07/09/2016 Archive
Barratt Developments PLC
Annual Results Announcement for the year ended 30 June 2016 Another year of strong performance and a positive start to FY17
|
£m unless otherwise stated |
Year ended 30 June 2016 |
Year ended 30 June 2015 |
Change |
|
Total completions1 (plots) |
17,319 |
16,447 |
5.3% |
|
Revenue |
4,235.2 |
3,759.5 |
12.7% |
|
Profit from operations |
668.4 |
576.8 |
15.9% |
|
Operating margin2 (%) |
15.8 |
15.3 |
0.5ppts |
|
Profit before tax |
682.3 |
565.5 |
20.7% |
|
Basic earnings per share (pence) |
55.1 |
45.5 |
21.1% |
|
Return on capital employed3 (%) |
27.1 |
23.9 |
3.2ppts |
|
Net cash4 |
592.0 |
186.5 |
405.5 |
Highlights
- Disciplined growth in housing completions, delivering our highest total in eight years
- Private average selling price increased by 10.4% to £289,800 (2015: £262,500), predominantly reflecting mix
- Strong growth in profit before tax, up by 20.7% to £682.3m (2015: £565.5m)
- ROCE up 3.2 ppts to 27.1% (2015: 23.9%), reflecting our fast asset turn model
- Positive cash generation resulting in strong balance sheet and net cash at 30 June 2016 of £592.0m (2015: £186.5m)
- Excellent future land opportunities secured with 24,387 plots approved for purchase; controlled land supply of 4.5 years at year end
- Step up in the delivery of strategic land with 22% (2015: 17%) of completions from strategic land
- 19% increase in final ordinary dividend per share to 12.3p (2015: 10.3p) together with 12.4p special dividend per share
- Total FY165 capital return of £308m (2015: £250m), equating to 30.7 pence per share (2015: 25.1 pence per share)
Current trading
- Positive start to the new financial year, with net private reservations per active outlet per average week from 1 July 2016 of 0.75 (2015: 0.71)
- Total forward sales including JV’s as at 4 September 2016 up by 4.1% compared to last year, at £2,416.5m (6 September 2015: £2,321.9m)
Commenting on the results David Thomas, Chief Executive of Barratt Developments PLC said:
“The strong operational and financial performance in FY16 reinforces the progress we have made over the last few years as does our disciplined volume growth. This was underpinned by our fast asset turn model and our industry leading customer service and construction excellence.
Barratt starts the new financial year in a good position with a strong balance sheet, good forward sales and an experienced management team. Whilst we continue to monitor market conditions closely, current trading trends are positive, and I remain confident in the fundamentals of the housing sector and of our business.”
1 Includes joint venture (‘JV’) completions in which the Group has an interest
2 Operating margin is profit from operations divided by revenue
3 Return on capital employed (‘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 obligations and derivative financial instruments
4 Net cash is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings and foreign exchange swaps.
5 FY refers to the Financial Year ended 30 June
Note: In this Annual Results Announcement, the ‘Company’ is defined as Barratt Developments PLC and the ‘Group’ relates to the Company together with its subsidiary undertakings.
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.
There will be an analyst and investor meeting at 9.00am today at Deutsche Bank, 1 Great Winchester Street, London, EC2N 2DB. The presentation will be broadcast live on the Barratt Developments corporate website, www.barrattdevelopments.co.uk, from 9.00am today. A playback facility will be available shortly after the presentation has finished.
A listen only function will also be available.
Dial in: 0800 953 1287
International dial in: +44 (0) 1452 560 297
Access code: 65907695
Further copies of this announcement can be downloaded from the Barratt Developments corporate website www.barrattdevelopments.co.uk or by request from the Company Secretary’s office at: Barratt Developments PLC, Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire, LE67 1UF.
For further information please contact:
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Barratt Developments PLC |
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Neil Cooper, Chief Financial Officer |
020 7299 4862 |
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Analyst/investor enquiries |
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Abi Genis/Chloe Barnes, Investor Relations |
020 7299 4895 |
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Media enquiries |
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Tim Collins, Head of Corporate Communications |
020 7299 4874 |
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Derek Harris, Head of PR |
020 7299 4873 |
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Brunswick |
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Jonathan Glass/Wendel Verbeek |
020 7404 5959 |
Chairman’s Statement
A year of strong performance
This has been another year of excellent progress for the Group, with a strong financial and operational performance. We have grown completion volumes in a disciplined way, significantly grown profit and continued our delivery of industry leading build quality and customer service.
