* Sees FY 2020 volume growth at lower end of range
* Profit grows as margins improve
* Sees demand for houses in Scotland, outer London areas
* Shares fall about 5% (Adds analysts comments, details on results, shares)
By Samantha Machado and Noor Zainab Hussain
Sept 4 (Reuters) - Britain’s biggest housebuilder Barratt Developments Plc said profit rose on improved margins and higher home sales in a tough real estate market, but warned it now expected volumes for the current year at the lower end of forecasts.
Shares in Barratt fell about 5% to 591.4 pence on Wednesday, pushing them to the bottom of London’s bluechip index as investors fretted about the company’s growth.
British house price growth has sagged since the 2016 Brexit referendum - especially in London and neighbouring areas. But at a national level the market appears to have stabilised, surveys suggest.
However, housebuilders remain under pressure, facing the risk of a knock-on impact from a potential recession if Britain were to crash out of the European Union without a divorce deal.
“Based on current market conditions, we expect to grow volume towards the lower end of our medium term target range in FY20,” Barratt said in a statement.
The FTSE 100 company has a medium-term target of volume growth in wholly-owned home completions of 3% to 5% annually.
Barratt has been trying to cut costs by changing the design of the houses it builds and reducing exposure to central London, focusing on more affordable, outer parts of the city.
“We believe that the shadow of Brexit will continue to hang over the sector, but the sector should continue to benefit from the perception that the probability of a Labour government appears to be fading,” Liberum analysts said, referring to the odds of the opposition party coming to power as British lawmakers won a bid to try to block a no-deal Brexit.
Rival Persimmon, Britain’s second-largest housebuilder, suffered a profit hit last month hit after a drive to improve the quality of its houses slowed sales in the first half of the year.
Barratt, however, said pretax profit rose 8.9% to 909.8 million pounds for the year ended June 30. It also declared a special dividend of 17.3 pence.
Barratt, founded in 1958 and headquartered in Coalville, said its gross margin rose to 22.8% compared to 20.7% reported last year, as it welcomed the extension of the government’s Help to Buy scheme that makes it easier for first-time home buyers to afford them.
“If you look at the period over the last three years since the referendum, customer demand has been very strong, there is lots of eligibility, including Help to Buy and we see no change in that backdrop,” Chief Executive Officer David Thomas told Reuters.
The company sold 17,856 homes, up from 17,579 last year, with demand seen in Scotland and outer London areas. (Reporting by Samantha Machado in Bengaluru; Editing by Bernard Orr and Deepa Babington)