TIDMBDEV
RNS Number : 7638K
Barratt Developments PLC
12 July 2017
12 July 2017
Barratt Developments PLC
Continued strong performance
Barratt Developments PLC (the 'Group') is today issuing a
trading update for the year ended 30 June 2017 (the 'period') ahead
of publication of its annual results on 6 September 2017. All
comparatives are to the year ended 30 June 2016 ('2016') unless
otherwise stated.
Highlights
-- The UK's largest housebuilder with total completions
including joint ventures ('JVs') at 17,395 (2016: 17,319), the
highest level of completions in nine years
-- Profit before tax expected to increase to around GBP765m (2016: GBP682.3m), ahead of market expectations(1)
-- Expect to deliver our financial targets set in 2014 of 20%
gross profit margin and 25% return on capital employed ('ROCE')(2)
for FY17
-- Year end net cash(3) balance of c. GBP720m (30 June 2016:
GBP592.0m), ahead of guidance, driven by strong performance and the
timing of land and working capital payments
David Thomas, Chief Executive commented,
"It has been another very strong year for the Group both
operationally and financially. We have delivered our highest number
of completions for nine years, more than any other housebuilder,
and continue to see a positive mortgage environment and strong
consumer demand.
In March we were recognised as a five star builder by the Home
Builders Federation for the eighth year in a row and we are
determined to lead the industry in quality and service as we drive
operational improvements through the business."
Trading Update
The Group has traded well throughout the year, once again
delivering against our financial and operational targets. Market
conditions remain supportive, with attractive mortgage financing
and the support of Help to Buy driving strong consumer demand.
Completions (including JVs) for the period were 17,395 units
(2016: 17,319 units). Affordable housing represented 20% (2016:
17%) of total completions.
Profit before tax for the period is expected to be around
GBP765m (2016: GBP682.3m) and ahead of market expectations. We
expect to meet our FY17 financial targets, set in 2014, of 20%
gross profit margin and 25% ROCE, with ROCE expected to increase to
around 29% (2016: 27.1%).
Total average selling price ('ASP') on completions in the year
increased by c. 5.9% to c. GBP275k(4) (2016: GBP259.7k), with
private ASP increasing by c. 8.0% to c. GBP313k (2016: GBP289.8k)
benefiting from mix changes as well as some underlying house price
inflation.
The sales rate for FY17 was 0.72 (2016: 0.69) net private
reservations per active outlet per week in the full year and 0.76
(2016: 0.72) in the second half. During the year, we operated from
an average of 377 active outlets including JV's (2016: 378).
We lead the industry in the high quality of our homes and our
customer service. That quality is recognised through the NHBC Pride
in the Job Awards where we have achieved more than any other
housebuilder for the 13(th) consecutive year. We remain the only
major housebuilder to be rated five star by our customers in the
HBF customer satisfaction survey for eight consecutive years.
We are committed to investing in the future of housebuilding. We
are one of the largest employers of apprentices in the industry,
and continue to develop, trial and implement modern methods of
construction which can help address industry-wide skills challenges
and support future growth.
Forward Sales
Our forward sales position is strong, with total forward sales
(including JVs) as at 30 June 2017 at a value of GBP2,144.4m (2016:
GBP1,762.0m), equating to 9,762 plots (2016: 8,724 plots). Our
wholly owned forward sales were up by 18.8% on the prior year to
GBP1,909.2m (2016: GBP1,607.2m), equating to 8,953 plots (2016:
8,054 plots).
Land and Planning
The land market remains attractive and we continue to secure
operational land opportunities that meet or exceed our minimum
hurdle rates of 20% gross margin and 25% site ROCE(5) .
We approved GBP957.2m (2016: GBP1,095.6m) of operational land
for purchase in the period, which we expect to equate to 18,497
plots (2016: 24,387 plots). Whilst this is lower than historical
levels, it reflects our caution immediately following the EU
referendum. At 30 June 2017 the Group had around a 4.5 year supply
of owned and controlled land, in line with our target.
Capital Structure and Returns
As at 30 June 2017 the Group had a net cash balance of c.
