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Barratt lays foundation for new targets at gradual pace

By Oliver Haill

Date: Wednesday 17 Oct 2018

Barratt lays foundation for new targets at gradual pace

(Sharecast News) - Sales of Barratt Developments homes in the first 15 weeks of its financial year have slowed slightly compared to last year but the builder said market conditions "remain good".
The sales rate was nudged lower, with net private reservations per active outlet per average week of 0.72 compared to 0.74 a year ago.

The FTSE 100 group has launched 53 new developments in the 15 weeks to 14 October, including joint ventures, down from 62 a year ago. It is currently operating from an average of 365 active outlets, down from 371 this time last year.

"We continue to expect outlet numbers to grow for the full year when compared to the prior year," said chief executive David Thomas.

He also pointed to total forward sales up 12.4% on the prior year at a value of £3.15bn, equating to 12,903 units.

However, analysts at broker Shore Capital pointed out that forward sales are often boosted at this stage of the year as housebuilders accrue social housing contracts, which boosts the order book.

Ahead of the company's annual shareholder meeting, Thomas said that Barratt has started the new financial year "in a strong position, with a good sales rate, healthy forward order book and customer demand supported by an attractive lending environment".

Last month Barratt provided three new medium-term targets alongside its final results, including an aim to build 3-5% more houses over coming years, lifting its margins in line with the rest of the sector thanks to new housing designs that are faster to build and reduce costs and waste, with land only acquired when there is sufficient potential return on capital employed.

Thomas added on Wednesday: "Good progress is being made with the planned roll-out of the new product ranges and this will increasingly benefit margin going forward. We are securing excellent operational land opportunities that meet our new land acquisition hurdle rates, of minimum 23% gross margin and a minimum of 25% ROCE."

Shares in Barratt were down 1.4% to 506.6p after an hour of trading on Wednesday.

ShoreCap analyst Robin Hardy said there is normally very little insight to be gained from housebuilders' first-quarter updates and this was no exception.

"We still believe that PBT will drop this year as margins ease and the average price drop (strategically). We are looking at PBT of £765m versus £835m and we are below consensus," he wrote.


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