Business World

Monday 21 October 2019

UK housebuilder Barratt set to beat profit expectations

UK housebuilder Barratt Developments' efforts to cut costs by making changes to the design of the properties it builds will help the company to report an annual profit that beats market expectations, it said yesterday. Stock photo
UK housebuilder Barratt Developments' efforts to cut costs by making changes to the design of the properties it builds will help the company to report an annual profit that beats market expectations, it said yesterday. Stock photo

Samantha Machado and Shashwat Awasthi

UK housebuilder Barratt Developments' efforts to cut costs by making changes to the design of the properties it builds will help the company to report an annual profit that beats market expectations, it said yesterday.

The company has also been reducing its exposure to central London in order to focus on outer parts of the capital, where houses are more affordable for many.

Britain's biggest housebuilder expects pre-tax profits of £910m (€1bn) for the period ended June 30, compared with £835m a year earlier. Analysts on average expected full-year pre-tax profits of £883m, according to company compiled estimates.

"The main initiative has been to redesign and simplify our housing range," chief executive David Thomas told Reuters.

"Back in 2016, we substantially reduced the number of house types. We reduced the roof pitch and height of the house. By doing that, we were reducing the cost of build," he added.

Mr Thomas told Reuters he expected the company to exit central London by the end of the calendar year. Barratt's push to redesign its houses helped it guide to an operating margin of 18.9pc for the year, up from 17.7pc a year earlier. Shares in Barratt, which have surged nearly 25pc this year, gained as much as 1.4pc on Wednesday, and nudged stocks of rival housebuilders higher.

"Barratt's profitability is improving as it dials down exposure to a tricky London market, but it is worth noting that its margins are still running behind most of its peers," said Russ Mould, investment director at AJ Bell.

Reuters

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