Barratt Developments Delivers An Increase In Expected Full Year Completions
Barratt Developments PLC has issued a trading update in respect of the period from 1 January 2021 to 2 May 2021.
David Thomas, Chief Executive commented: “We have seen strong demand for our high quality, energy efficient homes on well-designed developments which means we now expect to increase wholly owned completions to between 16,000 and 16,250 homes this year, along with around 650 JV home completions. As construction activity has increased our employees and sub-contractors have worked hard to maintain our high standards of quality and service and we are proud that for the 12th successive year, our customers have rated us as a 5 star housebuilder.
Net private reservations per active outlet per average week of 0.83 (2020: 0.52; 2019: 0.79)(1)
Fully forward sold for FY21 with total forward sales (including JVs) at 2 May 2021 of £3,696.3m (3 May 2020: £2,834.0m; 5 May 2019: £3,365.1m)
Strong well capitalised balance sheet with expected improvement in year end net cash position
Construction activity progressing well with an average of 321 equivalent homes (including JVs) built per average week in the period
Highest scoring national housebuilder in the 2020 NextGeneration Sustainability Benchmark Report
FY21 wholly owned completions expected to increase to 16,000 to 16,250 homes with around 650 JV home completions, resulting in an outlook for the full year modestly above the Board’s previous expectations.
"Our priority continues to be keeping our customers and colleagues safe as we deliver high quality sustainable homes and developments the country needs, creating jobs and supporting economic recovery across England, Scotland and Wales.”
Ian Ruthven, Managing Director, Barratt Developments Yorkshire West commented:
Ian Ruthven, Managing Director, Barratt Developments Yorkshire West
“We have seen strong demand for our high quality, energy efficient homes across developments in West Yorkshire, which is being further supported with the launch of multiple developments throughout the region over the next year. As construction activity has increased, our employees and subcontractors have worked hard to maintain our high standards of quality and service, and we are proud that for the 12th successive year, our customers have rated us as a 5 star housebuilder.
"Our priority continues to be focused on keeping our customers and colleagues safe, as we deliver high quality sustainable homes and developments that the country needs, creating jobs and supporting economic recovery across the region.”
The company commented on a number of factors:
The Group has performed well since the start of the calendar year reflecting underlying market strength and strong customer demand for our high quality sustainable new homes. Overall, our net private reservation rate was strong at 0.83 (2020: 0.52; 2019: 0.79) per active outlet per average week with some positive house price inflation experienced across the country. The reservation rate increase of 59.6% on last year reflects the comparative period including the impact of the unprecedented closure of our sales outlets and sites by 27 March 2020 due to COVID-19.
During the period, we operated from an average of 346 (2020: 362; 2019: 388) outlets including 8 JVs (2020: 9; 2019: 9) per average week. New outlet openings are progressing well and we have launched 57 (2020: 29; 2019: 47) new outlets in the period (including JVs) positioning us well for FY22.
In the period we delivered 4,481 (2020: 3,504, 2019: 4,239) total home completions (including JVs of 149 (2020: 216, 2019: 258)) bringing total home completions in the financial year to date to 13,558 (2020: 11,818; 2019: 11,861). The increase in completions in the period reflects the delivery of customers’ homes in line with the original Help to Buy scheme and the stamp duty holiday deadlines.
Total forward sales (including JVs) as at 2 May 2021 were 14,846 homes (3 May 2020: 12,205 homes; 5 May 2019: 14,181 homes), 4.7% ahead of 2019. The value of our total forward sales was £3,696.3m (3 May 2020: £2,834.0m; 5 May 2019 £3,365.1m), 9.8% ahead of 2019. Reflecting our strong reservation rate, we are now fully forward sold for FY21 and substantially more forward sold for FY22 than we were at the same point in FY19 for planned FY20 home completions.
As a result of the continued commitment of our site teams and sub-contractors, construction activity has been ahead of planned output, with an average of 321 equivalent homes (including JVs), built per average week in the period. Construction output has equated to 304 equivalent homes per week in the financial year to date. Given the continued strength of the market, we are now seeing increases in build costs, currently running at c. 3%, however we continue to expect build cost inflation will be in the range of 1% to 2% for FY21.
The housing market and fundamentals
Despite the continued economic uncertainties, the housing market fundamentals remain attractive. There is strong demand for new homes across the country and years of undersupply underpins the Government’s ongoing target of 300,000 new homes each year. We are well positioned to deliver the high quality sustainable homes and developments the country needs across England, Scotland and Wales.
For the industry to continue to increase supply, it is vital that home buyers are able to access sustainable and competitive mortgage finance. There have been some modest reductions in mortgage interest rates in recent weeks, but there remains limited availability of higher loan to value (‘LTV’) mortgages for new build homes compared to the rest of the market.
We have industry-leading and British Safety Council accredited COVID-secure policies in place and our priority is to keep our employees, sub-contractors, suppliers and customers safe. We continue to manage the operational challenges created by COVID-19 across our business providing flexibility and support for employees. We recognise that following the initial national lockdown, unlike many other industries, we have been fortunate in our ability to continue operations across the country. As a result, we are in a strong financial position and, in recognition of this, the Board has agreed to refund c. £3.5m of business rate relief on showhomes and sales offices offered by local authorities due to COVID-19. This is in addition to the £26.0m of Coronavirus Job Retention Scheme grant income voluntarily refunded by the Group in the first half of FY21. We now expect net administrative expenses to be around £210m for FY21.
Sustainability is central to everything we do and we were delighted to advance our ranking in the 2020 NextGeneration Sustainability Benchmark Report published in March 2021. NextGeneration conducts a comprehensive annual benchmarking of the 25 largest UK housebuilders, in which we were the highest scoring national housebuilder and achieved second place overall. As a top performing housebuilder, we were also awarded the NextGeneration Gold Award.
We remain disciplined and selective in our land purchasing and have approved the purchase of 6,399 plots on 31 sites in the period, bringing our total for the financial year to date to 12,034 plots across 66 sites. We are seeing a good range of land buying opportunities and continue to expect to approve between 14,000 and 16,000 plots in FY21. In line with our operating framework, we are targeting an owned and controlled land bank of around 4.5 years in the medium term with land approvals in FY22 expected to be between 18,000 and 20,000 plots.
The business is in a strong position with substantial net cash, a well-capitalised balance sheet and a healthy forward sales position. We remain focused on delivering both operational improvements across our business and high quality, sustainable homes and developments across the country. However, we remain mindful of the continued economic uncertainties.
Reflecting both strong trading and our successful increase in construction activity, we now expect FY21 wholly owned completions to be between 16,000 and 16,250 homes and to deliver around 650 JV home completions. As a result, we now expect an outturn for the full year modestly above the Board’s previous expectations.