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Barratt sees 'step change' in housing demand

11 Sep 13 House-builder Barratt Developments has reported strong growth for the year to 30 June 2013 and is looking at even faster growth this year.

Barratt said that it has seen a “step change in demand for new homes” since the launch of the Help to Buy (Equity Loan) scheme in April 2013. The summer has seen a near 30% rise in reservations for private house sales.

Group revenue last year was up 12% to £2,606m (2012: £2,323m), with completions (including joint ventures) of 13,663 units (2012: 12,857 units). This year it is targeting 16,000 completions.

By building more homes and fewer flats, the average selling price increased to £194,800 (2012: £180,500).

Group operating profit before operating exceptional items was up 32% to £252.7m (2012: £191.1m), boosting operating margin to 9.7% (2012: 8.2%). In the second half the operating margin edged up to 10.4%.

Profit before tax and exceptional items increased 74% to £192.3m (2012: £110.7m).

However, after a £79.3m hit on debt refinancing and other exceptional one-off costs, reported pre-tax profit was actually pretty flat at £104.8m (2012: £100.0m)

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Net debt was significantly reduced during the year to reach £25.9m by 30 June 2013, down from £167.7m a year before. This is ahead of target.

Group chief executive Mark Clare said: “These are significantly improved results and we have had a very strong start to the new financial year.  We are seeing the housing market recovery starting to spread beyond London and the southeast with a 29.4% increase in our average net private reservation rate across the group. Our £2.6bn commitment to land investment since 2009 puts us in a good position to capitalise on these market trends. We have already increased our completion volumes by over 20% in the past two years and expect to deliver around 45,000 new homes over the next three years."

As part of an efficiency drive, Barratt has centralised procurement for the majority of materials, including subcontractor materials. “This ensures consistent quality and costs across the group,” Mr Clare said.

He added: “All of our significant supply contracts are fixed in advance, usually for 12 months. During 2013 we saw some price increases in bricks, blocks and plastic plumbing. However our overall price increase on centrally procured materials was less than 1%.

“For FY14 we continue to put supplier agreements in place to ensure continuous availability of materials and overall we expect low single-digit cost increases. We will continue to work to ensure these increases are offset by further build efficiencies wherever we can.”

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