Barratt Developments BDEV Interim Management Statement

  Barratt Developments (BDEV) - Interim Management Statement

RNS Number : 0724R
Barratt Developments PLC
14 November 2012




14 November 2012



                           Barratt Developments PLC

                         Interim Management Statement





 Barratt on track to deliver significantly improved profits in the first half
                                     year



Barratt Developments PLC will be holding its Annual General Meeting ("AGM")
this afternoon at 2:30pm at the Royal College of Physicians, London and is
today issuing the Interim Management Statement for itself and its subsidiaries
(the "Group"), which covers the period from 1 July to 11 November 2012 (the
"period").



Highlights



· Net private reservations per site per week slightly up on the prior year
at 0.54 (2012: 0.53)

· Stable underlying selling prices

· Increase in private forward sales of 21.1% to £768.5m (2012: £634.5m)

· We continue to secure land at attractive prices across the country with
£226.8m (2012: £111.3m) of new higher margin land, equating to 29 (2012: 23)
sites, approved in the period. Half of full year completions expected to come
from newer higher margin land

· Reduction in overall indebtedness remains a key objective with target for
zero net debt as at 30 June 2015. Net debt guidance for 31 Dec 2012 reduced
to c. £400m, primarily reflecting the timing of land payments



Mark Clare, Group Chief Executive commented,

"We have traded well over the period. Our strategy of securing higher margin
land and bringing it into production as quickly as possible is delivering.
The Group is on track to report a significant improvement in profitability for
both the half and full year."



Trading



We have traded well over the  period. Market conditions have remained  stable 
with no  adverse  impact  from  the  Olympics,  and  our  London  business  in 
particular is continuing to trade strongly.



Average active sites (excluding joint ventures  ('JVs')) in the last 18  weeks 
were 375 (2012: 375) with  average JV sites of 5  (2012: 3). We have seen  an 
increased momentum in site openings from new land in recent weeks and continue
to expect average site numbers for the full year to be marginally ahead of the
prior year.



Average net private reservations per active site per week (excluding JVs) were
0.54 (2012: 0.53) in  the last 18  weeks (Note 1),  and the cancellation  rate 
(excluding JVs) was 16.0% (2012: 15.5%).



For the full  year we  expect social  completions to  be around  18% of  total 
completions. The delivery of social units is expected to be more weighted  to 
the second half resulting in lower  social completions in the first half  than 
in the prior year equivalent period.



The Group expects the  split of total completions  between the first half  and 
second half of the financial year to  be approximately 40% in H1 2013 and  60% 
in H2 2013, consistent with the split in prior years.



Overall underlying prices have remained stable during the period, with greater
strength in London  and the South  East. Further changes  in product mix  are 
expected to deliver growth in private average selling price in the first  half 
and full year 2013.



The Group  continues  to  retain  a  firm  control  on  costs,  in  particular 
capitalising on our scale, maximising  central procurement for materials,  and 
benchmarking costs across the Group.



Private forward  sales (excluding  JVs) were  up 21.1%  on the  prior year  to 
£768.5m (2012: £634.5m) with plots up 12.0%  on the prior year at 3,514  plots 
(2012: 3,137 plots).  Total forward  sales (excluding  JVs) were  up 2.1%  to 
£946.6m (2012: £926.7m) (Note 2).



Joint ventures



We are making  good progress with  our JV developments,  in particular on  our 
more complex London  sites. We  expect completions  and profits  from JVs  to 
increase significantly over  the next 2  to 3 years,  reflecting the  delivery 
profile of these sites (Note 3). Private JV forward sales were £38.2m  (2012: 
£10.2m) equating to 120 plots (2012: 49 plots) (Note 2).



We continue to review JV opportunities  which allow us either to access  sites 
that may not otherwise be available, or to reduce the investment required  and 
improve the  return on  capital employed  through construction  management  or 
marketing fees.



Government initiatives



The acceleration of housebuilding remains an important economic objective  for 
the Government  and there  are  a range  of Government-backed  initiatives  to 
support the industry.



