Healthy trading conditions
Housebuilder Barratt reports ‘robust fundamentals’
Barratt Developments reported strong demand and said “market fundamentals are robust” despite the uncertainty over the Brexit decision.
The housebuilder echoed comments earlier this week by Taylor Wimpey and also pointed to the undersupply of properties as a factor in maintaining buoyancy in the market.
However, shares fell 11p in early trade to 471.75p on EU concerns and confirmation of price cuts in the London market.
In a trading update for the period 1 July to 13 November it confirmed some softening in the London market where it was reducing prices.
It said it is suffering a shortage of skilled labour and is investing in training its own employees with 642 graduates, trainees and apprentices currently employed across the company.
“We are also assessing, trialling and selectively implementing modern construction methods to reduce our dependency on certain trades,” it said.
The group expects to deliver further good progress on operating performance in FY17, with modest growth in wholly owned completions.
“We remain focused on delivery of 20% gross margin for FY17 notwithstanding that the high-end London market presents some headwinds in this regard. Overall trading remains in-line with market expectations.
“We remain committed to our cash return policy and expect to deliver cash returns of c. £1bn of dividends (based on consensus earnings) in the three year period to November 2017,” said the company.
As previously announced, Mark Rolfe will step down after eight years from the board following the AGM today. Jock Lennox, who joined the board on 1 July will take over as chairman of the audit committee and Richard Akers, who joined the board on 2 April 2012, will take over as senior independent director.
David Thomas, chief executive, said: “This has been another good trading period for the group. Consumer demand is strong supported by good mortgage availability.
“We are mindful of the potential for economic uncertainty created by the outcome of the EU Referendum. However, market fundamentals are robust, and we remain a housebuilder of choice.
“Barratt’s commitment to quality design, build and excellence in market-leading customer service has supported our strong sales performance. Our focus remains on maintaining good operational and financial performance, and delivering attractive shareholder returns.”
In its statement, the company said Mmarket conditions remain healthy, with the group trading positively since the start of the new financial year.
“In general, consumer demand is robust, driven by an undersupply of homes, good mortgage availability and a supportive Government policy environment including Help to Buy (Equity Loan).
“Our net private reservations per average week were in line with the prior year at 265 (2015: 265) with a sales rate of 0.74 (2015: 0.71) net private reservations per active outlet per average week. Sales rates compared to last year remain softer in London. Sales rates in our Northern and Central regions are strongly outperforming the prior year.
“Market conditions in London at higher selling prices remain more challenging. To mitigate these risks we have taken pricing action on a number of our sites in London. Further actions to de-risk London delivery include an exchanged build and sale agreement on a bespoke development of 39 apartments for a total value of £47m. “
The company launched 69 developments in the period (2015: 51) and currently operates from 385 sites (2015: 380). It expects the average site numbers to remain broadly flat in FY17 against FY16.
· Sales rate of 0.74 (2015: 0.71) net private reservations per active outlet per average week
· Total forward sales (including joint ventures (‘JVs’)) up by 4.3% to £2,654.3m (2015: £2,544.6m), with wholly owned forward sales up strongly by 19.5% to £2,466.1m (2015: £2,062.9m)
· As previously announced the board has proposed a record dividend payment of £248m payable on 21 November 2016.
The board proposed a final ordinary dividend of £123m or 12.3p per share (2015: 10.3p per share) to be paid on 21 November. Under the special cash payment programme, a payment of £125m (12.4p per share) was proposed with the Group’s FY16 results and will also be payable on 21 November 2016. The FY16 total dividend payment, including the special and interim dividend, is 30.7p per share (2015: 25.1p per share) equating to a total of £308m.
The dividend plan was announced in September 2014 and delivers future cash returns through an ordinary dividend of one third of earnings and a special dividend of £400m in aggregate with made or planned payments of £100m, £125m and £175m over the three years to November 2017.