11/09/2013 Archive
Barratt Developments PLC Annual Results Announcement for the year ended 30 June 2013
Significantly improved results; investing for the future
11 September 2013
Barratt Developments PLC (the ‘Company’) is today issuing its final results for the Company and its subsidiaries (the ‘Group’) for the year ended 30 June 2013.
Mark Clare, Group Chief Executive, commented: “These are significantly improved results and we have had a very strong start to the new financial year. We are seeing the housing market recovery starting to spread beyond London and the south east with a 29.4% increase in our average net private reservation rate across the Group. Our £2.6 billion commitment to land investment since 2009 puts us in a good position to capitalise on these market trends. We have already increased our completion volumes by over 20% in the past two years and expect to deliver around 45,000 new homes over the next three years.”
Full year highlights
- Group revenues up by 12.2% for the full year to £2,606.2m (2012: £2,323.4m), with completions (including joint ventures) of 13,663 units (2012: 12,857 units)
- Average selling prices1 increased to £194,800 (2012: £180,500) with private average selling prices increasing by 6.0% to £213,900 (2012: £201,800)
- Group operating profit before operating exceptional items for the full year up by 32.2% to £252.7m (2012: £191.1m)2
- Operating margin3 increased to 10.4% (2012: 9.5%) in the second half and to 9.7% for the full year, up from 8.2% in the prior full year
- Profit before tax and exceptional items increased by 73.7% to £192.3m (2012: £110.7m)4
- Net debt at 30 June 2013 significantly reduced to £25.9m (2012: £167.7m)
Outlook
- Very strong start to the new financial year with a 29.4% increase in average net private reservations per week per active site for the first ten weeks compared with the same period last year
- Private forward sales up 44.4% to £880.4m as at 8 September 2013 (9 September 2012: £609.6m)
- Continue to see good opportunities in the land market that meet our minimum hurdle rates of 20% gross margin and 25% return on capital employed (‘ROCE’)
- Group has outperformed on its target to reduce indebtedness and going forward expects to maintain an appropriate capital structure
- Focus on driving significant improvement in ROCE with an 18% ROCE target set for FY16
- The Board is proposing a final dividend of 2.5 pence per share payable in November and is adopting a progressive dividend policy with a target of three times dividend cover for FY16
1 Unless otherwise stated all numbers exclude joint ventures
2 Profit from operations was £249.9m (2012: £191.1m) including operating exceptional items of £2.8m (2012: £nil)
3 Operating margin is profit from operations before operating exceptional costs divided by Group revenue
4 Profit before tax was £104.8m (2012: £100.0m) including exceptional items of £87.5m (2012: £10.7m)
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, Winchester House, 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 560297
Access code: #31757241
Further copies of this announcement can be obtained from the Company Secretary’s office at: Barratt
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Developments PLC, Barratt House, Cartwright Leicestershire, LE67 1UF. |
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For further information please contact: |
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Barratt Developments PLC David Thomas, Group Finance Director |
020 7299 4896 |
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Analyst/investor enquiries Susie Bell, Head of Investor Relations |
020 7299 4880 |
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Media enquiries Patrick Law, Group Corporate Affairs Director |
020 7299 4892 |
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Maitland Liz Morley |
020 7379 5151 |
Chairman's Statement
Stronger market conditions, coupled with the extensive improvements in our operational performance, have led to a significant improvement in the financial results and the outlook for the Group.
As a result we have made rapid progress towards our strategic objectives of enhancing profitability, reducing indebtedness to achieve a more appropriate capital structure and improving return on capital.
Profit before tax and exceptional items increased by 73.7% to £192.3m (2012: £110.7m) and operating margin improved to 9.7% (2012: 8.2%). Net debt has been reduced to £25.9m (2012: £167.7m) at the year end and the business has refinanced ahead of schedule.
At the same time, we are creating a platform for future growth by agreeing the purchase of a further £1 billion of high margin land during the year. Our improved sales rates meant that we finished the financial year with a much enhanced forward sales position.
An improving market
The fundamental drivers of the new homes market in the UK are consumer confidence and the availability of mortgage finance, particularly at higher loan to values. Confidence in the UK housing market has started to grow, particularly during our final quarter, against the backdrop of a more stable economic outlook.
Significant progress has been made on the availability of finance for customers and the mortgage providers' capacity to lend has slowly improved. This has been accelerated by a series of Government mortgage initiatives - FirstBuy, NewBuy and Help to Buy.
