TIDMBDEV
RNS Number : 4822X
Barratt Developments PLC
22 February 2017
22 February 2017
BARRATT DEVELOPMENTS PLC
Half Year results for the six month period ended 31 December
2016
Strong half year for the Group, well on track for the full
year
Half year ended Half year Change
31 December ended
2016 31 December
2015
------------------------ ---------------- ------------- -------
Total completions[1]
(plots) 7,180 7,626 (5.8%)
------------------------ ---------------- ------------- -------
Revenue (GBPm) 1,816.2 1,875.5 (3.2%)
------------------------ ---------------- ------------- -------
Gross margin[2] 2.1
(%) 20.7 18.6 ppts
------------------------ ---------------- ------------- -------
Profit from operations
(GBPm) 324.0 301.8 7.4%
------------------------ ---------------- ------------- -------
Operating margin[3] 1.7
(%) 17.8 16.1 ppts
------------------------ ---------------- ------------- -------
Profit before tax
(GBPm) 321.0 295.0 8.8%
------------------------ ---------------- ------------- -------
Interim dividend
per share (pence) 7.3 6.0 21.7%
------------------------ ---------------- ------------- -------
1.5
ROCE[4] (%) 27.0 25.5 ppts
------------------------ ---------------- ------------- -------
Net Cash[5] (GBPm) 196.7 24.2 712.8%
------------------------ ---------------- ------------- -------
Highlights
-- Completions outside of London at highest level for nine
years; London completions were in line with planned build
programme, with significant uplift expected on wholly owned sites
in the second half
-- Half year profit before tax for the period of GBP321.0m, up 8.8%
-- ROCE increased by 1.5 ppts to 27.0%, reflecting our fast build and sell model
-- Maintained industry-leading customer satisfaction and build quality
Current Trading
-- Completion growth expected in the second half with record
total forward sales (including JV's) as at 19 February 2017 up
17.0% at GBP3,018.2m
-- Net private reservations per active outlet per average week of 0.77 (2016: 0.76)
Capital Return Plan
-- Improved and extended Capital Return Plan with ordinary
dividend cover re-set at 2.5 times and special dividends of GBP175m
in November 2017 and November 2018
Commenting on the results David Thomas, Chief Executive of
Barratt Developments PLC said:
"As we reported in the January trading update, we have delivered
another very strong first half performance, pre-tax profits were up
nearly 9% and completions outside of London at their highest level
in nine years.
Whilst we have increased volumes across the UK by 55% in the
last five financial years, we have maintained our commitment to
build quality and customer service and we are the only major
housebuilder with the HBF 5 Star Customer Satisfaction Award.
With a record forward order book, strong consumer demand and a
positive lending backdrop, we remain confident in our outlook for
the full year. Our confidence in the business going forward is
reflected in the improved and extended Capital Return Plan."
There will be an analyst and investor meeting at 9.00am today at
Deutsche Bank, 1 Great Winchester Street, London, EC2N 2DB. The
presentation will be broadcast live on the Barratt Developments
corporate website, www.barrattdevelopments.co.uk, from 9.00am
today. A playback facility will be available shortly after the
presentation has finished.
A listen only function will also be available.
Dial in: 0800 358 6377
International dial in: +44 (0) 330 336 9105
Access code: 7318349
Further copies of this announcement can be downloaded from the
Barratt Developments corporate website
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
David Thomas, Chief Executive 020 7299 4896
Analyst/investor enquiries
Chloe Barnes, Investor
Relations 020 7299 4895
Media enquiries
Tim Collins, Head of Corporate
Communications 020 7299 4874
Derek Harris, Head of
Public Relations 020 7299 4873
Brunswick
Jonathan Glass/Wendel
Verbeek 020 7404 5959
Chief Executive's Statement
Strong half year for the Group
The Group has delivered an excellent first half performance,
with year on year improvements across our key financial metrics.
The fundamentals of the market remain robust, with strong demand
supported by good mortgage availability and Help to Buy. Government
policy remains supportive and we welcome the recent publication of
the housing white paper, which will allow a full debate on
addressing the country's housing needs.
Profit before tax increased by 8.8% to GBP321.0m (2015:
GBP295.0m) for the period, gross margin improved by 2.1 percentage
points to 20.7% and operating margin improved by 1.7 percentage
points to 17.8%. ROCE to 31 December 2016 increased by 1.5
percentage points to 27.0% benefiting from further reductions in
legacy assets coupled with the business continuing to drive our
fast build and sell model.
Completions (including JV's) outside of London are at the
highest level for nine years at 6,813 (2015: 6,784). Total
completions (including JV's) for the period were 7,180 (2015:
7,626). Our regional sales performance has been very strong
particularly in Scotland, the North of England, the North West and
the West Midlands. Completions in London were lower at 367 (2015:
842) in line with the Group's planned build programme. The Group
expects a significant increase in completions on wholly owned sites
in London in the second half.
In London, for homes with higher selling price points, we have
supplemented our private sales with other sales agreements: a build
and sale agreement on a bespoke development of 39 apartments for a
total value of GBP47m, completion of a 54 apartment sale at our JV
sites in Fulham and Aldgate and in January we exchanged on a build
and sale agreement for 118 apartments at our Nine Elms JV site.
We continue to drive efficiencies across all key aspects of our
business and improving our operating margin is a key priority for
the Group.
Our focus remains on delivering high quality homes alongside
good operational and financial performance and attractive
shareholder returns.
