British housebuilders enjoyed an early rally on Wednesday morning after mid-cap Barratt Developments reported a narrower-than-expected loss for the first half and said completions during the period were ahead of estimates.
The outlook statement accompanying the housebuilder’s interim results made for rather gloomy reading, however, as chief executive Mark Clare warned: “This remains an intensely difficult market with little forward visibility…there will be no recovery in the housing market until the availability of mortgage finance improves.”
At 9.15am, Barratt’s shares were over 8% higher on the FTSE 250 index, up 6p at 77.5p, with peers Redrow and Bellway respectively adding 8% to 135p and 7.8% to 602.5p on the read-across. In the broader read estate sector, mid-cap property developer Brixton gained 12% to 42p and blue-chip Hammerson jumped into pole position on the FTSE 100 index with an 8.2% rise to 336.25p. The latter was further boosted by JP Morgan upgrading its stance on the stock to Overwight from Neutral, citing its “strong future development potential.”
Barratt reported pretax losses for the six months to end-December of £592.4 million after exceptional items, down from a profit of £194.6 million in the previous year. The first-half pretax loss came in at £80 million before exceptionals, which was not as bad as the market had feared.
The average selling price decreased by 9.7% year-on-year to £160,700 and, on an underlying basis – excluding the effect of product mix changes, average selling prices have decreased by about 27% since June 2007.
Regarding current trading, CEO Clare said the group has reduced its prices and is now seeing some signs of increased activity levels in terms of visitor numbers and sales. Over the last six weeks the group has delivered a 20.5% increase in private sales per site compared to the first half of the financial year and visitor levels are currently up 24.4% on the first half.
Traders also highlighted Barratt’s reduced debt and cost savings as positives. The group, which found itself saddled with debt following its acquisition of Wilson Bowden in 2007, today said it has reduced net debt by £315.7 million since the end of 2007 to £1.42 billion at the end of 2008.
The housebuilder added that it has made considerable progress in its cost reduction programmes and has identified further savings of around £80 million, to be realised in the next financial year.
An additional positive from the results was a smaller-than-expected write-down of £495 million, one trader said, which compares to some analysts’ forecasts over a figure above £ 1 billion.
“This update has given the market the opportunity for a bit of optimism,” the trader said. “Trading over the last six weeks is encouraging and the group’s managed to reduce its debt further, which is another positive. Yes, the outlook is pretty gloomy but in the current markets this sort of update is well-received.”
At last check, the FTSE 100 index was up 1.1% at 3,858.09, while the housebuilder rally helped take the FTSE 250 index 2.5% higher at 6,055.74.
