Barratt reports ‘very strong year’ for sales
Housebuilder Barratt Developments said it has been a “very strong year” with profit before tax for expected to be around £765m (2016: £682.3m)and ahead of market expectations.
Total average selling price on completions in the year increased by c. 5.9% to c. £275k (2016: £259.7k), with private ASP increasing by c.8% to c.£313k (2016: £289.8k) benefiting from mix changes as well as some underlying house price inflation.
David Thomas, chief executive commented: “It has been another very strong year for the Group both operationally and financially. We have delivered our highest number of completions for nine years, more than any other housebuilder, and continue to see a positive mortgage environment and strong consumer demand.
“In March we were recognised as a five star builder by the Home Builders Federation for the eighth year in a row and we are determined to lead the industry in quality and service as we drive operational improvements through the business.”
The Group has traded well throughout the year, once again delivering against our financial and operational targets. Market conditions remain supportive, with attractive mortgage financing and the support of Help to Buy driving strong consumer demand.
Completions (including JVs) for the period were 17,395 units (2016: 17,319 units). Affordable housing represented 20% (2016: 17%) of total completions.
“We are committed to investing in the future of housebuilding. We are one of the largest employers of apprentices in the industry, and continue to develop, trial and implement modern methods of construction which can help address industry-wide skills challenges and support future growth.”
Forward sales position is strong, with total forward sales (including JVs) as at 30 June 2017 at a value of £2,144.4m (2016: £1,762.0m), equating to 9,762 plots (2016: 8,724 plots). Wholly owned forward sales were up by 18.8% on the prior year to £1,909.2m (2016: £1,607.2m), equating to 8,953 plots (2016: 8,054 plots).
Land and Planning
“The land market remains attractive and we continue to secure operational land opportunities that meet or exceed our minimum hurdle rates of 20% gross margin and 25% site ROCE.
“We approved £957.2m (2016: £1,095.6m) of operational land for purchase in the period, which we expect to equate to 18,497 plots (2016: 24,387 plots). Whilst this is lower than historical levels, it reflects our caution immediately following the EU referendum. At 30 June 2017 the Group had around a 4.5 year supply of owned and controlled land, in line with our target.
Capital Structure and Returns
As at 30 June 2017 the Group had a net cash balance of c. £720m (2016: £592.0m), ahead of guidance, driven by strong performance and the timing of land and working capital payments.
“We remain committed to our capital return policy announced in February and will announce in September the proposed full year ordinary dividend based on 2.5 times dividend cover. As previously announced, the Board also proposes to pay a special dividend of £175m in November 2017 and 2018. We expect to deliver cash returns of c. £1.4bn( of dividends (based on consensus earnings) in the four year period to November 2018.”
“This has been another strong year for the Group and we continue to drive operational improvements through the business, with a particular focus on improving operating margin.
“In FY18 we expect to deliver modest growth in wholly owned completions year on year. “
· The UK’s largest housebuilder with total completions including joint ventures (‘JVs’) at 17,395 (2016: 17,319), the highest level of completions in nine years
· Profit before tax expected to increase to around £765m (2016: £682.3m), ahead of market expectations(1)
· Expect to deliver our financial targets set in 2014 of 20% gross profit margin and 25% return on capital employed (‘ROCE’)(2) for FY17
· Year end net cash(3) balance of c. £720m (30 June 2016: £592.0m), ahead of guidance, driven by strong performance and the timing of land and working capital payments