GBP720m (2016: GBP592.0m), ahead of guidance, driven by strong
performance and the timing of land and working capital
payments.
We remain committed to our capital return policy announced in
February and will announce in September the proposed full year
ordinary dividend based on 2.5 times dividend cover. As previously
announced, the Board also proposes to pay a special dividend of
GBP175m in November 2017 and 2018. We expect to deliver cash
returns of c. GBP1.4bn(6) of dividends (based on consensus
earnings) in the four year period to November 2018.
Outlook
This has been another strong year for the Group and we continue
to drive operational improvements through the business, with a
particular focus on improving operating margin.
In FY18 we expect to deliver modest growth in wholly owned
completions year on year.
We will update on current trading and our guidance for FY18,
alongside our full year results announcement on 6 September
2017.
This trading update contains certain forward-looking statements
about the future outlook for the Group. Although the Directors
believe that these statements are based upon reasonable
assumptions, any such statements should be treated with caution as
future outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
This announcement contains inside information.
Notes:
(1) Based on Reuters consensus estimate range of FY17 PBT GBP699m-GBP740m as at 7 July 2017
(2) ROCE is calculated as earnings before interest, tax,
operating charges relating to the defined benefit pension scheme
and operating exceptional items, divided by average net assets
adjusted for goodwill and intangibles, tax, cash, loans and
borrowings, retirement benefit assets/obligations and derivative
financial instruments
(3) Net cash is defined as cash and cash equivalents, bank
overdrafts, interest bearing borrowings and foreign exchange
swaps
(4) All figures exclude joint venture completions in which the
Group has an interest unless otherwise stated
(5) Site ROCE on land acquisition is calculated as site
operating profit (site trading profit less overheads less allocated
administrative overhead) divided by average investment in site
land, work in progress and equity share
(6) Based on Reuters consensus estimates of earnings per share
of 58.2p for FY17 and 60.4p for FY18 as at 7 July 2017. Applying a
two and a half times dividend cover in line with the announced
policy, and upon 30 June 2017 share capital of 1,007,899,274 shares
for proposed payments. All final dividends and the special cash
payment programme are subject to shareholder approval
Appendices
1. Completions 2017 2016 Variance
(units)
---------------- ------- ------- ---------
Private 13,303 13,198 0.8%
Affordable 3,342 2,707 23.5%
Wholly owned 16,645 15,905 4.7%
JV 750 1,414 (47.0%)
---------------- ------- ------- ---------
Total 17,395 17,319 0.4%
---------------- ------- ------- ---------
2. ASP (GBPk) 2017 2016 Variance
--------------- -------- ------ ---------
Private c. 313 289.8 8.0%
Affordable c. 124 113.2 9.5%
Total c. 275 259.7 5.9%
2017 2016 Variance
(GBPm)
3. Forward GBPm Plots GBPm Plots %
sales
-------------- -------- ------ -------- ------ ---------
Private 1,247.7 3,528 1,016.6 3,165 22.7%
Affordable 661.5 5,425 590.6 4,889 12.0%
Wholly owned 1,909.2 8,953 1,607.2 8,054 18.8%
JV 235.2 809 154.8 670 51.9%
--------------- -------- ------ -------- ------ ---------
Total 2,144.4 9,762 1,762.0 8,724 21.7%
--------------- -------- ------ -------- ------ ---------
Conference call for analysts and investors
David Thomas, Chief Executive and Jessica White, Chief Financial
Officer will be hosting a conference
call at 08:30am today, Wednesday 12(th) July, to discuss this
Trading Update.
To access the conference call:
Participant dial in: +44 (0)330 336 9411
Passcode: 6001266
24 hr replay dial in:
Tel: +44 (0)808 101 1153
Passcode: 6001266
For further information please contact:
Barratt Developments PLC
Jessica White, Chief Financial
Officer 01530 278 259
Chloé Barnes, Head of
Investor Relations 020 7299 4895
For media enquiries:
Tim Collins, Head of Corporate
Communications 020 7299 4874
Derek Harris, Head of Public
Relations 020 7299 4873
Brunswick
Jonathan Glass/Wendel Verbeek 020 7404 5959
www.barrattdevelopments.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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