Interest in  the NewBuy  mortgage indemnity  scheme has  increased during  the 
Autumn selling season and,  for the period,  reservations supported by  NewBuy 
totalled 9% of private reservations (excluding Scotland and Wales).



In September  the Government  announced additional  funding for  the  FirstBuy 
shared equity scheme. During October we  received an initial tranche of  this 
further funding and expect our full  allocation to be determined ahead of  the 
Spring selling season.  The Group will  target the use  of FirstBuy on  sites 
where affordability remains a key issue, in particular focusing the product to
drive sales on older and impaired developments.



The Group expects to receive c.  £35m in low-cost development finance in  FY13 
from the Government's Get  Britain Building Scheme which  is designed to  kick 
start stalled developments.



Despite the positive impact  of these Government  initiatives, we continue  to 
believe that  a  step  change  in  mortgage  lending  is  required  to  see  a 
sustainable increase in  the number  of new homes  being built.  The Bank  of 
England's Funding for Lending Scheme, launched  in July, has the potential  to 
stimulate mortgage  lending, with  around  30 lenders  now  signed up  to  the 
programme, including the UK's five largest lenders.



Land and planning



We are making  good progress in  transforming our landbank  as we continue  to 
bring more recently acquired, higher margin land into production as quickly as
possible.



For FY13 we expect around  half of completions to  come from this newer  land, 
increasing to c.  70% in  FY14 and  c. 85% in  FY15. This  land continues  to 
perform in line  with or ahead  of our required  hurdle rates on  acquisition, 
which include a gross margin of at least 20% and a return on capital  employed 
of at least 25% (Note 4).



We also remain focused on maximising the value of our historic land holdings.
We anticipate delivering  c. 18%  of completions  in FY13  from impaired  land 
which would, in  turn, reduce the  proportion of impaired  plots in the  owned 
land bank as at 30 June 2013  to c. 8% (2012: 15.2%). Where appropriate,  we 
will also accelerate the  utilisation of impaired land  through land sales  or 
swaps.



As at  30  June 2012  the  Group had  approximately  4.3 years  of  owned  and 
controlled land  based on  FY12 volumes.  We are  targeting a  similar  length 
landbank in the current financial year. In the period we have agreed terms on
£226.8m (2012: £111.3m)  of land  equating to 29  sites (2012:  23) and  3,685 
plots (2012: 2,320)  (Note 5). We  continue to see  good land  opportunities 
across the country and  our dual focus  remains on ensuring  we have the  land 
supply necessary to  support business growth  over the next  few years and  to 
deliver it in a way that maximises return on capital.



We continue to  seek to defer  payment for  new land where  possible to  drive 
higher return  on capital.  As at  30 June  2012, land  creditors of  £726.1m 
equated to 35% of our owned land bank and for FY13 we expect land creditors to
remain fairly constant as a proportion of the land bank.



Planning consents continue to be achieved  in line with our expectations.  We 
have detailed planning consents for 98%  of our expected FY13 completions  and 
detailed consents for  73%, with  outline consents on  a further  11%, of  our 
expected FY14 completions.



Net debt and interest



Reducing overall indebtedness  remains a  key objective  of the  Group with  a 
target of zero net debt as at 30 June 2015.



As we increase site numbers, make scheduled payments on new land approvals and
build work in  progress, particularly  in London, to  deliver completions  for 
Spring 2013, we expect net debt at 31 December 2012 to be c. £400m. The  £75m 
reduction  from  previous  guidance  largely  reflects  the  timing  of   land 
payments. In line with  normal seasonal trends, over  the second half of  the 
year net debt  will reduce  and as  at 30 June  2013 is  expected to  be at  a 
similar level to the prior year.



For FY13 we expect  the blended rate of  interest to be c.  8.5% and that  our 
total interest charge will be c. £75m, including a non-cash interest charge of
c. £20m.



