria among highstreet lenders.
He said: “Although we remain positive about our ability to grow, it is clear that the market is being restricted by the requirement of large deposits at most banks, which will continue to be particularly tough on the majority of first time buyers.”
The update was welcomed by the city, with Barratt’s shareprice up 3.9% to 118.00.
A broker note from Citigroup said: “The group’s IMS release has pointed to another solid period of trading in terms of prices and sales volumes.
“As far as the outlook is concerned, the group continues to see a constrained market due mainly to the mortgage availability side of things.”
