HY22 Interim Results

RNS Number : 0855B
Barratt Developments PLC
09 February 2022
 

 

 

 

9 February 2022

BARRATT DEVELOPMENTS PLC

 

Half year results for the six month period ended 31 December 2021

 

 Strong build performance, well positioned for the second half with increased guidance for full year completions

 

Commenting on the interim results David Thomas, Chief Executive of Barratt Developments PLC said:

"We have delivered an excellent first half and the strong rebound in our construction activity means that we now expect to complete more than 18,000 homes, including 750 from JVs, this year, ahead of previous expectations and pre-COVID levels.

 

This increase in construction activity has not affected our focus on our customers, on quality and service and on acting in a responsible and ethical way. We continue to work hard to lead the industry in building the high-quality sustainable homes and developments the country needs."

 

£m unless otherwise stated 1,2

Half year ended

31 December 2021

Half year ended

31 December 2020

Change

Total completions (homes)3

8,067

9,077

(11.1%)

Revenue

2,247.1

2,494.7

(9.9%)

Profit from operations

434.0

422.9

2.6%

Adjusted operating margin4

20.0%

20.3%

(30bps)

Operating margin4

19.3%

17.0%

+230bps

Profit before tax

432.6

430.2

0.6%

Basic earnings per share (pence)

34.5

34.3

0.6%

Adjusted basic earnings per share (pence)4

35.9

40.5

(11.4%)

Interim dividend per share (pence)

11.2

7.5

49.3%

ROCE4

26.8%

17.7%

+910bps

Net cash4

1,131.7

1,106.7

2.3%

 

 

Highlights  

· Strong build performance with 341 (HY21: 298) construction equivalent homes built each week3, an increase of 14.4%.

·   Total home completions3 of 8,067, 11.1% below the prior period, reflecting the unusually high completions in HY21 due to COVID lockdown dislocation and a return to the more normal seasonal phasing of completions across our fiscal year.

· Now on track to deliver total home completions of 18,000 - 18,250 in FY22 (including 750 JV completions), an increase of 250 homes on previous guidance and in excess of the total home completions delivered in FY19.

· Continued industry leadership in quality and customer service recognised through a seventeenth successive year of achieving more NHBC Pride in the Job Awards than any other housebuilder and the twelfth consecutive year of receiving the HBF maximum 5 Star customer satisfaction rating.

·   Significant progress as the leading national sustainable housebuilder with the completion of the Z House, a unique zero carbon concept home showcasing the future of sustainable living in the UK; awarded "2021 Sustainable Housebuilder of the Year"; and ranked Top 30 in Glassdoor's "Best Places to Work 2022".

· Continued strong cash generation with period end net cash of £1,131.7m (HY21: £1,106.7m) after significant incremental investment in land and work in progress. Net indebtedness surplus of £449.4m ( HY21 : £505.6m) after deducting land creditors of £682.3m ( HY21 : £601.1m).

· Phased reduction of ordinary dividend cover commenced, with cover reducing to 2.25x in FY22, 2.0x in FY23 and 1.75x in FY24.

 

Current trading

· Net private reservations per active outlet per average week for January were 0.90, 16.9% above the 0.77 rate in the equivalent period in 2021, reflecting continued strong demand.

· Strong total forward sales3 as at 30 January 2022 of 15,736 homes (31 January 2021: 14,289 homes) at a value of £4,109.7m (31 January 2021: £3,425.8m) with 11,362 homes of these total forward sales either exchanged or contracted.

 

 

 

 

1 Refer to Glossary for definition of key financial metrics

2 Unless otherwise stated, all numbers quoted exclude JVs 

3 Including JVs in which the Group has an interest

4 In addition to the Group using a variety of statutory performance measures it also measures performance using alternative performance measures (APMs). Definitions of APMs and reconciliations to the equivalent statutory measures are detailed in the Glossary and Definitions. Net cash definition in Note 5.1

 

Note on forward looking statements

Certain statements in this announcement may be forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Accordingly undue reliance should not be placed on forward looking statements. Unless otherwise required by applicable law, regulation or accounting standards, the Group does not undertake to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

 

This announcement contains inside information. The person responsible for arranging for the release of this announcement on behalf of Barratt Developments PLC is John Messenger (Group Investor Relations Director).

 

There will be an analyst conference call and webcast at 8.30am today:-

· Dial in UK toll free: 0808 109 0700

· International dial in: +44 (0) 33 0551 0200

A replay of the analyst conference call will be available until Tuesday 15th February:-

· Dial in UK toll free: 0800 633 8453

· International dial in: +44 (0) 20 3451 9993

· Pin: 6301540#

The presentation will also be webcast live with the follow on Q&A. Please register and access the webcast using the following link:

https://broadcaster-audience.mediaplatform.com/#/event/61d5be76be62a50300366607

An archived version of the webcast will also be available on our website during the afternoon of 9 February 2022.

Further copies of this announcement can be downloaded from the Barratt Developments PLC corporate website at www.barrattdevelopments.co.uk or by request from the Company Secretary's office at: Barratt Developments PLC, Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire, LE67 1UF.

 

For further information please contact:

Barratt Developments PLC

Mike Scott, Chief Financial Officer  07881 327 748

 

Analyst/investor enquiries

John Messenger, Group Investor Relations Director                07867 201 763

 

Media enquiries

Tim Collins, Head of Corporate Communications                  020 7299 4874

 

Brunswick

Jonathan Glass / Rosie Oddy                                     020 7404 5959

 

Barratt Developments PLC LEI: 2138006R85VEOF5YNK29

 

Financial reporting calendar

The Group's next scheduled announcement of financial information is the Q3 trading update on 5 May 2022. 

 

Chief Executive's Statement

 

Overview

We have delivered an excellent operational and financial performance. We made strong progress in increasing build activity in the period and total home completions returned, as planned, to the more typical seasonal pattern following the dislocation created by the initial national lockdown in Spring 2020. We are building homes the country needs, supporting and creating jobs, and aiding wider economic growth whilst delivering both operationally and financially for all of our stakeholders.

 

 

Progress in the half year

Area of focus in second half

Medium term targets

 

Home completions

8,067 total home completions (HY21: 9,077) including 395 JV completions (HY21: 378) reflecting a return to normal H1 : H2 completion phasing

On track to deliver between 18,000 and 18,250 total home completions including c. 750 JV completions in FY22

Disciplined growth in home completions to current target of 20,000 homes

 

 

Gross margin

120 bps increase in adjusted gross margin to 25.0% (HY21: 23.8%)

 

370 bps increase in gross margin to 24.3% (HY21: 20.6%)

Further build optimisation and focus on build cost inflation control.

Delivering continued operational improvements across our business

Land acquisition at a minimum 23% gross margin and continued build optimisation and performance

 

ROCE

910 bps improvement in ROCE to 26.8% (HY21: 17.7%)

Disciplined land and work in progress investment to support growth

Minimum of 25% delivered through continued operating framework discipline

 

We are proud to be the UK's leading national sustainable housebuilder and to lead the industry in both customer service and build quality. We operate across England, Scotland and Wales through our three brands: Barratt Homes, David Wilson Homes and Barratt London. We strive to meet our customers' expectations and we believe that the high quality of our homes and our excellent customer service are both fundamental to our ongoing success.

 

We delivered half year total completions3 of 8,067 homes, 11.1% below the 9,077 delivered in the first half of FY21 (HY20: 8,314). HY21 total completions were boosted by the disruption created by the initial national lockdown in Spring 2020 and HY22 total completions reflect a return to the more normal seasonal phasing of completions across our fiscal year.

 

We are now on track to deliver total home completions of between 18,000 and 18,250, including c. 750 completions from our joint ventures.  This is an increase of 250 homes on previous guidance and is in excess of the volume delivered in FY19.  We remain committed to growing to our medium term target of 20,000 home completions, playing our part in addressing Britain's housing shortage.

 

Our house type ranges and their ongoing refinement continue to underpin our land acquisition at a minimum of 23% gross margin. We also remain focused on driving further improvements in the efficiency of our operations, controlling costs whilst maintaining our focus on quality and customer service and delivering a minimum ROCE of 25%.

 

It is a credit to our construction teams across the country that not only did they deliver growth in construction activity against a backdrop of supply chain challenges, they have also continued to lead the industry on quality. For the seventeenth year in a row, we achieved more NHBC Pride in the Job Quality awards than any other housebuilder.

 

As a result of strong market demand, tight cost control and the underlying strength of our land bank, we delivered a 120 bps increase in adjusted gross margin to 25.0% (HY21: 23.8%, HY20: 23.0%) in the half year. Reflecting the planned return to the more typical seasonal pattern of legal completions and increased administrative expenses we experienced a 30 bps reduction in adjusted operating margin to 20.0% (HY21: 20.3%, HY20: 19.4%).

 

During the period, we incurred £15.9m (HY21: £56.3m, HY20: £17.8m) of costs associated with legacy properties which are recognised outside adjusted gross and operating profit. As a result we delivered a reported gross margin of 24.3% (HY21: 20.6%, HY20: 22.2%) and a reported operating margin of 19.3% (HY21: 17.0%, HY20: 18.6%). Profit from operations for the half year was £434.0m (HY21: £422.9m, HY20: £421.7m).

 

Our ROCE at 26.8% (HY21: 17.7%, HY20: 29.3%) remained ahead of our target of a minimum 25% over the medium term and recovered by 910 bps on the 17.7% reported to 31 December 2020. The ROCE improvement was predominantly driven by the recovery in annualised profitability, with the comparative period impacted by the inclusion of the initial national lockdown in 2020.

 

Our balance sheet remains strong and we ended the half year with net cash of £1,131.7m (31 December 2020: £1,106.7m, 31 December 2019: £433.8m).

 

Keeping people safe

 

Our fundamental priority is to provide a safe working environment for all of our employees and sub-contractors and we are committed to achieving the highest industry health and safety standards.

 

We are continually developing our processes and procedures, challenging unsafe behaviours and looking at ways we can further improve. As highlighted in September 2021, in line with the wider construction industry and reflecting increased activity across housebuilding, we experienced an increase in our Injury Incidence Rate (IIR) to 416 (FY20: 256) per 100,000 workers in FY21. Following the introduction of action plans across the Group to address the IIR, with close monitoring from the Safety, Health and Environment (SHE) Committee, we are able to report an improvement. In the 12 months to 31 December 2021, our IIR has reduced to 295 (2020: 305, 2019: 330) per 100,000 workers and our SHE audit compliance was 97% (2020: 96%).

 

In response to the ongoing pandemic we continue to refine and update our working practices and policies in line with the latest guidance from Government, Public Health Authorities and the Construction Leadership Council. We also continue to operate enhanced induction, training and support for our employees and sub-contractors. Our sales offices also continue to operate on an appointment only basis across the country.

Responsible development

 

We remain focused on the complex issues surrounding fire safety. All of our buildings, including the cladding and complete external wall systems used, were signed off by approved inspectors as compliant with the relevant Building Regulations at the time of their construction. The Group does not believe that leaseholders should have to pay for any necessary remediation of their buildings.

We established an in-house Building Safety Unit in July 2021 which has brought additional expertise and resources to our existing review of our historic multi-storey buildings of all heights in light of evolving Government guidance on building safety. At 31 December 2021, 206 buildings over 11 metres were part of the ongoing review.

Where we are the "responsible person" at a building we are ensuring any required remediation is carried out, at no cost to leaseholders. Where we no longer own buildings we are helping current building owners and management companies as they carry out reviews of their buildings and we will work with them to find suitable solutions to support leaseholders and residents in buildings we built.

 

On 10 January and 3 February 2022, the Department for Levelling Up, Housing and Communities contacted residential property developers regarding the financing and rectification of unsafe cladding on buildings with a height of above 11 metres constructed in the last 30 years . Discussions are ongoing and we will continue to work constructively with Government to ensure leaseholders are protected. Throughout its existing review the Group has been reviewing buildings of all heights and a provision has already been recognised for the rectification of buildings over 11 metres for which the Group is liable or had made a commitment at the reporting date. It is possible that further commitments may be made by the Group as work progresses or as Government legislation or regulations develop.

 

We detail our approach to building safety on our website at:

https://www.barrattdevelopments.co.uk/about-us/our-approach-to-building-safety .

 

Building sustainably

 

Our Building Sustainably Framework is built around three core pillars - Environment, Communities and People and is the blueprint for identifying and driving the positive changes we want to make. We are determined to maintain our position as the leading national sustainable housebuilder. Sustainability presents opportunities for business growth, encourages innovation and improves our products for customers.

The Group's Sustainability Committee, chaired by our Chief Executive David Thomas and attended by three other members of the Board, is now operational. This Committee is responsible for ensuring our Building Sustainably Framework is embedded across the Group's operations, to deliver our short, medium and longer term targets.

 

Key areas of focus for the Committee in the financial year to date have included our waste performance and action plans to drive continued waste reduction; plans to further reduce our emissions from operations, notably diesel consumption and the continued shift to renewable electricity tariffs across all of our operations.

 

A key milestone has been the completion of our prototype zero carbon home concept, the "Z House". This is the first zero carbon house developed by a major housebuilder which goes beyond the Future Homes Standard by delivering a carbon reduction of 125%5 and, reflecting our target that all of our new homes will be zero carbon from 2030, the Z House is an important step on this journey.

