British housebuilder Barratt Developments Plc
A focus on margins is helping UK housebuilders recover their footing after several difficult years, supported by new and cheaper land and a shift in product mix from apartments towards houses, which is lifting average selling prices.
Barratt, one of the larger listed housebuilders, said in a trading update it expected its group operating profit to rise by 40 percent to 61 million pounds for the six months through December.
Barratt is due to release first-half results on in February.
Group revenue is expected to rise 8 percent year-on-year to 950 million pounds, albeit against weak comparative figures hindered by bad weather last year.
We've seen a strong first half with our strategy delivering significant improvements in profitability, Barratt's group finance director David Thomas told journalists.
This echoed comments from larger rival Persimmon
Barratt confirmed a good start to its financial year with a rise in its operating margin from 5 percent last year to 6.4 percent and said it expected further improvements in the second half.
Private forward sales jumped by nearly a third year-on-year to 415.3 million pounds, and total forward sales rose 8 percent to 698.1 million, leading the company to feel more confident in its outlook despite the uncertain economic prospects.
The perspective for homebuyers in the UK is bleak, with the number of first-time buyers plummeting to a record low in 2011, despite prices dropping and a number of government measures such as FirstBuy and a mortgage guarantee scheme.
Clearly there is ongoing uncertainty in the UK housing market as a result of economic concerns, however, we have a strong forward sales position and we believe the implementation of the new government-backed 95 pct mortgage indemnity scheme will have a positive effect on the market, said Thomas.
Completions in the six-month period rose to 5,198 units from 4,832 in the same period last year. The average selling price rose 3 percent to 181,000 pounds, with the positive results helping lift the group's shares by 3.4 percent at 0900 GMT.
Driven in part by a greater exposure to London, Barratt is, in our view, making solid progress in reshaping and re-energising its business, said Simon Brown at Northland Capital Partners. The first half shows a marked improvement on last year's comparables, he added.
(Reporting by Lorraine Turner; Editing by Adveith Nair and Helen Massy-Beresford)