Wednesday, 15 November 2017

More good news from the Housebuilding sector

The housebuilding continues to bring the building industry positive news, after Wimpey reported a strong second half to 2017 last week, McCarthy & Stone, Bovis, Crest Nicholson and Barratt Developments all issued positive statements to the City. A strong housebuilding sector is good for all involved, manufacturers, distributors, merchants, developers, architects, contractors and builders

McCarthy & Stone announced its financial results for the full year ending August 31 2017, which show record revenues for the firm up 4% to £661 million although total legal completions at 2,302 were similar to last year (2,296). Underlying profit before tax was £94.1 million (FY16: £105.0 million). The firm said that the results were in line with market expectations.

The results reveal a “strong” forward order book at November 10 2017 of £277 million (November 11 2016: £250 million) with workflow on track to support the firm’s growth strategy and deliver around 80 new sales releases in 2018, up on the 52 in 2017.

McCarthy & Stone CEO Clive Fenton said: “We achieved a strong result in the second half of the year and delivered an improvement in both margins and volumes compared to the first half of FY17. Our full year completion volumes were in line with the prior year despite some headwinds as a result of the increased level of uncertainty in the secondary market and the expected lower number of first occupations.  We delivered to market 49 high-quality new developments and maintained our exceptional build quality and levels of customer satisfaction. 

“The group starts the new financial year with a strong forward order book and a robust balance sheet.  We have sufficient land under control, much of which already has detailed planning consent, to deliver our strategic growth plan of building and selling more than 3,000 units per annum.”

McCarthy & Stone has been exploring additional revenue streams to diversify its business model including a strategic relationship with Places for People (PfP Capital) to supply homes for rent – the firms says 17% of older people have indicated that they would rather rent than buy, equivalent to around 2 million people.

The firm has also been piloting a new scheme to build bungalows as an alternative product for retirees.

Bovis, meanwhile, in a trading update says it is making encouraging progress towards its medium term targets “with continued improvement in customer satisfaction and excellent progress in optimising the balance sheet and bringing additional cash into the business,” according to group ceo Greg Fitzgerald. “We expect to have a net cash position of at least £100 million as at 31 December 2017.  Trading is in line with expectations, the market remains strong, and we are on track to deliver another disciplined period end."

Bovis is fully sold for its targeted FY 2017 completions with an average sales rate over the period of 0.52 (H1 2017: 0.48), and the firm says pricing remains “robust” and it expects to deliver an increase in the average selling price for FY 2017, largely driven by changes in mix with a modest increase in underlying prices.

Bovis says its HBF Customer Satisfaction rating on completions since February 1 2017 has averaged 75%, equivalent to a 3-star rating and the firm remains confident in achieving its medium term target of a 4-star rating.

Crest Nicholson has continued to grow overall housing volumes this year, issuing an update on its financial year ending October 31 2017, Crest’s overall housing unit completions in 2017 rose 2.3% to 2,935 homes against 2016.

Its open market average selling prices improved 5.4% to £391,000, which Crest said tallied with its “well established strategy to position the business at around this pricing level”.

Underlying sales rates for 2017, excluding PRS, averaged 0.77 sales per outlet per week against 2016’s 0.81, reflecting the increase in Crest’s average selling price and to a degree, Crest said, the softer central London market. Its average number of sales outlets increased 8.5% to 51.

As of the end of October, Crest’s total forward sales were 13.6% ahead of 2016 at £391.4 million.

Crest said the housing market was “generally robust” across the group’s operating areas, but transactions in central London were “suffering from some volume and price weakness”.

It added that “whilst there may be some impact” from ongoing economic and political uncertainty, the fundamentals of the new build housing market remained strong.

The housebuilder expects growth in revenues across all tenures and reported sales for the year to be around 6-7% higher than 2016.

Stephen Stone, Crest’s CEO, said: “I am pleased to report yet another year of growth for the group.  The business continues to increase the number of homes built and carries positive momentum into 2018 with strong forward sales.”

Barratt, covering the period from July 1 to November 12 2017, said the robust demand across its regions was reflected in its net private reservations per average week of 268, against the 265 of the equivalent period in 2016.

The volume housebuilder launched 79 new developments during the period (2016: 69), operating from an average of 373 active outlets compared to 2016’s 370.

Total forward sales as of November 12 2017 grew 8.4% to a value of £2,876.0 million, equating to 12,843 plots (November 13 2016: 11,733 plots).

David Thomas, Barratt’s CEO, said: “We have started the financial year strongly with a good sales rate, driven by customer demand for new homes, and supported by an attractive lending environment. We remain committed to quality, build excellence and market leading customer service and are working hard to increase the supply of houses across the UK.” 

Photo via Shutterstock

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