Barratt Developments delivers interims outperformance in spades

Making the most of the strong housing market, housebuilder Barratt Developments has delivered first-half profits up over 70%, well ahead of expectations, as the its disciplined approach to growth paid off in spades.

Revenues rose 24.6% to £1.58bn in the six months to end-December, with a moderation in building cost pressures from increased supply of materials and labour helping to drive a whopping 320-basis-point expansion of the operating margin and lead to profit before tax surging 74.6% to £210.2m.

Basic earnings per share was up 78.9% to 17p and the interim dividend was raised 50% to 4.8p a share, with the board claarifying that it expects to return a total of 97p per share over the three years to November 2017.

As flagged in its recent trading update, housing completion volumes increased by 12.5% and are running at the highest level for six years, combining with a total average selling price (ASP) up 8.5% to £229,200.

"Since 2009 we have committed to invest over £4 billion in land for new housing and this is now paying off," said chief executive Mark Clare.

There has been a significant step up in the rate of site openings, with nearly 100 new sites opened in the half year, including joint ventures (JVs).

"Over the next six months we plan to open a further 90 sites (including JVs) that will deliver another 13,500 new homes over their lifetime."

He said the land market remains "attractive" with a good supply of high quality new development opportunities.

The second half has begun strongly, with net private reservations per week of 279 for the first eight weeks of 2015.

Total forward sales as at 22 February 2015 were up 17.5% against strong comparatives from the prior year at a value of £2,275.3m from 10,740 plots.

"We are confident in the outlook for the group and expect to deliver a strong performance for the full financial year and make further significant progress towards achieving our medium term targets," Clare concluded.