Interim Management Statement

RNS Number : 3689U

Barratt Developments PLC

14 May 2008

 



14 May 2008

Barratt Developments PLC 

Interim Management Statement

Barratt Developments PLC (the 'Group') is today publishing its Interim Management Statement covering the 19 week period from 1 January 2008.

As announced with the interim results on 27 February 2008, the Group made a relatively encouraging start to the new calendar year. However, since the end of March, market conditions have deteriorated significantly as a result of an unprecedented reduction in mortgage availability and tightening lending criteria, combined with a decline in consumer confidence.

Total housebuilding revenues for the 19 week period to 11 May 2008 were £825m compared to a prior year pro forma of £893m, a decrease of 7.6%. Completions were down 5.5%, with an increase in the proportion of social housing to 18%.  Net private reservations per week averaged 276 over the period - an uplift of 13.1% compared to 244 for the first half of the financial year, but down 33.6% against the prior year proforma.

Whilst the first 19 weeks of 2008 produced a relatively robust completion and revenue performance, reservation rates were disappointing when compared to a very strong prior year selling period.  In particular, there has been a significant fall in net private reservations per week since the end of March, with an average of 206 over the last 6 weeks.  Cancellation rates since the beginning of the calendar year have run at c. 25%, broadly in line with the medium term average, although we have seen an increase in cancellations over the last six weeks.

The forward order book currently stands at approximately £1.56bn as compared to a pro forma of £2.1bn in the prior year reflecting the lower sales rates currently being delivered.

Current market conditions are impacting to varying degrees on regional performance, with the Midlands and West worst affected, whilst the London and South East markets are proving to be relatively more resilient. The Group continues to benefit from a broad geographic and product mix and a targeted exposure to the London market. We are seeing greater pricing pressure across all regions and increased sales incentives are being required. This will have a small negative impact on operating margins in the current financial year.  New sites are only being started on a highly selective basis where we have clear visibility of demand and where work-in-progress can be particularly tightly controlled. Overall, we expect the number of sites to decline in the next financial year.

We continue to make good progress in delivering the announced synergy targets of at least £30m in this financial year increasing to at least £60m in 2008/09, and are focused on ensuring that we run the business as cost effectively as possible in the current climate.

The commercial development market remains challenging. We continue to focus Wilson Bowden Developments on realising cash from its portfolio and are exploring all opportunities to maximise value. We are making progress in selling existing stock units, and have also received a number of expressions of interest in the remainder of the business, although these are at a very early stage.

The Group continues to operate within its £2.6bn of committed facilities and its banking covenants.  Given the level of reserved and contracted sales, we expect net debt at the end of June to be approximately £1.7bn.

The Group has now paid down, through re-financing, £200m of its £800m acquisition finance facility and on 26 April 2008 exercised its option to roll the remaining £600m of its acquisition financing facility for a further 12 months to 25 April 2009. The Group has agreements in principle from its key bankers to convert approximately £400m of the facility into a new two year facility with a one year extension option, which combined with the expected fall in land spend over the next financial year, effectively deals with the Group's short term re-financing requirements. This new facility is likely to be in place by the end of this financial year.

Mark Clare, Group Chief Executive commented:

'Despite the deterioration in current trading conditions, we expect to deliver a satisfactory outcome for the current financial year.

'Against the difficult market backdrop, we continue to prioritise margin management and cash generation by focusing on efficient and effective selling, reducing costs, and tightly controlling land spend and work-in-progress.

'We do not expect to see a meaningful upturn in the housing market until there are improvements in the availability of mortgage finance.  We do, however, continue to believe the medium-term outlook remains strong given the restricted supply of housing in the UK.'

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For further information please contact:

Barratt Developments PLC

Mark Clare, Group Chief Executive

Mark Pain, Group Finance Director

For analyst/investor enquiries, please contact:

Barratt Developments PLC	020 7299 4880
Susie Bell, Acting Head of IR

For media enquiries, please contact:

Weber Shandwick Financial	020 7067 0700
Terry Garrett / Nick Dibden / James White

 

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