House Completions Down as Barratts Operate at 75% but Orders Rise

BARRATTS HAS ISSUED a trading update confirming all sites are now reopened and all employees, other than those shielding, have restarted working.

The number of homes completed was significantly reduced by the lockdown with 12,604 homes completed during the year to 30 June 2020, compared to the previous year’s figure of 17,856.

The company reports that all sites are now open and there is high customer interest since sales centres reopened, with private reservations per active outlet per average week of 0.63 for the last six weeks, compared to 0.69 in 2019.

The forward order book shows upcoming sales of 14,326 homes at a value of £3,249.7m compared to 11,419 at £2,604.1m at the same point in the previous year.

Site productivity

Barratts reports that sites that have been reopened for four weeks or more are operating at around 75% of construction activity levels prior to lockdown. The company puts this drop in productivity down to social distancing requirements, the timing of subcontractors returning to sites and prioritising building those houses already sold.

The business says it expects site productivity levels to improve following the most recent changes to social distancing requirements in England, the return of additional subcontractors and extended operating hours on many sites.

Supply chain

Barratts’ supply chain has suffered less, with around 90% of housebuilding materials being manufactured or assembled in the UK making them relatively secure.

However, the Group has had additional costs from the pandemic forcing it to cycle through the controlled closure, hibernation and restart of sites. Site durations are now expected to be extended, pushing up costs.

David Thomas, Chief Executive said, “Prior to the COVID-19 pandemic, the Group was delivering a strong year of progress on both volume and margin. The pandemic has caused significant disruption, but our highly skilled and experienced team have shown incredible resilience, flexibility and commitment both through the peak of the crisis and in the careful reopening of our sites.

“Now, with our construction sites operational across the UK, we begin the new financial year with cautious optimism supported by our strong forward order book and our well capitalised balance sheet.”

Market recovery

The company says prospects for new homes sales are uncertain and mortgage availability is key. It says demand from first time buyers looking to use Help to Buy has been significant since the market reopened and wants to see the scheme extended beyond March 2021.

The slowing market has not affected forward sales or selling prices with the average selling price at £280k, up from £274.4k in 2019.

Cash liquidity

Predictably, the Group’s net cash more than halved from last year’s position of £765.7m to the current £305m resulting in the business actively managing cash flows.

Land buying activities remain suspended, unless the company can obtain attractive conditional options so that it can choose whether or not to progress as market conditions become clearer.