The NewBuy mortgage indemnity scheme launched in March 2012 (and coupled with the FirstBuy equity share scheme that launched in summer 2011) made 90-95% mortgages for new build properties more widely available at more competitive rates. Whilst we made good use of both of the schemes, we saw a step change in demand for new homes with the launch of the Help to Buy (Equity Loan) scheme in April 2013.
Tackling the shortage of homes
Whilst there are signs that the market for new homes is improving and build rates are starting to respond, the shortage of homes of every tenure cannot be fully resolved in the short-term. It is conservatively estimated that as a nation to satisfy demand from household formation we should build around 260,0005 homes per annum but we are building around 135,0006. The social and economic consequences of this housing shortage are considerable.
We support the attempts of the Government to accelerate the supply of new homes by providing the ability to buy and also by addressing the longer term supply issues of land availability and planning.
Our land buying has accelerated and last year we agreed to acquire land for 18,536 homes (2012: 12,085 homes). Since 2009 we have agreed to invest £2.6 billion in new land which is being brought through planning and into production at the earliest opportunity. The land that we have secured is transforming the business. It will boost production and continue to drive our margin growth.
We have already increased our completion volumes by over 20% in the past two years and expect to deliver around 45,000 new homes over the next three years.
Pursuing quality
For the last five years, the Group has focused on improving every aspect of its operational performance and during the year I have seen at first-hand the result of the changes we have made. We have developed a compelling business model which has at its core targeted land buying, effective planning, outstanding design and construction excellence, all backed by an industry leading customer experience.
The quality of our operations is improving year after year at every point of our process. Design, build quality and customer service are all areas where our performance continues to be strong.
5 Source: Department of Communities and Local Government, Welsh Assembly and Scottish Government
6 Source: Department of Communities and Local Government, 2012 completed dwellings
I was particularly pleased to see the results of the NHBC ‘Pride in the Job’ Awards where our site managers secured more awards for quality workmanship than has ever been achieved by any housebuilder. We have now led the industry for nine consecutive years. We remain a 5 Star builder and we are the only national housebuilder to achieve that recognition for four consecutive years.
Employees
All our employees have played their part in delivering significant operational improvements. The Board is grateful for their efforts and is delighted that so many have bought shares in the Company and are benefiting from its success.
We are committed to investing in our workforce both to underpin quality and also to address the longer term skills issues that the industry faces as it increases output. The training we offer across a range of disciplines via our Barratt Academy and our graduate programme are now widely regarded as industry leading. We have launched a series of new initiatives including the recruitment of around 600 apprentices, graduates and paid interns over the next three years. We will also support 100 people through a unique Housebuilding Foundation Degree Programme delivered in partnership with Sheffield Hallam University.
The Board
We have recruited Nina Bibby to the Board as a Non-Executive Director and she brings with her extensive consumer marketing experience from a range of sectors including financial services.
Bob Davies retired from the Board after nearly nine years. Rod MacEachrane has decided to retire from the Board at the 2013 Annual General Meeting after nearly eight years on the Board. Their wise counsel and contributions will be missed.
Dividend
The Board recognises the importance of both capital growth and dividend income to our existing and potential shareholders. We are proposing to recommence dividend payments with a final dividend of 2.5 pence per share, which is covered around six times by adjusted basic earnings per share. The Board will adopt a progressive dividend policy as profitability grows, with the aim, for the year ending 30 June 2016, of achieving a target dividend cover of around three times.
The future
Our strategy continues to deliver a significantly improved business performance. In a recovering housing market, we would expect to achieve our objectives for the business earlier than previously anticipated. Whilst maintaining our disciplined approach, we will use the outstanding capability of the organisation to deliver significantly improved performance by continuing to secure the right land opportunities and delivering the highest quality homes for our customers.
Bob Lawson
Chairman
Group Chief Executive’s Review
We have delivered a strong set of results and put in place the foundations for a further year of growth. We have a clear strategy that the business continues to implement in a disciplined way as the housing market starts to show signs of improvement.
In the year, we have increased revenues by 12.2%, our operating margin has increased by 150 basis points and our profit from operations before operating exceptional items has improved by 32.2%. We have reduced net debt by £141.8m to £25.9m (2012: £167.7m) at 30 June 2013.
