Barratt Developments hitting top end of expectations

10th Jul 2014 08:11

- PBT doubled to £390m, top end of forecasts- ROCE of 18%, two years ahead of schedule- Land bank up 15.9%Pre-tax profits at Barratt Developments will hit the top end of analyst expectations, the company boasted in a pre-close statement, as an 8.6% increase in housing completions accompanied a 13% jump in selling prices. The housebuilder said selling more of its recently acquired higher-margin land and an ongoing efficiency drive had further helped it more than double profits before tax to £390m in the 12 months to end-June. Barratt also expects to beat its target for 18% return on capital employed (ROCE) a full two years ahead of schedule.Group Chief Executive Mark Clare said the market remained positive "with strong demand for new homes across the country". "The land we have acquired in the last five years together with our disciplined operating model is delivering a very strong business performance," he said. "Our focused approach to land buying will enable us to maintain a land supply of around 4.5 years and support a significant increase in profitability and return on capital employed."The 13% increase in average selling price was largely driven by increased delivery of larger homes in attractive locations with additional help from UK house price inflation, taking the average Barratt home up from £194,800 to around £220,000.The FTSE 100 company has been busy on the land buying front too, buying 21,478 plots of land, up 15.9% from the 18,536 bought the year before and costing 14.4% more at £1.2bn."The transformation of our land from older low margin land to more recently acquired high margin land is nearly complete," it said, with 84% of its owned and controlled land now high-margin newer land.This was accompanied by considerably strengthening of the forward order book, with total forward sales up an impressive 45% to £1.2bn.Barratt welcomed recent Bank of England action to calm the frenzied housing market and said it was positive on the outlook for the group. As well as strong demand for new homes across the country, it expects to make good progress towards achieving its 2016 target of 16,000 total completions. OH