TIDMBDEV
RNS Number : 6995X
Barratt Developments PLC
06 May 2021
6 May 2021
Barratt Developments PLC
Strong operational performance delivers an increase in expected
full year completions
Barratt Developments PLC (the 'Group') is today issuing a
trading update in respect of the period from 1 January 2021 to 2
May 2021 (the 'period'). Comparatives are to the prior year
equivalent periods ('2020' and '2019') unless otherwise stated.
Barratt Development PLC's year end is 30 June 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 12(th) successive
year, our customers have rated us as a 5 star housebuilder.
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."
Highlights
-- 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 GBP3,696.3m (3 May 2020:
GBP2,834.0m; 5 May 2019: GBP3,365.1m)
-- 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
Trading
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 GBP3,696.3m
(3 May 2020: GBP2,834.0m; 5 May 2019 GBP3,365.1m), 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.
COVID-19
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. GBP3.5m of business rate relief
on showhomes and sales offices offered by local authorities due to
COVID-19. This is in addition to the GBP26.0m 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 GBP210m for FY21.
Leadership in quality and customer service
Our long term commitment to quality and customer service remains
absolute. This is the right thing to do for our customers and is
fundamental to the resilience of our business. Our quality has been
recognised through the NHBC Pride in the Job Awards for build
quality and 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, we secured seven of the ten regional awards where we
operate. In February 2021, our site managers secured both the
Supreme Award and runner-up in the Large Builder category. This is
the second year in a row that our site managers have secured the
Supreme Award and the fifth time in the last six years highlighting
the long term commitment of our site management teams to deliver
excellent build quality on safe and efficient sites across the
country.
We are also delighted that in March 2021 we retained our maximum
5 Star rating from our customers in the HBF customer satisfaction
survey for the 12(th) successive year, a unique achievement amongst
the major national housebuilders.
Sustainability
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.
Land
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.
Balance sheet and liquidity
The Group remains financially strong, with a well-capitalised
balance sheet and a substantial cash and liquidity position. As at
30 April 2021 the Group had c. GBP1,075m of net cash(2) and an
undrawn committed revolving credit facility of GBP700m. Reflecting
the expected delivery of additional wholly owned completions, year
end net cash is now expected to be around GBP1.0bn. We continue to
operate in line with our well embedded operating framework creating
discipline in our operations and resilience in our balance
sheet.
Costs associated with legacy properties
Cladding and the associated review
We recognise that the wider complex issues surrounding fire
safety guidance have caused distress for affected homeowners, as
regulations and requirements have continued to evolve, and that a
long term solution is required involving industry, the supply chain
and Government. We will continue to dedicate significant focus to
this area, as we have done to date, as founding signatories to the
Building Safety Charter and active members of the Early Adopters
Group, which is committed to protect life by putting safety first
ahead of all other building priorities.
All of our buildings, including the cladding and complete
external wall systems used, were signed off by approved inspectors
as compliant with the relevant Building Regulations at the time of
construction. In the aftermath of the tragedy at the Grenfell
Tower, we acted to remove and replace ACM cladding from the small
number of legacy developments where this material had been
installed. Now, alongside evolving Government advice on fire safety
for multi-storey buildings, we are working with building owners,
management companies and expert engineers on assessments of
buildings we have constructed and the solutions needed to support
leaseholders and residents.
Citiscape and the associated review
During the period we have incurred a cash outflow of c. GBP31m
in relation to Citiscape in line with the provision as at 31
December 2020. The associated review of reinforced concrete frames
announced in July 2020 is now complete.
Cost incurred with respect to legacy properties
In aggregate, from FY18 to date, we have incurred charges of
GBP163.1m(3) (Appendix 4) in respect of legacy properties across
both the cladding and Citiscape reviews, of this GBP85.6m remains
to be spent . Whilst the charges reflect the current best estimate
of the extent and future costs of work required, as assessments and
work progresses or if Government legislation and regulation further
evolves, estimates will be updated.
Dividend
Our interim dividend of 7.5 pence per share(4) (2020: nil), will
be paid on Monday 10 May 2021 to all shareholders that were on the
register on Friday 16 April 2021. The Board continues to target a
full year dividend based on a dividend cover of 2.5 times
earnings.
Outlook
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.
We remain focused on our medium term targets. Firstly rebuilding
total home completions in FY22 to FY19 levels and then progressing
towards our medium term target and current capacity of 20,000
homes. In order to do this, we are investing in work in progress
and seeking to increase site numbers to support growth. We have
acquired land in recent years at a minimum 23% gross margin and
through our continued focus on operating efficiencies and
optimising performance, we continue to target a minimum 25%
ROCE.
