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Barratt cuts its losses to £4.6m

Significantly improved margins have helped Barratt Developments cut their losses to £4.6 million in the six months to 31 December 2010, down from £178.4m in the same period the previous year.

Britain’s biggest housebuilder by volume saw margins improve to 5 per cent in the second half of 2010, compared to just 0.6 per cent previously.

Chief executive Mark Clare said the group had made “decent progress in a difficult autumn selling season” and said the spring was “off to a decent start”.

Revenues for the half year were broadly flat at £877.6m, compared to £872.4m in the prior year equivalent but the improved margins helped operating profit climb to £43.5m from £5.2m.

Completions were down from 5,053 to 4,832 but average selling prices have improved by 5.7 per cent.

The group’s overall average selling price is now £175,800 with private sales prices increasing 10.8 per cent to £191,900, mainly as a result of mix changes.

Mr Clare said he believed the decision to avoid chasing volume had proved “very successful”.

He said: “In terms of pricing, we have commanded a premium at many outlets and we didn’t chase the market when buyers became more scarce. 

“Some 81 per cent of our new plots are for houses rather than flats and that will continue to drive the radical change in mix that we have seen over the last three to four months.”

In the first six months of the financial year the group sold from  an average of 352 sites, down 4.3 per cent on the same period last year.

During the half year it opened 79 sites and as at 31 December 2010 it was operating from 366 active sites, two up on 2009.

In the second half Barratt expects to open 100 new sites, with total active sites as at 30 June 2011 expected to be around 390 compared to 339 at the same time last year.

In terms of current trading the company has achieved a sales rate of 0.57 sales per site per week since the beginning of the year.

That equals last year’s rate and is up almost 50 per cent on the average for the first half.

However Mr Clare acknowledged sales rates had been boosted by deferrals form the snowbound end to 2010 and said confidence remains fragile.

“We are running the business within an extremely tight framework imposed by a lack of mortgage finance and that will not change until there is more finance available for our customers. 

“It is doubly frustrating that it remains harder for customers to borrow money for new homes than second hand homes – that’s a discrimination that needs addressing as soon as possible so looking ahead our focus will remain on tight cost control, further efficiency improvements and increasing completions on new higher margin land. 

“We expect to see further margin improvements in the second half.”

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