This improved performance has been achieved against market conditions that were stable in the first three quarters of our financial year and showed signs of sustainable improvement in our final quarter. We have continued to focus on improving every aspect of our business model to ensure that we are in a good position to capitalise on future market growth.
We have accelerated our land acquisition, agreeing to purchase 18,536 plots (2012: 12,085 plots) during the year with a value of £1,047.3m (2012: £578.1m).
We are confident that we can make further progress in the year ahead.
Improving Performance
During the year, we have seen improvements in each key financial performance indicator.
Revenue for the year increased to £2,606.2m (2012: £2,323.4m) with completions (including joint ventures (‘JVs’)) increasing to 13,663 (2012: 12,857). Private completions were 10,978 (2012: 9,832) and affordable completions were 2,268 (2012: 2,805). The reduction in affordable completions is explained by the timing of new development site starts. We expect the long-term average mix of affordable units to be between 18% and 20%. JV completions in which the Group had an interest were 417 (2012: 220).
We have a geographical balance to our business. 17.7% of completions (including JVs) were in Scotland and northern England, 17.4% in the north west and west Midlands, 17.7% in eastern England and south Midlands, 11.6% in London, 16.4% in southern England and 19.2% in the south west.
Average net private reservations per active site per week improved by 11.5% from 0.52 last year to 0.58 this year. Average site numbers for the year were stable at 381 (2012: 381). We also operated from an average of 6 (2012: 5) JV sites during the year.
Our sales performance in our second half was excellent, reaching 0.66 (2012: 0.56) average net private reservations per active site per week, up 17.9% on last year. We saw a particularly strong sales performance in the final quarter of the financial year following the announcement of the Help to Buy (Equity Loan) scheme.
We saw improvements in private reservation rates in all our regions of the country.
Our average selling price increased by 7.9% to £194,800 (2012: £180,500) for the full year. Private average selling prices for the year increased by 6.0% to £213,900 (2012: £201,800).
Profit from operations before operating exceptional items increased by 32.2% from £191.1m to £252.7m. We delivered a significant improvement in operating margin before operating exceptional items to 9.7% (2012: 8.2%) for the full year and to 10.4% (2012: 9.5%) in the second half.
Profit before tax and exceptional items increased by 73.7% to £192.3m (2012: £110.7m). In the year we reported exceptional items of £87.5m related to our refinancing, the monetisation of equity share loans and the impairment of a commercial JV (2012: £10.7m related to the acquisition of a former JV). After exceptional items, profit before tax was £104.8m (2012: £100.0m).
Delivering our strategic objectives
This improved performance has been achieved through our continued focus on building profitability and reducing indebtedness to achieve a more appropriate capital structure; we have made substantial progress on both. With the housing market now starting to improve, the Group is increasingly focused on improving return on capital employed (‘ROCE’).
Building profitability – acquiring land
The most important factor in the drive to build profitability is acquiring and bringing into production high margin land. In 2009, after a substantial fall in land prices, we started to re-invest in land.
Since re-entering the market we have agreed land purchases of £2,606.7m and in the year we approved
£1,047.3m (2012: £578.1m), an increase of 81.2%. During the year total cash expenditure on land was
£677.5m (2012: £397.4m). The land that we have acquired more recently and brought into production is transforming the business – it continues to meet or exceed our hurdle rates of 20% gross margin and 25% ROCE7. On completed sites acquired since 2009, we have achieved an average gross margin of 21%.
In the year, around half of our completions were from more recently acquired higher margin land. We continue to expect that around two thirds of completions will come from this higher margin land in the year to 30 June 2014. The proportion of impaired plots in the owned and controlled land bank fell to 7% (2012: 12%).
In addition, we have c. 11,400 acres (2012: c. 10,500 acres) of strategic land, which we actively manage to obtain the necessary planning consents. In the year, 2,557 plots (2012: 701 plots) were transferred from strategic land to our operational land bank. Strategic land is expected to produce an increasing proportion of our operational land in future years.
We continue to seek to defer payment for new land where possible so as to drive a higher ROCE. Land creditors were 35% (2012: 35%) of the owned land bank at 30 June 2013.
Building profitability – optimising prices
An important part of our strategy has been to improve the quality of our homes in terms of location, design and construction quality. This in turn has helped to underpin our determination to secure a competitive advantage and to ensure that we get the right price for the outstanding homes we build.