Whilst the outcome of the EU referendum has increased levels of economic and political uncertainty, the Group is in a strong position, with a substantial year end net cash balance, healthy forward sales position and an experienced management team. The Board will continue to monitor the market and economy and take appropriate action where necessary. The wider market for new homes remains healthy across Britain, with a long term undersupply of new homes, strong government support to the sector and a liquid mortgage market.
Consequently, we remain confident in the strong fundamentals of the housing sector and our business.
Operationally, we have delivered our highest completion volumes for eight years, increasing completions by 5.3% to 17,319 homes, a performance that highlights the reliability and delivery capability of our housebuilding operations. This performance is particularly impressive, given it accompanies our industry-leading quality and customer service standards.
As a result of this excellent operating performance, we were able to increase profit before tax by 20.7% and we ended the year with a net cash balance of £592.0m.
The Group’s fast asset turn model, supported by a relatively short consented land bank, the use of deferred payment terms, high levels of standard products and the ability to sell through both Barratt and David Wilson Homes on larger sites, ensures a focus on driving return on capital employed. We made further progress in the year, driving return on capital employed up to 27.1%, an increase of 3.2 percentage points.
Investing in land
The land market remained attractive throughout FY16 in terms of land availability at acceptable prices and we have secured excellent development opportunities that meet or exceed our minimum hurdle rates of 20% gross margin and 25% site ROCE. In the year we approved £1,095.6m of operational land for purchase, which we expect to equate to 24,387 plots. Our long term targets for land are to hold 3.5 years of owned and consented land and a further 1.0 year of controlled land. This strong performance helped us to end the year with 3.4 years of owned and consented land and a further 1.1 year of controlled land: 4.5 years in total (2015: 4.5 years).
During the year we have also made good progress in securing a longer term pipeline of land through strategic options.
Housing policy
The UK Government continues to recognise the need to see more homes built across the country as evidenced by its policies to improve land availability, planning and support for buyers.
By increasing the number of homes that we are building, in a disciplined way, we are not only playing our part in reducing the housing shortage but are also generating significant economic activity, creating jobs and enhancing communities. During the year we estimate that we supported over 55,000 jobs either directly, indirectly or induced.
Delivering returns for our shareholders
Our dividend plan was announced in September 2014 and aimed to deliver attractive future cash returns through an ordinary dividend of one-third of earnings and a special dividend, over three years, of £400m in aggregate.
As a result, the Board is pleased to propose a final dividend of 12.3 pence per share (2015: 10.3 pence per share). Under our Capital Return Plan, special dividends are proposed in addition to ordinary dividends with the second special dividend of £125.0m to be paid in November 2016, which equates to 12.4 pence per share.
The total proposed capital return for the year is therefore 30.7 pence per share (2015: 25.1 pence per share).
|
Capital returns for the financial year |
Year ended 30 June 2016 |
Year ended 30 June 2015 |
|
Interim ordinary dividend per share (pence) |
6.0 |
4.8 |
|
Final ordinary dividend per share (pence) |
12.3 |
10.3 |
|
Special dividend per share (pence) |
12.4 |
10.0 |
|
Total capital return per share (pence) |
30.7 |
25.1 |
|
Capital Return PlanA |
Ordinary dividend £m |
Special dividend £m |
Total Capital Return £m |
Total pence per share |
|
Paid to dateB |
281 |
100 |
381 |
38.2p |
|
Proposed payment |
||||
|
November 2016 |
123 D |
125 |
248 |
24.7p D |
|
Year to November 2017 |
159 C, D |
175 |
334 |
33.2p D |
|
Total proposed payment |
282 C, D |
300 |
582 |
57.9p D |
|
Total Capital Return Plan |
563 |
400 |
963 |
96.1p D |
A All ordinary and special dividends are subject to shareholder approval. The second special dividend will be subject to shareholder approval at the Annual General Meeting in November 2016 and subsequent special dividends will be subject to shareholder approval.