Board changes



As  separately  announced  today,  Nina  Bibby  will  join  the  Group  as   a 
Non-Executive Director with effect from 3 December 2012. Nina is Global Chief
Marketing Officer at  Barclaycard, the payments  subsidiary of Barclays  PLC. 
Her  mix  of  marketing,  customer  insight  and  digital  skills  will  be  a 
considerable asset to us as we strive to enhance further our relationship with
our customers.



Bob Davies  is  stepping down  at  the conclusion  of  today's AGM  as  Senior 
Independent Director, Chairman of the Remuneration Committee and member of the
Audit Committee after some 9 years on  the Board of the Company. Bob has  made 
an outstanding contribution to the Group during his tenure. We wish him  well 
for the future. Mark Rolfe will take over as Senior Independent Director  and 
Richard Akers as Chairman of the Remuneration Committee.



Outlook



The  Group  is  on  track  to  deliver  further  significant  improvement   in 
profitability for both the half and  full year 2013. Against a stable  market 
backdrop, these  improvements will  be founded  on the  increased delivery  of 
newer higher margin land  in combination with the  continued focus on  driving 
efficiencies throughout the business.  At the same time  we will continue  to 
identify and approve the purchase of new land that meets or exceeds our hurdle
rates for profitability and return on capital.



Whilst we  are  supportive  of  the Government  schemes  such  as  NewBuy  and 
FirstBuy, we continue to  believe that any  significant improvement in  market 
conditions will be driven by increased mortgage availability and approvals.



Assuming a continuing stable market, the Board expects to recommence  dividend 
payments, with a conservative dividend cover, by proposing a final dividend in
respect of the financial year to 30 June 2013, payable in the final quarter of
2013.



Note 1 - Reservation rates (excluding JVs)



                  Average net private   Net private reservations per week per
                 reservations per week             active site^(1)
Last 18 weeks to          202                           0.54
11 Nov 2012
Last 18 weeks to          199                           0.53
13 Nov 2011

(1) An active site is defined by the Group as a site with at least one unit
available for sale



Note 2 - Forward sales



Forward sales - owned



                        11 Nov 2012 13 Nov 2011 % change
Private
Value                     £768.5m     £634.5m    21.1%
- due in H1               £424.6m     £385.6m    10.1%
- due after H1            £343.9m     £248.9m    38.2%
Plots                      3,514       3,137     12.0%
Social
Value                     £178.1m     £292.2m   (39.0%)
- due in H1               £30.6m      £45.5m    (32.7%)
- due after H1            £147.5m     £246.7m   (40.2%)
Plots                      1,806       2,842    (36.5%)
Total
Value                     £946.6m     £926.7m     2.1%
- of which contracted     £512.5m     £523.8m    (2.2%)
- % of which contracted     54%         57%       (3%)
- due in H1               £455.2m     £431.1m     5.6%
- due after H1            £491.4m     £495.6m    (0.8%)
Plots                      5,320       5,979    (11.0%)
- % contracted              59%         65%       (6%)

Forward sales - Joint ventures



                        11 Nov 2012 13 Nov 2011 % change
Private
Value                     £38.2m      £10.2m     274.5%
- due in H1                £6.5m       £5.5m     18.2%
- due after H1            £31.7m       £4.7m     574.5%
Plots                       120         49       144.9%
Social
Value                      £9.9m      £15.8m    (37.3%)
- due in H1                £1.1m       £1.9m    (42.1%)
- due after H1             £8.8m      £13.9m    (36.7%)
Plots                       90          102     (11.8%)
Total
Value                     £48.1m      £26.0m     85.0%
- of which contracted     £34.3m      £19.8m     73.2%
- % of which contracted     71%         76%       (5%)
- due in H1                £7.6m       £7.4m      2.7%
- due after H1            £40.5m      £18.6m     117.7%
Plots                       210         151      39.1%
- % contracted              57%         75%      (18%)



Note 3 - Joint ventures



London

Site                         Altitude Queensland Fulham Wharf Hendon Waterside
                                       Terrace
Location                     Aldgate  Islington     Fulham      West Hendon
JV partner                   London &  London &    London &     Metropolitan
                             Quadrant  Quadrant    Quadrant       Housing
Ownership                     50:50     50:50       50:50          75:25
GDV                           £106m     £137m       £427m          £41.5m
Total units                    235       375         462            191
Private/social mix (%)        73:27     100:0       85:15          80:20
JV landbank plots              206       375          -             164

