Annual Report and Accounts 2009

Spain and Gibraltar Housing

Market conditions in the first two months of 2010 have been stronger than we anticipated. However, we remain cautious until a clearer pattern emerges for the Spanish economy as a whole.

Javier Ballester, Managing Director, Spain

Photo: Javier Ballester

Spain housing market at a glance

Key drivers

  • Continuing oversupply of properties on mainland Spain
  • Ongoing weakness of Sterling against the Euro
  • Economic weakness resulting in reduced consumer confidence

Spain strategy

  • Deliver high quality homes in popular locations that appeal to both foreign and Spanish buyers
  • Focus on cash generation and cost reduction
  • Remain cautious on land purchasing at the current point in the market cycle

Gibraltar strategy

  • As previously announced, we are exiting our business in Gibraltar.

Our Spain and Gibraltar Key Performance Indicators

  2009 2008
Order book volume as a percentage of completions 20.0% 83.2%
Owned and controlled plots with planning 1,901 2,121
Customer satisfaction 98% 85%
Health and safety (Spain) 0.481# 0.371
Health and safety (Gibraltar) 0.000 0.828##

# Please note that the injury frequency rate for Spain equates to just three incidents in 2009.

## Please note that the injury frequency rate for Gibraltar equates to just four incidents in 2008.


Performance

In Spain and Gibraltar we completed a total of 225 homes in 2009 (2008: 214) at an average selling price of £260k (2008: £270k). We delivered a higher proportion of our completions in Spain from the mainland as we discounted prices to reduce our level of inventory.

Revenue was broadly flat at £61.0 million (2008: £59.8 million). Operating loss* was £1.4 million (2008 loss: £2.4 million) as a result of the ongoing market weakness. The landbank has reduced from last year as we have become increasingly cautious in our approach to land purchases. Our year-end order book stood at £11 million (2008: £58 million).

We have undertaken further reviews of the carrying value of our landbank in Spain, which resulted in land and work in progress write downs of £3.3 million, all of which were recorded at the half year (2008: £37.4 million).

As previously announced, we are exiting our business in Gibraltar and expect the majority of the remaining completions to be achieved during the first half of 2010.

Current trading

Market conditions in the first two months of 2010 have been stronger than we anticipated. However, we remain cautious until a clearer pattern emerges for the Spanish economy as a whole.

* Profit on ordinary activities before finance costs, exceptional items, brand amortisation and tax, after share of results of joint ventures.