 

The Z House has involved more than 40 industry partners across housebuilding, sustainability and technology sectors and we challenged our supply chain partners to incorporate their most cutting edge products into the house to reduce its embodied carbon, both in build and long term occupation.

 

The Z House project will increase our understanding and showcase what can be done to deliver zero carbon living, using the latest technologies and working with the best industry partners. Ultimately, our aim is to find commercial solutions to enable our business and the wider industry to build high quality, zero carbon homes that customers love, at scale, driving the future of sustainable housebuilding.   

 

The 2021 CDP annual results were released in December 2021 and provided a valuable external appraisal of our performance against key sustainability measures. Our leadership level of A- in the "Climate" category was maintained in the year; we improved to leadership level status in the "Forests" category improving from B to A- and we also improved our result in the "Water" category moving from B- to B. These scores reflect our leading position in the UK housebuilding sector.

 

In July 2021 we also became a signatory of the UN Global Compact, reflecting our ongoing commitment to its Ten Principles for Corporate Sustainability. We continue our progress to achieve full compliance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and are committed to achieving full disclosure with our Annual Report and Accounts for the year ended 30 June 2022.

 

In December 2021, we were named 'Sustainable Housebuilder of the Year' at "The Housebuilder Awards 2021". This is the first time we have won this award and reaffirms both our progress to date and our commitment to be the leading national sustainable housebuilder.

 

Customer first

 

Our customers are at the heart of everything we do. We believe our industry leadership in customer service is fundamental to our success, we are the only major housebuilder to have been awarded the maximum 5 Star rating by our customers in the HBF customer satisfaction survey for 12 consecutive years, with a customer satisfaction rating above 90%.

We are continually striving to improve the energy efficiency and sustainability of our homes and are adapting our home designs in response to both changing homebuyer demands, as well as the Future Homes Standard and other changes to Building Regulations. We aim to build high quality homes that optimise internal space and deliver excellent energy efficiency, resulting in lower lifetime costs for our customers. In FY21 99% of our home completions were EPC rated 'B' or above, a level of energy efficiency shared by just 3.1% of the existing housing stock.

 

Through their own sustainability initiatives, mortgage lenders are increasingly engaging with the housebuilding industry with regard to green mortgages. We launched a green mortgage pilot with Halifax for homebuyers seeking to purchase our energy efficient new homes. The pilot provides increased mortgage loan size based on improved affordability, through reduced home running costs. We will be working with mortgage lenders in the months ahead to see how we can help create more competitive and attractive mortgage products for our customers, reflecting the efficiency advantages created by our homes.

 

Following the changes to Help to Buy in 2021 and the anticipated end of the scheme in March 2023, "Deposit Unlock", an industry sponsored scheme, piloted with the Newcastle Building Society, was launched during the half year. This scheme provides our homebuyers with access to 95% LTV lending with help from an insurance premium funded by us. The Nationwide Building Society joined the Deposit Unlock scheme in November and we continue to explore alternative ways to improve mortgage availability for our customers.

 

We have continued to drive improvements to the customer journey and have adapted our processes to protect and support our customers as a result of the changing restrictions around COVID and latterly, the Omicron variant.  

 

Great places

 

We build homes in locations where our customers want to live, with good access to open space and amenities, transport connections, schools and workplaces. Our specialised divisional land teams possess extensive local knowledge and strong relationships with landowners. This, combined with detailed research into local market conditions, means we can secure land in locations of strong customer demand.

Our Group Design and Technical (GD&T) team continue to develop plans to ensure our housetypes meet the requirements of new building standards, effective on new development sites started from June 2022 and applicable to all development sites from June 2023, as well as the more significant Future Homes Standard changes required in 2025.

 

The Z House is proving invaluable to the GD&T team in determining the most suitable changes to our housetypes to meet the Future Homes Standard and the legislative requirements in England as well as different requirements in Scotland and Wales while also providing the best possible products for our customers.

 

The final phase of our national rollout programme to embed biodiversity best practice to all regions has now been completed and we are committed to demonstrating a minimum BNG of 10% across all development designs submitted for planning by 2023. With the Environment Bill receiving Royal Assent in mid-November 2021, we will remain ahead of legislation which will make BNG of 10% mandatory from mid-November 2023.

 

Leading construction

 

Our long standing commitment to build quality is embedded throughout our business. Throughout calendar 2021, Barratt has maintained its industry leadership with the lowest Reportable Items (RIs) per NHBC inspection6.

 

In June 2021 our site managers secured 93 awards at the NHBC Pride in the Job Awards for excellence in site management and build quality, more than any other housebuilder for the 17th consecutive year. In the subsequent Regional NHBC Pride in the Job Awards, in Autumn 2021, 31 site managers went on to win "Seals of Excellence" and our site managers secured five of the ten regional awards where we operate in the "Large Builder" category. Then, at the NHBC Pride in the Job Supreme Awards in January 2022, Henry Patecki, site manager at Wigston Meadows in our East Midlands division was runner up in the Large Builder Category. As a business, we have won the supreme award five times and been runner-up three times in the past seven years. No other major housebuilder has achieved this level of success and recognition for quality.

 

We continue to increase the number of homes we build using Modern Methods of Construction (MMC). The adoption of MMC increases efficiency and helps to mitigate the challenges posed by the shortage of skilled workers within the industry. In the first half year we built and sold 22.3% of our homes using timber frame or large format block (HY21: 18.4%, HY20: 17.6%). We remain firmly on track with our target to use MMC to build 30% of our homes by FY25.

 

Investing in our people

 

Our 2021 employee engagement survey was completed in October 2021. This year's survey delivered an engagement score of 79.4% (2020 survey: 84.2%). Whilst Barratt experienced an annual decline in its engagement score, this follows a more general pattern observed across employers as a whole through the pandemic.

 

Following on from the 2021 engagement survey and reflecting our desire to positively respond and engage with our workforce, a number of new initiatives were agreed in the period. These include:

· Increasing the scope of our private medical insurance so that it now covers the whole workforce;

· an additional special day's holiday allowance from the start of the new calendar year for all employees to allow them to celebrate a birthday or anniversary; and

·     increasing the number of volunteering days to two per year from a previous one day per year, enhancing the opportunities for our employees to support their local charities and good causes.

 

The Group has also been recognised in the recently announced "Glassdoor Best Places to Work in the UK 2022" survey where, based entirely on employee feedback, we were ranked 30th in the results announced on 12 January 2022, the only UK housebuilder to be in the top 50.

 

We are an accredited Living Wage Employer and we promote the payment of the Living Wage within our UK supply chain through our standard sub-contractor terms and conditions.

 

As our industry continues to face a skills shortage, it is important to attract and retain the best people. We invest for the future through our award winning schemes including those for graduates, apprentices and former Armed Forces personnel. Alongside our existing Degree Apprenticeships delivered in partnership with Sheffield Hallam University, we launched our new degree apprenticeship in Technical Design and Management. This is our third degree apprenticeship, alongside Construction and Quantity Surveying, making us the first house builder to deliver degree apprenticeships across the three main build functions.  We are also recruiting for candidates to join a new degree apprenticeship in Real Estate which will commence in 2023 again with Sheffield Hallam University. This is a first for the housebuilding industry and complements our existing popular programmes. Our development programmes included 456 participants at 31 December 2021 (31 December 2020: 473) and we plan to grow these programmes in 2022.

 

We are seeking to build a diverse and inclusive workforce that reflects the communities in which we operate, delivering excellence for our customers by drawing on a broad range of talents, skills and experience. This is embedded within our Building Sustainably Framework delivering our Diversity and Inclusion Strategy, focusing in particular on gender and ethnicity, where we are looking to build on the improvements in representation we have seen over the last 12 months. We also have a successful career development programme, Catalyst, for high potential female employees.

 

Charitable giving

 

We recognise the role we should play in supporting the communities in which we operate and we aim to be industry leading in our approach to charitable giving and social responsibility. We believe it is important to support charitable causes both locally and nationally and we actively promote charitable giving and volunteering amongst our employees. In FY21 we raised and donated £4.3m (FY20: £4.4m) for charitable causes and launched the Barratt Foundation which draws together all our charitable work under one body.

 

In the half year period the Foundation has:

 

· Agreed a new £1.3m three-year funding partnership with the Outward Bound Trust. The funding will help this national youth charity to continue its work making positive changes in young people's lives through learning and adventures outdoors. The Foundation also match funded £300,000 raised by readers of The Times and Sunday Times who picked The Outward Bound Trust as one of their Christmas charities in 2021. The total, £1.6m, is the largest single charity donation ever made by the Group or the Foundation.

 

· Made donations including £126,000 to Whizz-Kidz to help them provide essential mobility equipment for disabled children; £50,000 to The Fire Fighters Charity to support their ongoing work helping the UK's fire services community and £20,000 to The Big Issue to support their vendors through the Christmas and New Year period.

 

· Provided an additional £5,000 to each of the Group's 27 divisions to support local charities in need during the Christmas and New Year with donations going to a range of good causes including hospices, foodbanks and homelessness charities.


Our financial performance

Half year results

 

The Group has delivered an excellent first half performance. Overall our sales rate in the period was 2.6% ahead of the same period last year at 0.79 (HY21: 0.77, HY20: 0.69) net private reservations per active outlet per week. This sustained level of strong activity was ahead of our expectations given the strength in reservations activity for the comparative period in HY21, which benefited from pent-up demand following the initial national lockdown, the Stamp Duty holiday and increased Help to Buy ('HTB') reservation activity ahead of the tapering of HTB in December 2020.

 

Our sales rate remained strong throughout the half year period, reflecting the clear strength of underlying consumer demand and despite the significantly reduced HTB support now available to new home buyers. In the half year 22% of our private reservations used HTB, a significant decline from the 49% using HTB in HY21. 

 

During the half year, we operated from an average of 337 (HY21: 342, HY20: 372) active outlets including 8 (HY21: 8, HY20: 9) JV active outlets, the reduction of 1.5% reflecting the better than expected strength of the private sales rate in the half year which saw some sites trading through available homes for sale ahead of schedule. We have made good progress accelerating new site openings, launching 46 new outlets 3 (HY21: 63 outlets, HY20: 45 outlets) in the half year, ahead of our expectations at the start of FY22.

 

Reflecting the stronger than expected sales rate in the period, we now expect average active outlets for the full year to be broadly in line with FY21. New outlet launches in the second half, along with those launched in the first half, are however expected to support a c. 3%  increase in active outlets at the year end, providing a solid active outlet position to support growth in FY23 and thereafter.

 

Total home completions 3 were 8,067 homes (HY21: 9,077, HY20: 8,314 homes). The decline in completions reflected the planned return to the more normal seasonal pattern of completions with the comparative half year benefitting from the elevated level of construction work in progress carried into the new financial year following the initial national lockdown in Spring 2020 delaying planned FY20 completions into HY21.

 

The Group's completion mix was:

 

Completions (units)

HY22

HY21

Change

Private

5,896

6,903

(14.6%)

Affordable

1,776

1,796

(1.1%)

Wholly owned

7,672

8,699

(11.8%)

JV

395

378

4.5%

Total3

8,067

9,077

(11.1%)

Reflecting continued market strength, our total forward sales (including JVs) as at 31 December 2021 were up 9.1% at 14,818 homes (31 December 2020: 13,588 homes; 31 December 2019: 11,885 homes) at a value of £3,794.3m (HY21: £3,212.1m; HY20: £2,691.0m).

As a result of our strong order book position, the continued strength in housing demand and based on current market conditions and further growth in site based construction activity, we now expect total home completions to be between 18,000 and 18,250 homes in FY22, including 750 completions from our JVs, whilst ensuring we maintain our industry leading standards of both build quality and customer service. This represents an increase of 250 homes compared to our previous guidance.  We also continue to expect that affordable completions will equate to c. 21% of our completion volumes this year.

Our private ASP was £327,400 (HY21: £319,500, HY20: £312,000) reflecting c. 5% house price inflation, offset by a lower proportional delivery from London and a slight reduction in the average size of homes completed in the period. The affordable ASP increased by 8.1% to £157,100 (HY21: £145,300, HY20: £160,000) reflecting a shift in geographic mix. As a result, total ASP was £288,000 (HY21: £283,500, HY20: £279,800).

 

We delivered an uplift of 120 bps in adjusted gross margin in the half year. This reflected the net impact of mid single-digit house price growth and increasing build cost inflation, the ongoing transition to new sites and some dilution from lower completions in the period, driving reduced fixed cost efficiency. Each home completion delivered a contribution of c. 34% after land and build costs. As a result, our adjusted gross margin was 25.0% (HY21: 23.8%, HY20: 23.0 %) .

 

During the first half, total build cost inflation was around 5%. Whilst we anticipate improved fixed cost efficiency in the second half through completion volume growth and sales price inflation, we also expect to experience an increase in total build cost inflation (including infrastructure, materials and labour) to c. 6% for FY22. This reflects inflationary pressures across the economy and specific areas of building material cost inflation related to commodity input cost pressures and energy intensity. Given that our forward sales at the start of the second half incorporate underlying sales price inflation of c. 7%, we expect that the overall effect on margin will be neutral or positive for the second half of FY22.

 

In line with our commitment to put customers first, we incurred further costs in relation to building safety in the first half, recording adjusted item costs of £15.9m (HY21: £56.3m, HY20: £17.8m) through cost of sales in the period. This resulted in a reported gross margin of 24.3% (HY21: 20.6%, HY20: 22.2%).

