Trading Statement

RNS Number : 3841V

Barratt Developments PLC

09 July 2009

 



9 July 2009

Barratt Developments PLC

Trading update

Barratt Developments PLC ('Barratt') is today issuing a trading update for the twelve months to 30 June 2009, ahead of its annual results announcement on 29 September 2009.

Highlights

●	Full year completions of 13,202 in line with expectations, with target pricing achieved
●	Early signs of market stability, reported in our Interim Management Statement in May, continuing.
●	Operating margins in line with expectations.
●	Net debt reduced by approximately £370m over the last twelve months to an expected level of c.£1.28billion as at 30 June 2009.
●	Continuing to operate within financial covenants.

Mark Clare, Group Chief Executive commented:

'During the last six months, the early signs of stability we saw at the start of 2009 in the new housing market have continued, underpinned by limited stock and improved customer sentiment. We have seen higher sales rates, lower cancellations and prices leveling. We are not however going to see a sustained improvement in trading conditions until the availability of mortgage finance, particularly in the higher loan to value segment, recovers.'

Revenues

Visitor levels per site during the second half were down 4.3% on the equivalent period in the prior year, and up 11.9% on the first half.  

Private net reservations for the second half averaged 209 per week. We delivered 0.45 private net reservations per site per week, up 28.6% on the equivalent period in the prior year and up 15.4% on the first half.  On an effective site basis (i.e. only including sites where we are actively selling), private net reservations per site per week averaged 0.52 during the second half. 

The cancellation rate for the second half was 19.9% compared to 37.4% in the equivalent period in the prior year. The full year cancellation rate was 24% (2008: 33.6%).

Completions for the second half were 6,297, giving a total for the year of 13,202 (2008: 18,588). Private completions for the year were 24.8% lower at 11,133 (2008: 14,803). S.106 social completions were 45.3% lower at 2,069 (2008: 3,785). Social housing accounted for 15.7% (2008: 20.4%) of total completions.

Over the last twelve months total average selling prices decreased by 14% to c.£157,000 (2008: £183,100). Private average selling prices decreased by 19% to c.£166,000 (2008: £205,400) and social average selling prices increased, as a result of mix changes, by 12% to c.£107,000 (2008: £95,900). The main impact of these price changes was experienced during the autumn.  

Although sales prices remain under pressure, mainly as a result of constrained mortgage availability and down valuations, since 1 January we have seen greater stability. We have therefore been able to deliver adequate sales volumes during the second half at planned selling prices.  

As at 30 June, forward sales for the Group totalled £464.3m (2008: £697.6m), equating to 3,328 plots (2008: 4,586). Of this, £286.4m (62%) was contracted. Since the end of December, the value of our forward order book has remained stable (Dec 2008: £455.8m).

Margin

The combination of more stable selling prices and our relentless focus on costs has enabled us to hold operating margins in line with expectations. We are continuing to make good progress towards our 2009/10 cost saving targets. 

Land

The Group's owned and controlled land bank totalled c.68,000 plots as at the end of June (June 2008: 78,700). At 30 June, the Group's landbank equates to approximately 5.2 years' supply. The Group continues to invest in new land where it is contractually committed to do so or where it can secure attractively priced opportunities on deferred terms. Total land spend for the twelve months to 30 June 2009 was c.£260m (2008: £1,048m).

In line with normal accounting practices, the Group has commenced its year end review of the carrying value of land and work in progress. The review is being carried out on a site by site basis, using valuations incorporating forecast sales rates, and average selling prices that reflect current trading conditions. On the basis of work completed to date, average selling prices across developments are overall in line with the impairment levels identified at the time of our interim results announcement and accounted for as at 31 December 2008. We therefore do not currently expect further material land write-downs as at 30 June 2009 for the Group as a whole.

Stock and work in progress 

Stock and work in progress have been tightly controlled throughout the period.  

Unreserved roof to complete units are down 61% to 2,008 (June 2008: 5,157).  

Stock of completed units continues to reduce. We had 822 unreserved stock units at 30 June 2009, 3.9 weeks' supply at current sales rates, down 55% from the holding of 1,821 units at 30 June 2008.  

Part-exchange levels have also continued to fall. At 30 June 2009, we had 150 unreserved part-exchange units, down 78% over the last twelve months (June 2008: 677).

Wilson Bowden Developments

As previously reported, good progress has been made in the disposal of assets from the Wilson Bowden Developments portfolio, with total cash proceeds of £180m received to date with a further £20m expected over the next twelve months.

Investments and development opportunities, with a net asset value of c.£50m, are being retained and managed by a dedicated team with a view to realising value when the market improves. This team will also seek opportunities to create value from the mixed use sites within the wider Barratt portfolio.  

Pensions

With effect from 1 July 2009, the Group Pension and Life Assurance Scheme will cease to offer future accrual of defined benefit pensions for current employees and the link between accrued benefits and future salary increases will be removed.  This decision has been taken following a detailed consultation process with the Trustees and employee members of the Scheme. Alternative defined contribution pension arrangements are in place for current employees.

Borrowings

Group net borrowings as at 30 June 2009 are expected to stand at c.£1.28bn, representing a reduction of approximately £370m from levels as at 30 June 2008 and down c.£140m since 31 December 2008.  

As detailed in our Interim Results Announcement in February and our Interim Management Statement in May, future cash flows remain vulnerable given continued market uncertainty. Nevertheless, the Group has operated within its financial covenants throughout the last twelve months and expects to continue to do so.

Outlook

Since the start of 2009, we have continued to see signs of stability in the new housing market albeit at lower volumes. We have begun to open new sites on a selective and highly controlled basis where justified by local market conditions, and there are early, albeit limited, signs of activity in the land market. Nevertheless, confidence remains fragile and sustained recovery will depend on the wider outlook for the economy, particularly the availability of mortgage finance which remains highly constrained.  

We therefore remain cautious about the outlook and will continue to match work in progress to demand whilst reducing debt and controlling costs.  

- ends -

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

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, Thursday 9 July 2009, to discuss the Trading Update

To access the conference call

Dial-in: 020 8609 0581

Passcode: 136298

A replay facility will be available until Wednesday July 15 2009

Dial-in: 0800 358 2189 (UK toll free).  

1 866 676 5865 (US toll free)

Passcode: 267017

www.barrattdevelopments.co.uk

For further information please contact:
Barratt Developments PLC
Mark Pain, Group Finance Director	020 7299 4896
For media enquiries, please contact:
Barratt Development PLC
Dan Bridgett, Head of External Affairs	020 7299 4873
James Mason, Head of Investor Relations	020 7299 4880
Maitland
Liz Morley	020 7379 5151
Neil Bennett

 

END

 

 

TSTFGGGNKLLGLZG