Capital Return Plan
The Board recognises an ongoing dividend stream as an important
component of total shareholder return, alongside capital
appreciation. Given the significant operational and financial
improvements the Group has made over the last few years, the Board
believes it is now appropriate that the Group returns a higher
proportion of earnings through its ordinary dividend. Therefore,
going forward the Board proposes to re-set the level of ordinary
dividend cover from 3 times to 2.5 times.
When market conditions allow, ordinary dividends will be
supplemented with the payment of special dividends. The Board
proposes to pay special dividends of GBP175m in November 2017 and
November 2018.
For the four years to November 2018 total dividend payments are
expected to be around GBP1.4bn based on current analyst
estimates.
Capital Return Ordinary Special dividend Total Total
Plan(A) dividend GBPm GBPm pence
GBPm per share
------------------ ---------- ----------------- -------- -----------
Year to November
2015 150.6 100.0 250.6 25.1
------------------ ---------- ----------------- -------- -----------
Year to November
2016 183.7 124.7 308.4 30.7
------------------ ---------- ----------------- -------- -----------
Year to November 220.5 (B,
2017 C) 175.0 395.5 39.3(C)
------------------ ---------- ----------------- -------- -----------
Year to November 227.5 (B,
2018 C) 175.0 402.5 40.0(C)
------------------ ---------- ----------------- -------- -----------
Total 782.3 574.7 1,357.0 135.1
------------------ ---------- ----------------- -------- -----------
A. All future ordinary and special dividends are subject to shareholder approval
B. Based on Reuters consensus estimates of earnings per share of
54.7p for FY17 and 56.4p for FY18 as at 17 February 2017 and
applying a two and a half times dividend cover in line with the
announced policy
C. Based upon 31 December 2016 share capital of 1,006,940,985 shares for proposed payments
In accordance with the new policy, the Board is pleased to
announce an interim dividend of 7.3 pence per share (2016: 6.0
pence per share). This dividend represents one-third of the
expected ordinary dividend for the financial year, based on the
full year dividend being covered 2.5 times by current consensus
earnings.
The interim dividend will be paid on Friday 19 May 2017 to all
shareholders on the register on Friday 21 April 2017.
Committed to building more high quality homes
As the demand for housing remains strong, we have continued our
disciplined investment to increase housing production, with
GBP5.0bn approved for the purchase of over 94,000 plots of land
over the last five years.
Additionally, over the last five years we have built more than
77,100 homes (including JV's) of which more than 13,800 were
affordable homes (including JV's) sold to registered providers. We
have invested in our employees, including 152 new apprentices,
trainees, graduates and undergraduates in the period to further
expand our skilled workforce, securing future delivery of supply of
high quality homes.
Barratt's commitment to quality through excellence in design,
build and industry-leading customer service allows us to
differentiate ourselves from our competition. This commitment makes
us the only national housebuilder with a HBF 5 Star Customer
Satisfaction rating - awarded for the 7th consecutive year. The
next largest housebuilder with a 5 Star rating builds fewer than
3,000 homes a year.
Last year we won more NHBC Pride in the Job Awards for site
management than any other housebuilder for the 12th year in a row.
We have also won more Building for Life Awards for excellence in
design than any other housebuilder.
There remains a long term housing shortage of all tenures that
can be addressed through additional supply in the right locations.
We are committed to playing a leading role in addressing this
issue.
Our financial results
The Group has delivered a strong first half performance
supported by healthy market conditions driving robust consumer
demand.
Overall our net private reservation rate was 0.68 (2015: 0.66)
per active outlet per week in the half year period.
During the period, we operated from an average of 374 outlets
(including JV's) (2015: 386). We have made good progress on new
site openings, launching 83 new developments (including JV's)
(2015: 63) in the half year. We expect to see average outlet
numbers remain broadly flat for the full year when compared against
the prior year.
Total completions (including JV's) were 7,180 units (2015:
7,626).
Completions 2016 2015 Variance
(plots)
------------- ------ ------ ---------
Private 5,561 5,993 (7.2%)
------------- ------ ------ ---------
Affordable 1,221 1,114 9.6%
------------- ------ ------ ---------
JV 398 519 (23.3%)
------------- ------ ------ ---------
Total 7,180 7,626 (5.8%)
------------- ------ ------ ---------
Total average selling price ('ASP') increased by 3.8% in the
period to GBP263,800 (2015: GBP254,200). Private ASP increased by
5.4% in the period to GBP296,400 (2015: GBP281,100) benefiting from
changes in mix as well as some underlying house price
inflation.
Affordable housing ASP similarly increased in the period by 5.6%
to GBP115,300 (2015: GBP109,200).
Our gross margin was 20.7%, up 2.1 percentage points in the
period reflecting, amongst other things, new sites coming through
at higher margins, mix changes and some underlying inflation. We
delivered a gross profit of GBP375.2m (2015: GBP348.4m) in the half
year.
Operating profit increased by GBP22.2m to GBP324.0m (2015:
GBP301.8m). Operating margin was up by 1.7 percentage points to
17.8% (2015: 16.1%), reflecting our increased gross margin, offset
by reduced levels of other income.
Net finance charges were broadly in line with the prior year at
GBP29.4m (2015: GBP29.8m). We expect FY17[6] net finance cost to be
around GBP65m, comprising GBP25m of cash and GBP40m of
non-cash.
In the half year, the Group's share of JV profit was GBP26.3m
(2015: GBP22.9m). We continue to expect to deliver JV profit of
around GBP45m for FY17. Profit before tax increased by 8.8% to
GBP321.0m (2015: GBP295.0m) and the Group recognised GBP61.4m of
tax charges at an effective rate of 19.1% (2015: 19.0%). Basic
earnings per share increased by 8.4% to 25.9 pence per share (2015:
23.9 pence per share).
