Mark Clare, the new chief executive of Barratt Developments, has done more than just rearrange the furniture since he took charge at the FTSE 100 new homes builder at the beginning of the year.
Not content with turning it into the UK’s second-largest builder through the £2.2 billion acquisition of Wilson Bowden in February, he set about sharpening up the two groups’ land procurement process. His aim was to ensure the cost-efficient supply of property to the market at sustainable profit margins.
As a result of his continuing efforts, he was able to use today’s pre-close trading update to shrug off the gloom descending on parts of the housing market. Not only were forward sales up 15 per cent on last year at £1.4 billion, but sales reservations had shown no signs of slowing in recent weeks, he said.
The housing market may “tighten”, Mr Clare said, but Barratt will be bolstered by its strong land bank of 109,700 plots. Average selling prices for its homes were also up on last year.
Mr Clare provided even more good news about costs. Having targeted annual savings from the Wilson Bowden deal of at least £45 million during the second year of ownership, Mr Clare said that this was now running ahead of plan.
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He promised that details of more cost synergies would be delivered in September.
It is hard to fault Mr Clare, who has signalled that he is keen to be involved in any further M&A activity among the UK builders that might take place over the coming months. He has a £3 billion debt facility he can draw on if necessary.
That ambition may unsettle some investors. But sitting at a paltry 7.2 times next year’s earnings, and offering a 4.1 per cent dividend yield, Barratt looks too cheap.