The changing nature of the homes we build – more large family homes and fewer apartments outside London – led to an increase in the average private selling price. Larger family homes accounted for 27% of completions, up from 24% in the prior year. Private average selling price increased from £201,800 to
£213,900 for the full year and in the second half increased year on year from £203,200 to £221,500 – an increase of 9.0%.
Overall prices during the period remained stable with some local variations and we continued to see strength in the London and south eastern market.
Building profitability – improving efficiency
Improving efficiency remains a priority for the Group. We continue to standardise the building of our homes, centralise procurement and share best practice. We regularly benchmark efficiency measures across divisions.
In the year, the majority of materials, including subcontractor materials, were centrally procured. This ensures consistent quality and costs across the Group as well as securing a supply chain for our 278 divisions.
All of our significant supply contracts are fixed in advance, usually for twelve months. During 2013 we saw some price increases in bricks, blocks and plastic plumbing. However our overall price increase on centrally procured materials was less than 1%.
For FY14 we continue to put supplier agreements in place to ensure continuous availability of materials and overall we expect low single-digit cost increases. We will continue to work to ensure these increases are offset by further build efficiencies wherever we can.
7 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.
8 During the year ended 30 June 2013, we operated from 25 divisions. On 1 July 2013 we opened an additional division in Aberdeen. We are also in the process of opening a central London division, which will be fully operational in November 2013.
Reducing indebtedness – to achieve a more appropriate capital structure
Our progress on reducing indebtedness has been significantly ahead of expectations with net debt as at 30 June 2013 reduced to £25.9m (2012: £167.7m). This reduction has been achieved whilst we have continued to invest in land and indeed increased the rate of new land approvals. The strong performance on indebtedness in the year was the result of our improved trading performance combined with strong control of working capital.
Now that we have largely achieved our target of zero year end net debt, we believe the appropriate capital structure for the Group is that land and long-term work in progress are funded by shareholders’ funds and land creditors. The use of land creditors drives a higher ROCE and we continue to expect land creditors to equate to around 35% of the owned land bank in current market conditions. The lending syndicate will fund short and medium-term work in progress.
Our improved financial position enabled the Company to agree a comprehensive refinancing package a year ahead of schedule, which provides us with more appropriate lending facilities in terms of both interest costs and duration.
Following our refinancing, we now have committed borrowing facilities of around £850m at attractive terms with maturities ranging from 2016 to 2021. We have repaid historic high cost private placement notes early and cancelled historic interest rate swaps. As a result the underlying average interest rate for the Group (excluding historic interest rate swaps) will fall to c. 4.5%.
The reduction of our indebtedness also reflects the monetisation of part of our equity share loan portfolio. This has been achieved by entering into a JV with a fund managed by Anchorage Capital and transferring equity share loans made between 1 January 2009 and 31 December 2011 to that JV. Anchorage has acquired a 50% interest in the JV for £33.7m.
Driving return on capital employed
The Group is focused on driving a significant increase in ROCE9 and is targeting a ROCE of 18% for FY16. All land acquired since 2009 has required a minimum ROCE hurdle of 25%. On completed sites acquired since 2009, we have achieved an average ROCE of 39%. In the year ended 30 June 2013 the Group generated a ROCE of 11.5% (2012: 8.3%).
We operate a fast asset turn operating model and the capital employed on our newer sites is already around a third lower than on our older sites.
We are focused on cashing in our low returning assets. In addition to the part sale of the equity share loan portfolio, we received proceeds of £35.4m for the sale of low return land during the year and we are continuing to reduce our commercial assets by developing them out or selling those already completed.
A proven business model
To deliver our objectives we have a strong business model and we are continuing to drive operational improvements in every aspect of our business. At the heart of our business model is targeted land buying, effective planning, outstanding design, construction excellence and an industry leading customer experience. This is supported by significant investment in the training and the quality of our workforce.
Targeted land buying
Our land purchase successes are based on the extensive local knowledge of our divisional teams and strong local relationships with land owners, combined with detailed assessments of local market conditions.
We have developed a series of target locations based on the availability of land, housing market conditions and the likelihood of obtaining planning. We see a good range of opportunities for investment in our targeted locations without undue concentration and without relaxing our 20% gross margin or 25% ROCE hurdle rates.