Delivery of our strategic objectives
Our strategic objectives remain clear - maintain disciplined
growth, deliver on our targets for key financial metrics (minimum
ROCE of 25% and gross margin of 20% by the end of FY17) and
continue to deliver attractive cash returns. We have made good
progress against these objectives during the half year and remain
focused to deliver in the second half.
Land and planning
The land market remains attractive from an investment
perspective and we continue to secure excellent opportunities that
meet or exceed our minimum hurdle rates of 20% gross margin and 25%
site ROCE[7]. In the period we approved the purchase of GBP328.2m
(2015: GBP558.7m) of land, equating to 39 sites (2015: 54 sites)
and 5,262 plots (2015: 10,967 plots). Whilst this is lower than
historical levels for the period, it reflects our caution
immediately following the EU referendum. However, we continue to
expect to approve c. 15,000 plots for purchase in FY17 as a whole
and remain on track to achieve our targeted land bank of at least
4.5 years owned and controlled land by the year end.
The Group continues to maintain a balanced capital structure
with land and long term work in progress funded by shareholders'
funds and land creditors. Land creditors as at 31 December 2016
represented 34% (2015: 36%) of our owned land bank. We continue to
secure attractive deferred payment terms on land and expect land
creditors as a proportion of the owned land bank to be between 30%
and 35% in the medium term.
We continue to target a regionally balanced land portfolio with
a supply of owned land of at least 3.5 years and a further 1.0 year
of controlled land. Our target is for a shorter than sector average
land bank reflecting our focus on ROCE and our fast build and sell
model. As at 31 December 2016 we achieved a 4.9 years land supply
(excluding JV's) including 3.4 years owned land with both outline
and detailed planning consents.
Our land bank 31 December 31 December
2016 2015
---------------------------- ---------------- ----------------
Owned and unconditional
land bank (plots) 52,976 52,007
---------------------------- ---------------- ----------------
Conditionally contracted
land bank (plots) 24,120 19,949
---------------------------- ---------------- ----------------
Total owned and controlled
land bank (plots) 77,096 71,956
---------------------------- ---------------- ----------------
Number of years' supply[8] 4.9 4.5
---------------------------- ---------------- ----------------
JV's owned and controlled
land bank (plots) 4,911 6,124
---------------------------- ---------------- ----------------
Strategic land (acres) 11,400 11,500
---------------------------- ---------------- ----------------
Land bank carrying value GBP2,801.3m GBP2,860.1m
---------------------------- ---------------- ----------------
The transformation of our land bank from lower margin land
acquired pre 2009 to more recently acquired higher margin land is
well progressed. As at 31 December 2016, 94% (2015: 92%) of our
owned and controlled land is land acquired post 2009. On the 269
sites that we have acquired and completed since 2009 we have
achieved an average gross margin of c. 21%, and an average site
ROCE of c. 36%, demonstrating sustained delivery above our hurdle
rates on this more recently acquired land. We continue to reduce
the absolute value of our lower margin legacy assets. The total
book value is down 42% to GBP315.8m as at 31 December 2016 (2015:
GBP544.4m).
We remain well positioned to benefit from Government's
continuing drive to release public land with our strong track
record in partnering and JV's with the public sector, as well as
our leading design and sustainability credentials. We are a member
of the Homes and Communities Agency Delivery Partner Panel 2 (on
all four regions) and the Greater London Authority London
Development Panel.
Whilst maintaining a first class operational land bank, we
remain focused on securing a longer term land pipeline through the
acquisition of strategic land options. In the period ended 31
December 2016, 1,407 plots (2015: 1,542 plots) were transferred
from strategic land to our owned land bank. During the half year
period 24% of our completions (2015: 22%) were on strategically
sourced land, and we expect around 24% of completions to be
delivered from strategic land in FY17.
Reflecting our success with planning over the past 12 months we
are very well positioned, with 97% of expected FY18 completions
(2015: 97% of FY17 completions) having outline or full planning
consent.
Improving operating margin
In 2016 the Group undertook a fundamental review of our Barratt
and David Wilson housing ranges. The outcome was a reduction in the
number of houses in the range which will increase standardisation,
simplify construction and reduce build costs whilst maintaining our
high standards of design and quality.
We have a carefully managed supply chain which has proved to be
very resilient. We have effectively sourced the materials required
to underpin our controlled volume growth and the cost of all of our
centrally procured materials is now fixed until the end of FY17
with more than 40% fixed for FY18.
On labour, we continue to see some pressure on skilled labour
supply with shortages remaining location and trade specific.
However, whilst labour costs are still rising, the rate of increase
is moderating.
We are also seeking to increase construction efficiency and
reduce demand on labour through the use of alternative build
options such as timber frames, large format block and light gauge
steel frames.
We expect that overall build cost inflation for FY17 will be c.
2-3% and in FY18 we expect this to be c. 3-4%.
Maintaining appropriate financial structure
Net cash as at 31 December 2016 was GBP196.7m (2015: GBP24.2m).
The cash outflow from our net cash position of GBP592.0m as at 30
June 2016 reflects normal seasonal trends, investment in land and
work in progress to deliver the Group's build programme and the
payment of GBP248.3m of dividends in November.
The Group continues to maintain an appropriate financial
structure with shareholders' funds and land creditors funding the
longer term requirements of the business and with term loans and
bank debt funding shorter term requirements for working capital. In
December we further strengthened working capital capacity by
amending and extending our existing revolving credit facility,
removing the GBP150m stepdown in facility size previously due in
December 2017 and extending our GBP700m facility to December
2021.
