Barratt Developments issued their results for the year this week and warned that the housing market is still not out of the woods, as mortgage finance continues to be difficult to secure and buyers’ confidence is still low. Mark Clare the Group Chief Executive stated that "our priority remains optimising prices rather than volume and securing high quality land that will continue to drive our margin recovery."
The number of buyers and sellers in the market is still down compared to previous years, and to June 2010, completions have fallen by 15% with only just over 11,000 completions last year. Despite this, Barratt posted an operating profit of £90 million, in line with its forecast in May of a profit in the region of £85 million. This is almost a threefold improvement on 2009 figures, but Barratt will not reinstate a dividend for its shareholders — the company plans to continue to try to steady prices, which dropped faster than expected in August.
This focus on cost control and reducing volumes, together with improving efficiency and renegotiating supply contracts has helped the company to significantly reduce its net debt. Given that signals from the market are still mixed, Barratt continues to guard against a “double dip” recession, led by another steep fall in house prices.
It is planning to change its mix by moving construction away from the saturated flats market and towards housing. The company has replanned some of its current sites with the consent of local authorities.
Bob Lawson, Barratt’s Chairman warns that economic uncertainty may influence the company’s future: ‘The key restriction on the industry remains the availability of mortgage finance. Whilst there was some improvement during the year, the lack of availability of suitable higher loan to value products continued to restrict the new build sector where customer deposits have traditionally been lower. With demand continuing to be constrained, the industry responded by opening fewer sites and controlling stock better. Whilst the improved balance between supply and demand has stabilised prices, it has done little to address the nation’s fundamental housing shortage which in the longer term will underpin the sector’s growth.’
But in a postive statement the company said that it had agreed terms on the acusition of land valued at over £500M or the equivalent of 13,359 plots.