In the year as a whole we were successful in agreeing the acquisition of 18,536 plots (2012: 12,085 plots) of land, a 53.4% increase on the prior year. Our owned and controlled land bank now stands at 4.4 years (2012: 4.1 years) against a target of 4.5 years. We also have 6,174 plots (2012: 4,186 plots) of approved
9 ROCE is calculated as earnings before interest, tax 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.
land and c. 11,400 acres (2012: c. 10,500 acres) of strategic land, equivalent to c. 59,800 plots (2012: c. 61,000 plots). At 30 June 2013, our JVs had an owned and controlled landbank of 2,006 plots (2012: 1,583 plots), of which 1,446 plots (2012: 1,208 plots) are in London.
A strong competitive advantage for the Group is our ability to source land from the public sector. We have a specialist unit, Barratt Partnerships, which together with local divisions won 23 sites covering 4,320 units with a gross development value (‘GDV’) of £1,023m during the year. These sites included Ladywell Village, Catford, Milford Hospital, Godalming and the remaining phases of Derwenthorpe in York.
During the year we were appointed to all of the retendered Development Partner Panels. It is likely that public sector land disposal will increase in importance as a target has been set by Government to release sufficient land to build 100,000 homes.
We believe that our proven track record in winning and delivering complex schemes on former public sector land continues to place the Group in a strong position to benefit from this source of land.
We are increasingly proactive in the strategic land market and in the year we agreed option and promotion agreements on 1,611 acres and 11,762 plots of strategic land. Our strategic land portfolio is expected to produce an increasing proportion of our operational land in future years.
Planning
An important part of bringing land into production is the planning process. We have seen some improvements in this area both as a result of changes in Government policy and operational improvements within our business.
Following the implementation of the Government’s National Planning Policy Framework, there are stronger incentives for local authorities to put in place five year land supplies. That in turn is leading to an improved dialogue between local authorities and our divisions.
Consultation with local people is playing a more important part in the planning process. We have overhauled how we consult with local people and have implemented a new approach, which is aimed at engaging with all key stakeholders.
Nevertheless, the planning process remains a lengthy one, and on average it takes us around 70 weeks from agreeing to purchase the land to achieving full or outline planning consent. The length of the planning process will remain a restriction on the speed at which housing supply can increase.
During the year, we achieved planning on 14,964 plots (2012: 13,159 plots) and as at 30 June 2013 we had detailed planning consent for 95% of our expected FY14 completions and outline consent for a further 3%.
Design
We aim to design homes and places where people aspire to live. We are continuing to invest in our new product range and during the year, 27% of our private completions outside London were from our new ranges. The new product ranges offer improved external designs, with better use of space and more light internally.
We have continued to emphasise the importance of design in creating attractive places to live. We have used our own design code, Q17, extensively throughout the Group to ensure our developments, as well as the individual homes, incorporate best design practice. We are now introducing a new initiative, Great Places, to ensure that we build attractive, functional and sustainable places. It will incorporate the Design Council’s Building for Life 12, the industry standard for well-designed neighbourhoods. All relevant staff, including the Executive Committee, will be trained in the Building for Life 12 principles.
This year, we won two prestigious Housing Design Awards; one for our plans for Evolution South in London and one for our Derwenthorpe site in York, developed in conjunction with the Joseph Rowntree Housing Trust.
Designing and building homes that meet the environmental challenges of the future remains a significant issue for the industry. This year, we have completed our AIMC4 project that aims to establish how best to meet higher environmental standards without the need for renewable technology. We have also made good progress at Hanham Hall, Bristol, one of the most environmentally advanced housing developments in the United Kingdom.
Construction excellence and efficiency
Quality of construction is a key priority for the Group. It underpins our brands and the attractiveness of our homes to potential buyers. This year our site managers won 102 NHBC ‘Pride in the Job’ Awards – the most awards a housebuilder has ever won and an industry leading performance for the ninth consecutive year.
We are continuing to invest in our people to ensure that this track record is maintained. We plan to take on around 600 apprentices, graduates and paid interns over the next three years with a clear career path for all of them. We will also support 100 people to follow a unique Housebuilding Foundation Degree Programme delivered in partnership with Sheffield Hallam University.
Our health and safety record continues to improve with our reportable injury incidence rate decreasing by 36% to 329 (2012: 511) per 100,000 persons employed. We are committed to seeking to reduce this year- on-year and we are working with our suppliers, partners and local communities to minimise the risk of injury on our sites.
