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Barratt cuts losses 76% to £130m

8 Sep 10 Barratt Developments has cut its pre-tax losses by 76% from £535m to £130m for the year ending 30 June 2010.

Barratt Developments has cut its pre-tax losses by 76% from £535m to £130m for the year ending 30 June 2010.

Revenue was down 10% to £2.04bn (2009: £2.29bn).

Operating profit before exceptional items was £90.1m (2009: £34.2m) at a full year operating margin of 4.4% (2009: 1.5%).

Net debt was reduced by £910m since 30 June 2009 to £366.9m (2009: £1,276.9m), helped by a rights issue.

Total completions, including joint ventures, were 11,377 (2009: 13,277).

Average selling price, excluding joint ventures, was up by 10.9% for the full year to £174,300 (2009: £157,200).

Barratt said that driving operational efficiency has been “a significant focus”. By reviewing purchasing, the house builder has consolidated a number of supply chains. Standard house-type construction costs have been reduced and it plans further reductions wherever possible.

Overall, Barratt has reduced house building total build costs (including infrastructure) by 4.7% per square foot.

It said that it continues to renegotiate material supply contracts, but added “some pressure will be felt in future as raw material prices rise in-line with the recovery of the economy”.

Barratt re-entered the land market in mid-2009, and up to 30 June 2010 had agreed terms on £527.2m of land purchases. This equates to 96 sites and 13,359 plots with an expected average selling price of £197,000, the firm said. Of the 13,359 plots, 51% are located in the South of England.

The house builder said it was targeting total completions for this financial year at 5-10% higher than 2010, driven by increasing numbers of outlets rather than higher sales rates. There is likely to be a further shift in product mix, with houses expected to represent at least 65% of total volumes.

Chief executive Mark Clare said: “We have delivered a much improved operating performance in a slowly recovering housing market. Whilst the housing market is likely to remain challenging, we are now well placed to secure further margin growth.

“Our overriding objective is to rebuild profitability and we have set out three clear priorities to achieve this: optimising margin, improving operational efficiency and securing high value future land.

“We are building more houses to satisfy customer demand. Excluding the London market where the majority of completions are flats, 65.9% of completions were houses compared with 50.5% during the prior year.

“The outlook for new housing remains challenging as a result of continuing constraints on the availability of mortgage finance and overall economic concerns.”

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