Barratt Developments Bounces Back with Trading Update

IN A TRADING update for the period from 1 January 2021, Barratt Developments PLC reports a stronger bounce back than expected.

There have been 4,481 houses already sold since the start of this year. Sales are up by 9.8% from the same four-month period in 2019; including forward sales they were valued at £3,696.3 million. Total forward sales at May 2021 are 14,846 homes – 4.7% ahead of 2019.

An average of 321 homes were built per week since January, and sales completions are expected to increase to around 16,250 homes by the end of this year – also above Barratt’s expectations.

Reservations are up too. The company is now reporting it is now fully forward sold up to April this year and substantially more forward sold for up to April 2022 than at the same point last year. In 2019 they were 0.79 houses sold per active outlet per average week, which decreased to 0.52 in 2020, but has now risen to 0.83 since the start of 2021.

The knock-on effects of the pandemic-shutdown meant Barratts has had a declining number of sites over the past three years, dropping from 388 in 2019 to 346 this year. However, since January the company has opened a further 57 outlets, positioning it well for 2022.

After giving back £26.0 million of furlough money claimed for Barratt staff earlier this year, the company’s board has now also agreed to refund £3.5 million of business rate relief on show homes and sales offices offered by local authorities due to COVID-19.

Build Costs

Given the continued strength of the housing market, Barratt is not immune to the widespread increases in build costs, currently running at around 3% for the housebuilder, it says. The company says it expects build cost inflation will be in the range of 1% to 2% for the 2021 financial year.

David Thomas, Chief Executive commented: “We have seen strong demand which means we now expect to increase wholly owned completions to between 16,000 and 16,250 homes this year, along with around 650 JV home completions.

“As construction activity has increased our employees and sub-contractors have worked hard to maintain our high standards of quality and service and we are proud that for the 12th successive year, our customers have rated us as a 5 star housebuilder.”

Land

Barratts has approved the purchase of 6,399 plots on 31 sites since January, bringing the total for the financial year to date to 12,034 plots across 66 sites. The company expects to approve between 14,000 and 16,000 plots in the coming 12 months, increasing to 18,000 – 20,000 plots in the 2022 financial year.

Cladding

Barratts say it recognises “that the wider complex issues surrounding fire safety guidance have caused distress for affected homeowners”.

But the company points out “All of our buildings, including the cladding and complete external wall systems used, were signed off by approved inspectors as compliant with the relevant Building Regulations at the time of construction.”

The south London development of 100 flats, Cityscape designed by a third party engineering form continues to cost Barratt’s with £31m spent by the end of 2020 on ACM cladding removal and defective reinforced concrete frames.

A review of other legacy properties has incurred charges of £132.1m, and of this £85.6m remains to be spent at current estimates.

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