TIDMBDEV
RNS Number : 9963K
Barratt Developments PLC
08 January 2021
8 January 2021
Barratt Developments PLC
Strong first half delivery ahead of expectations
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Barratt Developments PLC (the 'Group') is issuing a trading
update in respect of the half year ended 31 December 2020 (the
'period') ahead of publication of its interim results on 4 February
2021.
David Thomas, Chief Executive commented:
"Throughout the pandemic, our teams have worked hard to make our
operations COVID-secure and our first priority continues to be
keeping our employees, sub-contractors, suppliers and customers
safe. I'd like to thank our people for their efforts in helping us
to rebuild completion volumes, drive further operational
improvements and deliver on our commitment to build the highest
quality homes across the country. Despite the ongoing challenges
presented by the pandemic, we are confident that our operating
performance and strong financial position provide us with the
resilience and flexibility to respond to the operating environment
in FY21 and beyond."
Trading
We have delivered an excellent first half performance. Across
the country, we have seen strong customer demand for our high
quality new homes. Our sales rate over the period has, as
anticipated, moderated since our October update to a more
normalised level and for the period was up 11.6% at 0.77(1) (2019:
0.69(2) ) net private reservations per active outlet per week.
During the first half we saw an increased sales rate as strong
underlying demand was supplemented by pent-up demand from the
initial national lockdown, the introduction of the stamp duty
holiday and the March 2021 end of Help to Buy for existing home
owners. While we entered FY21 with elevated levels of work in
progress and rapidly improved our site-based construction activity
in the first quarter, the very strong demand experienced in the
half year absorbed both of these, and has reduced our product
availability for the third quarter of FY21.
In the half year, we operated from an average of 342 (2019: 372)
active outlets (including 8 JVs (2019: 9)), a reduction of 8.1%
reflecting the delay to site starts created by the initial national
lockdown period. We have had a successful first half, launching 63
(2019: 45) new outlets (including JVs), above our expectations,
which we expect to sustain the ongoing recovery in our completion
volumes in FY21 and beyond.
In the period we delivered 9,077 (2019: 8,314) home completions
(including JVs of 378 (2019: 314)), up 9.2% on last year. This
growth benefited from both the elevated level of work in progress
carried into the new financial year and our higher opening forward
sales position, due to the initial national lockdown delaying
completions. Our total average selling price ('ASP') increased by
1.1% to c. GBP283k (2019: GBP279.8k), with private ASP up 2.2% to
c. GBP319k (2019: GBP312.0k), reflecting both a positive mix impact
and underlying house price inflation.
Total forward sales (including JVs) as at 31 December 2020 have
increased by 14.3% to 13,588 homes (2019: 11,885 homes) at a value
of GBP3,212.1m (2019: GBP2,691.0m), 19.4% up on last year. We are
now over 90% forward sold for this financial year.
Despite the challenges, our sites operated successfully across
the country during the period, enabled by our extensive COVID-19
working practices and protocols. As a result, construction activity
in the first half was slightly ahead of planned output, with an
average of 298 equivalent homes, including JV's, constructed per
week. We enter our second half with a reduced level of work in
progress carried forward at December 2020 compared to June 2020
and, as a result, a greater reliance on construction activity in
the half year ahead.
Under the latest regulations to address the recent increase in
coronavirus infections, we are able to continue site based
construction across Britain. Our sales offices continue to operate
on an appointment basis in England and Scotland but have been
required to close in Wales. Our industry-leading and British Safety
Council accredited COVID-secure policies are fully embedded and our
first 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 including
providing flexibility for those with childcare responsibilities and
supporting our clinically extremely vulnerable employees who are
unable to work from home.
Land
We remain disciplined and selective in our land purchasing.
Following our recommencement of land buying in August, we have
approved the purchase of 5,635 plots on 35 new sites in attractive
geographical locations that meet our hurdle rates. We are now
seeing a greater range of land buying opportunities come to market
and have a good pipeline of offers accepted on additional sites. We
continue to target an owned and controlled land bank of around 4.5
years in the medium term, in line with our operating framework.
Balance sheet and liquidity
The Group is financially strong and has improved its net cash
position this half year to c. GBP1,105m(3) from GBP308.2m at 30
June 2020 reflecting our excellent completion delivery which has
significantly reduced our work in progress. With our success in
delivering new site starts, we expect to see increased investment
in both land and work in progress in our second half as we focus on
the further recovery of completion volumes beyond FY21.
Leading the industry in quality and customer service
Our long term commitment to quality and customer service is
absolute. This is the right thing to do for customers but also
fundamental to the resilience of our business. Our quality
continues to be recognised through the NHBC Pride in the Job Awards
for site management. In June 2020 our site managers were awarded 92
awards, more than any other housebuilder for the 16(th) consecutive
year. In the subsequent Regional NHBC Pride in the Job Awards,
Barratt secured seven out of the ten regional awards where we
operate, an unprecedented achievement.
We also remain the only major housebuilder to be awarded the
maximum 5 Star rating by our customers in the HBF customer
satisfaction survey for 11 years in a row.
In December 2020, we were named 'Large Housebuilder of the Year'
at The Housebuilder Awards 2020. This is the second year in a row
we have won this award and the third time we have secured this
title in the last five years.
Delivering our long term commitment to quality and customer
service rests with the effort and dedication of our employees
across the country. We believe it is important that we recognise
our colleagues' commitment, particularly after the challenges faced
over the last year, and that we share the success of the business
with the people who make it possible. Reflecting the challenges met
and overcome in 2020, and to mark the milestone of completing our
500,000(th) home this financial year, an award of 200 shares has
been made to all employees below managing director level. This is
the third year in a row that the Board has recognised our
employees' commitment and support in this way, following the
special share award in 2019 to mark ten years of HBF 5 Star rating
and our 60(th) anniversary share award in 2018.
