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UPDATE 1-UK builder Barratt says on track for higher profit
November 14, 2012 / 9:08 AM / 5 years ago

UPDATE 1-UK builder Barratt says on track for higher profit

* Avg weekly reservations per site 0.54 vs 0.53 a year ago

* Shares rise 1.2 pct, up over 100 pct this year

By Natalie Huet

LONDON, Nov 14 (Reuters) - British housebuilder Barratt Developments said it was on track for higher profits this financial year as its focus on higher-margin sites, rather than volumes, pays off in a tough market.

Britain’s largest housebuilder by volumes said on Wednesday market conditions had remained stable since July, but it highlighted that recent government schemes aimed at easing mortgage lending had yet to filter through to help the country’s housing market gain traction.

“Despite the positive impact of these government initiatives, we continue to believe that a step change in mortgage lending is required to see a sustainable increase in the number of new homes being built,” it said in a trading statement covering the first 18 weeks of its financial year.

Weekly net private reservations per site averaged 0.54 in the 18 weeks to Nov. 11, marginally up from 0.53 a year ago, while the cancellation rate inched up to 16 percent from 15.5 percent.

Barratt said interest in the NewBuy scheme, which provides state and developer guarantees on 95 percent mortgages, had increased over the past weeks and now made up 9 percent of private reservations excluding Scotland and Wales.

“Clearly NewBuy is starting to get traction ... The one we are still waiting to see the longer-term effect from is Funding for Lending,” Chief Executive Mark Clare told reporters on a conference call, referring to a scheme launched in July by the Bank of England, which provides banks with cheap funds if they keep up lending to households and businesses.

Like rivals Persimmon, Taylor Wimpey and Redrow, Barratt has in the past year sought to make the most of a sluggish market by building on land made cheap by the recession, developing more lucrative family homes rather than apartments, and focusing on areas where prices have stayed strong, such as London and southern England.

This has enabled it to reduce debt and announce a dividend in 2013 for the first time in five years.

Shares in Barratt, which have doubled in value this year, were up 1.2 percent at 189 pence on Wednesday morning, valuing the company at around 1.8 billion pounds ($2.9 billion).

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