Sir Lawrie Barratt, who came out of retirement in July 1991 to resume his post as executive chairman, said yesterday that the company planned from July to step up its rate of building from 5,000 to 8,000 units a year.
'House prices have now completely stabilised. In the second half of this year, we should see them rising in line with earnings and inflation - that is, at 3 or 4 per cent,' he commented.
News of the expansion plan accompanied half-year figures showing an increase in pre-tax profits from pounds 2.5m to pounds 4.8m, on turnover down from pounds 209.7m to pounds 174m, and a 1p interim dividend compared with no payment a year ago. Barratt shares fell 3p to 133p.
Admitting that Barratt had made mistakes in southern England in the past, Sir Lawrie insisted that the company would not get involved again in paying over the odds for land. Every new site would have to generate the right gross margin, and growth would be financed from the company's own resources.
A new subsidiary is planned to begin operations in south London in July, followed by another in north London before the end of the year.
In the year to 30 June 1991, Barratt was forced to make write-downs of pounds 73m on over-priced land holdings in southern England and the US. Since then, borrowings have been more than halved to pounds 81m, or 45 per cent of shareholders' funds, as Barratt cut back on sales outlets, stocks and unsold houses.
In the first half, UK completions fell from 2,128 to 2,017 and average prices slipped from pounds 81,200 to pounds 75,800. Although profitable overall in the UK, Barratt lost pounds 2.5m in southern England during that period. But Frank Eaton, its chief executive, said that all its holdings of expensive land would be built out by the summer, giving a boost to profit margins in the 1993/4 financial year.
Barratt, which built 16,500 homes at its peak in 1983, aims to lift pre-tax margins from 5 per cent in the first half to 10 per cent within three years.
Amid continuing problems with prices and demand, its Californian subsidiary showed only a small reduction in losses from pounds 3.8m to pounds 2.7m. Mr Eaton said that he expected a break-even performance in 1993/4.
Steve Charnock of Charterhouse Tilney has forecast pre-tax profits of pounds 20m for the year to 30 June, followed by pounds 35m. 'Barratt has a strong story to tell of improving margins and cash generation from its housing stock to fund attractive land bank purchases,' he said.Reuse content