Barratt builds on Help to Buy boost

Barratt Developments has seen a sharp jump in property sales thanks to the Government's 'Help to Buy' scheme and says the current market was the strongest since the credit crunch.

Barratt Developments has seen a sharp jump in property sales thanks to the Government's 'Help to Buy' scheme and says the current market was the strongest since the credit crunch.

Management at the housebuilder said consumer demand and mortgage supply had created the most positive market conditions it had seen for five years and that it expected to deliver a "significant year on year improvement in operating profit" for the full year.

Barratt, which aims to hire 600 graduates and apprentices over the next three years, said net private reservations leapt 18% following the announcement of the Help to Buy shared equity-loan scheme, which helps home-hunters purchase a property with as little as a 5% deposit.

Overall, net private reservations were up 9.7% to 0.68 per active site per week in the the 18 weeks from the start of the year to May 5th.

Barratt reported that prices were 4% higher, driven by a better mix, and were expected to improve further in the second half.

Consequently the order book of private forward sales, excluding joint ventures, climbed 28.5% above the £1bn mark, from £788.6m a year ago.

Due to the timing of its spending on new land, having approved the purchase of 17,000 plots of land and good control of working capital, Barratt trimmed its net debt guidance to £100m for June 2013 as part of its stated targets of zero net debt by the end of June 2015.

Chief Executive Mark Clare said the group's improved performance was being underpinned by stronger market conditions and the operational changes management had made across the business.

"Help to Buy has seen a strong start and we are investing in land and bringing it through planning to meet increasing consumer demand."

The FTSE 250 group has begun to see a positive effect of the new planning regime, with an improved level of dialogue with Local Authorities, and is confident of securing public land as the Government accelerates the disposal of public land as part of its housing strategy.

So far, the group has had offers accepted on public land equating to 3,568 plots with a total gross development value of £835.3m.

Broker Numis said the strong statement had prompted it to increase its estimates and target price, although the feeling remained that the valuation is reflecting recent positive trends and "is broadly high enough in the short term".

"In our view Barratt remains one of the more geared housebuilders into the recovery of UK housing, given its financial leverage and nationwide coverage."

Shares in Barratt Developments were down 0.95% to 317.46p at 09:56 on Thursday.

OH

Recommended

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework
Investment strategy

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework

John Stepek talks to Steve Clapham, investor, analyst and author of The Smart Money Method, about the dangers in picking individual stocks and why you…
8 Apr 2021
BP looks set to return more money to shareholders as it beats expectations
Energy stocks

BP looks set to return more money to shareholders as it beats expectations

Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfoli…
6 Apr 2021
Deliveroo has hit the market – but it’s not getting the warmest welcome
UK stockmarkets

Deliveroo has hit the market – but it’s not getting the warmest welcome

Food delivery company Deliveroo made its debut on the stockmarket this morning. But with the share price sliding by 30% straight away, it’s not made t…
31 Mar 2021
Three stocks to buy now that will come back stronger after Covid-19
Share tips

Three stocks to buy now that will come back stronger after Covid-19

Professional investor Ed Wielechowski of Odyssean Capital, chooses three compelling stocks that should thrive in a post-pandemic world.
29 Mar 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021