10th Jul 2014 12:17
LONDON (Alliance News) - Housebuilder Barratt Developments PLC on Thursday said it expects pretax profit for the full-year ended June 30 to be around GBP390 million, which it said is above the top end of analysts estimates.
In the year to June 30, 2013, the company reported pretax profit of GBP104.8 million and pretax profit before exceptional items of GBP192.3 million.
The company became the latest housebuilder to cite recovery in the UK housing market behind its strong first-half. All of the UK's major housebuilders have reported an accelerating recovery in the UK housing market through 2013 and into this year, particularly in London and the southeast of England, where Barratt has high exposure. The builders virtually halted new construction programmes in the wake of the financial crisis as banks pulled mortgage financing and the ensuing economic crisis put off house buyers. The companies instead focused on paying down debt.
The recovery has reached a level this year that has given the Bank of England cause for concern. Mortgage lender Nationwide last week said UK house prices expanded at the fastest pace since 2005 in June. The central bank has moved to slow the rate of growth by asking mortgage lenders to limit the amount they will lend compared to a person's salary and to undertake even tougher stress tests to ensure a customer can repay the mortgage even if interest rates increase.
However, Barratt said it supports the measures and believes they "will provide greater stability for the market, without significantly reducing the ability of customers to secure mortgage finance."
Barratt said it ramped up house building in response to an uplift in consumer demand. Total completions including joint ventures increased 8.6% to 14,838 compared with 13,663 a year earlier. Private completions rose 8.7% to 11,936 from 10,978, while affordable completions rose to 2,255 from 2,268. Joint venture completions in which the group had an interest increased to 647 from 417 a year earlier.
Sales rates increased to 0.69 net private reservations per active site per week in the recent year, compared with 0.58 reservations a year earlier. The sales rate in the second-half was 0.71 net private reservations per active site per week, compared with 0.66 reservations a year ago.
FTSE 100-listed Barratt said the total average selling price increased to GBP220,000 during the recent financial year from GBP194,800 a year earlier.
"The majority of this increase continues to be driven by changes in mix but underlying sales prices have also strengthened throughout the year," the company said.
In addition, the private average selling price for the full-year increased 13% to around GBP241,000, from GBP213,900 a year earlier.
During the year, the company said it strengthened its forward order book with total forward sales, excluding joint ventures, up to GBP1.20 billion from GBP829.7 million a year earlier. Private forward sales rose 66% to GBP870.1 million from GBP525.5 million.
The company also said it continues to secure land opportunities across all regions. Its landbank now totals 21,478 plots compared with 18,536 plots a year earlier. Barratt said the transformation of its land from older low margin land to more recently acquired high margin land is nearly complete. At June 30, the firm said 84% of owned and controlled land was high margin new land compared with 73% a year ago.
Barratt said it remains focused on driving return on capital employed and for the full-year 2014 it expects this to exceed its target of 18%, some two years ahead of schedule. In the full-year to June 2013 the company's return on capital employed was 11.5%.
Looking ahead, the company said it expects strong demand for new homes to continue and it hopes to open around 180 sites in the year to June 2015. Barratt also said it expects to make progress towards achieving its full year 2016 target of 16,000 total completions, including joint ventures.
Barratt said it will announce its full-year results on September 10.
Barratt Development shares were quoted down 2.0% at 357.70 pence Thursday afternoon.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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