 

Administrative costs have increased, principally reflecting increased people costs, the one-off charge for certain IT assets previously capitalised following a review of latest accounting guidelines, as well as a reduced level of sundry income. Administrative costs in the half year were £114.5m (HY21: £94.3m, HY20: £83.9m). We expect net administrative expenses for FY22 will now be approximately £240m.

 

Adjusted operating profit decreased by £55.3m to £449.9m (HY21: £505.2m, HY20: £439.5m) reflecting the return to more normal first half seasonal pattern of completion delivery.

 

The change in the adjusted operating margin in the half year reflected a number of factors:

 

· Completion volumes : the return to the more normal seasonal pattern of completions saw an 11.8%, or 1,027 homes, decline in wholly owned home completions in the period creating a 80 bps negative margin impact; 

· Net impact of selling prices relative to build cost : c. 5% house price inflation, offset by build cost inflation produced a 60 bps positive margin improvement;

· Site transition: our margin initiatives continued to drive underlying improvement, including the ongoing transition to new sites using our continually refined standard house types, increasing margin by 70 bps;

· Site extension costs: these costs arose from the expected extension in site durations due to COVID-19, reflecting the improvement in site efficiency through the period, new site starts and the completion of sites carrying these additional costs. The reduced charge across our completions created a 50 bps positive margin impact;

· Mix and other items: changes in sales mix and other smaller items combined to create a 30 bps negative impact on the margin; and

· Administrative expenses : the change in administrative expenses detailed above, resulted in a 100 bps negative margin impact.

 

Our adjusted operating margin, as a result, reduced by 30 bps to 20.0% (HY21: 20.3%, HY20: 19.4%). After adjusted items, the reported operating margin for the half year was 19.3% (HY21: 17.0%, HY20: 18.6%).

 

Net finance charges were in line with the prior period at £15.0m (HY21: £14.8m, HY20: £14.1m). The cash finance charge was £5.2m (HY21: £4.9m) with non-cash charges of £9.8m (HY21: £9.9m). We continue to expect FY22 net finance costs will be around £30m, ‎comprising £10m of cash and £20m of non-cash charges.

 

In the half year, the Group's reported share of JV profit was £13.6m (HY21: £22.1m, HY20: £15.4m). The adjusted share of JV profit was £15.1m (HY21: £16.8m) after adjusting for a £1.5m charge (HY21: £5.3m credit) associated with legacy properties. We continue to expect to deliver around 750 JV home completions in FY22.

Adjusted profit before tax reduced by 11.3% to £450.0m (HY21: £507.2m, HY20: £440.8m) and, after adjusted items, profit before tax increased by 0.6% to £432.6m (HY21: £430.2m, HY20: £423.0m). The Group recognised £81.6m of tax charges (HY21: £81.2m, HY20: £77.7m) at an effective rate of 18.9% (HY21: 18.9%, HY20: 18.4%).

 

Following the Autumn Budget announcement, with details of the Residential Property Developer Tax (RPDT), we now expect the effective tax rate in FY22 will be c. 20%, incorporating a 1% impact from the RPDT reflecting one quarter's application of the new tax from 1 April 2022. The full impact of the RPDT alongside with the scheduled increase in corporation tax to 25% from 1 April 2023, will result in the Group's effective tax rate increasing to c. 24.5% in FY23 and c. 29.0% in FY24.

 

Adjusted basic earnings per share reduced by 11.4% to 35.9 pence per share (HY21: 40.5, HY20: 35.3 pence per share). Basic earnings per share increased by 0.6% to 34.5 pence per share (HY21: 34.3, HY20: 33.8 pence per share) with the significantly lower adjusted items in the period creating the modest increase in basic earnings per share.

 

Adjusted items

 

Adjusted items of £17.4m (HY21: £77.0m, HY20: £17.8m) were recognised in the half year, reflecting legacy property costs associated with building safety related remediation activities. We continue to anticipate adjusted items of between £40m and £50m in FY22, comprising works related to external wall systems and reinforced concrete frames. This includes costs that we may agree to incur beyond our contractual and legal obligations and are in addition to any Government levies.

 

Capital structure and operating framework

 

We continue to maintain an appropriate capital structure reflecting our disciplined operating framework to ensure our balance sheet strength. Our capital structure remains centred on shareholders' funds and land creditors funding the longer term requirements of the business with term loans and bank debt funding shorter term requirements for working capital.

 

The net cash balance of £1,131.7m (31 December 2020: £1,106.7m, 31 December 2019: £433.8m), reflected the strength of underlying operating cash generation, notwithstanding an increase in working capital driven by our investment in both land and construction work in progress in the period and the payment of the final dividend of £223.0m with respect to FY21 in the period.

 

We continue to anticipate year end net cash of between £1.0bn - £1.1bn with improved trading counterbalanced by the acquisition of Gladman Developments Limited which completed on 31 January 2022, increased land and working capital investment in the second half to support our growth plans beyond FY22, as well as the payment of the enhanced interim dividend.

 

Whilst we continue to defer payment for some land purchases to meet land vendor aspirations, land creditors have remained within our operating framework range. As at 31 December 2021 land creditors totalled £682.3m (31 December 2020: £601.1m, 31 December 2019: £830.8m) and equated to 22.4% (31 December 2020: 21.2%, 31 December 2019: 27.4%) of the owned land bank. Land creditors falling due within the next 12 months totalled £412.5m at 31 December 2021 (31 December 2020: £333.6m, 31 December 2019: £491.3m).

 

In order to maintain a resilient balance sheet, our operating framework is to hold modest average net cash over the financial year and to be cash positive at year end over the medium term. We have achieved a half year total surplus (net cash and land creditors combined) of £449.4m (31 December 2020: total surplus of £505.6m, 31 December 2019: total indebtedness of £397.0m).

 

During the period we also successfully extended the £700m Revolving Credit Facility (RCF) for one additional year with the RCF now maturing 22nd November 2025.

 

Our operating framework remains unchanged with the exception of future dividend cover policy and progress over both the last six and twelve month periods are shown below:

 

 

 

Operating framework

Position at 31 December vs 30 June 2021

Position at 31 December  2020

Land bankA

c. 3.5 years owned and c. 1.0 year controlled

4.3 years owned and 0.8 years controlled

(2021: 4.0 years owned and 0.7 year controlled)

5.0 years owned and 0.9 years controlled

 

Land creditors

Maintain at 15 - 25% of the land bank over medium term

22.4%

(2021: 22.3%)

2020: 21.2%

 

Net cash

 

Modest average net cash over the financial year

 

£1,144m over six months ending 31 December 2021

(£821m over twelve months ending 30 June 2021)

£548m over six months ending 31 December 2020

Year end net cash

£1,131.7m net cash

(2021: £1,317.4m net cash)

£1,106.7m net cash

 

Total indebtedness (net cash and land creditors)

Minimal year end total indebtedness in the medium term

Total net surplus of £449.4m

(2021: Total net surplus of £659.1m)

 

Total net surplus of £505.6m

Treasury

Appropriate financing facilities

£700m RCF extended to November 2025

£200m USPP maturing 2027

£700m RCF extended to November 2024

£200m USPP maturing 2027

Dividend policy

2.25x dividend cover from previous framework position of 2.5x dividend cover with cover reducing to 2.0x in FY23 and 1.75x in FY24

 

Cover reduced to 2.25x

FY22 interim dividend proposed of 11.2p

(2021: total dividend of 29.4p)

FY21 interim dividend of 7.5p

 

 

A. Land supply is calculated as total owned (owned land and land subject to unconditional contracts) and controlled (land subject to conditional contracts) land bank plots divided by wholly owned completions in the last 12 months

 

Net tangible assets were £4,683.8m and £4.58 per share at 31 December 2021, (31 December 2020: £4,298.2m and £4.22 per share, 31 December 2019: £3,941.5m and £3.87 per share) of which land, net of land creditors, and work in progress, totalled £4,230.4m and £4.14 per share (31 December 2020: £3,835.2m and £3.77 per share, 31 December 2019: £4,005.8m and £3.93 per share).

 

The key dimensions underpinning delivery of our strategy

 

Land and planning

 

Our land bank is the foundation of our future operational and financial performance. Throughout the period, we have continued to focus on optimising our existing land bank to balance site duration and our build and sales capacity across our portfolio.

 

We have remained disciplined and selective in our land purchasing and have approved £673.4m (HY21: £254.0m, HY20: £406.1m) of operational land for purchase, which equates to 8,869 plots (HY21: 5,635 plots, HY20: 9,242 plots) on 48 (HY21: 35, HY20: 44) new sites in attractive locations across the country that meet our demanding hurdle rates. We are especially pleased that after suspending land buying from March through early August 2020, land approvals through calendar 2021 have recovered to 21,301 plots, more than 6% ahead of our internal ambitions at the start of last year. We continue to expect to approve between 18,000 and 20,000 plots of operational land (FY21: 18,067, FY20: 9,441) in FY22.

 

An attractive range of land buying opportunities continue to come to market and we have a good pipeline of offers accepted on additional sites. We invested around £410m (HY21: £320m, HY20: £450m) on land acquisitions and the settlement of land creditors during the half year and now expect to invest c. £1.1bn on land in FY22, ahead of the £745m invested in FY21.

 

We continue to target a geographically balanced land portfolio with a supply of owned land of c. 3.5 years and a further c. 1.0 year of controlled land. Reflecting our focus on future growth, we remain above this target with 5.1 years (31 December 2020: 5.9, 31 December 2019: 4.6). Our land bank comprised of 4.3 years (31 December 2020: 5.0, 31 December 2019: 3.7) of owned land and 0.8 years (31 December 2020: 0.9, 31 December 2019: 0.9) of controlled land at 31 December 2021.

 

 

 

Our land bank at 31 December comprised:

 

Our land bank

31 December 2021

31 December 2020

Plots with detailed planning consent

49,622

54,079

Plots with outline planning consent

16,373

9,846

Plots with resolution to grant and other

560

235

Owned and unconditional land bank (plots)

66,555

64,160

Conditionally contracted land bank (plots)

11,909

11,450

Total owned and controlled land bank (plots)

78,464

75,610

Number of years' supply (A)

5.1

5.9

JVs owned and controlled land bank (plots)

4,418

5,010

Strategic land (acres)

14,172

13,232

Land bank carrying value

£3,046.1m

£2,836.7m

 

A. Land supply is calculated as total owned (owned land and land subject to unconditional contracts) and controlled (land subject to conditional contracts) land bank plots divided by wholly owned completions in the last 12 months

 

At 31 December 2021, the ASP of plots in our owned land bank was £303,000 (31 December 2020: £275,000, 31 December 2019: £277,000).

 

During the half year we delivered 2,104 (HY21: 2,149, HY20: 1,942) completions from strategically sourced land, and we converted 1,272 plots (HY21: 1,106, HY20: 2,421 plots) of strategic land into our owned and controlled land bank. We continue to target 30% of completions from strategic land in the medium term. Around 28% of our strategic land is allocated or included in draft local plans.

 

Rebuilding site based construction activity

 

The potential of our land bank can only be unlocked through an efficient build process and we are pleased with the way our business has continued to rebuild activity from the complete shutdown which was required during the first national lockdown in March 2020. It is a testament to the strength and commitment of our construction teams, our sub-contractors, many of whom have worked with Barratt for many years, and our supply chain partners, in particular over recent months, that we have been able to drive continued growth in our site based construction activity.

 

As a result, site based construction activity, in the first half has shown a strong advance with an average of 341 equivalent homes (HY21: 298, HY20: 351), including JV's constructed each week, an increase of 14.4%. We also, as a result, enter the second half with an increased level of work in progress carried forward at 31 December 2021 compared with the positions at both 31 December 2020 and 30 June 2021. This combination puts the Group in a strong position to deliver both our upgraded guidance on total home completions for the year as well as a solid work in progress position to support growth in FY23.

 

Improving efficiency and reducing costs

 

Improving the efficiency of our operations and controlling costs, whilst maintaining our focus on quality and customer satisfaction, remains an over-riding focus for the Group, optimising our margin and improving our operational and financial resilience.

 

Our continuously evolving standard house type ranges maintain our high standards of design whilst being faster to build and more suitable for MMC, helping us to reduce build cost and waste.

 

Through our sales teams and regular home buyer surveys we continue to monitor changing home buyer priorities and requirements, particularly with respect to working from home and other lifestyle changes, which may have an enduring impact on home buyer preferences when we ultimately emerge from the pandemic and associated restrictions.

 

We delivered 4,920 completions (HY21: 5,376, HY20: 4,491 completions) from our standard house type ranges across the country in the half year. Of our outlets, 88% (HY21: 83%, HY20: 76%) have the standard house type ranges.

 

We continue to anticipate that c. 90% of our outlets will be suitable for our standard house type ranges equating to approximately 85% of our completions. Our continually refined house type ranges cover all segments of our market providing us with the flexibility to replan sites to suit market conditions and meet changing consumer demands should the need arise.

 

We have a robust and carefully managed supply chain with more than 90% of the housebuild materials sourced by our centralised procurement function being manufactured or assembled in the UK. We have pricing agreements in place for almost all of these materials to June 2022.