B Comprises FY14 final dividend of 7.1 pence per share (£70m), FY15 interim dividend of 4.8 pence per share (£48m), FY15 final dividend of 10.3 pence per share (£103m), FY15 special dividends of 10.0 pence per share (£100m) and FY16 interim dividend of 6.0 pence per share (£60m).
C Based on Reuters consensus estimates of earnings per share of 47.5 pence for FY17 as at 2 September 2016 and applying a three times dividend cover in line with previously announced policy.
D Based upon 30 June 2016 share capital of 1,003,607,066 shares for proposed payments.
Our employees
The outstanding progress made during the year would not have been possible without the capability and dedication of our employees whom I would like to thank on behalf of the board for their contribution.
We are delighted that our site managers were awarded 79 NHBC Pride in the Job Awards. This is the twelfth year in succession that we have secured more Pride in the Job Awards than any other housebuilder.
We are also very pleased that we have maintained the Home Builders Federation maximum five star rating for the seventh consecutive year, indicating that 90% of our homeowners would recommend us to a friend. This is a fantastic achievement and reflects the strength of our sales and customer service teams.
The Board
During the year there have been a number of significant changes to the Board.
David Thomas, who joined us as Group Finance Director in 2009, succeeded Mark Clare as Chief Executive on 1 July 2015.
Neil Cooper joined the Board on 23 November 2015 as Chief Financial Officer. Neil was previously Group Finance Director of William Hill PLC and was Group Finance Director of Bovis Homes Group PLC from 2007 until 2010.
After eight years’ distinguished service to the Board, Mark Rolfe will step down from his position as a Non-Executive Director of the Company with effect from the conclusion of the forthcoming AGM to be held in November 2016. Mark will also stand down as the Senior Independent Director and Chairman of the Audit Committee on the same date.
Richard Akers will replace Mark Rolfe as the Senior Independent Director with effect from the conclusion of the Group’s AGM in November 2016. Richard has been a Non-Executive Director of the Group since 2012 and is also Chairman of the Remuneration Committee.
The Board appointed Jock Lennox as a Non-Executive Director of the Company with effect from 1 July 2016. Jock also joined the Audit, Nomination and Remuneration Committees with effect from the same date and will succeed Mark Rolfe as Chairman of the Audit Committee from the conclusion of the 2016 AGM.
The Board is confident that the Executive Directors - David Thomas, Steven Boyes and Neil Cooper - supported by an experienced and talented Senior Management team, will continue to lead the Group effectively.
John Allan
Chairman
6 September 2016
Chief Executive’s Statement
Our results
The Group traded successfully throughout the financial year, delivering a strong performance. We made a record profit before tax of £682.3m, up 20.7% on the prior year (2015: £565.5m), and our highest ROCE in ten years at 27.1% (2015: 23.9%).
We have also significantly strengthened our balance sheet, ending the year with net cash of £592.0m (2015: £186.5m) and with net tangible assets¹ of £3,118m (2015: £2,819m).
|
£m unless otherwise stated |
Housebuilding |
Commercial |
Total |
|
Total completions including JV’s (plots) |
17,319 |
- |
17,319 |
|
Revenue |
4,153.3 |
81.9 |
4,235.2 |
|
Gross margin (%) |
19.1% |
10.3% |
18.9% |
|
Profit from operations |
662.4 |
6.0 |
668.4 |
|
Operating margin (%) |
15.9% |
7.3% |
15.8% |
|
Share of post-tax profit/(loss) from joint ventures and associates |
72.4 |
(0.3) |
72.1 |
¹ Group net assets less other intangible assets and goodwill
Our businesses
Our improved financial results have been driven by a strong and disciplined operational performance in both our housebuilding and commercial developments businesses.
Housebuilding
Housebuilding results
We saw good consumer demand across our regions throughout our financial year, with some slowdown in the higher value London market. Throughout the year, the mortgage market remained positive, with increased competition amongst lenders and new market entrants resulting in good availability of attractive mortgage finance for our customers.
The sales rate in the year was 0.69 (2015: 0.64) net private reservations per active outlet per week, with a sales rate in the second half of 0.72 (2015: 0.70) net private reservations per active outlet per week. During the year, we operated from an average of 365 active outlets (2015: 380).
In London, we have seen strong demand at price points up to £600,000, reflecting the benefit of the increase in the Help to Buy (Equity Loan) qualifying value limit to 40% in London. Above this price point, sales rates have slowed.
