Strong first half performance
Barratts trading statement issued last week presents positive new for conveyancers with an increase in the number of plots completed and net private reservations per active site per week increased by 23.1% to 0.48 (H1 2010/11: 0.39).
The report concludes saying “Whilst there remains considerable uncertainty surrounding the outlook for the macro-economic environment, in the first half of our financial year we have seen relative stability within our marketplace. We welcome the Government’s new housing strategy and believe it will have a positive impact on the industry.”
Mark Clare, Group Chief Executive commented, “This has been yet another six months of good progress for our business despite the wider economic uncertainty. We have delivered a further substantial increase in profits, brought debt in below expected levels and are starting the second half with a much stronger forward order book.”
Total completions for the period were 5,198 units (H1 2010/11: 4,832) with private completions of 4,028 (H1 2010/11: 3,669), social housing completions of 1,089 (H1 2010/11: 1,127) and joint venture completions of 81 (H1 2010/11: 36).Social housing accounted for 21.3% (H1 2010/11: 23.5%) of completions (excluding joint ventures).
Barratts continue to expect social housing completions to represent c. 20% of completions for the FY 2011/12.Shared equity remained an important selling tool throughout the period given the ongoing constraints on mortgage finance. In total, 972 (H1 2010/11: 1,342) completions used a shared equity product, representing 19.0% of completions (H1 2010/11: 28.0%). Of these completions, 477 used the Government FirstBuy initiative.
We have targeted and achieved an increased use of part-exchange as a selling tool, with 16.8% (H1 2010/11: 12.7%) of our completions supported by this product in the period.
We continue to manage our commitment to part-exchange stock carefully.During the period the Group operated from an average of 382 active sites, up from 352 for the equivalent period in the prior year and 375 in the second half of FY 2010/11.
The Group opened 80 sites and completed 57 sites during the period, resulting in a net increase in active sites to 400 as at 31 December 2011 (31 December 2010: 366).
Commenting on the Government housing strategy the trading update stated “The publication of the Government’s housing strategy in November was a welcome development for the industry.
The New Build Indemnity scheme is potentially the most important aspect, as it focuses on enabling customers to secure up to 95% loan to value mortgages which is significantly above current limits available for the new build sector. If the scheme is successfully implemented, it will substantially reduce the customer deposit required and be more cost efficient than shared equity products. Good progress is being made in its detailed implementation which is likely to see first completions in the Spring. However, whilst the indemnity scheme is being established, FirstBuy, the Government backed equity share product, will remain an important sales tool. We have made good progress in using our initial allocation of £24.9m (1,400 units) and this success has been recognised by the Homes and Communities Agency through an additional award of £7.0m (437 units).
The housing strategy is also expected to result in a substantial release of surplus Government land for housing through the ‘build now pay later’ initiative. The Group is well positioned to capitalise on this programme, as a result of its track record in successfully securing public land that has been released through the Delivery Partner Panel. To date, the Group has won six bids for more than 1,200 units with a gross development value of c. £270m and is also at an advanced stage of tendering for a further seven projects.
Shorter term Government initiatives to address housing supply include the Get Britain Building Fund of £420m. This is targeting sites where there is an implementable planning permission but where activity has either stalled or has not started for economic reasons. We also intend to submit a bid for an allocation of this funding”