HOUSEBUILDER Barratt Developments has posted its first underlying profit for three years as a squeeze on building costs and focus on family homes offsets a sluggish housing market.

The Newcastle-founded company’s sales remained flat at £2.04bn in the 12 months to the end of June but there was a 50% increase in profits before exceptional items to £135m.

Underlying profits were £42.7m in the year to June 30, up from a loss of £33m a year earlier – described by chief executive Mark Clare as an important milestone for the group.

After exceptionals, which included the cost of arranging a group refinancing deal, Barratt made a pre-tax loss of £11.5m, much reduced from last year’s £162.9m loss.

Chief executive Mark Clare said the market remained challenging but the company had done well out of the continuing strength of property demand in London. He said the market was “weaker the further you get from London”.

He added: “We have made considerable progress in rebuilding profitability – by optimising selling prices, improving operational efficiency and securing new higher margin land.

“While we expect progress to continue, further recovery in the housing market remains dependent on improving economic conditions and the ability of our customers to secure mortgage finance.”