 

Acquisition of Gladman Developments Limited

On  31 January 2022 we announced the acquisition of Gladman Developments Limited for a total cash consideration of £250m on a debt and cash free basis. Gladman operates as a land promoter in the UK with particular strength in the south of England. The acquisition brings together Barratt's best in class housebuilding operations with Gladman's excellent land sourcing and promotion capabilities, providing greater flexibility for landowners and significantly enhancing Barratt's strategic land credentials.

In the three years through to 31 March 2019, prior to the onset of the COVID-19 pandemic, Gladman generated average annual sales of £52.5m, EBITDA of £19.6m, operating profits of £18.7m and profit before tax of £18.9m; with an annual average of 4,230 plots securing planning permission and 4,156 plots sold for Gladman's promotion partners over this same period.

In its last financial year, to 31 March 2021, Gladman, despite the ongoing disruption created by COVID-19, secured planning consent on 2,760 plots across 15 sites with a high planning success rate and, through its targeted marketing, secured sales of 2,796 plots on 18 sites to housebuilders and housing associations.

Gladman's existing portfolio, comprising approximately 406 potential sites with an average site size of 242 plots, is expected to deliver an incremental 500 home completions per annum for Barratt from FY25.

Following the acquisition, Gladman will operate as a stand-alone business within the Group led by its experienced management team, including David Gladman, Chairman and Victoria Hesson, Chief Executive. Gladman will continue to supply land to third parties as well as provide an additional route for Barratt to source strategic land and help to promote Barratt's existing strategic land portfolio.

Shareholder returns

 

After an unprecedented and challenging period, our business has demonstrated both its operational strength and financial resilience. Our disciplined operating framework and the speed of management decision making and actions, both at the start of the pandemic and throughout the period since, have delivered a rapid operational recovery, robust cash flow generation and a strong balance sheet. Whilst uncertainties remain around COVID-19, the Board has confidence that the Group's financial position and inherent cash generation now allow the Group to review capital returns to shareholders.

 

Ordinary dividend cover to reduce on a phased basis FY22 - FY24

 

Whilst our overriding priority remains the continued investment in the business to grow our completion volumes, we recognise the significant ongoing cash generation of the Group's operations, as well as the importance of a long-term predictable dividend income stream for our shareholders. Accordingly, the Board has revised the Group's ordinary dividend policy, implementing a phased reduction in dividend cover from 2.5x in FY21 to 1.75x in FY24. The ordinary dividend cover will reduce by 0.25x annually from FY22 through to FY24.

 

The Board, has declared an interim dividend of 11.2 pence per share (2020: 7.5 pence, 2019: nil). The interim dividend will be paid on Wednesday 18 May 2022 to all shareholders on the register on Friday 8 April 2022. Shareholders who wish to elect for the Dividend Reinvestment Plan should do so by 26 April 2022. The Board will now target a full year ordinary dividend based on an ordinary dividend cover of 2.25 times adjusted earnings per share.

 

Over the medium term, we also recognise that the Group should operate with a strong and resilient but also capital efficient balance sheet, aligned with our operating framework. Where capital beyond the requirements for investment in the growth of the business is identified, it is the Board's intention to return this to shareholders. We will provide an update on the method and timing of any such return when it is appropriate to do so, taking into account opportunities for further investment and prevailing equity market conditions at that time.   

 

Guidance for FY22

Looking to the balance of the current financial year our guidance is summarised in the following table. Where guidance has been amended, this is highlighted.

Completions

 

c. 18,000 - 18,250 total home completions, inc. 750 JV completions
(previously 17,750 - 18,000, inc. 750 JV completions)

c. 21% affordable, c. 79% private mix

Average sales outlet growth

Year end sales outlet position

Average sales outlets in line with FY21 (previously c. 3% growth)

Year end outlet growth of 3% vs 358 at end of FY21

Build cost inflation range

 c. 6%(previously 4% to 5%)

Administrative expenses

c. £240m (previously £230m)

Interest cost

c. £30m

(c. £10m cash, c. £20m non-cash)

Adjusted items in respect of legacy properties

Estimated charge of £40m - £50m

Land approvals

18,000 to 20,000 plots

Land cash spend

c. £1.1bn(previously c. £1.0bn)

Year end net cash

c. £1.0bn - £1.1bn

Taxation

c. 20% for FY22 reflecting RPDT impact from 1 April 2022

Dividend cover

2.25x ordinary dividend cover based on adjusted earnings per share (previously 2.5x ordinary dividend cover)

 

Current trading and outlook

 

We have had a very strong start to our second half with 291 net private reservations per average week (2021: 264, 2020: 294) and operated from an average of 325 outlets (2021: 343, 2020: 355). This has resulted in a net private reservations per active outlet per average week of 0.90 (2021: 0.77, 2020: 0.83).

 

Our total forward sales3 as at 30 January 2022 were 15,736 homes (31 January 2021: 14,289 homes, 2 February 2020: 13,043 homes) at a value of £4,109.7m (31 January 2021: £3,425.8m, 2 February 2020: £3,027.1m) We are now 92% forward sold with respect to private wholly owned home completions for FY22 (FY21: 92%).

The composition of our forward sales at 30 January 2022 and the order book movement since the end of HY22 are detailed in the following tables:

 

30 January 2022

31 January 2021

Variance %

 

£m

Homes

£m

Homes

£m

Homes

Private

2,625.9

7,382

1,933.6

5,769

35.8

28.0

Affordable

1,219.2

7,534

1,242.4

7,746

(1.9)

(2.7)

Wholly owned

3,845.1

14,916

3,176.0

13,515

21.1

10.4

JV

264.6

820

249.8

774

5.9

5.9

Total

4,109.7

15,736

3,425.8

14,289

20.0

10.1

 

 

Current Year

Prior Year

Variance %

 

Private

Total

Private

Total

Private

Total

31 December

6,557

14,818

5,104

13,588

28.5

9.1

Reservations

1,248

1,439

1,169

1,330

6.8

8.2

Completions

(423)

(521)

(504)

(629)

(16.1)

(17.2)

30 Jan / 31 Jan

7,382

15,736

5,769

14,289

28.0

10.1

 

The Group is in a very good position. We have substantial net cash, a strong forward sales position, an excellent land bank as well as a continued focus on delivering operational improvements across our business and an unwavering commitment to deliver high quality sustainable homes across the country.

 

Based on current market conditions and absent any further COVID-19 related disruption, we now expect total home completions to be between 18,000 and 18,250 homes in FY22 (including 750 from JVs), whilst ensuring we maintain our industry leading standards of quality and service.  

 

We expect a higher level of completions in our second half relative to our first half reflecting a return to the normal phasing of completions, the increased level of work in progress carried forward at 31 December 2021 compared to 31 December 2020, as well as further anticipated growth in our construction activity in the traditionally stronger second half.

 

We remain focused on rebuilding our completion volumes to our medium term target of 20,000 homes. This, coupled with our land acquisition at a minimum 23% gross margin and our ongoing focus on operating efficiencies, support our continued target of a minimum 25% ROCE in the medium term.

 

Macro economic uncertainties remain, most notably around rising inflation and interest rates in the wider UK economy. As a business we also face higher taxation, the ongoing challenges around build cost inflation and the future withdrawal of Help to Buy, which will begin to impact reservations in Autumn 2022, as the scheme draws to a close in March 2023. The Board believes, however that the overall strength of the housing market, our operational performance since the onset of the pandemic and our strong financial position provide us with the platform and flexibility to react to any challenges and opportunities in the remainder of FY22 and beyond.

 

David Thomas

Chief Executive

8 February 2022

 

 

 

 

 

1 Refer to Glossary for definition of key financial metrics

2 Unless otherwise stated, all numbers quoted exclude JVs 

3 Including JVs in which the Group has an interest

4 In addition to the Group using a variety of statutory performance measures it also measures performance using alternative performance measures (APMs). Definitions of APMs and reconciliations to the equivalent statutory measures are detailed in the Glossary and Definitions. Net cash definition in Note 5.1

5 Measured against 2013 ADL1a but using Future Homes metrics and targets

6 Measured by the NHBC amongst the 14 major housebuilders constructing more than 1,000 homes annually

 

 

Principal risks and uncertainties

In pursuing our strategic priorities to create value for stakeholders, we experience risk. The Board is responsible for the overall stewardship of risk management and ensuring the Group maintains the appropriate level of risk to achieve its objectives.

The risks facing the Group, separately or in combination, could have a material adverse effect on the implementation of the Group strategy, our business, financial performance, shareholder value and returns, and reputation. Changes in the economic or trading environment can affect the likelihood and potential impact of risks, and may give rise to new risks.

Risk management controls are integrated into all levels and operations of our business and across all our operations, including at site, divisional, regional and Group level.

The business prioritises the safety of its workforce and continues to update its working practices, considering the latest government guidance. The risks associated with the pandemic are reducing as the country progresses with its vaccination programme and lifts the restrictions on its economy. Nonetheless, the current public health situation, the potential for future variants, and subsequent economic or operational disruption, remain factored into the assessment of risk.

Management is progressing its assessment of the possible effects of climate change, both of the potential physical changes to the environment in which it operates and of the regulatory and socio-economic changes required to transition to a low-emission society. Where risks are identified, mitigations are planned and the impact incorporated into our financial planning.

The Group's assessment of its legacy properties is ongoing. On 10 January and 3 February 2022, the Department for Levelling Up, Housing and Communities contacted residential property developers regarding the financing and rectification of unsafe cladding on buildings with a height of above 11 metres constructed in the last 30 years. Discussions are ongoing and we will continue to work constructively with Government to ensure leaseholders are protected. It is possible that further commitments may be made by the Group following these discussions.

Reputational risk could potentially arise from a number of sources including external and internal influences relating to the housebuilding sector that, when combined or over a period of time, could create a new principal risk. The Group actively manages the impact of reputational risk by carefully assessing the potential impact of all the principal risks and implementing mitigation actions to minimise those risks.

Save as set out above, the Directors do not consider the process of risk management and the principal risks and uncertainties to have changed since the publication of the Annual Report and Accounts for the year ended 30 June 2021.

Further details of the Group's principal risks and mitigation of the risks outlined below can be found on pages 58 to 64 of the Annual Report and Accounts for the year ended 30 June 2021, which is available at www.barrattdevelopments.co.uk.

Principal Risks

Economic environment, including housing demand and mortgage availability

Changes in the UK and European macroeconomic environments, may lead to falling demand or tightened mortgage availability, on which the majority of our customers are reliant, reducing the affordability of our homes.

Land availability

The inability to secure sufficient consented land and strategic land options at appropriate cost and quality in the right locations which enhance communities.

Government regulation and planning policy

Changes in the regulatory environment affect the conditions and time taken to obtain planning approval and technical requirements including Building Regulations, increasing the challenge of providing quality homes where they are most needed.

Construction

Failure to achieve excellence in construction, through delays from adverse conditions, a failure to identify cost overruns promptly, design and construction defects, and deviation from environmental standards.

Availability of raw materials, sub-contractors and suppliers

Shortages or increased costs of materials and skilled labour or the failure of a key supplier.

Safety, health and environment

Health and safety or environmental breaches can result in incidents affecting employees, sub-contractors and site visitors and undermine the creation of a great place to work.

Attracting and retaining high calibre employees

Failure to recruit and/or retain the best people so that both our employees and the business can benefit from the available development opportunities.

Availability of finance and working capital

Unavailability of sufficient borrowing and surety facilities to settle liabilities, manage working capital, respond to changes in the economic environment, and take advantage of appropriate land buying and operational opportunities to deliver strategic priorities.

IT

The Group continues to integrate its IT systems to enhance control and drive efficiency. The failure of any of these systems, in particular those relating to customer information, surveying and valuation, could restrict the Group's operations and disrupt progress in its strategic priorities. Failure to comply with data regulations could also incur significant financial penalties and reputational damage.

Significant nationwide unexpected event affecting multiple locations

A significant unexpected event, such as the COVID-19 pandemic or the failure of national infrastructure, could have a material impact on our business.

Climate change

In the short-to-medium term, Government regulations and customer and investor expectations will require the Group to further enhance its sustainable business practices. In the long term the Group must adapt to the physical changes to the climate in which it operates.

Emerging Risk

Social trends

Social and Demographic changes resulting in significant change to the demand profile for our products and developments. Social developments drive changes in customers' expectations of the service they receive, the ways in which they communicate with the Group, and the manner in which the Group engages with its stakeholders.

 

 

Condensed Consolidated Income Statement

for the half year ended 31 December 2021 (unaudited)

 

Continuing operations

Notes

Half year ended 
31 December 2021

 

£m

Half year ended 
31 December 2020

 

£m

Year ended
30 June

 2021

(audited)
£m

Revenue

2.1

2,247.1

2,494.7

4,811.7

Cost of sales

 

(1,700.6)

(1,980.8)

(3,801.7)

Gross profit

 

546.5

513.9

1,010.0

Administrative expenses

2.3

(114.5)

(94.3)

(204.4)

Part-exchange income

 

47.2

131.8

220.4

Part-exchange expenses

 

(45.2)

(128.5)

(214.9)

Profit from operations

2.3

434.0

422.9

811.1

Finance income

5.2

0.5

0.7

1.4

Finance costs

5.2

(15.5)

(15.5)

(28.0)

Net finance costs

5.2

(15.0)

(14.8)

(26.6)

Share of post-tax profit from joint ventures

 

13.6

22.1

27.7

Profit before tax

 

432.6

430.2

812.2

Tax

2.6

(81.6)

(81.2)

(152.1)

Profit for the period

 

351.0

349.0

660.1

 

Profit for the period attributable to the owners of the Company

 

 

351.0

 

348.8

 

659.8

Profit for the period attributable to non-controlling interests

 

-

0.2

0.3

Earnings per share from continuing operations:

 

 

 

 

Basic

2.4

34.5p

34.3p

64.9p

Diluted

2.4

33.9p

33.9p

64.0p


The notes in sections 1 to 6 form an integral part of these Condensed Consolidated Half Yearly Financial Statements.

