May 9, 2019 / 6:31 AM / 2 months ago

Barratt bucks trend with improved profit forecast

FILE PHOTO: A company logo is seen on the side of a house at a Barratt Homes housing development near Preston, Britain, October 9, 2017. REUTERS/Phil Noble

(Reuters) - Barratt Developments Plc bucked a trend of weak updates from UK housebuilders on Thursday, saying its margins were improving and annual profits would now be slightly above its previous expectations.

Chief Executive Officer David Thomas said that a modestly better outlook for the year translated to an improvement of 1-3 percent on Britain’s biggest housebuilder’s previous profit estimate.

Barratt’s upbeat view was in contrast to rivals Persimmon and Taylor Wimpey. The nation’s second-largest housebuilder Persimmon had reported a drop in orders so far this year, while third-largest Taylor Wimpey had warned on margins and flagged cost pressures.

Barratt shares, which had recovered all of last year’s almost 30 percent loss by the end of April, inched up 1 percent to 592.2 pence after it reported a 2.4 percent rise in forward sales so far this year.

“We are seeing a stable build cost environment,” Thomas said, adding that he expects to see improved margins for the year to June 2019.

Thomas, who has been in the job for almost four years, attributed the improvement to efficiency in the FTSE 100 component’s group procurement function, through which it purchases 80-90 percent of the materials it uses to build homes.

“Evidence of the margin initiative now being shown should reassure,” Jefferies analysts wrote in a note.

Like many British companies, Barratt has been preparing for Britain’s impending exit from the European Union by liaising with suppliers and boosting inventory, and said it was well positioned to handle any disruptions.

According to a survey on Thursday, Britain’s housing market showed little sign of recovery in April as properties put up for sale fell at the fastest rate since 2016.

Reporting by Shashwat Awasthi and Samantha Machado in Bengaluru; Editing by Gopakumar Warrier/Keith Weir

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