In a trading update today Barratt Developments said that it expects “construction activity will continue to moderate as customer commitments within our order book are satisfied and as construction activity continues to align with reservation activity”.
It has reduced land approvals, stopped taking on any new employees and introduced further controls for new site openings to manage working capital deployment. Reservation activity in the first quarter of the new calendar year will determine whether any further action will be needed, it said.
Over the six months to 31st December 2022, which is the first half of Barratt’s financial year, the company approved 16 new sites but these were more than offset by 22 previously approved sites that will not now proceed, making a net cancellation of six sites in period, compared to net approval of 48 sites over the same period in the previous year.
The approved sites added 3,003 plots, but 3,293 plots were removed from plans, resulting in a net cancellation of 290 plots in the half year (HY 22: net addition of 8,869 plots).
Full year out-turn will depend on how the market evolves in the next few months, the company said. If there is the usual pick-up in spring trading patterns, Barratt could reach total home completions of 17,475 for the year. But if trading remains at recent levels, completions for the financial year will be in the range of 16,000 to 16,500.
Chief executive David Thomas said: “We have delivered a strong operating performance for the six months to 31st December 2022. This was possible because of our significant forward order book at 30th June 2022 and the tremendous efforts of our employees, subcontractors and supply chain partners.
“The first half of the financial year has however seen a marked slowdown in the UK housing market. Political and economic uncertainty impacted the first quarter; this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.
“Our business remains fundamentally strong, both operationally and financially, with an experienced leadership team, a strong net cash position and a resilient and flexible business model. We are focused on successfully navigating the challenges ahead and continuing to deliver excellent quality and service for our customers.”