Optimism amongst builders as their profits accelerate

Graham_Devon · 12 July 2012 at 9:27AM

And Hamish states they can't cut house prices?!

Housebuilder Barratt Developments today said it expects a big rise in full-year profits thanks to cost-cutting, building on higher margin land and a relatively stable market.

The group, which will post its annual results on September 12, said operating profit before exceptional items should rise by 41 per cent to £191million for the year to the end of June.

Barratt chief financial officer David Thomas said the jump in profits was due to a move towards building on higher margin land, cost-cutting measures as well as a significant increase in volumes, with 12,637 completions compared with 11,078 the previous year.

About a third of completions came from new land contracts with gross margins above 20 per cent, Thomas said, expecting that to rise to about 50 per cent next year and around two thirds in 2014.

‘We feel we have certainly outperformed slightly compared with our expectations and the market's expectations,’ Thomas said.

A lack of available new homes in Britain and government schemes to spur the market have been helping prop up demand, despite flagging consumer sentiment and difficulties in obtaining mortgage financing.

Barratt said government initiatives, including the NewBuy scheme - which is designed to encourage the return of 95 per cent mortgages - continued to support the industry.

Why cut prices when the government will give you schemes and increase your profits?

http://www.thisismoney.co.uk/money/markets/article-2171944/Optimism-housing-market-builder-Barratt-lays-ground-big-rise-profits.html