L&G's Cala reports ‘encouraging’ sales recovery

Legal & General-owned housebuilder Cala Group has said it has seen an “encouraging” recovery in reservations in the first two months of this year, with the market having returned to “normal” conditions.

In a statement accompanying full year 2022 accounts posted on Companies House, Cala chief executive Kevin Whitaker said the firm had seen a reservation rate of 0.64 sales per site per week in the first seven weeks of 2023, down from 0.85 in the same period in 2022.

However, he said this was a “significant” improvement on the sales rate in the fourth quarter of 2022 seen in the immediate wake of former chancellor Kwasi Kwarteng’s mini Budget. Whitaker said Cala had received 285 private reservations in the first seven weeks, 25% down on the 378 received in the same period last year.

Whitaker said the firm had felt the effects of the mini Budget and the associated cost of living crisis in the final quarter of 2022, with the 751 forward sales accumulated by the end of the year 24% down on the level of the previous year.

However, he said the forward sales position was “more reflective of our normal forward sold position” and that the 0.64 reservations figure for 2023 was “encouraging”. He said: “This rate is a significant increase from what was achieved in Q4 of 2022 and is in line with our latest business plan, with pricing also in line with expectations.

“While it is behind what was achieved for the equivalent period in 2022 […], this reflects a return to more normalised market conditions.”

Whitaker added that Cala was in a strong position to manage continued “widespread uncertainty” in the market.

The publication of the accounts comes after Cala earlier this month announced the purchase of timber frame housebuilder Taylor Lane. This was announced on the same day that Cala’s owner, L&G said it was shutting its own timber modular housing business, L&G Modular, to new contracts.

The accounts also confirmed figures given in a trading update by Cala in January which predicted a sharp rise in pre-tax profit for the business in 2022 despite the post-mini Budget turmoil which crashed buyer demand in the last three months of the year.

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The accounts said pre-tax profit for the calendar year rose by 27% to £168m on the back of a nine per cent increase in turnover to £1.32bn as the firm managed to sell a larger proportion of higher value homes across the year.

Home sales at the firm, which works across Scotland, the Midlands and the South of England, topped 3,000 units, with 3,027 houses sold, up from 2,904 in 2021.

Whitaker said the firm had benefited from the fact that “strong market conditions” for the first nine months of the year enabled the business to sell out for the year by September, prior to collapse in demand inspired by former chancellor Kwasi Kwarteng’s financial statement that month.

Despite continued rises in construction costs, the firm managed to see its gross margin increase from 18.3% to 19.6%, which it said was the result of rising house prices outpacing rising costs, as well as better margin sites coming through the system.

Cala’s weekly sales rate per site across the year as a whole 0.62, 18% down on the previous year, with Whitaker saying sales “slowed during quarter 4 following the UK Government’s mini Budget.”