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Higher-margin land boosts housebuilders’ optimism

Housebuilders are reporting improved margins as they head into 2012.

Profits and revenues look set to have increased in 2011, largely on the back of recently acquired, higher margin land.

Persimmon is expecting profits to increase by 50 per cent for the year, and set to hit the top end of analysts’ predictions, which are in the region of £130 million to £148m.

Revenue for the year was £1.53 billion with operating margin approaching 10 per cent, including a margin for the second half of over 10.5 per cent.

Chief executive Mike Farley put the growth down to securing improvements in existing planning permissions and opening new outlets from recently acquired land.

Mr Farley also expects at least a 15 per cent surge in sales when the mortgage indemnity guarantee comes into play in the spring.

Barratt, the UK’s biggest housebuilder by volume, is expecting a 40 per cent lift in operating profit as a result of new, higher-margin land and an increase in mix, with 70 per cent houses rather than flats. 

Revenues are up 8 per cent to £950m, with total completions of 5,198 units, up from 4,832.

Group finance director David Thomas said recently acquired, higher-margin land has contributed to more than a third of the year’s completions and he expects this number to increase to half next year and two-thirds in 2013/14.

“This gives us confidence that we will deliver further margin improvement,” he said.

Galliford Try’s Linden Homes business recorded a 59 per cent rise in homes built in the second half of last year compared with the same period in 2010.

The firm completed 1,352 units in the six months to 31 December 2011 compared with 851 in the latter half of 2010, setting the group up to reach its target of becoming a 3,000-unit builder by 2012.

Bovis Homes said it expected to see operating margins at 10 per cent, with profits at about £31m. It predicts a “significant increase in profits in 2012”.

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