LONDON (Alliance News) - Barratt Developments PLC on Wednesday said it is on track for a significant improvement in its full-year results after reporting a rise in total completions, average selling prices and forward sales in the first half.
Barratt said it continuing to benefit from operational changes made to the company and said it is on track for another "significant improvement" to its results for the full year to the end of June. Barratt added it is making good progress on meeting its medium-term targets of a minimum gross margin of 20% and minimum return on capital expenditure of 25% by its 2017 financial year.
The FTSE 100-listed housebuilder said total completions, including joint ventures, in the six months to the end of December rose 12.5% to 6,971 from 6,195 a year earlier. It registered 5,563 private completions, up 6.9% from 5,202 last year, with 1,149 affordable housing completions, a 53% rise on the 751 posted for the first half of 2013. Joint venture completions totalled 259, up 7% year-on-year from 242.
Barratt said it is on track to meet its target for 15,700 completions for the full year, based on its current sales rate of 0.58 net private reservations per active site per week. That rate is slightly slower than the 0.67 reservations seen a year earlier, which Barratt said was "exceptionally high" due to the launch period of the UK government's Help to Buy scheme.
The total average selling prices for the company's houses rose 8.4% to GBP229,000 from GBP211,200 a year ago, boosted by a 12.3% rise in private selling prices to GBP253,000 from GBP225,300. Barratt said the increase in prices was split evenly between changes in its mix and from house price inflation. It said it expects the year-on-year rise for private selling prices to ease in the second half of the year.
Margins for the group are in line with guidance, reflecting a higher proportion of completions from newer higher-margin land, a growth in volumes, operational improvements and the benefits from underlying house price inflation net of cost inflation.
Total forward sales for the company, including joint ventures, rose 17% to stand at GBP1.68 billion at the end of December, up from GBP1.44 billion a year earlier. The total figure was given a big boost from joint venture forward sales, which more than doubled to GBP397.3 million. Private forward sales increased 3.3% to GBP901.9 million, but affordable forward sales were down 2.9% to GBP381.6 million, again due to the bounce provided in 2013 by the Help to Buy scheme.
"We have delivered a strong performance in our first half including a 12.5% step up in completion levels," said Barratt Chief Executive Mark Clare.
"We are on track for another significant improvement in our financial performance for the full year as we continue to operate in a disciplined way, building the highest quality homes in places people want to live," Clare added.
Barratt shares were up 1.1% to 430.10 pence on Wednesday morning, one of the best performers in the FTSE 100.
The upbeat update from Barratt echoed that issued on Monday by rival Taylor Wimpey PLC, the company with which it was promoted back into the FTSE 100 at the end of December.
Taylor Wimpey, providing a trading update for the year to 2014, said it completed 12,454 homes in 2014, up 6% from 11,696 in 2013, and it achieved an average selling price of GBP234,000, up 11% from GBP210,000 a year earlier.
It said its order book stood at nearly GBP1.40 billion at the end of 2014, up 12% from GBP1.25 billion a year earlier, driven mainly by strong private reservations. The order book represents 6,601 homes, down from 6,627 a year earlier.
Persimmon PLC, Barratt's other FTSE 100-listed housebuilding peer, also issued a positive trading statement last week, saying it expects to report significantly higher pretax profit in 2014 on the back of strong legal completions, average selling prices and margins.
Persimmon said legal completions in 2014 rose 17% to 13,509 new homes, from 11,528 in 2013, and its average selling price rose 5% to about GBP190,500, from GBP180,941. That drove a 23% increase in revenue to GBP2.6 billion, from GBP2.1 billion.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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Barratt Developments (BDEV)
Persimmon (PSN)
Taylor Wimpey (TW.)