Barratt Developments Plc, the U.K.'s largest house builder by volume, today said it made a H1 pre-tax loss of £48.5 million before exceptional items, but expects significantly better margins in the second half of the year after improving its trading performance in the first half.
Chief Executive Mark Clare said: "During the last six months, we have improved our trading performance, successfully refinanced the business and invested in new land. The value of our forward order book is now up 27% year on year and with our ongoing focus on optimising selling prices we are expecting to see significant improvements in operating margin in the second half."
The company said that total completions for the six-month period ended Dec. 31 were down to 5,053 compared with 6,905 in the same period a year earlier. Revenue fell to £872.4 million from £1.26 billion. The average selling price increased 3.5% to £166,300, driven by changes in mix. Operating margin increased to 2.4% from 1.3% in 2008.
Barratt Developments, like its rivals, has been hit hard by one of the worst housing downturns in decades. But as demand for housing and house prices slowly recover, Barratt is planning to go through its land bank quickly and start developments on new land to achieve higher margins.
Since mid-2009 the Group has agreed terms on £358million of land, comprising 74 sites and 9,038 plots, with an average plot cost to average selling price ratio of 20%, which will deliver attractive margins based on current selling prices.
The company previously said it plans to increase margins to their peak levels in three to four years.
Barratt cut its net debt to £605.3 million at Dec.31, a reduction of £671.6 million since June 30, helped by the net proceeds of its Placing and the Rights Issue, the sale of a commercial property and ongoing strong cash management.
Exceptional items of £129.9million primarily related to the Group's amended financing arrangements, which came into effect following the Placing and the Rights Issue.
Barratt Development shares closed at 122 pence yesterday, giving the company a market valuation of £1.17 billion. The stock traded at 43 pence a share a year ago, but has rebounded on hopes of recovery.
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