Final Results

Barratt Developments PLC 25 September 2002 BARRATT DEVELOPMENTS PLC PRELIMINARY RESULTS TO 30TH JUNE 2002 CHAIRMAN'S STATEMENT This has been the Barratt Group's most successful year to date. We delivered record profits of £220m, almost double our profits of three years ago, and ended the year with record forward sales. We also extended to 10 years our track record of increasing earnings per share by over 20% per year. Most importantly, even though we are only 11 weeks into our new financial year we have already secured 60% of our full year's sales projections. Our very strong forward sales position gives us great confidence for the year ahead. Group results for the year ended 30th June 2002 are as follows:- - Pre-tax profit amounted to £220m against £178.4m the previous year, an increase of 23.3%. - Basic earnings per share amounted to 68.6p against 55.1p the previous year, an increase of 25% - Final dividend of 9.89p per share will be recommended against 8.91p the previous year, giving a total dividend for the year of 14.38p, an increase of 10%, 4.8 times covered. - Turnover rose to £1,799m against £1,509m the previous year, an increase of 19%. - UK completions rose to 12,250, up 8% at an average selling price of oe139,600, up 9.6%. - UK land stocks increased from 35,100 plots to 40,050 plots, equating to over 3 years' volume. - Net cash in hand at the year end amounted to £94.6m, which highlights the emphasis placed on cash management. This continued strong balance sheet position was achieved notwithstanding a £160m increased investment in our UK land stocks and work in progress. - Return on capital employed was 31.6%, maintaining our position amongst the highest in the industry. These excellent results illustrate how we have further strengthened all aspects of our business. Throughout the year to 30th June the overall housing market progressively strengthened, buoyed by a lack of industry supply due to planning constraints, strong demand and low interest rates. We were able to take full advantage of market conditions, achieving strong sales and healthy price increases with total sales reservations up by 12% year on year. We benefited enormously from our total geographic spread and from selling to all market sectors, at prices from £60,000 to £3m. We produced increased sales and profits in all of our regional markets. In the North our markets progressively strengthened throughout the year. In the South, the overly buoyant levels we experienced from November through to April moderated towards the end of our financial year to more normal conditions. All our markets are now robust and sustainable, as evidenced by our sales achievement since 1st July. All of our regions are achieving strong sales with selling costs unchanged from the previous year. New sales reservations taken since 1st July are up 10% year on year, increasing our current forward sales to over £700 million. Mortgages are extremely affordable, and over the last 10 months interest rates have remained stable at 4%. Whilst interest rates may increase in due course, modest movement between 4% and 7%, as has been the case over the last 9 years, is not a restraint but merely moderates peaks and troughs and makes our markets more sustainable. We have benefited greatly from our policy of controlled organic expansion, establishing operations in areas of proven demand. Over the last 10 years we have increased our network of housing divisions from 12 to 32. Of these, 24 trade as Barratt Homes and 8 as KingsOak Homes. KingsOak, in its second year of trading, increased unit completions from 485 to 1,094 and we anticipate a contribution of 1,800 completions this financial year. Over the past 10 years we have consistently demonstrated our ability to produce uninterrupted growth through varying market conditions. During this period we have increased completions from less than 5,000 to over 12,000 homes, and profits and earnings per share by over 20% per annum. We are industry leaders in urban redevelopment with over 25 years experience and over 75% of our homes are built on brownfield sites, comfortably exceeding the Government's target of 60%. We benefit greatly from our skills in developing the more complex brownfield sites and undertake a wide range of schemes, from affordable homes to high-rise luxury apartments. Our experience of developing for all market sectors, including mixed use schemes, provides us with the widest range of developments and land-buying opportunities. The Group is well-positioned to maximise on the current planning regime and Government emphasis on urban regeneration. We continue to demonstrate our ability to grow the business organically, which is largely attributable to our land-buying skills. During the year we acquired a record 17,200 plots, 40% more than we used, increasing our total UK land stocks to 40,050 plots. This represents over 3 years' volume and is in line with our growth requirements. In addition, we have 4,000 plots under contract and a further 5,000 plots agreed subject to contract. This amounts to over 49,000 plots secured and being processed, equal to 4 years' supply. Our land teams were also highly successful in bringing a record 16,000 plots through to planning consent, more than any other housebuilder and more than sufficient to service our requirements in the new financial year. All land buying is stringently controlled and we continue to secure sites in desirable locations of proven demand. The quality of our land bank and control of our investments is reflected in our financial results, whereby we have consistently improved our margin and produce a return on capital