Builder reports strong demand
Low lending rates provides profits boost for Barratt
Barratt Developments says it is benefiting from the scramble for mortgage business among lenders offering rock bottom rates.
As a result it expects annual profits to rise by 45% after reporting an 8% rise in the average price of its homes to £262,000 from £241,600.
In a trading update, David Thomas, chief executive said: “The housing market has remained strong and our operating performance has been very good.
“Over the last 12 months we have opened 176 new developments, increased our housing completions by 11% and committed £1 billion of land investment for future housing.
“We start the new financial year with very strong forward sales and are well on the way to meeting our FY17 targets of a 20% gross margin and at least 25% return on capital.”
The company says it has traded well throughout the financial year, delivering a strong improvement in performance across all financial metrics.
It reports good demand for new homes across all six operating regions.
“We continue to see a positive mortgage lending environment, with increased competition amongst lenders and new market entrants resulting in very low rates for our customers,” it said.
“The land market remains attractive and we continue to secure excellent development opportunities that at least meet our minimum hurdle rates. We are also focused on securing our longer term land pipeline, in particular through the acquisition of options over strategic land.”
· Total completions, including joint ventures (‘JVs’), increased by 10.8% to 16,447 (2014: 14,838) reflecting strong consumer demand and increased site numbers
· Private average selling price up by c. 8% to c. £262k (2014: £241.6k), driven by further changes in mix and underlying house price inflation
· Profit before tax expected to increase by c. 45% to c. £565m (2014: £390.6m)
· Return on capital employed (‘ROCE’)(1) increased by c. 430 basis points to c. 23.8% (2014: 19.5%)
The company reports annual results on 9 September.