 

Adjusted items:

See note 2.2 for further details

Profit per Income Statement (above)

Cost/(credit) associated with legacy properties

CJRS grant repaid

Adjusted profit

 

£m

£m

£m

£m

Half year ended 31 December 2021:

 

 

 

 

Gross profit

546.5

15.9

-

562.4

Profit from operations

434.0

15.9

-

449.9

Share of post tax profit from JVs

13.6

1.5

-

15.1

Profit before tax

432.6

17.4

-

450.0

Half year ended 31 December 2020:

 

 

 

 

Gross profit

513.9

56.3

22.8

593.0

Profit from operations

422.9

56.3

26.0

505.2

Share of post tax profit from JVs

22.1

(5.3)

-

16.8

Profit before tax

430.2

51.0

26.0

507.2

Year ended 30 June 2021:

 

 

 

 

Gross profit

1,010.0

81.9

22.8

1,114.7

Profit from operations

811.1

81.9

26.0

919.0

Share of post tax profit from JVs

27.7

(0.4)

-

27.3

Profit before tax

812.2

81.5

26.0

919.7

 

Condensed Consolidated Statement of Comprehensive Income

for the half year ended 31 December 2021 (unaudited)

 

 

Half year ended 31 December 2021

 

£m

Half year ended 31 December 2020

 

£m

Year ended
30 June 
2021

(audited)
£m

Profit for the period

351.0

349.0

660.1

Other comprehensive (expense)/income:

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

Actuarial loss on defined benefit pension scheme

-

(0.2)

(2.2)

Tax credit relating to items not reclassified

-

-

0.4

Total items that will not be reclassified to profit or loss

-

(0.2)

(1.8)

Total comprehensive income recognised for the period

351.0

348.8

658.3

 

Total comprehensive income recognised for the period attributable to the owners of the Company

 

 

351.0

 

 

348.6

658.0

Total comprehensive income recognised for the period attributable to non-controlling interests

 

-

 

0.2

0.3

 

The notes in sections 1 to 6 form an integral part of these Condensed Consolidated Half Yearly Financial Statements.

 

Condensed Consolidated Statement of Changes in Shareholders' Equity (unaudited)

 

Share
capital (note 5.4)

£m

Share
premium

£m

Merger
reserve

£m

Own
shares

£m

Share-based
payments
£m

Retained
earnings

£m

Total
retained
earnings

£m

Non- controlling interests
£m

Total
equity

£m

At 30 June 2020

101.8

245.2

1,109.0

(20.1)

16.6

3,386.4

3,382.9

1.4

4,840.3

Profit for the period

-

-

-

-

-

348.8

348.8

0.2

349.0

Actuarial loss on pension scheme

-

-

-

-

-

(0.2)

(0.2)

-

(0.2)

Tax on items above taken directly to equity

-

-

-

-

-

-

-

-

-

Total comprehensive income recognised for the period ended 31 December 2020

-

-

-

-

-

348.6

348.6

0.2

348.8

Distributions to non-controlling interests

-

-

-

-

-

-

-

(0.6)

(0.6)

Share-based payments

-

-

-

-

7.4

-

7.4

-

7.4

Transfers in respect of share options

-

-

-

15.0

(10.8)

2.6

6.8

-

6.8

Tax on share-based payments

-

-

-

-

1.3

0.7

2.0

-

2.0

At 31 December 2020

101.8

245.2

1,109.0

(5.1)

14.5

3,738.3

3,747.7

1.0

5,204.7

Profit for the period

-

-

-

-

-

311.0

311.0

0.1

311.1

Actuarial loss on pension scheme

-

-

-

-

-

(2.0)

(2.0)

-

(2.0)

Tax on items above taken directly to equity

-

-

-

-

-

0.4

0.4

-

0.4

Total comprehensive income recognised for the period ended 30 June 2021

-

-

-

-

-

309.4

309.4

0.1

309.5

Dividends paid

-

-

-

-

-

(76.3)

(76.3)

-

(76.3)

Distributions to non-controlling interests

-

-

-

-

-

-

-

-

-

Issue of shares

-

0.1

-

-

-

-

-

-

0.1

Share-based payments

-

-

-

-

13.0

- -

13.0

-

13.0

Transfers in respect of share options

-

-

-

0.4

(1.4)

1.2

0.2

-

0.2

Tax on share-based payments

-

-

-

-

1.5

(0.6)

0.9

-

0.9

At 30 June 2021

101.8

245.3

1,109.0

(4.7)

27.6

3,972.0

3,994.9

1.1

5,452.1

Profit for the period being total comprehensive income recognised for the period ended 31 December 2021

-

-

-

-

-

351.0

351.0

-

351.0

Dividends paid

-

-

-

-

-

(223.0)

(223.0)

-

(223.0)

Distribution made to non-controlling party

-

-

-

-

-

-

-

(0.4)

(0.4)

Issue of shares

0.4

8.0

-

-

-

-

-

-

8.4

Share-based payments

-

-

-

-

10.7

-

10.7

-

10.7

Transfers in respect of share options

-

-

-

(1.5)

(17.8)

9.7

(9.6)

-

(9.6)

Tax on share-based payments

-

-

-

-

(0.9)

1.4

0.5

-

0.5

At 31 December 2021

102.2

253.3

1,109.0

(6.2)

19.6

4,111.1

4,124.5

0.7

5,589.7

 

The notes in sections 1 to 6 form an integral part of these Condensed Consolidated Half Yearly Financial Statements.

 

Condensed Consolidated Balance Sheet

at 31 December 2021 (unaudited)

 

 

Notes

31 December

2021

 

£m

31 December

2020

 

£m

30 June

2021

 (audited)

£m

Assets

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

 

805.9

805.9

805.9

Other intangible assets

 

100.0

100.6

100.0

Property, plant and equipment

 

22.5

19.6

20.4

Right-of-use assets

 

35.2

42.2

39.3

Investments in joint ventures and associates

 

160.4

165.7

163.1

Retirement benefit assets1

 

-

2.1

-

Trade and other receivables2

 

1.4

3.1

1.2

Deferred tax assets

2.6

-

4.9

-

 

 

1,125.4

1,144.1

1,129.9

Current assets

 

 

 

 

Inventories

3.1

4,932.0

4,479.9

4,645.5

Trade and other receivables2

 

138.6

131.7

179.6

Cash and cash equivalents

5.1

1,336.3

1,302.7

1,518.6

Current tax assets

 

13.7

-

-

 

 

6,420.6

5,914.3

6,343.7

Total assets

 

7,546.0

7,058.4

7,473.6

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Loans and borrowings

5.1

(200.0)

(200.0)

(200.0)

Trade and other payables

 

(275.9)

(276.4)

(296.8)

Lease liabilities

 

(26.9)

(32.4)

(29.8)

Deferred tax liabilities

2.6

(9.9)

-

(8.9)

 

 

(512.7)

(508.8)

(535.5)

Current liabilities

 

 

 

 

Loans and borrowings

5.1

(8.7)

(1.1)

(5.3)

Trade and other payables

 

(1,351.7)

(1,234.7)

(1,401.2)

Lease liabilities

 

(9.6)

(11.3)

(10.9)

Current tax liabilities

 

-

(16.0)

(1.0)

Provisions

3.2

(73.6)

(81.8)

(67.6)

 

 

(1,443.6)

(1,344.9)

(1,486.0)

Total liabilities

 

(1,956.3)

(1,853.7)

(2,021.5)

Net assets

 

5,589.7

5,204.7

5,452.1

 

Equity

 

 

 

 

Share capital

5.4

102.2

101.8

101.8

Share premium

 

253.3

245.2

245.3

Merger reserve

 

1,109.0

1,109.0

1,109.0

Retained earnings

 

4,124.5

3,747.7

3,994.9

Equity attributable to the owners of the Company

 

5,589.0

5,203.7

5,451.0

Non-controlling interests

 

0.7

1.0

1.1

Total equity

 

5,589.7

5,204.7

5,452.1

1 Following the buy-out of the Group defined benefit pension scheme, the remaining assets and liabilities at 31 December 2021 and 30 June 2021 have been included within trade and other payables and other receivables.

2 Secured loans, previously presented separately have been included within trade and other receivables.

The notes in sections 1 to 6 form an integral part of these Condensed Consolidated Half Yearly Financial Statements.

 

Condensed Consolidated Cash Flow Statement

for the half year ended 31 December 2021 (unaudited)

 

 

Notes

Half year ended

31 December 2021

 

£m

Half year ended 31 December 2020

 

£m

Year ended

30 June

 2021 (audited)

£m

Net cash inflow from operating activities

 

 

38.9

 

791.9

1,082.3

Investing activities:

 

 

 

 

Purchase of property, plant and equipment

 

(9.5)

(3.1)

(7.2)

Proceeds from disposal of fixed assets

 

0.1

-

-

Increase in investments accounted for using the equity method

 

(6.0)

(5.0)

(7.9)

Repayment of amounts invested in entities accounted for using the equity method

 

 

18.3

 

5.0

3.4

Dividends received from investments accounted for using the equity method

 

 

4.0

 

8.5

21.2

Proceeds from the disposal of investments accounted for using the equity method

 

 

-

 

2.0

2.0

Interest received

 

0.2

1.5

2.0

Net cash inflow from investing activities

 

7.1

8.9

13.5

Financing activities:

 

 

 

 

Dividends paid to equity holders of the Company

2.5

(223.0)

-

(76.3)

Distribution made to non-controlling partner

 

(0.4)

(0.6)

(0.6)

Purchase of own shares

 

(7.7)

-

-

Proceeds from the exercise of share options

 

-

7.8

8.0

Proceeds from issue of share capital

 

8.4

-

0.1

Payment of dividend equivalents

 

(1.9)

(1.0)

(1.0)

Repayment of lease liabilities

 

(7.1)

(7.5)

(14.8)

Loan drawdown/(repayment)

 

3.4

(116.6)

(112.4)

Net cash outflow from financing activities

 

(228.3)

(117.9)

(197.0)

Net (decrease)/ increase in cash and cash equivalents

 

(182.3)

682.9

898.8

Cash and cash equivalents at the beginning of the period

 

1,518.6

619.8

619.8

Cash and cash equivalents at the end of the period

5.1

1,336.3

1,302.7

1,518.6

The notes in sections 1 to 6 form an integral part of these Condensed Consolidated Half Yearly Financial Statements.

 

 

Reconciliation of profit from operations to net cash inflow from operating activities

for the half year ended 31 December 2021 (unaudited)

 

 

Notes

Half year ended

31 December 2021

 

£m

Half year ended 31 December 2020

 

£m

Year ended

30 June   2021
 (audited)

£m

 

 

 

 

 

Profit from operations

 

434.0

422.9

811.1

Depreciation of property plant and equipment

 

3.6

2.5

5.8

Loss on disposal of property, plant and equipment

 

3.7

-

-

Depreciation of right-of-use assets

 

6.6

7.1

13.8

Amortisation of intangible assets

 

-

0.5

1.1

Impairment/(reversal of impairment) of inventories

 

1.0

(0.9)

(3.5)

Profit on disposal of joint venture

 

-

(2.0)

(2.0)

Share-based payments charge

 

10.7

7.4

20.4

Imputed interest on deferred term payables1

5.2

(8.1)

(8.1)

(13.7)

Imputed interest on lease arrangements

5.2

(0.6)

(0.8)

(1.3)

Amortisation of facility fees

5.2

(1.1)

(1.0)

(2.0)

Finance income related to employee benefits

5.2

-

-

0.1

Total non-cash items2

 

15.8

4.7

18.7

(Increase)/decrease in inventories

 

(287.5)

548.9

385.9

Decrease/(increase) in receivables2

 

40.9

(45.3)

(93.1)

(Decrease)/increase in payables

 

(69.8)

(114.0)

74.8

Increase in provisions

 

6.0

53.6

39.4

Total movements in working capital2

 

(310.4)

443.2

407.0

Interest paid

 

(5.7)

(5.6)

(11.0)

Tax paid

 

(94.8)

(73.3)

(143.5)

Net cash inflow from operating activities

 

38.9

791.9

1,082.3

1 The balance sheet movements in land and leased assets include non-cash movements due to imputed interest. Imputed interest is therefore included within non-cash items in the statement above.

Profit on the redemption of secured loans, previously presented separately, has been included within movements on receivables.

The notes in sections 1 to 6 form an integral part of these Condensed Consolidated Half Yearly Financial Statements.

 

Notes to the Condensed Consolidated Half Yearly Financial Statements

for the half year ended 31 December 2021 (unaudited)

 

Section 1 - Basis of preparation

1.1  Cautionary statement

The Chief Executive's statement contained in this Half Yearly Financial Report, including the principal risks and uncertainties, has been prepared by the Directors in good faith based on the information available to them up to the time of their approval of this report solely for the Company's shareholders as a body, so as to assist them in assessing the Group's strategies and the potential for those strategies to succeed and accordingly should not be relied on by any other party or for any other purpose, and the Company hereby disclaims any liability to any such other party or for reliance on such information for any such other purpose.