Becoming the UK's leading national sustainable housebuilder
We believe that at the core of quality housebuilding is a
commitment to create a positive environmental, social and economic
legacy for future generations.
In early 2020, we became the first national housebuilder to
publish science-based targets for reducing carbon emissions, and
subsequently announced that by 2040 we will become a net zero
greenhouse gas emissions business across all of our direct
operations. In addition, in Autumn 2020 we set a new target to
ensure our standard house types will be net zero carbon in use from
2030. These targets and our constant commitment to lead the
industry in both quality and sustainability means that our
customers will live in high quality, low carbon, energy efficient
homes which have a lower impact on our environment and are cheaper
to run.
Dividends
The Board continues to recognise the importance of dividends to
all shareholders. As announced at our full year results, the Board
plans to implement a dividend policy based on a full year dividend
cover of 2.5 times. Subject to no material change in the operating
environment, the Board now expects to agree the resumption of
dividends with the interim results on 4 February 2021.
Outlook
The business continues to be in a strong position with
substantial net cash, a well-capitalised balance sheet, a healthy
forward sales position with over 90% sold for FY21, a continued
focus on delivery of operational improvements across our business
and an ongoing commitment to deliver high quality homes across the
country. Nevertheless, we are mindful of the continued economic
uncertainties arising from COVID-19 and the UK's new trading
arrangement with the EU, together with the end of the stamp duty
holiday and the changes to Help to Buy.
Based on current market conditions and site construction
activity, we now expect wholly owned completions to be between
15,250 and 15,750 homes in FY21, whilst ensuring we maintain our
industry leading standards of quality and service. We expect a
lower level of completions in our second half relative to our first
half reflecting the reduced level of work in progress carried
forward at December 2020 compared to June 2020 and, as a result, a
greater reliance on construction activity in the half year ahead.
We continue to expect to deliver around 650 home completions from
our joint ventures.
We remain focused on rebuilding our completion volumes to our
medium term target and current capacity of 20,000 homes. This,
coupled with our land acquisition in recent years at a minimum 23%
gross margin and our ongoing focus on operating efficiencies,
support our continued target of a minimum 25% ROCE in the medium
term.
The Board will continue to monitor the market and wider economy
but believes that our operating performance and further
strengthened financial position provide us with the resilience and
flexibility to react to changes in the operating environment in
both FY21 and beyond.
This trading update contains certain forward-looking statements
about the future outlook for the Group. Although the Directors
believe that these statements are based upon reasonable
assumptions, any such statements should be treated with caution as
future outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
Notes:
(1) Unless otherwise stated, all numbers quoted exclude Joint
Ventures (JVs) throughout this statement.
(2) All comparatives are to the prior year equivalent six month
period ended 31 December 2019 or as at 31 December 2019 ('2019'),
unless otherwise stated.
(3) Net cash comprises cash and cash equivalents, bank
overdrafts, interest bearing borrowings, and prepaid fees.
Appendices
1. Completions (Homes) 2020 2019 Variance
------------------------ ------ ------ ---------
Private 6,903 6,301 9.6%
Affordable 1,796 1,699 5.7%
------------------------ ------ ------ ---------
Wholly owned 8,699 8,000 8.7%
------------------------ ------ ------ ---------
JV 378 314 20.4%
------------------------ ------ ------ ---------
Total 9,077 8,314 9.2%
------------------------ ------ ------ ---------
2. ASP GBPk 2020 2019 Variance
------------- ------- ------ ---------
Private c.319 312.0 2.2%
Affordable c.145 160.0 (9.4%)
------------- ------- ------ ---------
Total ASP c.283 279.8 1.1%
------------- ------- ------ ---------
31 December 2020 31 December 2019 Variance
3. Forward sales GBPm Homes GBPm Homes GBPm Homes
------------------ ---------- ------- ---------- ------- -------- --------
Private 1,722.9 5,104 1,284.0 3,997 34.2% 27.7%
Affordable 1,238.6 7,699 1,103.2 6,990 12.3% 10.1%
------------------- ---------- ------- ---------- ------- -------- --------
Wholly owned 2,961.5 12,803 2,387.2 10,987 24.1% 16.5%
JV 250.6 785 303.8 898 (17.5%) (12.6%)
------------------- ---------- ------- ---------- ------- -------- --------
Total 3,212.1 13,588 2,691.0 11,885 19.4% 14.3%
------------------- ---------- ------- ---------- ------- -------- --------
Current Year Prior Year Variance
4. Forward sales Private Total Private Total Private Total
roll
------------------ -------- -------- -------- -------- -------- -------
30 June 5,320 14,326 3,827 11,419 39.0% 25.5%
Reservations 6,687 8,339 6,471 8,780 3.3% (5.0%)
Completions (6,903) (9,077) (6,301) (8,314) 9.6% 9.2%
------------------- -------- -------- -------- -------- -------- -------
31 December 5,104 13,588 3,997 11,885 27.7% 14.3%
------------------- -------- -------- -------- -------- -------- -------
For further information please contact:
Barratt Developments PLC
Jessica White, Chief Financial Officer 01530 278 259
Analyst/investor enquiries
John Messenger, Group Investor Relations Director 07867 201 763
Media enquiries
Tim Collins, Head of Corporate Communications 020 7299 4874
Brunswick
Jonathan Glass/Rosie Oddy 020 7404 5959
The person responsible for arranging the release of this
announcement on behalf of Barratt Developments PLC is John
Messenger (Group Investor Relations Director).
www.barrattdevelopments.co.uk
Barratt Developments PLC LEI: 2138006R85VEOF5YNK29
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