Barratt Developments Plc (LON:BDEV) , the UK house builder, said it was on course to make a profit in the second half of this year as higher selling prices and rigorous cost cutting take affect. In the same period last year Barratt posted a £63.5m loss and it shares responded this morning by rising 5.4%.
Reporting on activity since the start of 2010, Barratt said it was predicting that average selling prices would rise by around 15% in the six months to June 30, 2010, against the same period last year. It noted that the number of private reservations had risen by 4% versus the first four months of 2009 and were up 14% on its first half performance to December 31, 2009. Total forward sales were up 32% on the previous year at £1,073.3m.
Elsewhere, Barratt has continued to buy up land at “attractive” values, with terms agreed on £447.8m of land equating to 12,286 plots since mid 2009. Net debt as at June 30, 2010 is anticipated to be around £500m, below previous guidance due to the deferral of land payments.
Mark Clare, Barratt’s chief executive, said: “The increase in our selling prices coupled with effective cost control is leading to good margin growth and we expect to deliver a profit for the second half. Our forward sales now exceed £1bn, the highest level we have reported for two years, and we're continuing to secure highly desirable land that meets our hurdle rates and will further accelerate our margin recovery. Nevertheless while the market has seen a measure of recovery we remain cautious given continuing economic uncertainty and constrained lending.”
In September last year Barratt launched a £720.5m placing and 1.3 for 1 rights issue in order to reduce debt and give it greater headroom to develop sites and buy up land. Since hitting a 2010 high of 141p in early January, its shares have been off the pace, returning to 137p in late April before sliding to 104p last Friday. Today, they rebounded to 122.8p.
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