 

This Half Yearly Financial Report has been prepared in respect of the Group as a whole and accordingly matters identified as being significant or material are so identified in the context of Barratt Developments PLC and its subsidiary undertakings taken as a whole.

1.2  Basis of preparation

The condensed financial information for the year ended 30 June 2021 is an extract from the published Annual Report and Accounts for that year and does not constitute statutory accounts as defined in s434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 30 June 2021, prepared under International Financial Reporting Standards ('IFRS') as adopted by the European Union, on which the auditors gave an unmodified opinion which did not draw attention to any matters by way of emphasis and did not contain a statement made under either s498 (2) or (3) of the Companies Act 2006, has been filed with the Registrar of Companies.

1.3  Going concern

In determining the appropriate basis of preparation of the Financial Statements, the Directors are required to consider whether the Group and Company can continue to meet their liabilities and other obligations for the foreseeable future.

The Group's business activities, together with factors which the Directors consider are likely to affect its development, financial performance and financial position are set out in the Chief Executive's Statement. The material financial and operational risks and uncertainties that may have an impact on the Group's performance and their mitigation are outlined in the principal risks section of this Half Yearly Financial Report and financial risks including liquidity risk, market risk, credit risk and capital risk are outlined on pages 154 to 156 of the Group's Annual Report and Accounts for the year ended 30 June 2021 which is available at www.barrattdevelopments.co.uk.

At 31 December 2021, the Group held cash of £1,336.3m and total loans and borrowings of £208.7m, consisting of £8.7m of overdrafts repayable on demand and £200.0m sterling USPP notes maturing in August 2027. These balances, set against pre-paid facility fees, comprise the Group's net cash of £1,131.7m presented in note 5.1.

Should further funding be required, the Group has a committed £700m revolving credit facility, subject to compliance with certain financial covenants, that matures in November 2025.

As such, in consideration of its net current assets of £4,977.0m, the Directors are satisfied that the Group has sufficient liquidity to meet its current liabilities and working capital requirements.

The housing market has remained strong throughout the economic disruption caused by COVID-19 and the underlying fundamentals remain attractive. There is high demand for new homes across the country, and historical undersupply underpins the Government's ongoing target of 300,000 new homes each year.

Nonetheless, uncertainties remain, particularly the ongoing impact of new variants of COVID-19 on the wider UK economy, supply chain disruption, the competitive labour market and the industry-specific challenges, such as the withdrawal of Help to Buy from March 2023, which may impact reservations from Autumn 2022. These and other economic disruptions could result in flat or negative economic growth, reduced buyer confidence, reduced mortgage availability and affordability, falls in house prices or land values and cost increases associated with raw materials, suppliers, subcontractors and employees.

The Group's financial forecasts reflect the outcomes that the Directors consider most likely, based on the information available at the date of signing of these Condensed Consolidated Half Yearly Financial Statements ('Interim Financial Statements'), including the ongoing impact of COVID-19, market changes following the end of the Help to Buy scheme and anticipated build cost inflation.

To assess the Group's resilience to more adverse outcomes, its forecast performance was sensitised to reflect a series of scenarios based on the Group's high-level principal risks and the downside prospects for the UK economy and housing market presented in the latest available external economic forecasts.

This exercise included a reasonable worst-case scenario in which the Group's principal risks manifest in aggregate to a severe but plausible level. This assumed that average selling prices fall by 5%, sales volumes fall by between 7% and 9%, construction costs increase by between 5% and 8% and salary inflation increases by 1.5% from the base forecasts.

The effects were modelled over a 18-month period to June 2023. Reasonable mitigation that the Group would expect to undertake in such circumstances was also modelled, being a reduction in investment in inventories in line with the fall in expected sales. In all scenarios, including the reasonable worst case, the Group is able to comply with its financial covenants, operate within its current facilities, and meet its liabilities as they fall due.

Furthermore, a reverse stress test was performed to determine the market conditions in which the Group, without mitigating action, would cease to be able to operate under its current facilities. The Group's strong net cash position and its available facilities mean that the Group's primary sensitivity in this circumstance would be compliance with its financial covenants. Based on past experience and current economic forecasts, the Directors consider the possibility of the conditions required to result in non-compliance to be remote and have identified mitigation that would be adopted in such circumstances.

The Directors have considered the impact of the acquisition of Gladman Developments Limited, both the initial cash outflow and future working capital requirements, and are satisfied this does not create any material uncertainty over the Group's ability to operate within its facilities and meet its liabilities as they fall due.

Accordingly, the Directors consider there to be no material uncertainties that may cast significant doubt on the Group's ability to continue to operate as a going concern. They have formed a judgement that there is a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future, being at least 18 months from the date of signing of these Interim Financial Statements. For this reason, they continue to adopt the going concern basis in the preparation of these Interim Financial Statements.

1.4  Accounting policies

The unaudited Interim Financial Statements have been prepared using accounting policies consistent with UK adopted IFRS and in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, and using accounting policies and methods of computation consistent with those applied in the preparation of the Group's Annual Report and Accounts for the year ended 30 June 2021 except as disclosed below:

During the period the Group has adopted the following new and revised standards and interpretations which have had no impact on the Interim Financial Statements:

· Amendment to IFRS 4: Extension of the Temporary Exemption from applying IFRS 9;

· Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2; and

· Amendment to IFRS 16: COVID-19 Related Rent Concessions beyond June 2021.

 

Section 2 - Results for the year and utilisation of profits

2.1  Revenue

The Group's revenue derives principally from the sale of the homes we build and from the sale of commercial property. These activities are carried out alongside each other and considered together for management reporting and control purposes.

An analysis of the Group's continuing revenue is as follows:

 

Half year ended

31 December 2021

 

£m

Half year ended

31 December

 2020

 

£m

Year ended

30 June  2021  (audited)

£m

Private residential sales

1,930.4

2,205.3

4,274.6

Affordable residential sales

279.0

261.0

495.5

Commercial and other revenue

37.7

28.4

41.6

 

2,247.1

2,494.7

4,811.7

Included within Group revenue is £48.8m (31 December 2020: £34.2m; 30 June 2021: £69.1m) of revenue from construction contracts on which revenue is recognised over time by reference to the stage of completion of the contracts. Of this revenue, £5.5m (31 December 2020: £7.8m; 30 June 2021: £10.1m) was included in the contract liability balance at the beginning of the period.

2.2  Adjusted items

Cost associated with legacy properties

During the period, charges of £15.9m (31 December 2020: £56.3m; 30 June 2021: £81.9m) were recognised through cost of sales as adjusted items in respect of costs associated with legacy properties and are separately disclosed in the table below the Condensed Consolidated Income Statement. The adjusted costs in the period, associated with legacy properties, comprise additions to provisions of £26.3m, provisions releases of £11.4m, and costs expensed directly to the income statement of £1.0m. Further details of provisions movements are provided in note 3.2.

In addition a charge of £1.5m (31 December 2020: £5.3m credit; 30 June 2021: £0.4m net credit) was recognised in respect of costs associated with joint venture legacy properties and these amounts have also been separately disclosed as adjusted items in the table below the Condensed Consolidated Income Statement.

CJRS grant income/repayment

During the year ended 30 June 2020, the Group recognised grant income of £26.0m in respect of the UK Government's CJRS. This was a temporary scheme from which the income was voluntarily refunded by the Group during the year ended 30 June 2021. Both the income and the repayment of the grant were presented as adjusted items.

2.3  Profit from operations

Cost of sales

The value of inventories expensed in the half year ended 31 December 2021 and included in cost of sales was £1,601.0m (31 December 2020: £1,828.6m; 30 June 2021: £3,537.9m).

Administrative expenses

Administrative expenses of £114.5m (31 December 2020: £94.3m; 30 June 2021: £204.4m) include sundry income of £8.7m (31 December 2020: £12.3m; 30 June 2021: £24.5m) which principally comprises management fees receivable from joint ventures (note 6.2.1), refunded mortgage guarantees, forfeit deposits, the sale of freehold reversions and ground rent receivable.

2.4  Earnings per share

Earnings per share from continuing operations were as follows:

 

Half year ended

31 December

2021

 

pence

Half year ended

31 December 2020

 

pence

Year ended

30 June

2021

(audited)

pence

Basic earnings per share

34.5

34.3

64.9

Diluted earnings per share

33.9

33.9

64.0

Adjusted basic earnings per share

35.9

40.5

73.5

Adjusted diluted earnings per share

35.3

39.9

72.5

 

Basic earnings per share is calculated by dividing the profit for the half year attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares in issue during the half year, excluding those held by the Employee Benefit Trust that do not attract dividend equivalents which were treated as cancelled.

Diluted earnings per share is calculated by dividing the profit for the half year attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares in issue adjusted to assume conversion of all potentially dilutive share options from the start of the year.

Adjusted basic and adjusted diluted earnings per share exclude the impact of adjusted items and any associated net tax amounts.

 

Half year ended

31 December 2021

 

Half year ended

31 December 2020

 

Year ended

30 June  2021

(audited)

Profit attributable to ordinary shareholders of the Parent Company (£m)

351.0

348.8

659.8

Adjusted items (£m)

17.4

77.0

107.5

Tax on adjusted items (£m)

(3.3)

(14.6)

(20.4)

Adjusted profit attributable to ordinary shareholders of the Parent Company (£m)

365.1

411.2

746.9

 

 

 

 

Weighted average number of shares in issue (million)

1,021.2

1,018.3

1,018.3

Weighted average number of shares in EBT (million)

(3.0)

(2.5)

(1.9)

Weighted average number of shares for basic earnings per share (million)

1,018.2

1,015.8

1,016.4

 

 

 

 

Weighted average number of shares in issue (million)

1,021.2

1,018.3

1,018.3

Adjustment to assume conversion of all potentially dilutive shares (million)

13.7

11.5

12.5

Weighted average number of shares for diluted earnings per share (million)

1,034.9

1,029.8

1,030.8

 

2.5  Dividends

 

Half year ended

31 December 2021

 

£m

Half year ended

31 December

 2020

 

£m

Year ended

30 June

2021

 (audited)

£m

Amounts recognised as distributions to equity shareholders:

 

 

 

Final dividend for the year ended 30 June 2021 of 21.9p per share

223.0

-

-

Interim dividend for the year ended 30 June 2021 of 7.5p per share

-

-

76.3

Total dividends distributed to equity shareholders in the period

223.0

-

76.3

The interim dividend of 11.2 pence per share was approved by the Board on 8 February 2022 and has not been included as a liability as at 31 December 2021.

2.6  Tax

The corporation tax charge comprises of the best estimate of the expected annual effective corporation tax rate applied to the half year profit before tax plus the impact of rate changes and prior year adjustments.

The effective rates are as follows: 

 

 

 

Half year ended

31 December 2021

 

Half year ended

31 December 2020

Year ended

30 June 2021

(audited)

Effective rate of corporation tax for the period

18.9%

18.9%

18.7%

Effective rate of corporation tax for the period excluding the impact of rate changes and prior year adjustments

18.9%

18.9%

18.7%

As at 31 December 2021 the Group recognised a net deferred tax liability of £9.9m (31 December 2020: £4.9m asset; 30 June 2021: £8.9m liability).

The UK corporation tax rate will increase from 19% to 25% with effect from 1 April 2023. Legislation to increase the corporation tax rate was enacted during the 30 June 2021 accounting period and the impact on deferred tax was taken into account at the previous balance sheet date.

HM Treasury has published draft legislation for a new Residential Property Developer Tax ("RPDT").  The legislation, as drafted, provides that RPDT will be chargeable at a rate of 4% of relevant residential property development profits arising from 1 April 2022, to the extent that they exceed an annual allowance of £25m.

It is anticipated that the RPDT legislation will not be substantively enacted until later this month. It is expected that remeasurement of relevant deferred tax balances to take into account the additional rate attributable to RPDT would result in an increase in the deferred tax liability at the balance sheet date of £2.1m.

It is anticipated that the introduction of RPDT will result in a higher ETR for the full financial year than that of the ETR for the first half of the year.

 

Section 3 - Working capital

3.1  Inventories

 

31 December 2021

 

£m

31 December 2020

 

£m

30 June

 2021

(audited)

£m

Land held for development

3,046.1

2,836.7

2,946.3

Construction work in progress

1,866.6

1,599.6

1,675.9

Part-exchange properties and other inventories

19.3

43.6

23.3

 

4,932.0

4,479.9

4,645.5

Nature and carrying value of inventories

The Group's principal activities are housebuilding and commercial development. The majority of development activity is not contracted prior to a development commencing. Accordingly, the Group has in its Balance Sheet at 31 December 2021 current assets that are not covered by a forward sale. The Group's internal controls are designed to identify any developments where the balance sheet value of land and work in progress is more than either the projected net realisable value of the development or, if lower, its cost. The Group has conducted six-monthly reviews of the net realisable value of specific sites identified as at high risk of impairment, based upon a number of criteria including low site profit margins and sites with no forecast completions. Where the estimated net realisable value of a site was less than its current carrying value the Group has impaired the land and work in progress value to its net realisable value.

During the period, due to performance variations, changes in assumptions and changes to viability on individual sites, there were gross impairment charges of £1.9m and gross impairment reversals of £0.9m, resulting in a net impairment of £1.0m (31 December 2020: £0.9m reversal of impairment; 30 June 2021: £3.5m reversal of impairment) included within profit from operations.

