Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Housebuilders target sustained growth over short-term volumes

Housebuilders have revealed soaring profits and their highest shareholder returns for years.

Bovis Homes, Persimmon and Taylor Wimpey released their full-year results for 2013 last week, with Redrow and Barratt Developments posting half-year results to 31 December 2013.

The housebuilders say sustained growth in the longer term is a priority rather than short-term gains. All five firms have set completion targets below 16,000 new homes in 2014.

Barratt Developments posted 6,195 completions for the six months to 31 December 2013 (H1 2014) and predicted around 15,000 completions for the full year to 30 June 2014, rising to 16,000 the following year.

Persimmon’s completions rose 16 per cent to 11,528 in 2013 compared with 9,903 for the same period in 2012, while Taylor Wimpey reported 11,696 new homes built within its UK business for 2013 compared with 10,886 homes in 2012.

Still short of peak

However, completions still stand below pre-recession peak levels seen in 2007/08.

Barratt built 18,588 homes in its 2008 financial year, while Persimmon reported 15,905 completed homes in 2007. Taylor Wimpey also peaked in 2007 with 14,862 new homes built.

This compares with recessionary lows of 9,962 completions in 2010 for Taylor Wimpey, 11,171 in 2011 for Barratt Developments and 9,360 in 2011 for Persimmon.

Recent research by Savills forecast housebuilding to grow by 55 per cent over the next five years to 167,000 by 2018, but will still fall short of the 240,000 homes needed annually.   

Construction began on 122,590 homes in 2013.

200,000 mark some way off

Barratt group finance director David Thomas says if you look at the industry over the past 20 years with the exception of the current year, you struggle to see one where volumes have grown by more than 10 per cent.

It is therefore no surprise, he argues, that it will take more than a couple of years for volumes to grow above 200,000.

Taylor Wimpey will now pay out £250m to shareholders (£50m in 2014 and £200m in 2015) with further annual payouts from 2016.

Chief executive Pete Redfern tells Construction News the payments are “irrelevant” to future land investments.

He says Taylor Wimpey has the capacity to build up to 14,000 homes a year, in line with the soft cap it placed on completions per annum in 2011 to achieve “disciplined growth”, which Mr Redfern says is adequate for 2014/15.

He adds that the company will take a “disciplined” approach to deliver sustained growth - a sentiment echoed by the other firms.

Bovis chief executive David Ritchie stresses the need to have a strategy for long-term growth, separate from market growth through schemes such as Help to Buy.

Persimmon financial director Mike Killoran says the group’s growth will not be at the expense of its existing businesses and that Persimmon’s 24 operational businesses have the ability to increase volumes by 30 per cent up to 15,000 new homes a year.

Bovis Homes predicts housing completions of between 3,400 and 3,600 new homes for 2014 compared with 2,813 new homes for 2013 – up 19 per cent on 2012 (2,355 homes).

Profits rocket

The housebuilders all reported pre-tax profit increases of above 45 per cent, with Persimmon topping the full-year results with a 50 per cent increase to £323m compared with £215.4m for the same period in 2012.

Bovis Homes and Taylor Wimpey both saw pre-tax profit increases of 48 per cent, to £78.8m (2012: £53.2m) and £268.4m (2012: £181.8m) respectively.

Barratt Developments’ half-year pre-tax profits shot up 162 per cent to £120.4m, compared to £45.9m for the same period in 2012.

The group says it is on track to increase profits for the full year to 30 June 2014 to between £323m and £380m from £104.5m for the year end to 30 June 2013.

Redrow posted a pre-tax profit jump of 107 per cent to £47.5m for the six months to 31 December 2013 (H1 2014) compared with £23m in H1 2013.

The group also announced three internal promotions, reinforcing its expansion into the North of England.

Redrow Eastern division managing director Keith Parrett has been made regional chief executive, overseeing its Southern and South-east businesses, while Midlands division managing director Matthew Pratt has become regional chief executive for the group’s Northern and Midlands businesses.

The group’s managing director John Tutte will become its chief executive on 30 June 2014.

Redrow decided to pay its first interim dividend for six years of 1p per share, totalling £3.7m for the six months to 31 December 2013. Group chairman Steve Morgan said he had no plans to accelerate shareholder returns.

Supply issues

All housebuilders highlight labour and materials as major constraints in 2013.

Barratt Developments group finance director David Thomas says housebuilders have “to step up the level of recruitment” to address labour shortages.

The company says it will expand its recruitment programme to 1,100 apprentices, graduates and trainees – almost double the 600 it announced in May.

Redrow has a policy that 15 per cent of its labour workforce is made up of trainees and apprentices and Mr Morgan urges other firms to make the same commitment.

All housebuilders say the supply of bricks and concrete blocks has been constrained, with Bovis Homes predicting an increase of between 3 and 5 per cent in build costs in the year ahead. Barratt also points to timber costs as another constraint. 

Mr Ritchie says the ability to secure workforce gangs for bricklaying and carpentry has also caused problems, but he is confident this will ease in 2014.

The firms are setting sights on boosting return on capital employed (ROCE) targets and analysts are pointing to another bumper year for housebuilders in 2014.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.