Barratt Developments said a strong second half to the year had helped push operating profits above market expectations, but warned that the outlook for UK housing remained uncertain.
In a trading update, the housebuilder said that a shift towards selling more family homes, rather than apartments, had lifted the average selling price 11 per cent to £174,000.
Profits for the year to June 30 will be at least £85m, compared with £34.2m in 2009.
The upbeat statement follows similar assessments of the housing market from rival housebuilders, including Bovis Homes, Bellway and Persimmon.
Mark Clare, chief executive, said Barratt was bringing down net debt, which stood at £375m at the end of June, against £1.27bn at the same point in 2009, and also expanding its land bank.
“A housebuilder is only as good as the land it is buying and we will keep squeezing the balance sheet as hard as we can so as to have cash for land,” Mr Clare said.
However, he added that Barratt would not seek to refinance its borrowings, which are due for repayment in 2012.
Taylor Wimpey, a rival housebuilder, this week announced it was in negotiations with its lenders to achieve less restrictive borrowing covenants.
Barratt cautioned over a sudden rebound in the housing market and said that the issue of weak mortgage availability was still making life hard for many buyers. “Will lending conditions ease during the next 12 months?” asked Mr Clare. “I’m not counting on it.”
Barratt said that forward sales at June 30 were up 27 per cent to £591.7m, the equivalent of 3,889 plots.
The shares, which have fallen 26 per cent since the start of the year, closed down 0.7p at 104.3p.
● FT Comment
Barratt has gone a long way to repairing the damage wrought on it by the collapse of the housing market. Shedding close to £1bn of debt in a market in which the pace of recovery has been distinctly sedate is a commendable feat. However, there are still recovery risks. The company has £600m tied up in deferred land deals and would suffer were the value of houses to fall again. Barratt’s shares trade at about half of their net asset value, a discount to the rest of the sector where shares generally trade at about 75 per cent to NAV. They look a sensible choice for investors wanting a recovery buy.
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