(30 June 12)
Forecast delivery profile
Commencement on site          Jan 11    May 12      Aug 12         Jul 10

                                                                     
Private legal completions     Aug 13    Nov 13      May 14        Sept 12
start
                                                                     
Off site                      Mar 14    Jun 15      Dec 17         Jun 13



Non-London

Site                         The Acres Windmill Bluebell Gate The Fieldings /
                                        Place                  Cissbury Chase
Location                      Horley    Thame       East          Worthing
                                                  Grinstead
JV partner                     Wates    Wates       Wates          Wates
Ownership                    78.5:21.5  50:50       50:50          50:50
GDV                            £150m     £25m      £48.8m          £67.5m
Total units                     501       99         142            301
Private/social mix (%)         78:22    60:40       70:30           95:5
JV landbank plots               229       4          142             -

(30 June 12)
Forecast delivery profile
Commencement on site          Feb 08    Jan 11     May 12          Nov 12
Private legal completions     Feb 09    Mar 11     Dec 12          Apr 13
start
Off site                      Jun 16    Dec 12     Jun 15          Jun 14



Note 4 - Return on capital employed



Return on capital employed is defined  as site operating profit (site  trading 
profit less sales overheads and allocated administrative overheads) divided by
average investment in site land and work in progress



Note 5 - Land acquisition since mid 2009



                    IMS period from 1 July   IMS period from 1 Total since mid
                   2012 to 11 November 2012   July 2011 to 13       2009
                                               November 2011
Total land                 £226.8m                £111.3m         £1,786.2m
approvals
Total number of             3,685                  2,320           37,990
plots
Total number of               29                    23               340
sites
Location
- South:North (by         67% : 33%              60% : 40%        59% : 41%
value)
- South:North (by         56% : 44%              41% : 59%        47% : 53%
plots)
Vendor
- Government :            32% : 68%              32% : 68%        26% : 74%
Private
Type
- Houses : Flats          53% : 47%              81% : 19%        80% : 20%
Status
- Owned                      n/a                    n/a              65%
- Contracted                 n/a                    n/a              22%
- Progressing                n/a                    n/a              13%
Payment
- Paid FY10                  n/a                    n/a            £40.2m
- Paid in FY11               n/a                    n/a            £132.9m
- Paid in FY12               n/a                    n/a            £222.5m
- Due in FY13                n/a                    n/a            £468.4m
- Due after FY13             n/a                    n/a            £922.2m

Unless stated otherwise, % splits are by plots



This Interim Management Statement 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.



Conference call for analysts and investors



Mark Clare, Group CEO and David Thomas, Group FD will be hosting a  conference 
call at 08:30am  today, Wednesday 14  November 2012, to  discuss this  Interim 
Management Statement.



To access the conference call:

Dial-in: +44 (0) 20 3140 0668

Toll-free: 0800 368 1950

Passcode: 898216#



A replay facility will be available shortly after:

Dial-in: +44 (0) 20 3140 0698

Toll-free 0800 368 1890

Passcode: 387934#



Annual General Meeting



Barratt Developments PLC will be holding  its Annual General Meeting today  at 
2:30pm at the Royal College of Physicians, 11 St Andrews Place, Regent's Park,
London NW1 4LE.



For further information please contact:



Barratt Developments PLC
David Thomas, Group Finance Director    020 7299 4896
Susie Bell, Head of Investor Relations  020 7299 4880
For media enquiries, please contact:
Patrick Law, Corporate Affairs Director 020 7299 4892
Maitland
Liz Morley                              020 7379 5151

                                      

www.barrattdevelopments.co.uk



                     This information is provided by RNS
           The company news service from the London Stock Exchange

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IMSGGGAWGUPPUQC -0- Nov/14/2012 07:01 GMT