We expect to operate an annual average net debt in the range of
GBP150m to GBP200m and expect a net cash position at each financial
year end. We anticipate net cash in the range of GBP350m to GBP400m
as at 30 June 2017.
Our Strategic Priorities
Within our business we remain focused on our strategic
priorities. Each of these priorities has a work plan to drive
improvements across the business and they support a set of
principles which underpin all of our operations.
Health and safety
Health and safety continues to be a non-negotiable number one
priority for the Group and 'Keeping people safe' is a core business
principle. We are driving our 'Five Steps to Safety' initiative,
which is aimed at improving engagement with our workforce and
challenging unsafe attitudes and behaviours. Skill shortages and
volume demands continue to put pressure on our performance in this
area but we continue to strive for improved standards and the
prevention of injury and ill health. In the 12 months to 31
December 2016 our reportable injury incidence rate was 369 (2015:
331), for FY16 the rate was 385 per 100,000 workers.
Customer first
We place customers at the heart of everything we do with their
satisfaction being a key performance indicator at all levels of
management.
We are the only major national housebuilder to be awarded a HBF
5 Star status rating for seven consecutive years, with over 90% of
customers being prepared to recommend us to their friends and
family.
We are continuing to improve the quality and efficiency of the
ways in which we support customers through the sales process.
During the half year period we have launched a range of
construction and customer service initiatives to further improve
the high quality of our homes. We have also developed a joint
training course with the NHBC and delivered this to all Customer
Care employees to increase their knowledge and capability.
We have invested in a significant piece of research to better
understand customer expectations and needs throughout the customer
journey and this insight is now being used to refine our policies
and procedures and also to inform the development of our digital
capability.
Great places
A key focus of the business continues to be securing the right
land in the right place to enable the building of outstanding
places to live. Our success in buying land is based on the
extensive local knowledge or our land teams and the building of
strong relationships with landowners combined with detailed
assessments of local market conditions.
During the period we continued to make progress in terms of
securing the right operational land, successfully delivering
completions from public sector land, and increased investment in
longer term strategic sites.
We continue to focus upon design and all of our developments are
reviewed against our 'Great places' design standard at the
pre-application stage. 'Great places' enables us to meet Building
For Life 12, the industry standard for the design of new housing
developments.
Leading construction
We put customer satisfaction at the heart of our construction
processes with a focus upon getting it right first time which also
drives operating efficiencies in our build process and reduces
remedial costs.
Our site managers continue to lead the industry. In 2016, 80
NHBC Pride in the Job awards were won on our sites. This was the
12th year in succession that our site managers and the Group have
won more of these awards than any other housebuilder.
We are implementing a number of key initiatives in terms of
improving efficiency. In addition to building around 1,300 homes
during FY17 using timber frames we have completed trials of light
gauge steel frames and large format block which give the business
additional options with similar benefits as timber frame ensuring
we are future proofing our business. We continue to trial various
offsite technologies and innovative products and we are investing
in research into smart technologies.
Investing in our people
We are committed to the development of our people in order to
drive our success. A shortage of skilled workers means that
attracting and retaining the best people is an important priority
for the business. We aim to have 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.
We are committed to investing in the future and continue to
develop our 'Future Talent' strategy, recruiting graduates,
apprentices and paid interns into our business.
We also continue to support the wider industry focus on
addressing the skills shortage with the HBF, the Construction
Industry Training Board and many schools and universities.
Board changes
Mark Rolfe, after more than eight years of distinguished
service, stepped down from the Board on 15 November 2016. Jock
Lennox, who joined the Board on 1 July 2016, took over as Chair of
the Audit Committee and Richard Akers, who joined the Board on 2
April 2012, took over as Senior Independent Director.
As announced on 19 January 2017, Neil Cooper, Chief Financial
Officer, left the Group by mutual agreement, effective immediately.
The Board have launched a search for a new Chief Financial Officer
and a further announcement will be made in due course. David
Thomas, who previously held the role of Barratt CFO for six years
until July 2015, has reassumed temporary responsibility for the
finance function supported by both Philip Schumacher and John
Flynn, the Group Financial Controller and Housebuilding Financial
Controller respectively. Deputy CEO and Chief Operating Officer,
Steven Boyes, will continue to support David with his ongoing
executive responsibilities.
The Nomination Committee, as part of its annual review of
committee memberships, assessed the composition of Nomination
Committees within the FTSE 100. In the majority the Chief Executive
was not a member of the Committee and consequently David Thomas,
Chief Executive, agreed to step down as a member of the Nomination
Committee effective from 21 February 2017. Going forward, the
Nomination Committee will comprise of the Chairman and each of the
Non-Executive Directors.
Current trading and outlook
The sales performance across the Group in the second half to
date has been strong, with net private reservations per average
week of 290 (2016: 280), resulting in average net private
reservations per active outlet per average week of 0.77 (2016:
0.76).
Our total forward sales (including JV's) as at 19 February 2017
were up 17.0% on the strong prior year at a record GBP3,018.2m.
