Wednesday 09 September 2015 12:28 pm

Building bonanza at Barratt as profits jump 45 per cent

Success in the housebuilding market continues apace, after Barratt reported another jump in profits.

The figures

This kind of fare has become standard among housebuilders in recent years: profit before tax jumped 44.8 per cent to £565.5m in the year to the end of June, while revenues rose 19.1 per cent to £3.76bn and basic earnings per share jumped 45.8 per cent to 45.5p.

Completions – the number of homes it built – rose 10.8 per cent to 16,447, while average selling price jumped seven per cent to £235,000.

It's a sign of the times that investors were only moderately impressed. Shares rose 0.9 per cent to 643p in lunchtime trading.

Why it's interesting

The global economy might be showing hints of slowing down again, but housebuilders are marching on: today's sunny news from Barratt follows an equally bright statement from Berkeley Group boss Tony Pidgley yesterday, in which he said the company was on track to meet an earnings target of £2bn.

That's partly down to the outcome of the General Election, which quietened worries about what would become of the top end of the residential market if the likes of Ed "mansion tax" Miliband came to power.

But some of the market's recent stability has also come from the prospect of an interest rate hike being put off, after signs of a slowdown in China spooked central bankers.

Whether that delay transpires or not remains to be seen – but mortgage lenders seem to have taken confidence from it. While there had been hints in recent months mortgage rates were beginning to climb in anticipation of the rate hike, figures published yesterday suggested lenders are now pretty confident that won't happen for some time.

That can't be bad for the likes of Barratt, which also said it was making "very good progress" towards a target of a gross margin of at least 20 per cent by 2017.

What Barratt said

David Thomas, the company's chief executive, said:

The strong operational and financial performance in 2015 reinforces the progress we have made over the past few years. Alongside our industry leading management team, I will continue to execute on our current strategy and focus on driving further efficiencies across the business.

The new financial year has started very well; we have a strong forward sales position and are making very good progress towards our 2017 targets of at least a 20 per cent gross margin and at least a 25 per cent return on capital employed.