We delivered our highest completion volumes for eight years, being 17,319 units including JV’s (2015: 16,447). Private completions increased by 3.5% to 13,198 (2015: 12,746), affordable completions were 2,707 (2015: 2,853), and JV completions in which the Group had an interest were 1,414 (2015: 848).
We continue to increase the proportion of completions that are on more recently acquired higher margin land and these accounted for 86% (2015: 76%) of the total in the year.
Our total average selling price (‘ASP’) increased by 10.5% to £259,700 (2015: £235,000) in the financial year with our private average selling price increasing by 10.4% to £289,800 (2015: £262,500). The year on year increase predominately reflects mix changes, with the average size of total completions rising by 4.6% from 1,013 to 1,060 sq ft and with the selling price per square foot benefiting from locational improvement and underlying house price inflation. Affordable average selling price increased by 0.8% to £113,200 (2015: £112,300) reflecting changes in mix, with affordable completions representing 17% (2015: 18%) of total completions (excluding JV’s).
Our JV’s have performed well and our share of profits from JV’s in the year for the housebuilding business increased to £72.2m (2015: £45.6m). As at 30 June 2016 we were selling from 11 (2015: 16) JV outlets. We expect our share of profits from JV’s to be around £45m in FY17.
Housing policy
The UK Government recognises the need for more new homes to be built, given ongoing levels of household formation and historic undersupply, as evidenced by its policies to improve land availability, planning and support for buyers. In this regard, we noted in July this year the publication of the most recent DCLG publication updating household formation rate projections for England: now estimated at 210,000 per year through the period 2014-2039.
We were also pleased to see the extension of the Help to Buy (Equity Loan) programme in England through to 2021, as well as the increase in February 2016 of the Government’s equity loan to 40% in London. Help to Buy (Equity Loan) provides support on house purchases up to £600,000 in England with equivalent support at lower house values in Scotland and Wales. Our customers, especially first time buyers, have found this a very attractive proposition with 32% (2015: 31%) of our total completions (excluding JV’s) using the scheme during the year. In FY16, 95% of the private homes (including JV’s) that we completed had a selling price below £600,000. In FY17 we expect this to be around 93%, reflecting our forecast London mix.
Increasing our housing supply
With housing demand remaining strong, we have continued to invest, in a disciplined way, to increase housing production, with over £4.8bn approved for the purchase of over 93,400 plots of land over the last five years. There remains a long term housing shortage of all tenures that can only be addressed through additional supply; we are committed to playing a leading role in addressing this issue without compromising our operational or financial strength.
Over the last five years we have built more than 75,000 homes (including JV’s) of which over 13,600 were affordable homes (including JV’s) sold to registered providers and we have invested in our employees, including in FY16 268 new apprentices, trainees, graduates and undergraduates to further expand our skilled workforce, enabling further delivery of supply.
The key dimensions underpinning delivery of our strategy
In addition to the generally favourable market conditions during the year, the increase in our housebuilding profitability has benefited from our successful land investment strategy and from improvements in operating margin.
Land and planning
A key enabler of the growth of our housebuilding business in recent years has been our land investment strategy, which has boosted absolute profit and led to increased completion volumes.
The land market remained attractive throughout the financial year and we secured excellent opportunities that meet or exceed our minimum hurdle rates of 20% gross margin and 25% site ROCE2. In the period, we approved the purchase of £1,095.6m (2015: £957.0m) of land, equating to 130 sites (2015: 114 sites) and 24,387 plots (2015: 16,956 plots).
We continue, under normal market conditions, to target a regionally balanced land portfolio with a supply of owned land of c. 3.5 years and a further c. 1.0 year of controlled land. Our target for a shorter than sector average land bank reflects our focus on ROCE and a rapid asset turn. At 30 June 2016 we achieved this target with a 4.5 years land supply (excluding JV’s) comprising 3.4 years owned land and 1.1 years controlled land, with the owned land bank including land with both outline and detailed planning consents.
Following our success with planning over the past 12 months we are very well positioned, with 99.7% of expected FY17 completions (2015: 100% of FY16 completions) having outline or full planning consent.
