Barratt Developments Plc (BDEV), the U.K.’s largest homebuilder by volume, climbed the most since November 2009 in London trading after first-half earnings rose 40 percent.
The shares jumped 11 percent. Operating profit increased to about 61 million pounds ($93.5 million) in the six months ended Dec. 31 from 43.5 million pounds a year earlier, Barratt said in a statement today. The average home price gained 3 percent to 181,000 pounds as the London-based company built more single- family houses than apartments.
Homebuilders are boosting profit margins by focusing more on houses and building on discounted land bought during the recession that ended in 2009. The U.K. government is trying to bolster homebuilding with investment and mortgage guarantees. From the second quarter, more people seeking a new home will be able to get a mortgage with a down payment of as little as 5 percent.
“There is ongoing uncertainty in the housing market as a result of economic concerns,” Finance Director David Thomas said on a conference call. “However, we have a strong forward sales position and we believe the implementation of the new government-backed 95 percent mortgage indemnity scheme will have a positive effect on the market.”
Barratt rose 10.2 pence to 107.2 pence, narrowing the decline for the past six months to 1.7 percent.
Revenue rose 8 percent in the first half to 950 million pounds, the company said. Barratt completed 5,198 homes in the second half, up from 4,832 home a year earlier. The operating margin was about 6.4 percent compared with 5 percent a year ago.
Net debt increased to about 550 million pounds at the end of 2011 compared with 537 million pounds a year earlier.
“This is a robust update, with net debt at the end of the year slightly lower than previous guidance suggested, though still the highest in the sector,” Jon Bell, an analyst with Shore Capital, said in a note to investors. He reiterated his “hold” rating on the stock, citing doubts about whether land values will remain at current levels.
Around 900 of Barratt’s homes were reserved by customers under the coalition government’s FirstBuy program in last six months, Thomas said. The program allows buyers to get cheaper mortgages with an interest-free loan of 20 percent of the home’s value from the developer and the government.
Average U.K. home values fell 0.9 percent in December from the previous month to 160,063 pounds, Lloyds Banking Group Plc’s Halifax unit said Jan. 6.