David Pretty, Barratt Developments chief executive, said this week that increased government regulations will lower housebuilders鈥� profit margins over the next 12 months.

Speaking after the release of Barratt鈥檚 trading statement on Monday, Pretty told 好色先生TV: 鈥淕overnment regulations are having an impact 鈥� not just Part L, but a whole raft of things, such as the sustainable buildings code and environmental factors.鈥�

Barratt鈥檚 margin for 2004/05 was 16.1%, and is expected to be about 16.25% for the 12 months to 30 June this year. However, Pretty鈥檚 prediction would suggest this could be reduced by about 0.5% in the next financial year.

The trading statement led to further speculation that Barratt will make a major acquisition later this year, when Pretty hands over to incoming chief executive Mark Clare, currently managing director of British Gas. The statement said that gearing, or borrowing, was just 11% and that the company had 拢38m cash.

Regulations are having an impact on margins 鈥� not just Part L, but a whole raft

David Pretty, Barratt

Pretty said no acquisition would be made ahead of Clare鈥檚 arrival, and added that the adoption of an acquisitive strategy was a matter for his successor. However, Pretty admitted: 鈥淲e have clearly got the firepower.鈥�

He added that there was 鈥渘o reason鈥� why the company should not get into the FTSE 100 in the next few years 鈥� a major acquisition would propel it on to this list 鈥� but said that this was 鈥渘ot an objective we are obsessed with鈥�. Pretty said that the 拢850m of land bought in the past 12 months amounted to 鈥渁n acquisition in itself鈥�.

The statement said the company expected to confirm its 14th successive year of profit growth in its annual results on 27 September. Initial estimates suggest a pre-tax profit of 拢382m.

Postscript

Are your margins affected by tough regulations? Email building@cmpi.biz