The key estimates in these reviews are those used to estimate the realisable value of a site, which is determined by forecast sales rates, expected sales prices and estimated costs to complete.  

The Directors consider all inventories to be current in nature although the Group's operational cycle is such that a proportion of inventories will not be realised within 12 months. It is not possible to determine with accuracy when specific inventory will be realised as this will be subject to a number of variables such as consumer demand and the timing of achievement of planning permissions.

3.2  Provisions

 

Legacy properties - external wall systems and associated review

£m

Legacy properties - Citiscape and associated review

£m

Total

 

 

£m

At 1 July 2021

41.6

26.0

67.6

Additions

12.3

14.0

26.3

Releases

(10.6)

(0.8)

(11.4)

Utilisation

(3.2)

(5.7)

(8.9)

 At 31 December 2021

40.1

33.5

73.6


External wall systems and associated review

The Group is undertaking a review, led by our Building Safety Unit, of current and legacy multi-storey and multi-occupancy residential buildings to identify and assess any remedial action required. All of our buildings, including the cladding and complete external wall systems used, were signed off by approved inspectors as compliant with the relevant Building Regulations at the time of completion. We have provided for the cost of assisting with remedial work identified at a limited number of legacy properties where we have a legal liability or have made a commitment to do so, either where relevant build issues have been identified or it is considered that such build issues are likely to exist.

The amounts provided reflect the current best estimate of the extent and future costs of work required; however, these estimates may be updated as work progresses or as Government legislation or regulations develop.

Citiscape and associated review

As announced in July 2020, we took the decision to pay for required remedial action on the reinforced concrete frame at the Citiscape development in Croydon and undertook an associated review of 26 other developments where reinforced concrete frames were designed for us by either the same engineering company or by other companies within its related group of companies. This review is substantially complete and has not identified any other buildings with issues as severe as those present at Citiscape. Detailed reviews, also led by our BSU, are ongoing and, in line with our commitment to put our customers first we will ensure that the costs associated with any remedial works from these reviews are not borne by leaseholders.

Management have made estimates as to the future costs, to the extent of the remedial works required and the costs of providing alternative accommodation to those affected. These Interim Financial Statements have been prepared based on currently available information, including known costs and quotations where possible. However, the extent, cost and timing of remedial work may change as work progresses.

The Group works to rectify all identified defects, including those relating to external wall systems, Citiscape and their associated reviews, as soon as is practicable, therefore the Directors consider these provisions to be current in nature. It is possible that following the completion of reviews or as a result of adjustments made as work progresses, some provisions may be utilised after 12 months from the reporting date.

 

Section 4 - Business combinations and other investing activities

4.1   Investments accounted for using the equity method

The Group has neither acquired nor disposed of any joint ventures during the period.

Section 5 - Capital structure and financing

5.1  Net cash

Net cash is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowing and prepaid fees.

Drawn debt and net cash at the period end are shown below:

 

31 December 2021

 

£m

31 December 2020

 

£m

30 June

2021

(audited)
£m

Cash and cash equivalents

1,336.3

1,302.7

1,518.6

Drawn debt

 

 

 

Borrowings

 

 

 

Sterling USPP notes

(200.0)

(200.0)

(200.0)

Bank overdrafts

(8.7)

(1.1)

(5.3)

Total borrowings being total drawn debt

(208.7)

(201.1)

(205.3)

Prepaid fees

4.1

5.1

4.1

Net cash

1,131.7

1,106.7

1,317.4

Total borrowings at the period end are analysed as:

 

 

 

Non-current borrowings

(200.0)

(200.0)

(200.0)

Current borrowings

(8.7)

(1.1)

(5.3)

Total borrowings being drawn debt

(208.7)

(201.1)

(205.3)

 

On 23 December 2021 the Group's £700.0m Revolving Credit Facility was amended and extended from November 2024 to November 2025.

Movement in net cash, including a reconciliation of liabilities arising from financing activities, is as follows:

 

Half year ended
31 December 2021

 

£m

Half year ended 31 December 2020

 

£m

Year ended 30 June 2021 (audited)

£m

Net (decrease)/increase in cash and cash equivalents

(182.3)

682.9

898.8

(Drawdown)/repayment of borrowings:

 

 

 

Loan and borrowings drawdowns

(3.4)

-

-

Loan and borrowings repayments

-

116.6

112.4

Other movements in borrowings:

 

 

 

Movement in prepaid fees

-

(1.0)

(2.0)

Movement in net cash in the period

(185.7)

798.5

1,009.2

Opening net cash

1,317.4

308.2

308.2

Closing net cash

1,131.7

1,106.7

1,317.4

 

 

5.2   Net finance costs

 Recognised in the Income Statement:

Half year ended

31 December 2021

 

£m

Half year ended 31 December 2020

 

£m

Year ended

30 June 2021 (audited)

£m

Finance income

 

 

 

Finance income on short term bank deposits

(0.3)

(0.2)

(0.5)

Finance income related to employee benefits

-

-

(0.1)

Other interest receivable

(0.2)

(0.5)

(0.8)

 

(0.5)

(0.7)

(1.4)

Finance costs

 

 

 

Interest on loans and borrowings

4.9

4.9

9.8

Imputed interest on deferred term payables

8.1

8.1

13.7

Finance charge on leased assets

0.6

0.8

1.3

Amortisation of facility fees

1.1

1.0

2.0

Other interest payable

0.8

0.7

1.2

 

15.5

15.5

28.0

Net finance costs

15.0

14.8

26.6

The weighted average interest rates (excluding amortised fees and non-utilisation fees) were as follows:

 

31 December 2021

 

%

31 December 2020

 

%

30 June 2021

(audited)

%

USPP notes

2.8

2.8

2.8

 

5.3   Financial instruments - fair value disclosures

The fair values of financial assets and liabilities are determined based on discounted cash flow analysis using current market rates for similar instruments. Other financial liabilities are subsequently measured at amortised cost using the 'effective interest rate' method.

 

The carrying values and fair values of financial assets and liabilities are as follows:

 

 

Half year ended
31 December 2021


£m

Half year ended
31 December 2020


£m

Year ended
30 June 2021

(audited)

£m

 

Fair value

Carrying value

Fair value

Carrying value

Fair value

Carrying value

Financial assets

 

 

 

 

 

 

Cash and cash equivalents

1,336.3

1,336.3

1,302.7

1,302.7

1,518.6

1,518.6

Trade and other receivables1, 3

84.2

84.2

105.1

105.1

119.8

119.8

Total financial assets

1,420.5

1,420.5

1,407.8

1,407.8

1,638.4

1,638.4

Financial liabilities

 

 

 

 

 

 

Trade and other payables2

1,169.8

1,165.8

1,134.9

1,130.5

1,296.1

1,293.8

Lease liabilities

36.5

36.5

43.7

43.7

40.7

40.7

Bank overdrafts

8.7

8.7

1.1

1.1

5.3

5.3

Loans and borrowings

199.1

200.0

200.1

200.0

202.8

200.0

Total financial liabilities

1,414.1

1,411.0

1,379.8

1,375.3

1,544.9

1,539.8

1 Excludes amounts recoverable on contracts, prepayments and accrued income, and tax and social security.

2 Excludes deferred income, payments received in excess of amounts recoverable on contracts, tax and social security and other non-financial liabilities.

3 Secured loans, previously presented separately, have been included within trade and other receivables.

 

 

5.4  Share capital

 

31 December
2021

31 December 2020

 

30 June
2021

 (audited)

Allotted and issued ordinary shares (£m):

 

 

 

10p each fully paid

102.2

101.8

101.8

Allotted and issued ordinary shares (number):

 

 

 

10p each fully paid

1,022,535,412

1,018,316,938

1,018,331,741

 

Options over the Company's shares granted during the period:

Half year ended
31 December 2021

 

number

Half year ended
31 December
2020

 

number

Year ended
30 June
2021

(audited)

number

LTPP

2,543,778

3,086,457

3,204,477

Sharesave

-

-

1,913,489

DBP

674,051

-

-

ELTIP

1,080,733

1,249,000

1,249,000

 

4,298,562

4,335,457

6,366,966

 

Allotment of shares during the period:

Half year ended
31 December
2021

 

number

Half year ended
31 December
2020

 

number

Year ended
30 June

 2021

(audited)

number

At the beginning of the period

1,018,331,741

1,018,302,400

1,018,302,400

Issued to satisfy early exercises under Sharesave schemes

16,258

1,158

10,251

Issued to satisfy exercises under matured Sharesave schemes

1,801,214

13,380

19,090

Issued to the EBT to satisfy exercises through the EBT

2,386,199

-

-

 

1,022,535,412

1,018,316,938

1,018,331,741

Own shares reserve

The own shares reserve represents the cost of shares in Barratt Developments PLC purchased in the market or issued by the Company and held by the EBT on behalf of the Company in order to satisfy options and awards that have been granted by the Company.

 

The EBT has agreed to waive all or any future right to dividend payments on shares held within the EBT and these shares do not count in the calculation of the weighted average number of shares used to calculate EPS until such time as they are vested to the relevant employee.

 

 

31 December 2021

 

31 December 2020

 

30 June

 2021

(audited)

Ordinary shares in the Company held in the EBT (number)

1,380,595

1,362,876

1,300,125

Cost of shares held in the EBT

£6.2m

£5.1m

£4.7m

Market value of shares held in the EBT at 748.0p (31 December 2020: 670.0p; 30 June 2021: 695.2p) per share

£10.3m

£9.1m

£9.0m

 

During the period 2,386,199 shares were allotted to the EBT (31 December 2020: none; 30 June 2021: none) and the EBT purchased 1,050,000 shares in the market (31 December 2020: none; 30 June 2021: none). The EBT disposed of 3,355,729 shares which were used to satisfy the vesting of the HBF 5 Star Award, the LTPP and the DBP schemes (31 December 2020: 1,665,587; 30 June 2021: 1,689,670 shares were used to satisfy the vesting of the ELTIP 60th Anniversary Award, the LTPP and the DBP schemes). No shares were disposed of in settlement of exercises under Sharesave schemes (31 December 2020: 1,680,343; 30 June 2021: 1,719,011 in settlement of exercises under the Sharesave 2015 5-year plan and the Sharesave 2017 3-year plan).

 

Section 6 - Contingencies, related parties and post balance sheet events

6.1 Contingent liabilities

6.1.1  Contingent liabilities related to subsidiaries

Certain subsidiary undertakings have commitments for the purchase of trading stock entered into in the normal course of business.

In the normal course of business, the Group has given counter-indemnities in respect of performance bonds and financial guarantees. Management estimate that the bonds and guarantees amount to £428.8m (31 December 2020: £406.5m; 30 June 2021: £423.8m), and confirm that at the date of these Interim Financial Statements the possibility of cash outflow is considered minimal.

External wall systems and associated review

As disclosed in note 3.2, the Group is undertaking a review of all of its current and legacy multi-storey and multi-occupancy residential buildings and continues to assess the action required in line with the latest updates to Government guidance. All of our buildings, including the cladding and complete external wall systems used, were signed off by approved inspectors as compliant with the relevant Building Regulations at the time of completion. At 31 December 2021, 206 buildings over 11 metres were part of the ongoing review.

The Interim Financial Statements have been prepared based on currently available information and the current best estimate of the extent and future costs of work required, based on the reviews and physical inspections undertaken. However, these estimates may be updated as further inspections are completed, as work progresses or as Government legislation and regulations develop.

On 10 January and 3 February 2022, the Department for Levelling Up, Housing and Communities contacted residential property developers regarding the financing and rectification of unsafe cladding on buildings with a height of above 11 metres constructed in the last 30 years.

Discussions are ongoing and we will continue to work constructively with Government to ensure leaseholders are protected. Whilst a provision has been recognised for the rectification of buildings over 11 metres for which the Group was liable or had made a commitment at the reporting date, it is possible that further commitments may be made by the Group following these discussions.

Citiscape and associated review

As disclosed in note 3.2, following the issues identified at Citiscape, the Group is conducting a review of developments where reinforced concrete frames have been designed by either the same original engineering firm which designed Citiscape, or by other companies within the group of companies which has since acquired it. The Interim Financial Statements have been prepared based on currently available information; however, detailed reviews are ongoing and the extent and cost of any remedial work may change as this work progresses. While in most cases we have no legal liability, in line with our commitment to put our customers first we will ensure that the costs associated with remedial works are not borne by leaseholders.

We are actively seeking to recover costs from third parties, however there is no certainty regarding the extent of any financial recovery.

6.1.2  Contingent liabilities related to joint ventures

The Group has given counter-indemnities in respect of performance bonds and financial guarantees to its joint ventures totalling £2.2m (31 December 2020: £9.9m; 30 June 2021: £1.8m).

The Group has also given a number of performance guarantees in respect of the obligations of its joint ventures, requiring the Group to complete development agreement contractual obligations in the event that the joint ventures do not perform as required under the terms of the related contracts.At 31 December 2021 the probability of any loss to the Group resulting from these guarantees is considered to be remote.

