Interim Management Statement

RNS Number : 3518I

Barratt Developments PLC

18 November 2008

 



Barratt Developments PLC

Interim Management Statement

Barratt Developments PLC ('Barratt') is today publishing its Interim Management Statement covering the 19 week period from 1 July 2008 to 9 November 2008.

Conditions in the housing market have remained extremely challenging with poor consumer confidence, continuing restrictions on the availability of mortgage finance, and further pressure on pricing.  Against this backdrop, Barratt continues to focus on maximising sales revenues, reducing costs and generating cash to reduce debt levels.

Enhanced marketing initiatives combined with increased discounts have enabled the Group to capitalise on the traditional autumn selling season. We have seen good visitor levels and sales volumes have been in-line with management's expectations for the period.  Pricing pressure has continued which, despite cost cutting, will have a negative impact on our operating margins.

Visitor levels per site for the 19 week period were down 5.8% compared to prior year. However, since the beginning of the autumn selling season at the start of September, we have seen visitor levels per site up approximately 7.5% on the comparable period.

Private net reservations averaged 197 per week, equating to 0.36 private sales per week per site, down 23% on the same period last year.  Again, we have seen a pick-up since the beginning of September, with private net reservations averaging 233 per week, 0.44 sales per week per site, down 6.6 % on the comparable period.

Section 106 social housing represented 16% of total completions for the period, broadly the same level as prior year.

Cancellation rates have averaged approximately 24% for the period, compared to 23% in the prior year. We expect this rate to trend upwards in keeping with normal seasonal trends as we approach the December half-year.

As indicated at our preliminary results announcement, we are seeing increased pricing pressure driven by buyers' expectations, lenders lowering valuations and competitor activity.  We estimate that average selling prices on a like-for-like basis, will have fallen by between 15% to 20% at the end of December 2008 from their peak in July 2007.  Although operating costs continue to reduce, increased discounts are exerting continued downward pressure on margins.

Total sales outlets for the period averaged 544, with effective sales outlets averaging 476. Total sales outlets are expected to reduce further, to an average of around 500 for the Group's financial year.

The forward order book currently stands at £817.7m equating to 5,513 plots (2007: 10,424). Of this, £481.5m (59%) is contracted.

We are only investing in land where we are contractually committed to do so, and expect total land spend for the financial year to be less than the £568m disclosed in early September. Land spend then reduces significantly in the next financial year. At current sales rates, the Group's landbank equates to approximately six years' supply.

There are very tight controls over work-in-progress and we are on track to deliver our target of at least £200m of free cash flow from the reduction of work-in-progress in the full year.

Stock levels continue to decline.  As at 9 November, we had 1,291 unreserved stock units, equating to 6.6 weeks supply at current sales rates. This is down from 1,821 units at 30 June 2008, a 29% reduction.  Whilst part exchange remains an effective sales tool, it is being tightly managed. Part exchange stock levels have continued to fall, and we currently have 252 unreserved units compared to 677 at 30 June 2008, down 63%.

We expect net borrowings at both the half and full year to be lower than prior year levels and that the Group will continue to operate within its committed facilities and banking covenants.

In-line with normal valuation practices and the relevant accounting standards, the Group will review the carrying value of its land and work-in-progress at the half-year.  Given the continued pricing pressure we have experienced since the beginning of September, it is anticipated that further write-downs to land and work-in-progress will be required at 31 December 2008.  In assessing the level of required write-downs, the Group will use site-by-site valuations carried out at the end of December.  Based on a further tightening of the commercial property market and restricted availability of bank finance, we anticipate that additional write-downs will also be required against the assets of Wilson Bowden Developments.  The Group will provide a full update on write-downs at its half yearly results which will be announced on 25 February 2009.

Mark Clare, Group Chief Executive commented:

'Conditions in the housing market are now as tough as anyone can remember with increasing pressure on prices and margins.  Against this backdrop, Barratt's focused sales effort has enabled us to deliver robust sales volumes, in-line with management expectations'.

Conference call for analysts and investors

Mark Clare, Group CEO and Mark Pain, Group FD will be hosting a conference call at 08:00am today, Tuesday 18 November 2008, to discuss the Interim Management Statement.

To access the conference call

Dial-in: 020 7162 0025

A replay facility will be available until 3 December

Dial-in: 020 7031 4064. Passcode: 816447

Barratt will be holding its Annual General Meeting today at 2:30pm.

Certain statements 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 representation that such trends or activities will continue in the future. Accordingly undue reliance should not be places on forward looking statements.

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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
Susie Bell, Acting Head of Investor Relations	020 7299 4880
For media enquiries, please contact:
Barratt Developments PLC
Dan Bridgett, Head of External Affairs	020 7299 4873
Maitland
Liz Morley	020 7379 5151
Neil Bennett

 

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