Barratt and Crest report mixed market conditions
Barratt Developments and Crest Nicholson have issued updates to the market. Barratt reported a strong start to the financial year but Crest has issued a profit warning, announcing a new strategy to combat difficulties it is experiencing in the market.
Reporting on the period from July 1 to October 14 2018, Barratt said that the group had “traded well” since the start of its new financial year. Total forward sales as of October 14 2018 were up 12.4% year-on-year at a value of £3,146.5 million, equating to 12,903 units against the 12,277 units achieved as of October 15 2017.
In the first 15 weeks, net private reservations per active outlet per average week remained “strong” at 0.72 although marginally down on last year’s 0.74.
David Thomas, Barratt’s ceo, said: “The group 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.”
Meanwhile, Crest said that it expected its pre-tax profit for the year to October 31 2018 to be in the range of £170 million to £190 million, with the London market and conditions in the south of England for higher priced homes “more difficult than previously anticipated, where sales have not picked up during the traditionally stronger early autumn selling season”.
For the year ending October 31 2017, Crest achieved a pre-tax profit of £207 million.
The housebuilder also said that actions to mitigate falling sales volumes, including speeding up bulk sales to registered providers and private rented sector investors, had impacted its margins which are now expected to be lower than the previous guidance of 18%.
Crest’s strategy will focus on shareholder returns “by prioritising cashflow and dividends,” maximising value in its land and development portfolio and improving operational efficiencies.
Measures include generating a cash reserve, slowing down build rates and reducing land expenditure, and engaging in offsite construction.
The firm also announced the departure of chief financial officer Robert Allen. Crest said that executive chairman Stephen Stone would lead the new strategy’s implementation with support from ceo Patrick Bergin, who will take over finance duties until Allen’s replacement is found.
Crest said it intended to maintain profitability for 2019 at FY18 levels, despite market uncertainty.
Stephen Stone said: “The usual autumn pick up in sales volumes has not been evident during September and October, with many customers putting off decisions to buy whilst current political and economic uncertainties persist.”
“Mindful of the current uncertain market environment, our new strategy will focus on shareholder returns by prioritising cash flow and dividends, maximising the value in our portfolio, and improving operational efficiency.”