UK homebuilder Barratt Developments Plc (BDEV.L) Wednesday reported a slight decline in revenues in its first half as completions lowered, partly offset by higher selling prices. The company said it expects pre-tax profit to more-than-double in the first half.
Looking ahead, for fiscal 2013, Barratt expects to deliver a significant improvement in profitability.
In its trading update for the six months ended December 31, the company noted that market conditions remained stable and that it has made good progress in increasing profitability and reducing overall indebtedness.
The company’s group revenues were about 950 million pounds, compared to 952.8 million pounds a year ago.
Total completions, excluding joint ventures, were 5,085 units, lower than last year’s 5,117 units. Private completions grew 5.3 percent, while social housing completions declined and represented 16.6 percent of total completions, compared to 21.3 percent a year ago.
According to the company, the reduction in volume reflects site phasing and for fiscal 2013, it expects social completions to account for around 18 percent of total completions.
Total average selling price, excluding JVs, increased about 2.1 percent to 185 thousand pounds. Private selling price increased 1.1 percent, while social selling price declined 7.9 percent.
For the first half, Barratt expects to report pre-tax profit of about 45 million pounds, a growth of 108 percent from last year’s 21.6 million pounds.
Operating profit would be about 80 million pounds for the period, 31 percent higher than last year. The company also projects operating margin to increase to about 8.4 percent, compared to last year’s 6.4 percent.
Group Chief Executive Mark Clare said, “Pre-tax profit has more than doubled, net debt was significantly lower than the prior year, and we have started the second half with a strong private forward order book up by over 35 percent. In addition, we have been investing for the future, successfully securing higher margin land both in the South-East and across the rest of the country that will drive further profit growth.”
The company is slated to release its first-half results on February 27.
As of December 31, private forward sales, excluding JVs, were 35.5 percent higher at 536.5 million pounds, equating to 2,281 plots. Barratt said it has started to see some improvements coming through, even though the availability of mortgage finance remains the key constraint to industry growth.
The company continues to expect around half of completions to come from more recently acquired higher margin land, increasing to about 70 percent in FY14 and about 85 percent in FY15.
The company announced the acquisition of two new major sites in central London with a gross development value of 400 million pounds.
Barratt also reaffirmed its target of achieving zero balance sheet net debt by June 2015.
Assuming a continuing stable housing market, the Board expects to propose a conservatively set final dividend in respect of the financial year to 30 June 2013, Barratt added.
Barratt shares are currently trading at 222.80 pence in London, down 3.70 pence or 1.63 percent.
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by RTT Staff Writer
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