19 February 2017 21 February 2016 Variance
(GBPm)
------------ ------------------- ------------------- ---------
GBPm Plots GBPm Plots %
------------ ---------- ------- ---------- ------- ---------
Private 1,945.8 5,579 1,564.1 5,169 24.4
------------ ---------- ------- ---------- ------- ---------
Affordable 769.8 6,187 523.4 4,448 47.1
------------ ---------- ------- ---------- ------- ---------
Wholly
owned 2,715.6 11,766 2,087.5 9,617 30.1
------------ ---------- ------- ---------- ------- ---------
JV 302.6 965 492.0 1,369 (38.5)
------------ ---------- ------- ---------- ------- ---------
Total 3,018.2 12,731 2,579.5 10,986 17.0
------------ ---------- ------- ---------- ------- ---------
The Group is confident it will deliver on its full year volume
guidance. We expect to achieve modest volume growth in wholly owned
completions and deliver c. 700 JV completions in FY17, helped by a
strong delivery in London in the second half.
We are also on track to achieve our target ROCE of 25%, and
remain focused on the delivery of a 20% gross margin for FY17,
notwithstanding that the high-end London market presents some
headwinds in this regard.
We remain confident in our outlook for the full year as we
continue to execute our strategies aimed at ensuring disciplined
growth, improving key financial metrics through a focus on
efficiency and the continued delivery of attractive cash
returns.
Note on forward looking statements
The Half Year results contain certain forward-looking statements
about the future outlook for the Group. Although the Directors
believe that these statements are based on reasonable assumptions,
any such statements should be treated with caution as the future
outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
This announcement contains inside information.
David Thomas
Chief Executive
21 February 2017
Principal risks and uncertainties
The Group's financial and operational performance and reputation
is subject to a number of potential risks and uncertainties, which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Directors do not consider that 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 2016.
Economic environment, including housing demand and mortgage
availability
Changes in the UK and European macroeconomic environments,
including but not limited to unemployment, flat or negative
economic growth, buyer confidence, availability of mortgage finance
particularly for higher loan to values including government backed
schemes, interest rates, competitor pricing, falls in house prices
or land values, may lead to a fall in the demand or price achieved
for houses, which in turn could result in impairments of the
Group's inventories, goodwill and intangible assets.
Land purchasing
The ability to secure sufficient consented land and strategic
land options at appropriate cost and quality to provide profitable
growth.
Liquidity
Unavailability of sufficient borrowing facilities to enable the
servicing of liabilities (including pension funding) and the
inability to refinance facilities as they fall due, obtain surety
bonds, or comply with borrowing covenants. Furthermore, there are
risks from management of working capital such as conditional
contracts, build costs, joint ventures and the cash flows related
to them.
Attracting and retaining high calibre employees
Inability to recruit and/or retain employees with appropriate
skill sets or sufficient numbers of such employees.
Availability of raw materials, subcontractors and suppliers
Shortages or increased costs of materials and skilled labour,
the failure of a key supplier or the inability to secure supplies
upon appropriate credit terms could increase costs and delay
construction.
Government regulation and planning policy
Inability to adhere to the increasingly stringent and complex
regulatory environment, including planning and technical
requirements affecting the housing market and regulatory
requirements more generally.
Construction and new technologies
Failure to identify and achieve key construction milestones, due
to factors including the impact of adverse weather conditions, the
failure to identify cost overruns promptly, design and construction
defects, and exposure to environmental liabilities, which could
delay construction, increase costs, reduce selling prices and
result in litigation and uninsured losses. There are also risks
associated with climate change and the use of new technology in the
build process e.g. materials related to carbon reduction.
Joint ventures and consortia
Large development projects, some of which involve joint ventures
or consortia arrangements and/or commercial developments, are
complex and capital intensive and changes may negatively impact
upon cash flows or returns.
Safety, health and environmental
Health and safety or environmental breaches can result in
injuries to employees, sub-contractors and site visitors, delays in
construction or increased costs, reputational damage, criminal
prosecution and civil litigation.
Information technology ('IT')
Failure of the Group's IT systems (whether due to cyber-attacks
or other causes) in particular those relating to surveying and
valuation, could adversely impact the performance of the Group.
Further details of the Group's principal risks and mitigation of
the risks outlined above can be found on pages 41 to 45 of the
Annual Report and Accounts for the year ended 30 June 2016, which
is available at www.barrattdevelopments.co.uk.
Condensed Consolidated Income Statement
for the half year ended 31 December 2016 (unaudited)
Half year Half year
ended ended 31 Year ended
31 December December 30 June
2016 2015 2016 (audited)
Continuing operations Notes GBPm GBPm GBPm
-------------------------- ------ ------------- ---------- ----------------
Revenue 2.1 1,816.2 1,875.5 4,235.2
========================== ====== ============= ========== ================
Cost of sales (1,441.0) (1,527.1) (3,434.8)
-------------------------- ------ ------------- ---------- ----------------
Gross profit 375.2 348.4 800.4
========================== ====== ============= ========== ================
Administrative expenses (51.2) (46.6) (132.0)
-------------------------- ------ ------------- ---------- ----------------
Profit from operations 2.1 324.0 301.8 668.4
========================== ====== ============= ========== ================
Finance income 5.2 1.8 3.3 5.9
========================== ====== ============= ========== ================
Finance costs 5.2 (31.2) (33.1) (64.1)
-------------------------- ------ ------------- ---------- ----------------
Net finance costs 5.2 (29.4) (29.8) (58.2)
========================== ====== ============= ========== ================
Share of post-tax
profit from joint
ventures 26.3 22.9 71.9
========================== ====== ============= ========== ================
Share of post-tax
profit from associates 0.1 0.1 0.2
-------------------------- ------ ------------- ---------- ----------------
Profit before tax 321.0 295.0 682.3
========================== ====== ============= ========== ================
Tax 2.4 (61.4) (56.1) (132.0)
-------------------------- ------ ------------- ---------- ----------------
Profit for the period 259.6 238.9 550.3
-------------------------- ------ ------------- ---------- ----------------
Profit for the period
attributable to
the owners of the
Company 259.7 238.6 550.3
-------------------------- ------ ------------- ---------- ----------------
(Loss)/profit for
the period attributable
to non-controlling
interests (0.1) 0.3 -
-------------------------- ------ ------------- ---------- ----------------
Earnings per share
from continuing
operations
========================== ====== ============= ========== ================
Basic 2.2 25.9p 23.9p 55.1p
-------------------------- ------ ------------- ---------- ----------------
Diluted 2.2 25.6p 23.6p 54.3p
-------------------------- ------ ------------- ---------- ----------------
The notes in sections 1 to 6 form an integral part of the
condensed consolidated half yearly financial statements.