Improving efficiency and reducing costs
Improving the efficiency of our operations and controlling costs continues to be a high priority for the Group, as it will further enhance margin. Efficiency can be improved through increasing throughput, as we have done in the year, but we are also focused on improving efficiency through business simplification including further standardisation of our layouts and product range and through driving process efficiency across key aspects of our business, with wide- ranging reviews underway, for example in the areas of commercial, construction and sales and marketing.
We have a robust and carefully managed supply chain with 90% of the house build materials sourced by our centralised procurement function denominated in Sterling. We have effectively sourced the raw materials required to underpin our controlled volume growth and the cost of c.75% of our centrally procured materials is now fixed until the end of FY17.
Whilst we have seen an increase in the supply of skilled sub-contractors over the past year, there remains an industry shortage in the UK, with increases in labour costs remaining the largest driver of overall build cost inflation. We are currently well placed with the necessary labour to meet our operational and quality requirements. We are also seeking to increase efficiency through the use of timber frame on over 1,300 plots during FY17 and through the use of alternative offsite manufacturing options.
We expect that overall build cost inflation for FY17 will be c.2-3%.
2 Site ROCE on land acquisition is calculated as site operating profit (site trading profit less sales overheads less allocated administrative overheads) divided by average investment in site land, work in progress and equity share.
Commercial developments
Greater occupier confidence in the second half of calendar year 2015, particularly from within the logistics sector, encouraged institutional funding back into the market enabling us to enter into agreements to commit to over 1 million sq. ft. of speculative forward funded logistics buildings.
During the year we successfully secured a planning permission for a Regional Distribution Centre on a parcel of strategic land that we subsequently sold to a supermarket group. We also completed the final phase of our retail and leisure scheme at Hinckley. This final phase is 80% let and further transactions are in legals.
As we move forward we will continue to carefully manage our risk profile by seeking to secure forward commitments; accordingly our activity levels are very much determined by securing occupiers up front, which in turn is governed to a large extent by sentiment and occupier confidence.
Commercial development revenue was £81.9m (2015: £57.2m) with an operating profit of £6.0m (2015: £6.1m).
Going forward our commercial division will continue to work closely with our housebuilding business to develop mixed- use schemes, and will seek to develop independent commercial schemes where they can be forward funded by third parties prior to commencement.
Our strategic objectives
Our strategic objectives remain clear – maintain disciplined growth, improve our key financial metrics and continue to deliver attractive cash returns.
Our key financial metrics
Our gross margin was broadly flat at 18.9% (2015: 19.0%) with an improvement in margin arising from the reduction in the mix of legacy assets, offset by adverse business mix and other net impacts. Operating margin grew by 0.5 ppts, from 15.3% to 15.8%, reflecting improved overhead leverage levels and an absolute fall in net administrative expenses.
We have made further good progress against our ROCE objective in the year with ROCE increasing by 3.2 ppts to 27.1% (2015: 23.9%). This is benefiting from the absolute reduction in legacy assets: the disposal of £85.4m of loans arising from equity share programmes early in our second half for £82.9m of cash has contributed. We have also been successful in driving business growth levels ahead of growth in working capital levels, reflecting our effective balance sheet discipline. It remains a core part of our strategy to drive ROCE performance further, in line with our fast asset turn model.
We remain committed to delivering our FY17 targets of at least 20% gross margin and at least 25% ROCE.
Maintaining an appropriate capital structure
As at 30 June 2016 the Group had a net cash balance of £592.0m (2015: £186.5m), reflecting a strong financial year. This was ahead of expectations, partly driven by our completion volumes and the timing of land payments. We also benefited from timings of other working capital payments.
We seek to defer payment for new land where possible to drive a higher ROCE, and land creditors as at 30 June 2016 were 38% of the owned land bank (30 June 2015: 35%).
The Group continues to maintain a balanced capital structure with land and long-term work in progress funded by shareholders’ funds and land creditors. Net tangible assets were £3,118m (£3.11 per share) of which land net of land creditors and work in progress totalled £3,180m (£3.17 per share).
We continue to secure attractive deferred payment terms on land and expect land creditors as a proportion of the owned land bank to be around one-third at 30 June 2017, in line with our operating framework.
