Barratt has reported strong demand as net reservations and forward sales are roughly 20% ahead of last year.
David Thomas, Chief Executive of Barratt, said: “Health and safety remains our number one priority and we remain focused on keeping our people safe while we rebuild completion volumes, bring further operational improvements to our business, and deliver on our commitment to build the highest quality homes across the country.
“There is continuing strong customer demand for our homes and we have a healthy forward order book. As we look ahead, whilst significant economic and political uncertainties persist, we believe our disciplined approach and strong balance sheet provide us with the resilience and flexibility to react positively to future challenges.”
Barratt reported strong demand; sales rate in the period was 0.871 net private reservations per active outlet per average week, up 20.8% on last year (2020: 0.72).
In line with expectations, 33 new developments, including JVs, were launched helping underpin the expected recovery of completion volumes.
Completions stood at 4,032 (2020: 3,252), up 24.0% on last year. Total forward sales (including JVs) as at 11 October 2020 were 15,135 homes (13 October 2019: 12,963 homes) at a value of £3,647.6m (13 October 2019: £3,070.2m).
Construction activity remains in line with FY21 planned output, with an average of 294 equivalent homes constructed per week in the period.
“Whilst mortgage rates remain relatively attractive, since the pandemic there has been a material change in loan to value (LTV) lending criteria with no mainstream mortgage lenders providing mortgages at 95% LTV for new build homebuyers, increasing the reliance of first time buyers on Help to Buy,” said Thomas.
In the period, 51% of Barratt’s private reservations (2020: 45%) used Help to Buy of which 74% were first time buyers (2020: 70%).
As at 9 October 2020 the Group had c. £570m of net cash. The Group also has an undrawn committed revolving credit facility of £700m.
“We are focused on rebuilding our completion volumes to our medium term target and capacity of 20,000 homes,” said Thomas. “We have acquired land in recent years at a minimum 23% gross margin, and through our continued focus on operating efficiencies and the rebuilding of completion volumes, we continue to target a minimum 25% ROCE in the medium term.
“Based on current market conditions, construction activity levels and assuming no further national lockdowns creating disruption to our construction sites, we continue to expect to grow wholly owned completions to between 14,500 and 15,000 homes in FY21, and in addition deliver around 650 completions from our joint ventures, whilst ensuring we maintain our industry leading standards of quality and service.
“Whilst there continues to be economic and political uncertainty, the Group is in a strong position. We have a substantial net cash balance, a well-capitalised balance sheet, a healthy forward sales position, a continued focus on delivery of operational improvements across our business and an ongoing commitment to deliver high quality homes across the country.
“The Board will continue to monitor the market and economy and believes that our strong financial position provides us with the resilience and flexibility to react to changes in the operating environment in FY21 and beyond.”
