Commercial Property News

Barratt Developments Plc, the U.K.'s largest house builder by volume, in it's H1 statement today, said it will focus on improving margins amid a recovery in the markets, but said it remains cautious.

Mark Clare, Group Chief Executive commented,

"Over the last six months we have successfully refinanced the business, reduced debt and invested in land which will deliver higher returns. With margins growing and a 43% increase in total forward sales, the market has improved but is still subject to the major uncertainties of both mortgage finance and the general economic outlook."

The company said it remains cautious, with growth likely to be constrained by economic uncertainty and a lack of mortgage finance, particularly in the high loan-to-value sector.

Barratt Developments, which expects to build some 12,000 homes in the year to June 30, said it will focus on improving margins and expects selling prices to rise by around 8% to 10% in its financial year.

The company said operating margins will rise to 2% in the first half of the year, compared with 1.3% in the prior year, but that significant further progress is likely in the second half of the year.

Barratt reported forward sales at Dec. 31 climbed to £651.2 million from £455.8 million the previous year. During the six-month period, Barratt opened 52 sites and was operating from 364 sites at Dec. 31.

U.K. house builders have been going through one of the most severe downturns in decades as the erosion of financing hurt demand for housing, which caused builders to halt developments to avoid accumulating stock to sell at lower prices.

In order to benefit from the downturn, house builders raised capital and now are focusing on acquiring land as well opening mothballed sites.

Since re-entering the land market in mid 2009, Barratt have agreed terms on £315million of land purchases, the majority of which are bought on a deferred payment basis. This equates to 7,730 plots with an average plot cost to average selling price ratio of 21%, which will deliver full margins based on current selling prices.

Barratt Developments shares closed Wednesday at 139 pence, giving the company market capitalization of £1.34 billion. The stock has risen 12% since the start of the year on hopes of an improvement in market conditions.