Dividend
Our strong financial performance supports the Group’s Capital Return Plan and dividend policy. We are delighted to propose a final dividend of 12.3 pence per share (2015: 10.3 pence per share) resulting in a total ordinary dividend for the year up 21% to 18.3 pence per share (2015: 15.1 pence per share) and the second of our special dividends totalling
£125m, equivalent to 12.4 pence per share, payable in November 2016. This reflects our ordinary dividend policy of the dividend being covered three times by earnings, supplemented by the special dividends to November 2017 totalling £400m.
Health and safety
We were deeply saddened that two employees of our sub-contractors lost their lives in separate incidents on two of our sites during the year. Both of these incidents have been thoroughly investigated by our internal health and safety (SHE) team. We are fully co-operating with the Health and Safety Executive during their ongoing investigations into each of the incidents.
Increased activity levels across the industry in terms of site openings and production volumes combined with shortages of skilled staff has contributed to an increased risk of accidents on sites. We remain fully committed to the highest standards of health and safety upon our sites. In the year, our reportable incident rate has increased slightly with 385 (2015: 381) reportable incidents per 100,000 employees.
Our priorities
We believe that a strongly performing business benefits from a focus on its wider priorities which for us are: Customer First, Great Places, Leading Construction and Investing in our People.
Each of these priorities has a work plan to drive improvements across the business and they are supported by a set of principles and financial discipline which underpins all of our operations.
Customer First
We place customers at the heart of our business by building outstanding homes and anticipating the changing needs of home buyers.
We are the only major national housebuilder to achieve the HBF 5 Star Customer Satisfaction rating for seven consecutive years, with over 90% of customers being prepared to recommend us to a friend.
We continue to improve the quality and efficiency of the way in which we deal with customers through the sales process. During the period we invested in our customer service systems to speed up and improve the efficiency of our service.
We worked with suppliers, customers and industry experts to produce the ‘Future Home Report’ to inform design direction in terms of customer trends and preferences. As well as carefully defining customer segments and their design preferences, our project with The Architects’ Journal to select new house design features to meet these requirements concluded in the year.
Great Places
A key focus of our business continues to be building relationships with landowners to ensure that we can acquire the right land and then create outstanding places to live. Our objective is to be the partner of choice for landowners by demonstrating our ability to achieve planning permission and create value.
During the period we made significant progress in terms of securing the right operational land and increased investment in longer term strategic sites.
We continue to focus upon design and all of our developments are reviewed against our ‘Great Places’ design standard at the pre-application stage. ‘Great Places’ enables us to meet Building For Life 12, the industry standard for the design of new housing developments.
Leading Construction
We continue to be focused on a ‘right first time’ approach as the most efficient way of operating across all aspects of our building processes with a continuous focus on improving build quality which will reduce remedial costs and improve customer satisfaction.
We are implementing a number of key initiatives in terms of increasing construction efficiency, for example we have built 988 timber frame homes in FY16.
Our site managers continue to lead the industry and in 2016 we won 79 NHBC Pride in the Job awards. This was the 12th year in succession that our site managers have won more of these awards than any other housebuilder.
Investing in our People
The building and construction industry continues to face a shortage of skilled workers and attracting and retaining the best people is an important priority for the business. We aim to have a diverse workforce that reflects the communities in which we operate, delivering excellence for our customers and business by drawing on a broad range of talents, skills and experience.
We have continued with our graduate and apprentice programmes, with 268 employees joining us on these programmes in this period.
We also continue to support the wider industry focus on addressing the skills shortage.
Current trading
The sales performance of the Group has been positive, with average weekly net private reservations since 1 July 2016 of 267 (FY16: 265), resulting in net private reservations per active outlet per average week of 0.75 (FY16: 0.71). Regionally, trading conditions in the North and Midlands have been stronger than those seen in the South.
Our total forward sales (including JV’s) as at 4 September 2016 were up 4.1% on the strong prior year figures at a value of £2,416.5m (6 September 2015: £2,321.9m), equating to 11,364 plots (6 September 2015: 10,755 plots).
|
Forward sales |
4 September 2016 |
6 September 2015 |
Variance |
||
|
£m |
Plots |
£m |
Plots |
% |
|
|
Private |
1,545.9 |
4,723 |
1,332.3 |
4,788 |
16.0 |
|
Affordable |
707.4 |
5,957 |
512.2 |
4,487 |
38.1 |
|
Sub total |
2,253.3 |
10,680 |
1,844.5 |
9,275 |
22.2 |
|
JV |
163.2 |
684 |
477.4 |
1,480 |
(65.8) |
|
Total |
2,416.5 |
11,364 |
2,321.9 |
10,755 |
4.1 |
We expect FY17 wholly owned completions to grow modestly versus the comparable period, with around 700 completions delivered through our JV portfolio.
