Barratt set for profit surge thanks to Help to Buy

Kasmira Jefford
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BARRATT Developments said this morning it expects to post better than expected full-year profits, after improving mortgage availability and government schemes to help struggling homebuyers boosted sales.

Britain's largest housebuilder by volume said it now expects full year pre-tax profits and exceptional items to be £192m, at the top end of analyst forcasts of around £191m.

It also estimates its operating margin will increase around 10.4 per cent in the second half and 9.7 per cent for the full year – up from 8.2 per cent in the prior full year.

“As more house buyers return to the market, supported by improved mortgage availability and the Help to Buy scheme, we are in a strong position to continue to grow the value of the business,” chief executive Mark Clare said.

“We are increasing our investment in land whilst reducing debt and have delivered a performance ahead of expectations,” he added.

The company said it has seen improved market conditions across all six of the UK regions it operates in, with London and the South East showing the strongest trends.

Sales increased 17.9 per cent in the second half of 2013 compared to the year before, and by 34.7 per cent since the launch of Help to Buy in April.

Total forward sales were up 53.6 per cent to £829.7m at the end of June.

Barratt is the latest housebuilder to have seen sales and reservations jump in the months since the government unveiled plans to support house buyers with billions of pounds in loans, followed Persimmon, Galliford Try and Taylor Wimpey.

Their profits have also been helped by a strategy of buying land cheaply during the financial crisis, which has boosted their margins, and by building more lucrative family homes rather than city centre flats.

Barratt said completions, including joint ventures, totalled 13,663 for the full year, and that private completions were up by 16.1 per cent in the second half.

Its average selling price was up nine per cent over the period, as the company sold more lucrative larger family homes as opposed to flats.

It said it could hit its target of completing 16,000 homes earlier than expected due to the strong demand generated by the Help to Buy scheme.