The Board will continue to monitor the market and the wider
economy but believes that our operating performance and strong
financial position provide us with the resilience and flexibility
to react to changes in the operating environment through the
balance of FY21 and beyond.
Notes:
(1) All figures exclude joint venture (JV) completions in which
the Group has an interest unless otherwise stated.
(2) Net cash comprises cash and cash equivalents, bank
overdrafts, interest bearing borrowings, and prepaid fees.
(3) Legacy property costs include costs relating to cladding
remedial works and associated reviews, as well as costs relating to
Citiscape and associated reviews. Joint venture costs are not
included.
(4) The FY21 interim dividend equates to GBP76.3m (2020: GBPnil).
Note on forward looking statements
Certain statements in this document may be forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results to differ materially from those expressed or implied
by those statements. Forward looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. Accordingly
undue reliance should not be placed on forward looking statements.
Unless otherwise required by applicable law, regulation or
accounting standards, the Group does not undertake to update or
revise any forward looking statements, whether as a result of new
information, future developments or otherwise.
Conference call for analysts and investors
David Thomas, Chief Executive, Steven Boyes, Chief Operating
Officer and Deputy Chief Executive and Jessica White, Chief
Financial Officer, will be hosting a conference call at 08:30am
today, Thursday 6 May 2021, to discuss this Trading Update.
To access the conference call:
Dial-in UK & International: +44 (0) 330 336 9104
UK toll free: 0800 358 6374
Passcode: 552984
A replay facility will be available shortly after:
Dial-in UK & International: +44 (0) 330 336 9104
UK toll free: 0800 358 6374
Passcode: 8160592
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
www.barrattdevelopments.co.uk
Barratt Developments PLC LEI: 2138006R85VEOF5YNK29
Financial reporting calendar
The Group's next scheduled announcement of financial information
is the FY21 full year trading update on 14 July 2021.
Appendices:
1. Sales Rate H2 to date H1 FY
--------------- ------------ ------ -----
FY21 0.83 0.77 n/a
FY20 0.52 0.69 0.60
FY21 vs FY20 59.6% 11.6% n/a
FY19 0.79 0.64 0.70
FY21 vs FY19 5.1% 20.3% n/a
--------------- ------------ ------ -----
2 May 2021 3 May 2020 Variance 5 May 2019 Variance
2. Forward GBPm Homes GBPm Homes GBPm Homes GBPm Homes GBPm Homes
sales
-------------- -------- ------- -------- ------- ------ ------ -------- ------- --------- -------
Private 2,197.1 6,508 1,496.5 4,623 46.8% 40.8% 1,821.9 5,924 20.6% 9.9%
Affordable 1,204.8 7,480 1,067.9 6,767 12.8% 10.5% 1,186.7 7,496 1.5% (0.2%)
--------------- -------- ------- -------- ------- ------ ------ -------- ------- --------- -------
Wholly owned 3,401.9 13,988 2,564.4 11,390 32.7% 22.8% 3,008.6 13,420 13.1% 4.2%
JV 294.4 858 269.6 815 9.2% 5.3% 356.5 761 (17.4%) 12.7%
--------------- -------- ------- -------- ------- ------ ------ -------- ------- --------- -------
Total 3,696.3 14,846 2,834.0 12,205 30.4% 21.6% 3,365.1 14,181 9.8% 4.7%
--------------- -------- ------- -------- ------- ------ ------ -------- ------- --------- -------
FY21 FY20 Variance FY19 Variance
3.Forward Private Total Private Total Private Total Private Total Private Total
sales roll
-------------- --------- --------- ----------- --------- ------------ ------ -------- --------- -------- --------
30 June 5,320 14,326 3,827 11,419 39.0% 25.5% 3,863 10,155 37.7% 41.1%
Reservations 11,588 14,078 9,745 12,604 18.9% 11.7% 11,443 15,887 1.3% (11.4%)
Completions (10,400) (13,558) (8,949) (11,818) 16.2% 14,7% (9,382) (11,861) 10.9% 14.3%
--------------- --------- --------- ----------- --------- ------------ ------ -------- --------- -------- --------
May 6,508 14,846 4,623 12,205 40.8% 21.6% 5,924 14,181 9.9% 4.7%
--------------- --------- --------- ----------- --------- ------------ ------ -------- --------- -------- --------
4. Legacy property costs H2 FY21
charged to the income statement(3) FY18 FY19 FY20 H1 FY21 to date Total
------------------------------------- ----- ----- ----- -------- --------- ------
Costs charged in ordinary
operations 4.1 17.3 28.7 1.8 1.5 53.4
Costs charged in adjusting
items 4.0 6.9 39.9 56.3 2.6 109.7
Total legacy property costs 8.1 24.2 68.6 58.1 4.1 163.1
------------------------------------- ----- ----- ----- -------- --------- ------
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