Barratt plans incentives as profits slide

Housebuilder Barratt today announced a raft of sales incentives to shift stock after seeing annual profits slide by 68 per cent.

The firm, which posted pre-tax profits of £137.3 million for the year to June 30, is paying stamp duty on houses worth up to £500,000 and protecting buyers from house price falls of up to 15 per cent during the next three years. The deals apply to completions made before Christmas.

Barratt's profit slump came after the group wrote off £208.4 million from its £3.3 billion land bank to reflect the poor state of the property market.

The firm, which bought rival Wilson Bowden last year for £2.2 billion, also revealed that forward sales at the year end were down nearly 51 per cent to £697.6 million. On an underlying basis, Barratt's average selling prices were 5 per cent down over the year.

Chief executive Mark Clare said: "Pricing continues to be under pressure with higher incentive levels being required."

He added: "There is little prospect for any material improvement in trading conditions until mortgage finance and customer confidence return."

Under Barratt's "price promise" sales scheme, if a new buyer sells the house for a loss within three years, the firm will refund the difference up to a maximum of 15 per cent.

The firm's UK-wide stamp duty deal will save buyers up to £15,000. The Government announced last week it was upping its stamp duty exemption limit to £175,000 for a year to boost sales.

Barratt is cutting around 1,200 jobs to cope with the housing market downturn. Rivals such as Taylor Wimpey and Redrow have also announced hefty job losses amid the tough trading.

Overall property sales were 18,588 in the year, up from 17,168 and bringing in revenues of £3.4 billion. But on a like-for-like basis, sales were down 14 per cent, reflecting the tough conditions.

Of the year's completions, 14,803 were private sales - up 3.3 per cent on prior year - with the remainder 3,785 sales being social housing, up a third.

The overall average selling price increased by 6 per cent to £183,100, reflecting more sales of properties in "premium" London locations. Excluding the product mix, prices were down 5 per cent.

During the past four weeks, net private sales have been down around 30 per cent, the company said.

Mr Clare said: "Whilst market conditions during the first two months of the new financial year have been broadly stable, they remain extremely challenging."

The firm said the market changed in September due to higher interest rates and a mortgage squeeze from lenders.

Latest figures from the Bank of England show the number of mortgages approved for people buying homes dived by 71 per cent during the past year to hit a new record low of 33,000. UK house prices have also fallen nearly 13 per cent year on year.

Barratt said its net debt was £1.65 billion at the end of June - primarily due to its Wilson Bowden acquisition last year. The firm recently agreed new banking terms, including the extension of £350 million of credit to help it cope with the tougher market.

Mr Clare said: "With the successful refinancing of the business, a good deal of the uncertainty about our future has been removed."

Barratt also confirmed it was not paying a final dividend, leaving shareholders with just the 12.23p interim payment.