# Barratt Developments expect to deliver YOY growth of 4% to 6%

- Link: https://www.directorstalkinterviews.com/barratt-developments-expect-to-deliver-yoy-growth-of-4-to-6/4121063134
- Published: 2022-05-05T07:35:39+01:00
- Author: Amilia Stone

**[Barratt Developments PLC](https://www.directorstalkinterviews.com/ftse-company/barratt-developments/bdev.l)**(
LON:BDEV) has issued a trading update in respect of the period from 1 January 2022
to 1 May 2022. Comparatives are to the prior year equivalent period unless otherwise
stated. Barratt Development PLC’s year end is 30 June 2022.

As our business grows, we remain committed to leading our industry in quality, service
and [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
and we are proud to be the only major housebuilder to be awarded 5 stars by our 
customers for the 13^(th) successive year.”

**Highlights**

·    Net private reservations per active outlet per average week of 0.93 (2021: 
0.83)^((1))

·    Fully forward sold for FY22 with total forward sales (including JVs) at 1 May
2022 of £4,383.3m (2 May 2021: £3,696.3m; 3 May 2020: £2,834.0m)  

·    Construction activity progressing well with 362 (2021: 321) equivalent homes(
including JVs) built per average week in the period

·    Balance sheet strength maintained with year-end net cash expected to be between
£1.0bn and £1.1bn

·    On track to deliver total home completions of between 18,000 and 18,250 homes
including around 750 JV home completions, resulting in a trading outlook for the
full year in line with the Board’s previous expectations

**Trading**

Barratt Developments has performed very well in the period. Our net private reservation
rate has been strong at 0.93 (2021: 0.83) per active outlet per average week. The
reservation rate increase of 12% on the equivalent prior year period, alongside 
continued house price inflation, reflects the strength of demand for our high quality,
energy efficient and sustainable homes right across the country.

During the period, we operated from an average of 326 (2021: 346) outlets including
7 JVs (2021: 8) per average week. We have launched 31 (2021: 57) new outlets in 
the period (including JVs) with the reduction in sales outlets reflecting the strength
of the private sales rate, which has continued throughout the period, as well as
some planning delays on new sites. Further outlet openings are scheduled for the
balance of FY22 and notwithstanding the continued strength of reservations, we expect
to enter FY23 with more outlets than at the start of the current financial year.

In the period we delivered 4,625 (2021: 4,481) total home completions (including
JVs of 133 (2021: 149)) bringing total home completions in the financial year to
date to 12,692 (2021: 13,558). As previously flagged, the decrease in completions
in the financial year to date reflects a return to the Group’s normal seasonality
as well as the impact of the tapering of the Help to Buy scheme and the original
stamp duty holiday deadline, which fell within the comparative period in 2021.

Total forward sales (including JVs) as at 1 May 2022 were 15,821 homes (2 May 2021:
14,846), 6.6% ahead of 2021. The value of our total forward sales was £4,383.3m (
2 May 2021: £3,696.3m), 18.6% ahead of 2021. Reflecting the strength of the reservation
rate, we are now fully forward sold for FY22.

As a result of the continued commitment of our site teams and sub-contractors, as
well as increased use of our standard house types and modern methods of construction,
build activity has further improved with 362 (2021: 321) equivalent homes (including
JVs) built per average week in the period. Construction output has equated to 346(
2021: 304) equivalent homes per week in the financial year to date positioning the
business well to deliver current year completion guidance and provide a solid platform
for completion growth in FY23.

As highlighted at the interim results, we expect total build cost inflation (including
infrastructure, materials and labour) of c. 6% for FY22. While the build cost inflation
outlook is uncertain, we anticipate it will remain at elevated levels over the coming
months as suppliers move to more dynamic pricing, primarily as a result of energy
cost volatility. As such, we will continue to work collaboratively with our supply
chain partners to secure sustainable, competitive pricing, while maintaining the
security of supply. Overall, our improved fixed cost efficiency, through completion
volume growth, along with the c. 7% sales price inflation within our forward sales
position at the start of the second half, means we continue to expect the effect
of build cost inflation on margin to be broadly neutral or positive for the second
half of FY22.

**Supporting our employees**

Recognising the impact of recent rises in the cost of living and as part of our 
commitment to being the employer of choice in the housebuilding industry, the Group
brought forward its regular annual salary review from 1 July to 1 April 2022, awarding
an increase to all eligible employees. This early salary increase, offering practical
support to our employees, comes in addition to our recent extension of private medical
insurance to our entire workforce and increased holiday and volunteering allowances.