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 31 December 2016 (unaudited)
Half year Year
ended ended
Half year 31 December 30 June
ended 2015 2016
31 December
2016 (audited)
Notes GBPm GBPm GBPm
--------------------------------------- ------ -------------- ------------- -----------
Profit for the period 259.6 238.9 550.3
--------------------------------------- ------ -------------- ------------- -----------
Other comprehensive (expense)/income:
======================================= ====== ============== ============= ===========
Items that will not be reclassified
to profit or loss
======================================= ====== ============== ============= ===========
Actuarial (loss)/gain on
defined benefit pension scheme (23.3) 7.5 (9.0)
======================================= ====== ============== ============= ===========
Fair value adjustment on
available for sale financial
assets - 0.5 0.5
======================================= ====== ============== ============= ===========
Tax credit/(charge) relating
to items not reclassified 4.2 (1.6) 1.7
--------------------------------------- ------ -------------- ------------- -----------
Total items that will not
be reclassified to profit
or loss (19.1) 6.4 (6.8)
--------------------------------------- ------ -------------- ------------- -----------
Items that may be reclassified
subsequently to profit or
loss
======================================= ====== ============== ============= ===========
Amounts deferred in respect
of effective cash flow hedges 5.5 2.3 6.3
======================================= ====== ============== ============= ===========
Amounts reclassified to the
Income Statement in respect
of hedged cash flows 5.2 (1.5) 0.2 (1.1)
======================================= ====== ============== ============= ===========
Tax charge relating to items
that may be reclassified (0.9) (0.7) (1.2)
--------------------------------------- ------ -------------- ------------- -----------
Total items that may be reclassified
subsequently to profit or
loss 3.1 1.8 4.0
--------------------------------------- ------ -------------- ------------- -----------
Total comprehensive income
recognised for the period 243.6 247.1 547.5
--------------------------------------- ------ -------------- ------------- -----------
Total comprehensive income
recognised for the period
attributable to the owners
of the Company 243.7 246.8 547.5
--------------------------------------- ------ -------------- ------------- -----------
Total comprehensive (expense)/income
recognised for the period
attributable to non-controlling
interests (0.1) 0.3 -
--------------------------------------- ------ -------------- ------------- -----------
The notes in sections 1 to 6 form an integral part of the
condensed consolidated half yearly financial statements.
Condensed Consolidated Statement of Changes in Shareholders'
Equity
at 31 December 2016 (unaudited)
Total Non-
Share Share Merger Hedging Own Share-based Retained retained controlling Total
capital premium reserve reserve shares payments earnings earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
At 1 July
2015 (audited) 99.5 219.1 1,109.0 (13.7) (2.7) 34.0 2,257.2 2,288.5 8.9 3,711.3
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
Profit for
the period - - - - - - 238.6 238.6 0.3 238.9
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Amounts deferred
in respect
of effective
cash flow
hedges - - - 2.3 - - - - - 2.3
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Amounts
reclassified
to the Income
Statement
in respect
of hedged
cash flows - - - 0.2 - - - - - 0.2
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Fair value
adjustments
on available
for sale
financial
assets - - - - - - 0.5 0.5 - 0.5
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Actuarial
gains on pension
scheme - - - - - - 7.5 7.5 - 7.5
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Tax on items
above taken
directly to
equity - - - (0.7) - - (1.6) (1.6) - (2.3)
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
Total
comprehensive
income
recognised
for the period
ended 31
December
2015 - - - 1.8 - - 245.0 245.0 0.3 247.1
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Dividend payments - - - - - - (203.1) (203.1) - (203.1)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Issue of shares 0.7 1.0 - - - - (0.6) (0.6) - 1.1
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Share-based
payments - - - - - 6.2 - 6.2 - 6.2
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Net purchase
of own shares - - - - (0.9) - - (0.9) - (0.9)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Transfer of
share-based
payments charge
for
exercised/lapsed
options - - - - - (10.7) 10.7 - - -
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Tax on
share-based
payments - - - - - (4.7) 6.7 2.0 - 2.0
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
At 31 December
2015 100.2 220.1 1,109.0 (11.9) (3.6) 24.8 2,315.9 2,337.1 9.2 3,763.7
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
Profit for
the period - - - - - - 311.7 311.7 (0.3) 311.4
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Amounts deferred
in respect
of effective
cash flow
hedges - - - 4.0 - - - - - 4.0
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Amounts
reclassified
to the Income
Statement
in respect
of hedged
cash flows - - - (1.3) - - - - - (1.3)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Actuarial
losses on
pension scheme - - - - - - (16.5) (16.5) - (16.5)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Tax on items
above taken
directly to
equity - - - (0.5) - - 3.3 3.3 - 2.8
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
Total
comprehensive
income
recognised
for the period
ended 30 June
2016 - - - 2.2 - - 298.5 298.5 (0.3) 300.4
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Dividend payments - - - - - - (60.1) (60.1) - (60.1)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Issue of shares 0.2 2.6 - - - - - - - 2.8
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Share-based
payments - - - - - 6.6 - 6.6 - 6.6
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Disposal of
own shares - - - - 0.1 - - 0.1 - 0.1
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Transfer of
share-based
payments charge
for
exercised/lapsed
options - - - - - (0.1) 0.1 - - -
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Tax on
share-based
payments - - - - - (3.8) 0.5 (3.3) - (3.3)
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
At 30 June
2016 (audited) 100.4 222.7 1,109.0 (9.7) (3.5) 27.5 2,554.9 2,578.9 8.9 4,010.2
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
Profit for
the period - - - - - - 259.7 259.7 (0.1) 259.6
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Amounts deferred
in respect
of effective
cash flow
hedges - - - 5.5 - - - - - 5.5
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Amounts
reclassified
to the Income
Statement
in respect
of hedged
cash flows - - - (1.5) - - - - - (1.5)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Actuarial
losses on
pension scheme - - - - - - (23.3) (23.3) - (23.3)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Tax on items
above taken
directly to
equity - - - (0.9) - - 4.2 4.2 - 3.3
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
Total
comprehensive
income
recognised
for the period
ended 31
December
2016 - - - 3.1 - - 240.6 240.6 (0.1) 243.6