employed of 31.6%, one of the highest in our industry. We have progressively strengthened our land bank to be one of the largest in the industry and at the same time we have maintained a very strong balance sheet, increasing shareholders' funds by 20% to £760m. At the year end we had £94.6m net cash in hand, notwithstanding £549m expenditure on land. Our operation in Southern California continues to make good progress with profits up 17% to £7m on turnover up 15% to £123.8m. Local market conditions remain favourable with high levels of employment, good affordability and strong demand. Our move to a more affordable product proved to be highly successful, producing increased sales which more than compensated for the anticipated lower average selling price. Sales since 1st July continue to show a healthy increase with selling costs in line with the previous year. The overall housing market is very similar to the UK and is underpinned by low interest rates and a restricted supply. Our strategic emphasis on re-investing in the better markets of Southern California in sites of manageable investment, coupled with our strong forward order book, gives confidence for another successful year. The Group commenced the new financial year in a very strong position with a substantial increase in forward sales, up 30% to £620m. New sales reservations taken since 1st July are up 10% year on year, further strengthening our forward order book which currently stands at over £700 million. All of our regional markets remain strong and we continue to achieve price increases and our selling costs are being maintained in line with the year just ended. Throughout the Group we have been extremely successful in maintaining a low cost base, which we see as critical to our competitive edge. This emphasis on low overheads and effective cost controls has benefited us greatly and will continue to do so in the future. We are pleased to welcome a new non-executive director, Mr Charles Toner, who joined the Board in May and has been appointed Vice Chairman. Mr Toner was formerly Deputy Chief Executive of Abbey National plc and brings with him a wealth of experience. Our management team has once again demonstrated its ability to succeed and on behalf of the Board I would like to thank all my colleagues throughout the Group, both office and site based. Our record results would not have been achieved without their hard work, enthusiasm and skill. Looking ahead, our corporate objectives will continue to be to improve earnings per share and generate shareholder value. We are extremely well-placed to build on our proven track record and we have great confidence for the future. Frank Eaton Chairman 25th September 2002 The following are the unaudited results of the Group for the year ended 30th June 2002. ---------------------------------------------------------------- 1. GROUP PROFIT & LOSS ACCOUNT Unaudited Audited 2002 2001 £m £m ---------------------------------------------------------------- TURNOVER: Group and share of joint venture 1,799.4 1,515.0 LESS: Share of joint venture turnover - (5.9) ---------------------------------------------------------------- GROUP TURNOVER 1,799.4 1,509.1 ================================================================ OPERATING PROFIT 227.9 186.2 SHARE OF OPERATING PROFITS OF JOINT VENTURE - 0.9 PROFIT ON DISPOSAL OF INTEREST IN JOINT VENTURE - 3.7 ---------------------------------------------------------------- PROFIT BEFORE INTEREST AND TAXATION 227.9 190.8 INTEREST PAYABLE (7.9) (12.4) ---------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 220.0 178.4 TAXATION (61.9) (51.7) ---------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 158.1 126.7 DIVIDENDS (33.3) (30.2) ---------------------------------------------------------------- RETAINED PROFIT 124.8 96.5 ================================================================ EARNINGS PER SHARE - BASIC 68.6p 55.1p ================================================================ EARNINGS PER SHARE - DILUTED 67.7p 54.7p ================================================================ DIVIDEND PER SHARE 14.38p 13.07p ================================================================ DIVIDEND COVER 4.8x 4.2x ================================================================ All activities of the group are continuing. ---------------------------------------------------------------- 2. STATEMENT OF TOTAL RECOGNISED GAINS AND Unaudited Audited LOSSES 2002 2001 £m £m ---------------------------------------------------------------- Profit on ordinary activities after taxation 158.1 126.7 Currency translation differences on foreign currency net investments (2.1) 1.9 ---------------------------------------------------------------- Total gains and losses recognised since last annual report 156.0 128.6 ================================================================ ---------------------------------------------------------------- 3. GROUP BALANCE SHEET Unaudited Audited 2002 2001 £m £m ---------------------------------------------------------------- FIXED ASSETS Tangible assets 2.4 1.9 Other investments: interest in own shares 17.7 11.7 ---------------------------------------------------------------- 20.1 13.6 ================================================================ CURRENT ASSETS Properties held for sale 6.1 4.9 Stocks 1,451.3 1,177.6 Debtors due within one year 26.4 28.3 Debtors due after more than one year 0.5 0.7 Bank and cash 131.8 86.6 ---------------------------------------------------------------- 1,616.1 1,298.1 ---------------------------------------------------------------- CURRENT LIABILITIES Creditors due within one year (753.3) (596.4) ---------------------------------------------------------------- NET CURRENT ASSETS 862.8 701.7 ================================================================ TOTAL ASSETS LESS CURRENT LIABILITIES 882.9 715.3 CREDITORS DUE AFTER MORE THAN ONE YEAR (123.4) (84.2) ---------------------------------------------------------------- NET ASSETS 759.5 631.1 ================================================================ CAPITAL AND RESERVES Called up share capital 23.8 23.5 Share premium 185.2 179.8 Profit retained 550.5 427.8 ---------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 759.5 631.1 ================================================================ NET ASSETS PER SHARE 320p 269p ================================================================ ---------------------------------------------------------------- 4. GROUP SUMMARY CASH FLOW STATEMENT Unaudited Audited 2002 2001 £m £m ---------------------------------------------------------------- Net cash inflow from operating activities Operating profit 227.9 186.2 Increase in stocks (280.9) (190.4) Increase in debtors (1.7) (6.4) Increase in creditors 199.5 143.4 Other non cash movements (0.6) (0.5) ---------------------------------------------------------------- 144.2 132.3 Returns on investments and servicing of finance (8.8) (10.0) Taxation (59.7) (48.2) Capital expenditure and financial investment (7.1) (0.9) Acquisitions and disposals 3.7 4.8 Equity dividends paid (30.8) (28.0) ---------------------------------------------------------------- Cash inflow before financing 41.5 50.0 Financing 5.6 6.4 ---------------------------------------------------------------- Increase in cash 47.1 56.4 ================================================================ Reconciliation of net cash flow to movement in net funds Increase in cash 47.1 56.4 Cash flow from increase in debt - (3.6) ---------------------------------------------------------------- Change in net funds resulting from cash flows 47.1 52.8 Exchange movements 2.6 (2.6) ---------------------------------------------------------------- Movement in net funds in the period 49.7 50.2 Net funds/(debt) at 1st July 44.9 (5.3) ---------------------------------------------------------------- Net funds at 30th June 94.6 44.9 ================================================================ The financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 1985. The figures in the preliminary statement have been taken from the group's draft statutory accounts which have not yet been signed but upon which the auditors are expected to give an unqualified opinion. The figures for the year to 30th June 2001 are an extract from the full accounts for that year which have been filed with the Registrar of Companies and on which the auditors gave an unqualified opinion. The preliminary financial information has been prepared on the basis of accounting policies set out in the company's Annual Report for the year ended 30th June 2001, except for the adoption of Financial Reporting Standard 19 ('Deferred Taxation'). No prior year adjustment is required for the change in accounting policy as the impact upon the reported results for the current year is immaterial. ------------------------------------------------------------------ 5. CASH IN HAND/(BANK DEBT) 2002 2001 £m £m ------------------------------------------------------------------ Due within one year (10.9) (13.3) Due after more than one year (26.3) (28.4) ------------------------------------------------------------------ (37.2) (41.7) Bank and cash deposits 131.8 86.6 ------------------------------------------------------------------ Total net cash 94.6 44.9 ================================================================== 6. DIVIDENDS The directors propose a final dividend of 9.89p per share (2001: 8.91p) making a total for the year of 14.38p per share (2001: 13.07p). It is proposed that the final dividend will be paid on 15th November 2002, to shareholders on the register, at close of business, on 4th October 2002. 7. EARNINGS PER SHARE Basic earnings per ordinary share is based on the profit after taxation of £158,100,000 (2001: £126,705,000) and the weighted average number of ordinary shares in issue and ranking for dividend during the year of 230,518,421 (2001: 229,877,640). For diluted earnings per share, the weighted average number of shares in issue and ranking for dividend is adjusted to assume the conversion of all dilutive potential shares. The effect of the dilutive potential shares is 3,008,294 (2001: 1,794,208), this gives a diluted weighted average number of shares of 233,526,715 (2001: 231,671,848). 8. NET ASSETS PER SHARE Net assets per ordinary share are based on the net assets at 30th June 2002 of £759.5m (2001: £631.1m) and the number of shares in issue at that date of 237,592,250 (2001: 234,909,800). 9. TAXATION In the current year, a deferred tax asset of £1.9m (2001 : nil) relating to past trading losses incurred by the US operation has been recognised. In the opinion of the directors the asset will become recoverable based upon future profitable trading within the US. For further information: Mr C.A. Dearlove OR Ms. C. Lynch/Mr T.Garrett Group Finance Director Weber Shandwick Square Mile Barratt Developments PLC Telephone: 0191 286 6811 Telephone: 020 7950 2800 * * * * * * * * * * * * Further copies of the announcement can be obtained from the Company's Registered Office: Barratt Developments PLC, Wingrove House, Ponteland Road, Newcastle upon Tyne, NE5 3DP. This information is provided by RNS The company news service from the London Stock Exchange

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