7 February 2024
BARRATT DEVELOPMENTS PLC
Half year results for the six month period ended 31 December 2023
Solid operating performance in an uncertain market
Commenting on the interim results David Thomas, Chief Executive of Barratt Developments PLC said:
“Whilst our operating environment is still challenging, Barratt has remained focused on delivering high-quality, energy-efficient and well-designed homes across the country. We continue to lead the industry in customer service, build quality and sustainability.
During the period, we have been rigorous in carefully controlling our build activity, managing our costs, being highly selective in land buying, and driving revenue. These clear priorities have helped maintain the strength of our balance sheet despite lower levels of profitability and ensure we remain resilient and responsive through the cycle.
Despite the challenging macroeconomic backdrop, underlying demand for our homes is strong. Since the start of January, we have seen early signs of improvement in both reservation rates and buyer sentiment, helped by expectations of lower interest rates and the introduction of more competitive mortgage rates. I would like to thank everybody at Barratt, our sub-contractors and our suppliers for their commitment and hard work as we continue to deliver for our customers, stakeholders and shareholders.”
| £m unless otherwise stated1,2 | Half year ended31 December 2023 | Half year ended31 December 2022 | Change |
| Total completions (homes)3 | 6,171 | 8,626 | (28.5%) |
| Revenue | 1,850.8 | 2,783.9 | (33.5%) |
| Alternative performance measures:4 | |||
| Adjusted gross profit | 295.9 | 647.9 | (54.3%) |
| Adjusted profit before tax | 157.1 | 521.5 | (69.9%) |
| Adjusted gross margin | 16.0% | 23.3% | (730 bps) |
| Adjusted operating margin | 8.4% | 18.4% | (1,000 bps) |
| Adjusted basic earnings per share (pence) | 11.8 | 39.2 | (69.9%) |
| Statutory basis: | |||
| Gross profit | 238.5 | 630.3 | (62.2%) |
| Profit before tax | 95.2 | 501.5 | (81.0%) |
| Gross margin | 12.9% | 22.6% | (970 bps) |
| Operating margin | 5.3% | 17.8% | (1,250 bps) |
| Basic earnings per share (pence) | 7.1 | 37.7 | (81.2%) |
| ROCE | 12.8% | 29.6% | (1,680 bps) |
| Net cash | 753.4 | 969.1 | (22.3%) |
| Interim dividend per share (pence) | 4.4 | 10.2 | (56.9%) |
| Tangible net asset value per share (pence) | 451 | 462 | (2.4%) |
Highlights
| · | Resilient operational performance, delivering 6,171 total home completions3 (HY23: 8,626) and revenue of £1.9bn (HY23: £2.8bn), with adjusted profit before tax at £157.1m (HY23: £521.5m). |
| · | Adjusted items relating to costs associated with legacy properties of £61.9m (HY23: £20.0m), which resulted in reported profit before tax of £95.2m (HY23: £501.5m). |
| · | Balance sheet strength maintained with net cash of £753.4m (31 December 2022: £969.1m), after payment of the FY23 final dividend of £228.0m (FY22 final dividend: £259.8m). |
| · | Continued industry leadership on quality, customer satisfaction and sustainability: 96 NHBC Pride in the Job Awards, more than any other housebuilder for 19 years, rated ‘5 Stars’ by our customers in the HBF customer satisfaction survey for 14 years in a row, and recognised as the leading national sustainable housebuilder by NextGeneration for the eighth consecutive year. |
| · | Interim ordinary dividend of 4.4p (HY23: 10.2p) reflecting the reduced level of pre-tax profitability, the 600 bps step up in the corporation tax rate and partial offset from the planned reduction in dividend cover to 1.75 times for FY24. |
Current trading and outlook
| · | The net private reservation rate per active outlet per average week from 1 January 2024 through to 28 January 2024 was 0.60 (2023: 0.49), including a contribution of 0.04 (2023: 0.01) from sales into the private rental sector and to registered providers of social housing. |
| · | Forward sales3 as at 28 January 2024 were 8,760 homes (29 January 2023: 10,854) at a value of £2,268.3m (29 January 2023: £2,665.0m) with 6,470 homes of these total forward sales either exchanged or contracted (29 January 2023: 8,719). |
| · | Whilst our full year out-turn remains dependent on how the market evolves through the Spring selling season, based on the encouraging uplift in reservation activity since the start of January, we now expect to deliver total home completions of between 13,500 to 14,000 in FY24 (including c. 650 JV completions). |
Recommended all-share offer for the combination of Barratt Developments PLC and Redrow plc
Barratt has today separately announced that it has agreed the terms of a recommended all-share offer for the combination of Barratt and Redrow. We believe that the combination will create an exceptional UK housebuilder in terms of quality, service and sustainability, delivering excellence and driving innovation for customers, employees, sub-contractors and the supply chain. The combination will bring together two companies with highly complementary geographic footprints and three highly respected brands – Barratt Homes, David Wilson Homes and Redrow – with which to accelerate the delivery of much-needed housing across the UK and provide the opportunity for shareholders to participate in future value creation in the combined group.