Commercial Property News

Barratt Developments Plc today in it's results for the year ended 30 June 2010 said wider economic fears and the lack of mortgage finance meant the market for new housing was still challenging, as it reported a pre-tax loss before exceptional items of £33 million against a profit last year of £144.1 million on sales which were 11% down at £2.035 million.

The Group made a loss of £6.1 million on it's commercial property developments. The underlying housing business performed well producing a profit of £80.4 million, but exceptional finance costs of £114.1 million, up from £13.3 million last year showed the cost the banks levied on the business to keep it afloat. The business paid a further £235.7 million in interest charges, which will reduce in the coming year to around £105 million.

The Group's debt burden fell by £910 million, primarily due to the inflow of £693 million from the rights issue, but the business is still carrying around £1.5 billion of debt and since it has been engaged in buying land while prices are low, debt is expected to increase in the coming year.

Mark Clare, Group Chief Executive said:

 "During the year we have seen a very significant improvement in the performance of the business - operating margin in the second half increasing to 5.9%, returning us to profitability and gearing falling to 18%. Whilst the outlook for the UK housing market is still challenging, our priority remains optimising prices rather than volume and securing high quality land that will continue to drive our margin recovery."

House prices fell much faster than expected last month, according to a monthly survey from mortgage lender Nationwide, stoking concerns that the country could be headed for a double-dip recession.

Barratt said it would therefore continue to focus on prices rather than volume and would not reinstate dividends, unlike rivals Bovis and Persimmon.

Barrattt shares having fallen 16% over the year  closed last night at 104.3p which valued the company at £362 million.