Loughborough builder William Davis reports five-fold rise in profits
The boss of a major building firm says first-time buyers making a strong return to the housing market helped it record a 400 per cent rise in profits.
William Davis, of Loughborough, made a pre-tax profit of £5.9 million in its last financial year, compared with £1.04 million 12 months before.
The company said it had sold 20 per cent more new homes during the year – a total of 105.
Managing director Guy Higgins said Government schemes to help first-time buyers and pressure on banks to lend were having a positive effect.
The credit crunch meant many people were prevented from getting on the housing ladder, which badly hit building companies.
"Conditions are improving," said Mr Higgins. "It leads me to think that over the next 12 months, as people get used to the new normal, there will be pent-up demand for housing and as things settle down we expect to see further growth in the sector."
The firm's surge in profits was mainly down to a move towards schemes with higher profit margins. The figures were revealed in the company's accounts for the year to May 31, 2012, which became publicly available at Companies' House for the first time last week.
Mr Higgins' comments came after national figures revealed banks were offering more attractive mortgages to first-time buyers.
The Bank of England said average two-year fixed rate mortgages for buyers with a deposit of just 10 per cent fell sharply in December to the second lowest level in five years. Borrowers were offered 5.31 per cent in December, compared with 5.63 per cent the previous month.
The profits growth for William Davis is in line with the bounce-back experienced by major house building firms over the past two years as companies develop sites bought at cut-price amounts during the deepest part of the recession and sell at high profit margins.
Bardon-based Barratt, the UK's largest house builder and owner of David Wilson Homes, saw pre-tax profit before one-off costs surge by 158 per cent to £110 million in the 12 months to June 30, 2012.
William Davis's turnover fell by 9 per cent to £73.8 million over the reported period because of a drop in social housing projects – the result of Government funding cuts.
Housing made up about 80 per cent of turnover during the year, with business units accounting for the remainder. The proportion of business projects is set to increase this year, said Mr Higgins.
"Over the past few months, we have sold some units at reasonable figures," he said. "I think more people are thinking 'we need to expand'."
Mr Higgins said a development at Airfield Business Park, Market Harborough, was attracting high levels of interest.
The company, which employs 75 people at its Forest Road HQ and 325 in total, has managed to rebuild profit after a £10.5 million loss four years ago. But its latest figures were still below the record profit of £15.17 million it reported five years ago.