Industry leading customer experience
Customer satisfaction remains at over 90% in terms of whether customers would recommend us to a friend and we achieved the highest HBF grading of 5 Star for the fourth consecutive year, a stronger track record than any other national housebuilder.
During the year, we upgraded our customer websites, our most important sales channel, to improve them and add additional functionality and content. We have also increased our investment in mobile marketing. We track the speed of response to leads from our websites and during the year we responded to 84% of web leads within 24 hours.
We continue to work with our customers to find the most appropriate support for them during the house buying process. 14.0% (2012: 20.5%) used equity share products, 5.8% (2012: 0.5%) used the NewBuy scheme and 15.7% (2012: 15.1%) used our part-exchange scheme. Following the implementation of these schemes, the complexity of the sales process has increased. To address this we have also invested in a structured training programme for all 1,000 of our sales advisers and sales managers. New sales staff will be trained through our Barratt Academy programme.
We launched an in-house management service company for our London developments during the year - Barratt Residential Asset Management (‘BRAM’). BRAM will manage the public areas of developments post- completion and ensure a high standard of upkeep and good value for money in terms of service charges. This unique service will provide us with a competitive advantage in terms of service and value to buyers. We currently manage almost 1,500 properties through BRAM.
Our expanding London business
Our London business made significant progress during the year, with 1,362 completions compared with 1,233 in the prior year. In addition, we delivered 224 (2012: 59) JV completions. We are the only national housebuilder with a sizeable central London presence and we are now targeting delivery of 2,000 homes per annum in the medium-term from our London business.
Our ability to design, build and sell complex developments is providing the Group with a competitive advantage in this important market. During the year, excluding JVs, we agreed seven new sites which will result in 2,046 new homes for London and have a total GDV of over £820m.
Our London business has developed a number of strong joint venture partnerships over the last couple of years including those with L&Q, Metropolitan Housing, Morgan Stanley Real Estate Investing and British Land. These relationships have allowed us to maximise opportunities within London, whilst managing risk and the allocation of capital. Through increasing our outlets in central London we have increased customer awareness, raised our profile with land agents and seen increased access to land opportunities. Including JVs announced after the year end, these partnerships have sites with a GDV of over £2 billion, totalling around 4,800 units with an average selling price of c. £430,000.
At 30 June 2013, our London business had 4,864 (2012: 3,862) owned and controlled landbank plots, with an interest in a further 1,446 (2012: 1,208) plots within the owned and controlled landbank of our JVs.
Current trading
In the first ten weeks of the current financial year, the sales performance across the Group has been very strong. Average net private reservations per active site per week have increased by 29.4% to 0.66 (FY13 equivalent period: 0.51) driven by the improved market and a pull forward of our autumn sales and marketing campaign. Help to Buy has been used in 29.0% of total reservations. Net pricing has firmed in the financial year to date as we have been able to reduce our sales incentives compared to the same period last year by approximately 150 to 200 basis points.
As at 8 September 2013, total forward sales (excluding JVs) for the Group were up 59.5% at £1,231.3m (9 September 2012: £772.2m), equating to 6,676 plots (9 September 2012: 4,439 plots). Private forward sales
as at 8 September 2013 increased by 44.4% to £880.4m (9 September 2012: £609.6m).
The gross margin in the forward order book has increased year-on-year by around 250 basis points primarily as a result of reservations on higher margin sites acquired since 2009, coupled with reduced sales incentives.
JV total forward sales at 8 September 2013 were £164.3m (9 September 2012: £43.4m), equating to 325 plots (9 September 2012: 163 plots). JV private forward sales were £156.3m (9 September 2012: £37.5m).
Outlook
Current market conditions are very positive. We have seen a significant step-up in consumer demand and mortgage supply, enhanced by the introduction of the Government Help to Buy scheme.
The strength of current trading and our forward order book, coupled with the expected delivery of around two thirds of completions from higher margin land, gives us confidence of another substantial improvement in performance in FY14.
We are targeting total completions of c. 16,000 units (including JVs) from our current operating structure and, given continued strength in the market, believe this is achievable in the year to 30 June 2016. We continue to see a strong pipeline of land acquisitions that meet or exceed our hurdle rates with no assumption of future price inflation.
Our focus remains on building profitability, maintaining an appropriate capital structure and substantially improving our return on capital employed, with a target ROCE of 18% for the year ended 30 June 2016.
Mark Clare
Group Chief Executive