Outlook
We have started the new financial year in a good position, with £592.0m year end net cash, a healthy forward order position and an experienced management team in place. We have industry leading quality and customer service, and talented employees. There remains an under-supply of new homes, strong government support including Help to Buy (Equity Loan), and a mortgage market willing to lend. As a result, we remain confident in the underlying fundamentals of both the housing sector and our business.
Our sales trends since the start of the new financial year have been encouraging, and underpin an increasingly ‘business-as-usual’ stance whilst we continue to monitor consumer, economic and other lead indicators closely following the EU referendum vote.
I am proud to lead our first class team and we are all determined to build on this year’s outstanding operational and financial performance in the future, as well as delivering on our targets for key financial metrics and our capital return plans in FY17.
David Thomas
Chief Executive
6 September 2016
Priorities and principles in action
Building excellence by putting customers first
Our priority
Our priority is building great homes and providing an outstanding customer experience. We seek to anticipate our customers’ evolving needs by continuously improving the homes and places we build.
KPI
- HBF 5 Star Homebuilder1
1 Key performance indicator used to assess performance for annual incentive scheme
Key highlights
- Only national housebuilder to be awarded HBF 5 Star status for seven consecutive years
- Continued investment in customer service
- Mortgage market remains good
The challenge
Britain needs more homes to address its housing shortage, with continued demand in the market and continued undersupply of new homes. Home buyers are supported by a good mortgage market in terms of both availability and rates, as well as by the Government’s Help to Buy (Equity Loan) scheme in England, Scotland and Wales.
The industry is seeking to increase volumes, maintain customer satisfaction and build quality and at the same time address the constraint created by a shortage of skilled people.
Affordability of homes and accessibility to home ownership
We build a wide range of product, from homes for first time buyers to larger family homes. Our private average selling price for the year was £289,800 (2015: £262,500); £275,000 (2015: £246,800) outside of London.
During the year, the mortgage market remained positive. Our customers have access to mortgage finance that allows them to buy with a 5% deposit through the Help to Buy (Equity Loan) scheme and there is also a range of higher loan to value products which do not use the Help to Buy scheme available. We continue to work with a broad set of lenders through our approved brokers to ensure that our customers have access to independent advice and a wide range of mortgage products.
We delivered 2,707 (2015: 2,853) affordable homes built for registered providers, equating to 17% (2015: 18%) of our total completions (excluding JV’s) in the year. We have a team which engages with housing association partners at local, regional and national levels.
Customer satisfaction
We place customers at the heart of everything we do, with their satisfaction being a key performance indicator at all levels of management. All of our team are responsible for delivering customer satisfaction and we operate a Customer Service Academy comprising both classroom and online training to ensure that our employees understand how to deliver right first time, every time.
We are pleased that we have increased our completions delivery, including JV’s, by 5.3% during the year whilst retaining our HBF 5 Star status for the seventh successive year, the only national housebuilder to do so. We regularly review the results from the NHBC customer survey with the insights gained being used to aid our decision making.
We continue to drive customer service, investing in technology from developments to our customer service systems and our onsite systems to aid our quality control inspections. Each home we build is repeatedly inspected at key stages and, as a minimum, is approved by the site manager, contracts manager and sales staff before handover to our customers. Management throughout the business are responsible for customer service and monitor customer satisfaction survey performance on a weekly basis.
Increasing customer insight
To ensure that we continuously reflect our customers’ needs we have worked with suppliers, customers and industry experts to produce the ‘Future Home Report’ to inform design direction in terms of customer trends and preferences. As well as carefully defining customer segments and their design preferences, our project with The Architects’ Journal to select new house design features to meet these requirements concluded during this financial year.
Building excellence by developing great places
Our priority
Our priority is building long term relationships to secure good value land where people aspire to live. We design developments which look great, are a pleasure to live on, and will enhance local communities for years to come.