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Dividend payments - - - - - - (248.3) (248.3) - (248.3)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Issue of shares 0.3 0.9 - - - - - - - 1.2
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Share-based
payments - - - - - 6.1 - 6.1 - 6.1
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Purchase of
own shares - - - - (3.6) - - (3.6) - (3.6)
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Transfers
in respect
of
exercised/lapsed
options - - - - 5.1 (13.9) 8.8 - - -
================== ======== ======== ======== ======== ======= ============ ========= ========= ============ ========
Tax on
share-based
payments - - - - - 1.1 - 1.1 - 1.1
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
At 31 December
2016 100.7 223.6 1,109.0 (6.6) (2.0) 20.8 2,556.0 2,574.8 8.8 4,010.3
------------------ -------- -------- -------- -------- ------- ------------ --------- --------- ------------ --------
The notes in sections 1 to 6 form an integral part of the
condensed consolidated half yearly financial statements.
Condensed Consolidated Balance Sheet
at 31 December 2016 (unaudited)
31 December 2016 31 December 2015 30 June 2016 (audited)
GBPm
Notes GBPm GBPm
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Assets
=============================================== ====== ================= ================= =======================
Non-current assets
=============================================== ====== ================= ================= =======================
Other intangible assets 100.0 100.0 100.0
=============================================== ====== ================= ================= =======================
Goodwill 792.2 792.2 792.2
=============================================== ====== ================= ================= =======================
Property, plant and equipment 9.5 10.0 9.6
=============================================== ====== ================= ================= =======================
Investments in joint ventures and associates 254.6 223.3 255.9
=============================================== ====== ================= ================= =======================
Retirement benefit assets - 19.6 8.1
=============================================== ====== ================= ================= =======================
Available for sale financial assets 3.7 3.0 3.8
=============================================== ====== ================= ================= =======================
Trade and other receivables 2.3 2.4 1.6
=============================================== ====== ================= ================= =======================
Derivative financial instruments - swaps 5.1 - 5.5 11.8
----------------------------------------------- ------ ----------------- ----------------- -----------------------
1,162.3 1,156.0 1,183.0
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Current assets
=============================================== ====== ================= ================= =======================
Inventories 3.1 4,539.4 4,355.0 4,326.6
=============================================== ====== ================= ================= =======================
Available for sale financial assets 0.6 89.3 0.8
=============================================== ====== ================= ================= =======================
Trade and other receivables 94.7 95.2 149.6
=============================================== ====== ================= ================= =======================
Cash and cash equivalents 5.1 361.7 195.6 758.0
=============================================== ====== ================= ================= =======================
Derivative financial instruments - swaps 5.1 16.9 - -
----------------------------------------------- ------ ----------------- ----------------- -----------------------
5,013.3 4,735.1 5,235.0
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Total assets 6,175.6 5,891.1 6,418.0
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Liabilities
=============================================== ====== ================= ================= =======================
Non-current liabilities
=============================================== ====== ================= ================= =======================
Loans and borrowings 5.1 (110.6) (170.0) (171.5)
=============================================== ====== ================= ================= =======================
Trade and other payables (563.9) (634.7) (629.9)
=============================================== ====== ================= ================= =======================
Retirement benefit obligations (10.2) - -
=============================================== ====== ================= ================= =======================
Deferred tax liabilities (6.2) (6.6) (10.5)
=============================================== ====== ================= ================= =======================
Derivative financial instruments - swaps 5.1 (6.5) (14.3) (7.5)
----------------------------------------------- ------ ----------------- ----------------- -----------------------
(697.4) (825.6) (819.4)
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Current liabilities
=============================================== ====== ================= ================= =======================
Loans and borrowings 5.1 (70.8) (7.4) (6.0)
=============================================== ====== ================= ================= =======================
Trade and other payables (1,331.9) (1,241.2) (1,513.5)
=============================================== ====== ================= ================= =======================
Derivative financial instruments - swaps 5.1 (2.5) - (5.6)
=============================================== ====== ================= ================= =======================
Current tax liabilities (62.7) (53.2) (63.3)
----------------------------------------------- ------ ----------------- ----------------- -----------------------
(1,467.9) (1,301.8) (1,588.4)
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Total liabilities (2,165.3) (2,127.4) (2,407.8)
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Net assets 4,010.3 3,763.7 4,010.2
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Equity
=============================================== ====== ================= ================= =======================
Share capital 5.4 100.7 100.2 100.4
=============================================== ====== ================= ================= =======================
Share premium 223.6 220.1 222.7
=============================================== ====== ================= ================= =======================
Merger reserve 1,109.0 1,109.0 1,109.0
=============================================== ====== ================= ================= =======================
Hedging reserve (6.6) (11.9) (9.7)
=============================================== ====== ================= ================= =======================
Retained earnings 2,574.8 2,337.1 2,578.9
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Equity attributable to the owners of the
Company 4,001.5 3,754.5 4,001.3
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Non-controlling interests 8.8 9.2 8.9
----------------------------------------------- ------ ----------------- ----------------- -----------------------
Total equity 4,010.3 3,763.7 4,010.2
----------------------------------------------- ------ ----------------- ----------------- -----------------------
The notes in sections 1 to 6 form an integral part of the
condensed consolidated half yearly financial statements.