6.1.3  Contingent liabilities related to legal claims

On 4 September 2020, the UK Competition and Markets Authority ('CMA') announced that it was opening an enforcement case involving the Group (alongside certain other leading housing developers) as part of its ongoing investigation in relation to the sale of leasehold homes. As noted in its announcement, the CMA cannot levy administrative fines but it can enforce relevant consumer protection legislation through the courts and, where appropriate, obtain additional measures to (amongst other things) obtain redress for consumers.  The Group is committed to putting its customers first and continues to engage with the CMA whilst it completes its investigation. 

Provision is made for the Directors' best estimate of all known material legal claims and all legal actions in progress. The Group takes legal advice as to the likelihood of success of claims and actions and no provision is made (other than for legal costs) where the Directors consider, based on such advice, that claims or actions are unlikely to succeed, or a sufficiently reliable estimate of the potential obligations cannot be made.

There was no contingent liability in respect of such claims at 31 December 2021, 31 December 2020 or 30 June 2021.

6.2  Related party transactions

Related party transactions for the period to 31 December 2021 are detailed below:

6.2.1  Transactions between the Group and its joint ventures

The Group has entered into transactions with its joint ventures as follows:

 

31 December 2021

 

£m

31 December 2020

 

£m

30 June

 2021

(audited)

£m

Transactions between the Group and its JVs during the period:

 

 

 

Charges in respect of development management and other services  provided to JVs

2.6

3.6

4.5

Interest charges in respect of funding provided to JVs

0.2

0.4

0.7

Profit distributions received from JVs

4.0

8.5

21.2

Balances at the period end:

 

 

 

Capital due from JVs

81.0

85.9

86.1

Net funding loans and interest due from JVs

78.8

81.8

86.0

Other amounts due from JVs

29.9

22.4

26.9

Loans and other amounts due to JVs

(6.2)

(3.9)

(0.8)

In addition, one of the Group's subsidiaries, BDW Trading Limited, contracts with a number of the Group's joint ventures to provide construction services.

The Group's contingent liabilities relating to its joint ventures are disclosed in note 6.1.2.

6.2.2  Transactions between the Group and its Directors

The Board and certain members of senior management are related parties within the definition of IAS 24 (Revised) 'Related Party Disclosures' and Chapter 11 of the UK Listing Rules.

Transactions between the Group and key management personnel in the first half of the year ending 30 June 2022 were limited to those relating to remuneration, previously disclosed as part of the Remuneration report within the Group's Annual Report and Accounts for the year ended 30 June 2021. Options granted to executives and senior management under the LTPP and DBP schemes are disclosed in aggregate in note 5.4. There have been no other material changes to the arrangements between the Group and key management personnel.

There have been no related party transactions as defined in Listing Rule 11.1.5R for the period ended 31 December 2021. 

6.3  Post balance sheet events

On 31 January 2022 the Group acquired 100% of the share capital of Gladman Developments Limited for total consideration of £230.6m, of which £218.4m was paid in cash and £12.2m is deferred consideration, to be paid in instalments over the four years from the acquisition date. The Group is assessing the fair value of the assets and liabilities acquired.

Gladman Developments Limited is a land promoter operating in the United Kingdom.

 

Statement of Directors' Responsibilities

 

The Directors confirm that to the best of their knowledge these Interim Financial Statements have been prepared in accordance with IAS 34 as required by DTR 4.2.4R. They also confirm that to the best of their knowledge that the Interim Management Report herein includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and DTR 4.2.8R (disclosure of related party transactions and changes thereto).

 

The Directors of Barratt Developments PLC are:

J M Allan, Non-Executive Chairman

D F Thomas, Chief Executive

S J Boyes, Deputy Chief Executive and Chief Operating Officer

M Scott, Chief Financial Officer

J F Lennox, Senior Independent Director

N S Bibby, Non-Executive Director

K Bickerstaffe, Non-Executive Director

C P A Weston, Non-Executive Director

S M White, Non-Executive Director

 

 

The Half Yearly Financial Report was approved by the Board on 8 February 2022, and signed on its behalf by

 

 

 

 

 

D F Thomas

Chief Executive

Independent review report to Barratt Developments PLC

We have been engaged by the company to review the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 31 December 2021 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in Shareholders' Equity, the Condensed Consolidated Cash Flow Statement and related notes 1.1 to 6.3. We have read the other information contained in the Half Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1.2, the annual financial statements of the Group for the year ended 30 June 2022 will be prepared in accordance with United Kingdom adopted IFRSs. The condensed set of financial statements included in this Half Yearly Financial Report have been prepared in accordance with United Kingdom adopted International Accounting Standard 34 "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half Yearly Financial Report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 31 December 2021 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Deloitte LLP

Statutory Auditor

London, United Kingdom

8 February 2022

 

Glossary & Definitions

 

Active outlet

A site with at least one plot for sale

APMs

Alternative performance measures

ASP

Average selling price

BNG

Biodiversity Net Gain

BSU

Building Safety Unit

CJRS

Coronavirus Job Retention Scheme

CMA

Competition and Markets Authority

COVID-19

Coronavirus Disease 2019

DBP

Deferred Bonus Plan

Dividend cover

Calculated as the ratio of the Group's profit or loss for the period attributable to the owners of the Company to total ordinary dividend

DTR

Disclosure Guidance and Transparency Rules

EBITDA

Earnings before interest, tax, depreciation and amortisation

EBT

Barratt Developments Employee Benefit Trust

ELTIP

Employee Long Term Incentive Plan

EPS

Earnings per share

EWS

External Wall System

FY

Refers to the financial year ended 30 June

GD&T

Group Design & Technology

HBF

Home Builders Federation

HTB

Help to Buy

HY

Refers to the half year ended 31 December

IAS

International Accounting Standards

IFRS

International Financial Reporting Standards

IIR

Injury Incident Rate

JVs

Joint ventures

KPI

Key performance indicator

Land supply

Land supply is calculated as total owned (owned land and land subject to unconditional contracts) and controlled (land subject to conditional contracts) land bank plots divided by wholly owned completions in the last 12 months

Legacy property

A property constructed by the Group or one of its joint ventures for which the sale was completed in a prior period

LTV

Loan to value

LTPP

Long Term Performance Plan

MMC

Modern methods of construction

Net cash

Net cash / debt is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings, prepaid fees and foreign exchange swaps

Net tangible assets

Group net assets less other intangible assets and goodwill

NHBC

National House Building Council

Regional

Includes all regions except London

RCF

Revolving Credit Facility

RI

Reportable Items

ROCE

Return on capital employed calculated as earnings before amortisation, interest, tax, operating charges relating to the defined benefit pension scheme and operating adjusting or exceptional items, divided by average net assets adjusted for goodwill and intangibles, tax, cash, loans and borrowings, retirement benefit assets/obligations and derivative financial instruments.

RPDT

Residential Property Developer Tax

Sharesave

Savings-Related Share Option Scheme

SHE

Safety, Health and the Environment

TCFD

Task force on Climate related Financial Disclosures

The Company

Barratt Developments PLC

The Group

Barratt Developments PLC and its subsidiary undertakings

Total completions

Unless otherwise stated total completions quoted include JV completions

USPP

US Private Placement

 

Definitions of alternative performance measures ('APMs') and reconciliation to IFRS

Further information on the use of APMs and why the Group believes they are a good measure of performance alongside IFRS metrics is provided on pages 41 to 43 in the Group's Annual Report and Accounts for the year ended 30 June 2021.

 

Gross margin is defined as gross profit divided by revenue:

 

Half year ended
31 December 2020

 

Year ended
30 June
2021
(audited)

Revenue per Income Statement (£m)

2,247.1

2,494.7

4,811.7

Gross profit per Income Statement (£m)

546.5

513.9

1,010.0

Gross margin

24.3%

20.6%

21.0%

 

Adjusted gross margin is defined as adjusted gross profit divided by revenue:

 

Half year ended
31 December 2020

 

Year ended
30 June
2021
(audited)

Revenue per Income Statement (£m)

2,247.1

2,494.7

4,811.7

Adjusted gross profit per Income Statement (£m)

562.4

593.0

1,114.7

Adjusted gross margin

25.0%

23.8%

23.2%

 

Operating margin is defined as profit from operations divided by revenue:

 

Half year ended
31 December 2020

 

Year ended

 30 June

 2021

(audited)

Revenue per Income Statement (£m)

2,247.1

2,494.7

4,811.7

Profit from operations per Income Statement (£m)

434.0

422.9

811.1

Operating margin

19.3%

17.0%

16.9%

 

Adjusted operating margin is defined as adjusted operating profit divided by revenue:

 

Half year ended
31 December 2020

 

Year ended

 30 June

 2021

(audited)

Revenue per Income Statement (£m)

2,247.1

2,494.7

4,811.7

Adjusted operating profit per Income Statement (£m)

449.9

505.2

919.0

Adjusted operating margin

20.0%

20.3%

19.1%

 

Adjusted earnings for adjusted basic earnings per share and adjusted diluted earnings per share are calculated by excluding adjusted items and any associated net tax amounts from profit attributable to ordinary shareholders of the Company.

 

Half year ended

31 December

2021
 

£m

Half year ended

31 December

2020

 

£m

Year ended

30 June

2021

(audited)

£m

Profit attributable to ordinary shareholders of the Company

351.0

348.8

659.8

Government grants repaid

-

26.0

26.0

Costs associated with legacy properties

15.9

51.0

81.9

Net cost/(credit) associated with JV legacy properties

1.5

-

(0.4)

Tax on adjusted items

(3.3)

(14.6)

(20.4)

Adjusted earnings

365.1

411.2

746.9

 

Net cash is defined in note 5.1.
 

ROCE is calculated as earnings before amortisation, interest, tax, operating charges relating to the defined benefit pension scheme and operating adjusting or exceptional items for the 12 months to December, divided by average net assets adjusted for goodwill and intangibles, tax, net cash, retirement benefit assets/obligations and derivative financial instruments:

 

Half year ended 31 December 2021

 

Half year ended 31 December 2020*

 

Year

 ended 30 June

2021 (audited)

Year calculated to 31 December 2021

 

Half year ended 31 December 2019

 

Year

 ended 30 June

2020 (audited)

Year calculated to 31 December 2020

 

 

£m

£m

£m

£m

£m

£m

£m

Profit from operations

434.0

422.9

811.1

822.2

421.7

493.4

494.6

Amortisation of intangible assets

-

0.5

1.1

0.6

0.6

1.2

1.1

Adjusted cost/(credit) associated with legacy properties

15.9

56.3

81.9

41.5

17.8

39.9

78.4

CJRS grant repayment/(income)

-

26.0

26.0

-

-

(26.0)

-

Defined benefit past service cost and other operating charges

-

1.2

2.3

1.1

-

-

1.2

Share of post-tax profit from joint ventures and associates

13.6

22.1

27.7

19.2

15.4

28.3

35.0

Adjusted cost/(credit) related to JV legacy properties*

1.5

(5.3)

(0.4)

6.4

-

-

(5.3)

Annualised earnings before amortisation, interest, tax, adjusted items and defined benefit scheme charges*

 

 

949.7

891.0

 

536.8

605.0

* The annualised earnings before amortisation, interest, tax, adjusted items and defined benefit scheme charges, presented for the year ended 31 December 2020, have been amended to exclude the adjusted credit related to JV properties .  

 

 

 

31 December 2021

 

£m

31 December 2020
 

£m

30 June

2021

(audited)

£m

31 December 20191
(re-presented)

£m

30 June

2020

(audited)

£m

Group net assets per Balance Sheet

5,589.7

5,204.7

5,452.1

4,849.1

4,840.3

Less:

 

 

 

 

 

Other intangible assets Balance Sheet

(100.0)

(100.6)

(100.0)

(101.7)

(101.1)

Goodwill per Balance Sheet

(805.9)

(805.9)

(805.9)

(805.9)

(805.9)

Current tax (assets)/liabilities

(13.7)

16.0

1.0

(0.4)

2.8

Deferred tax liabilities/(assets)

9.9

(4.9)

8.9

16.2

2.4

Retirement benefit assets

-

(2.1)

-

(68.6)

(3.5)

Cash and cash equivalents1

(1,336.3)

(1,302.7)

(1,518.6)

(826.0)

(619.8)

Loans and borrowings1

208.7

201.1

205.3

399.3

317.7

Prepaid fees

(4.1)

(5.1)

(4.1)

(7.1)

(6.1)

Capital employed

3,548.3

3,200.5

3,238.7

3,454.9

3,626.8

Three point average capital employed

3,329.2

3,427.4

3,355.3

3,343.0

3,443.8

1 December 2019 balances for cash and cash equivalents and bank overdrafts were re-presented in accordance with IAS 32.

 

 

 

31 December 2021

31 December 2020*

 

30 June

2021
(audited)

Annualised earnings before amortisation, interest, tax, adjusted items and defined benefit scheme charges (from table above) (£m)

891.0

605.0

949.7

Three point average capital employed (from table above) (£m)

3,329.2

3,427.4

3,355.3

ROCE

26.8%

17.7%

28.3%

* The annualised earnings before amortisation, interest, tax, adjusted items and defined benefit scheme charges, presented for the year ended 31 December 2020,
have been amended to exclude the adjusted credit related to JV properties
.

 

 

Total indebtedness is defined as net (cash)/debt and land payables:

 

 

31 December 2021

31 December 2020

 

30 June

2021
(audited)

Net cash (£m)

(1,131.7)

(1,106.7)

(1,317.4)

Land payables (£m)

682.3

601.1

658.3

Total indebtedness (£m)

(449.4)

(505.6)

(659.1)

 

 

 

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