Barratt Developments completions recover to pre-pandemic levels

Barratt Developments

Barratt Developments PLC (LON:BDEV) has provided its Annual Results Announcement for the year ended 30 June 2022.

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

“This has been a year of fantastic progress, with completions recovering to pre-pandemic levels and excellent productivity across our sites. Customers are at the heart of everything we do and we were awarded more NHBC Pride in the Job Awards than any other housebuilder for the 18th year in a row – testament to the high quality we consistently achieve across our sites.

Our financial strength and operational excellence position us well to navigate the macro-economic uncertainties ahead. I’d like to thank our employees, sub-contractors and supply chain partners for helping us to continue to deliver the industry-leading, sustainable homes and developments our customers want and the UK needs”.

£m unless otherwise stated1,2,3Year ended 30 June 2022Year ended 30 June 2021 Change
Total completions (homes)417,90817,2433.9%
Revenue5,267.94,811.79.5%
Alternative performance measures:
Adjusted gross margin (%)24.823.2160bps
Adjusted profit from operations1,054.8919.014.8%
Adjusted operating margin (%)20.019.190bps
Adjusted profit before tax1,054.8919.714.7%
Adjusted basic earnings per share (pence)83.073.512.9%
ROCE (%)530.027.8220bps
Statutory basis:
Gross margin (%)17.121.0(390bps)
Profit from operations646.6811.1(20.3%)
Operating margin (%)12.316.9(460bps)
Profit before tax642.3812.2(20.9%)
Basic earnings per share (pence)50.664.9(22.0%)
Total ordinary dividend per share (pence)36.929.425.5%
Net cash1,138.61,317.4(178.8)

Highlights

·      Excellent operational performance throughout FY22 with total home completions4 increasing by 3.9% to 17,908 (FY21: 17,243) homes and returning to pre-pandemic levels. Based on current market conditions, we are targeting total home completion growth of 3% to 5% in FY23, to between 18,400 and 18,800 homes.

·      Adjusted gross margin of 24.8% (FY21: 23.2%) reflecting strong customer demand, house price inflation ahead of build cost inflation and improved site based productivity. The reported gross margin, after adjusted item costs of £408.2m (FY21: £104.7m), reduced to 17.1% (FY21: 21.0%).

·      Ongoing industry leadership in quality and customer service – 18th consecutive year of achieving more NHBC Pride in the Job Awards than any other housebuilder and the 13th consecutive year of receiving the maximum HBF 5 Star customer satisfaction rating.

·      Strong cash generation with net cash at 30 June 2022 of £1,138.6m (30 June 2021: £1,317.4m) retaining balance sheet strength, investment in capacity for planned growth, as well as enhanced returns to shareholders.

·      Significant progress as the leading national sustainable housebuilder with carbon intensity6 reduced by 14.0% to 1.53 (FY21: 1.78) tonnes and waste intensity6 reducing by 15.6% to 4.97 (FY21: 5.89) tonnes. Additional investments made in sustainability R&D during the year, further extending our industry leadership.

·      Final ordinary dividend per share of 25.7p (FY21: 21.9p) together with the interim dividend of 11.2p (FY21: 7.5p) resulting in a total ordinary dividend for the financial year of 36.9p (FY21: 29.4p), reflecting our policy of reducing dividend cover.

·      Return of £200m surplus capital through the implementation of a share buyback programme which will start shortly, with an initial tranche of £50m to be completed by the end of the calendar year and the total programme completed no later than 30 June 2023.

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Current trading

·      Market fundamentals remain strong, reflecting the continued imbalance between housing supply and demand, as well as good mortgage availability.

·      We entered FY23 with a strong forward sales position and at 28 August 2022 we are 55% forward sold with respect to private wholly owned home completions for FY237 (29 August 2021 for FY22: 59%8) with 59% of the private order book exchanged (29 August 2021: 56% of the private order book exchanged).  As at 28 August 2022 total forward sales were at 14,058 homes (29 August 2021: 15,402 homes) and a value of £3,808.9m (29 August 2021: £3,843.4m).4

·      Net private reservations per active outlet per average week for the period to 28 August 2022 were lower than last year at 0.60 (FY22: 0.82) and below the 0.70 for the equivalent period in FY20, prior to the pandemic.  In part, this reflects limited availability of homes for early occupation, given our strong forward order book, as well as heightened macro-economic uncertainty.

·      As the land market has become increasingly competitive, our land approvals in the new financial year to date are lower than in FY22, reflecting our strong land bank position and disciplined application of our minimum hurdle rates of 23% gross margin and 25% ROCE.

·      Construction activity is on track to deliver planned output growth in FY23 with 366 equivalent homes per average week built to date in the new financial year (FY22: 336 homes).

1. Refer to Glossary for definition of key financial metrics.

2. Unless otherwise stated, all numbers quoted exclude JVs.

3. In addition to the Group using a variety of statutory performance measures, it also measures performance using alternative performance measures (APMs). Definitions of the APMs and reconciliations to the equivalent statutory measures are detailed in the Definitions of alternative performance measures and reconciliation to IFRS section. Net cash definition in Note 19.

4. Including JVs in which the Group has an interest.

5. The definition of ROCE has been updated in the year to exclude provisions in relation to legacy properties from capital employed. To ensure comparability, ROCE for FY21 has been restated under the revised definition.

6. Both carbon and waste intensity are measured relative to 100m2 of legally completed build area in the respective financial year. Carbon intensity is based on scope 1 and 2 emissions.

7. Our forward sold position with respect to FY23 private home completions is based on the mid-point of wholly owned completions guidance (17,850 homes) and assuming a 79%: 21% private: affordable home completion mix.

8. Our forward sold position with respect to FY22 is based on actual wholly owned private home completions for the year.

There will be a results meeting at the Chartered Accountants’ Hall, 1 Moorgate Place, London, EC2R 6EA at 8.30am today.

A conference call and webcast will accompany the meeting starting at 8.30am. Details for the conference call are included below. We would advise calling in to the conference call at 8.15am to ensure you are registered ahead of the start of the meeting.

·      Standard International : +44 (0) 33 0551 0200

·      UK Toll Free: 0808 109 0700

·      New York: +1 212 999 6659

·      USA Toll Free: 1 866 966 5335

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/62f3ad76368bde6d2842e8f5

An archived version of the webcast will also be available on our website later this afternoon and 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.

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