**Building Safety – Industry Pledge**

In April 2022, we announced that a proportionate and sensible approach to fire safety
in historical buildings had been agreed with Government and we have pledged to support
leaseholders by funding remediation of buildings, which we developed, alongside 
paying the Residential Property Developer Tax.

We are now working with the Department for Levelling Up, Housing and Communities
to agree the necessary legal documentation in respect of our pledge and to set out
a fair approach to remediation including a robust and independent arbitration process
to provide clarity to all parties where there are areas of uncertainty.

However, we urge Government to reconsider its new plans to expand the scope of the
Building Safety Levy in addition to the existing Residential Property Developer 
Tax.  In our view, this is unjust and disproportionate, further punishing UK housebuilders
who were not responsible for most of the historical buildings or building safety
issues being addressed and fails to effectively allocate the cost of remediation
to those responsible.

**Land**

We remain disciplined and selective in our land purchasing and have approved the
purchase of 5,076 plots on 29 sites (2021: 6,399 plots on 31 sites) in the period,
bringing our total for the financial year to date to 13,945 plots across 77 sites(
2021: 12,034 plots across 66 sites). We are seeing a good range of land buying opportunities
and continue to expect to approve between 18,000 and 20,000 plots in FY22. In line
with our operating framework, we are targeting an owned and controlled land bank
of around 4.5 years in the medium term.

Following the acquisition of Gladman Developments, at the end of January 2022, we
are pleased with both the progress made on integration and the response from land
promotion partners.

**Balance sheet and liquidity**

The Group remains financially strong, with a well capitalised balance sheet. As 
at 29 April 2022 the Group had c. £735m of net cash^((2)) and the Group’s committed
revolving credit facility of £700m remained undrawn. Year-end net cash is expected
to be in line with previous guidance of between £1.0bn and £1.1bn.

**Outlook**

Reflecting both strong trading and our successful increase in construction activity,
we continue to expect FY22 total home completions to be between 18,000 and 18,250
homes including around 750 JV home completions, delivering year on year growth of
between 4% and 6%. As a result, we expect a trading outturn for FY22 in line with
the Board’s previous expectations.

Our business is in a very good position with substantial net cash, a very strong
forward sales position and an excellent land bank. We remain focused on delivering
high quality, sustainable homes and developments across the country supporting total
completions above pre COVID levels in FY22 and our planned completion growth in 
FY23 towards our medium-term target of 20,000 homes.

Macro-economic uncertainties remain, most notably around the war in Ukraine and 
rising inflation and interest rates in the wider UK economy. As a business, we also
face higher taxation, the ongoing challenges around build cost inflation and the
future withdrawal of Help to Buy, which will begin to taper in Autumn 2022, as the
scheme draws to a close in March 2023. The Board believes, however, that the overall
strength of the housing market, our operational performance since the onset of the
pandemic and our strong financial position provides us with the platform and flexibility
to react to any challenges and opportunities in the remainder of FY22 and beyond.

**Notes:**

(1)   All figures exclude joint venture (JV) completions in which the Group has 
an interest unless otherwise stated.

(2)   Net cash comprises cash and cash equivalents, bank overdrafts, interest bearing
borrowings and prepaid fees.

Note on forward looking statements

Certain statements in this document may be forward looking statements. By their 
nature, forward looking statements involve a number of risks, uncertainties or assumptions
that could cause actual results to differ materially from those expressed or implied
by those statements. Forward looking statements regarding past trends or activities
should not be taken as a representation that such trends or activities will continue
in the future. Accordingly undue reliance should not be placed on forward looking
statements. Unless otherwise required by applicable law, regulation or accounting
standards, the Group does not undertake to update or revise any forward looking 
statements, whether as a result of new information, future developments or otherwise.

**Conference call for analysts and investors**

David Thomas, Chief Executive, Steven Boyes, Chief Operating Officer and Deputy 
Chief Executive and Mike Scott, Chief Financial Officer, will be hosting a conference
call at 08:30am today, Thursday 5 May 2022, to discuss this Trading Update.

To access the conference call:

Dial-in UK & International: +44 (0) 330 165 3641

UK toll free: 0800 279 6894

Passcode: 292080

A replay facility will be available shortly after:

Dial-in UK & International: +44 (0) 203 859 5407

UK toll free: 0808 101 1153

Passcode: 8897875

> **David Thomas, Barratt Developments Chief Executive commented:**
> “We are seeing strong demand across the country for our high quality, energy efficient
> homes and our excellent operational teams are working hard to meet this demand.
> We expect to deliver full year trading results in line with the Board’s expectations
> as we remain focused on growing towards our medium-term target of 20,000 homes
> a year, delivering high quality sustainable developments the country needs, creating
> jobs and supporting the economy across England, Scotland and Wales.

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