UK’s largest housebuilder reveals covid impact in end of year trading update
Sales income at the UK’s largest housebuilder Barratt has slumped by nearly 30% in the wake of the covid-19 pandemic, the firm revealed in a year-end trading update this morning.
The firm issued a call for the government to extend the existing Help to Buy scheme as it said the number of houses it sold in the year to June 30 fell by 30% from 17,856 recorded in 2019, to just 12,604 this year.
While it did not reveal expected turnover for the year, it did reveal average sales prices of homes this year and last, which multiplied against the number of homes sold, indicated sales income is likely to have fallen from nearly £5bn last year to £3.5bn this.
However, with the pandemic preventing the firm from completing on existing reservations made by buyers, it said the forward order book was sharply up, to £3.2bn, from £2.6bn at the same point last year.
The firm also said that sales had been strong since the resumption of the housing market in early March, citing an average of 0.63 sales per site per week in the last six weeks, compared to 0.69 in the same period last year.
Barratt’s trading update cited the reduced level of availability of mortgages at higher loan to value ratios since the covid crisis, and said prospects for the housing market were “uncertain”. The statement said that “demand from first time buyers looking to use Help to Buy has been significant since the market reopened,” and issued a call to extend its current Help to Buy scheme, which helps those with small deposits to buy new-build homes, but which is due to expire in its current form in March next year.
The statement said: “To help ensure the UK’s housing recovery is sustained, capacity in the industry is maintained and to ensure that customers who planned to use the current Help to Buy scheme still can, given the unprecedented backdrop, we believe it would be sensible for Government to extend the existing scheme beyond March 2021.”
Barratt’s statement confirmed the business had now re-opened all of its sites and returned all employees back to work from furlough, and will pay back government support given to it under the scheme.
The firm said that site productivity had reached about 75% of pre-covid levels, due to social distancing requirements, but that this should improve given recent changes in guidance.
Barratt also revealed that its full year results, due to be released on September 2, will be further impacted by a £70m write-down for the cost of repairs to a series of existing large schemes at which problems with the structural concrete frames have emerged.
Barratt said the bulk of this charge related to costs at one development, Citiscape in Croydon, built in 2001, at which significant issues relating to the design of the building’s reinforced concrete frame had been identified, requiring “extensive remedial work”. In addition, following checks, it said minor problems had been identified in seven further schemes, and that it estimated the total cost of repairs and checks would amount to £70m. This is on top of £15.8m of costs already incurred at Citiscape.
The problems with Citiscape’s concrete frame were uncovered during work to replace cladding in the wake of the Grenfell Tower fire.
David Thomas, Barratt chief executive (pictured, left), said that prior to the COVID-19 pandemic, the firm had been set to deliver “a strong year of progress on both volume and margin.”
He said: “The pandemic has caused significant disruption, but our highly skilled and experienced team have shown incredible resilience, flexibility and commitment both through the peak of the crisis and in the careful reopening of our sites.
“Now, with our construction sites operational across the UK, we begin the new financial year with cautious optimism supported by our strong forward order book and our well capitalised balance sheet.”