Housebuilder to repay all its furlough cash
BARRATT ‘RESILIENT’ AS MARKET STARTS TO PICK UP
BRITAIN’S biggest housebuilder has said its finances are strong enough for it to repay tens of millions of pounds claimed under the government furlough scheme.
The business said 85 per cent of its 6,700 workers had been placed on the job retention scheme at the height of the lockdown.
However, all of its building sites had now reopened and everyone – apart from those shielding – was back at work.
The £4.76 billion-turnover building giant said it had been grateful for the help to safeguard its workforce and as its financial position had remained resilient, it wanted to give the money back – about £25 million.
Chief executive David Thomas said he was “cautiously optimistic” for the year ahead, despite the company warning the prospects for the wider UK economy and the new homes market remained uncertain.
In a trading update, the business, formed in Newcastle in 1958 and now based in Coalville, said it saw a big drop in the number of homes completed as a consequence of the pandemic.
The total number built in the year to June 30 – either by its subsidiaries or in joint ventures – was just over 12,600, compared with more than 17,800 a year earlier.
However, reservations were only down marginally and the company’s order book remained strong, with total forward sales of more than 14,300 homes (worth £3.25 billion) compared with about 11,400, worth £2.6 billion, this time last year.
Shares in the business were up 8 per cent on the news, at about £5.30.
When the pandemic hit, the business said it took action includingsuspending all land buying, stopping recruitment, postponing non-essential spending and cancelling an interim dividend, due on May 11.
Mr Thomas said: “Prior to the Covid-19 pandemic, the group was delivering a strong year of progress on both volume and margin.
“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, we begin the new financial year with cautious optimism, supported by our strong forward order book and our well-capitalised balance sheet.”
In a trading update, the business, which has 350 active sites, said: “Since the removal of government restrictions on housing market activity on May 13, there has been a welcome recovery in internet activity, site visitors and net reservations across the industry and our business.
“However, the prospects for the wider UK economy and the medium term impact on the new homes market remains uncertain.
“Key to the health of the new homes market is mortgage availability.
“While there is a reduced level of availability of higher loan-to-value mortgages, demand from first-time buyers looking to use Help to Buy has been significant since the market reopened.
“To help ensure the UK’s housing recovery is sustained, we believe it would be sensible for government to extend the scheme beyond March 2021.”
It said average private selling price had remained good, down £1,000 at about £311,000.
Russ Mould, investment director at online stockbroker AJ Bell said any kind of positivity was welcome.
He said: “This optimism is not founded on thin air.
“The company has a growing order book, has seen high customer interest levels since the reopening of its sales centres and it now has all its sites up and running.
“Help to Buy is helping to underpin already resilient demand and the reported prospect of stamp duty changes is potentially an indication the state is willing to stand behind the sector’s recovery.
“There was some bad news to balance out the good in Barratt’s statement – inevitably, completions were down in the 12 months to the end of June and the average asking price also fell.
“Dividends remain off the table, but it does not appear as if the market was expecting anything different.
“Barratt’s concession that mortgage availability is key to the health of the new homes market is a reminder any reduced willingness on the part of lenders to hand out high loan-to-value mortgages could be damaging.
“This nagging concern could build as the full economic impact of the crisis comes through.”