Barratt on target for new home sales: Market surprised by 73% jump in pre-tax profits House prices predicted to rise 5-10% in South

Click to follow
BARRATT Developments exceeded market expectations yesterday with a 73 per cent jump in pre- tax profits and a 50 per cent increase in the full-year dividend. The shares, which have fallen 38 per cent since February, closed 4p higher at 179p.

Sir Lawrie Barratt, who scotched rumours that he was retiring early from the board, said the company was on course to sell 8,000 houses in the year to June 1996, the target set last March as part of a three-year recovery plan.

House sales during the year to June marginally exceeded target at 5,782. Profits growth was driven by a return to profit after four years of losses in the group's southern region.

Sir Lawrie said higher volumes and lower selling incentives had pushed operating margins up from 8 to 10.4 per cent.

Analysts said the figures were better than forecast and pointed to lower-than-expected gearing, which fell to 5 per cent.

Pre-tax profits increased in the year to June from pounds 20.4m to pounds 35.2m, struck from turnover of pounds 499m ( pounds 405m). Earnings per share were 12.9p (9.3p) and a final dividend of 4p made a full-year total of 6p (4p).

Margins benefited from the continued working through of high- cost land, which had been squeezing them. Average selling prices remained unchanged at pounds 74,900, although prices in the South-east were stronger than elsewhere.

Sir Lawrie said he expected prices to rise by between 5 and 10 per cent in the South compared with 2 to 5 per cent for the country as a whole. Labour and raw material costs were rising no faster than house prices.

California continued to be a drain, with the market suffering from high unemployment, negative equity and mortgage arrears. There was an operating loss of pounds 2m. Leisure resorts in Britain and Spain were also loss-making.

Despite recent negative comment about prospects for the housing market, Sir Lawrie, who confirmed that he would see out a three-year non-executive contract, remained resolutely bullish.

He expected new house sales to increase by a further 10 per cent over the next 12 months.

Bottom Line, page 22

Comments