Selling higher value houses seems to be a strategy that is working for Barratt Developments, despite the tough market conditions and difficult potential homeowners are having with finding funding.
In an update to coincide with its annual meeting, the housebuilder said net private reservations rose 25.9% between the start of July and mid-November, with selling prices up 7%. Forward sales were up 27.4% on the previous year, and net debt was expected to be at the lower end of previous guidance at around £400m. Chief executive Mark Clare said:
Our strategy of pursuing value rather than volume combined with bringing recently acquired higher margin land into production, is delivering a significant improvement in operating performance. However, without an increase in the availability of mortgage finance, industry growth will remain constrained.
Even so, Barratt's shares have jumped 6.6p to 96.3p, making it the biggest riser in the FTSE 250. Analyst Mike Bessell at Evolution Securities issued a buy note, saying:
Barratt has clearly mapped out its path to recovery, and this statement is a clear indication of that being delivered. Site numbers are up, driving volumes, average selling prices and margins. Stronger sales are reducing debt.
