Barratt Developments Plc, the U.K.’s largest homebuilder by volume, said first-half profit more than doubled as the company reduced costs while margins and mortgage lending improved.
Net income for the six months ended Dec. 31 rose to 33 million pounds ($50 million), or 3.3 pence a share, from 12.1 million pounds, or 1.2 pence, a year earlier, the London-based company said in a statement today. Revenue was little changed at 951.1 million pounds.
“The foundations of stronger mortgage lending are a lot firmer than they have been for some time, which is why we are a little more confident,” Chief Executive Officer Mark Clare said on a conference call. “Mortgage availability is clearly improving. We’ve also got the benefit of NewBuy, which is firing on all cylinders now.”
U.K. house-construction companies are reporting increasing sales of new homes and higher average prices, resulting in improved profitability after a slump during the global recession in 2008. Homebuilders have also widened their margins after focusing more on houses and developing land acquired at discounts during the global financial crisis.
Barratt was down 0.40 penny at 235.1 pence at the 4:30 p.m. close in London. The shares have gained 66 percent in the 12 months, giving the company a market value of 2.3 billion pounds.
The Bloomberg EMEA Homebuilders Index, composed of Britain’s seven biggest publicly traded house builders, rose 70 percent last year even as mortgage lending remained at less than half the levels in 2007. The index has risen about 5 percent this year.
Barratt’s operating margin widened to 8.5 percent from 6.4 percent a year earlier. Completions were little changed at 5,085 homes and the average selling price of its properties rose 2.4 percent to 185,500 pounds.
The company’s net debt was 331.7 million pounds at the end of 2012 compared with 542.2 million pounds a year earlier. Barratt expects to be debt-free by June 2016, Clare said on the call.
The government’s NewBuy program, which helps to reduce the cost of mortgages for those buying their first home, is helping Barratt to sell more homes. Around 8 percent of its private reservations in autumn were aided by the mortgage indemnity program and Barratt expects the increase to amount to as much as 15 percent in the second half of its fiscal year.
“We will remain cautious as to whether the slow thaw in the lending market is sustained,” Clare said by telephone. The company’s fiscal year ends June 30.