Condensed Consolidated Cash Flow Statement
for the half year ended 31 December 2016 (unaudited)
Year ended
Half year
ended 30 June
Half year
ended
31 December 31 December
2016 2015 2016
(audited)
Notes GBPm GBPm GBPm
------------------------------- ------ ------------- ------------- -----------
Profit from operations 324.0 301.8 668.4
------------------------------- ------ ------------- ------------- -----------
Depreciation 2.0 1.8 4.5
=============================== ====== ============= ============= ===========
Loss on disposal of fixed
assets - - 0.2
=============================== ====== ============= ============= ===========
Impairment of inventories 5.6 0.9 8.6
=============================== ====== ============= ============= ===========
(Profit on redemption)/net
impairment of available
for sale financial assets (1.3) 3.0 2.1
=============================== ====== ============= ============= ===========
Share-based payments charge 6.1 6.2 12.8
=============================== ====== ============= ============= ===========
Imputed interest on deferred
term payables* 5.2 (16.5) (18.7) (34.5)
=============================== ====== ============= ============= ===========
Imputed interest on available
for sale financial assets
and interest free loans* 5.2 - 1.8 2.9
=============================== ====== ============= ============= ===========
Amortisation of facility
fees 5.2 (1.5) (1.5) (2.9)
=============================== ====== ============= ============= ===========
Finance income related
to employee benefits 5.2 0.2 0.2 0.4
------------------------------- ------ ------------- ------------- -----------
Total non-cash items (5.4) (6.3) (5.9)
------------------------------- ------ ------------- ------------- -----------
Increase in inventories (218.4) (182.3) (161.6)
=============================== ====== ============= ============= ===========
Decrease/(increase) in
trade and other receivables 49.2 58.2 (0.9)
=============================== ====== ============= ============= ===========
(Decrease)/increase in
trade and other payables (247.4) (83.2) 188.5
=============================== ====== ============= ============= ===========
Decrease in available
for sale financial assets 1.6 12.2 100.8
------------------------------- ------ ------------- ------------- -----------
Total movements in working
capital (415.0) (195.1) 126.8
------------------------------- ------ ------------- ------------- -----------
Interest paid (13.7) (10.0) (26.8)
=============================== ====== ============= ============= ===========
Tax paid (61.9) (47.2) (109.6)
------------------------------- ------ ------------- ------------- -----------
Net cash (outflow)/inflow
from operating activities (172.0) 43.2 652.9
------------------------------- ------ ------------- ------------- -----------
Investing activities:
Purchase of property,
plant and equipment (1.9) (3.6) (6.1)
=============================== ====== ============= ============= ===========
Increase in investments
accounted for using the
equity method (5.8) (18.6) (11.9)
=============================== ====== ============= ============= ===========
Dividends received from
investments accounted
for using the equity method 33.5 18.3 28.1
=============================== ====== ============= ============= ===========
Interest received 1.6 1.3 2.6
=============================== ====== ============= ============= ===========
Net cash inflow/(outflow)
from investing activities 27.4 (2.6) 12.7
------------------------------- ------ ------------- ------------- -----------
Financing activities:
Dividends paid 2.3 (248.3) (203.1) (263.2)
=============================== ====== ============= ============= ===========
Purchase of own shares (3.6) (0.9) (0.8)
=============================== ====== ============= ============= ===========
Proceeds from issue of
share capital 1.2 1.1 3.9
=============================== ====== ============= ============= ===========
Loan repayments (1.0) (2.5) (7.9)
------------------------------- ------ ------------- ------------- -----------
Net cash outflow from
financing activities (251.7) (205.4) (268.0)
------------------------------- ------ ------------- ------------- -----------
Net (decrease)/increase
in cash and cash equivalents (396.3) (164.8) 397.6
=============================== ====== ============= ============= ===========
Cash and cash equivalents
at the beginning of the
period 758.0 360.4 360.4
------------------------------- ------ ------------- ------------- -----------
Cash and cash equivalents
at the end of the period 5.1 361.7 195.6 758.0
------------------------------- ------ ------------- ------------- -----------
The notes in sections 1 to 6 form an integral part of the
condensed consolidated half yearly financial statements.
* The balance sheet movements in land, available for sale
financial assets and certain interest free loans include non-cash
movements due to imputed interest. Imputed interest is therefore
included within non-cash items in the statement above.
Notes to the Condensed Consolidated Half Yearly Financial
Statements
for the half year ended 31 December 2016 (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 financial information for the year ended 30 June 2016 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 2016, prepared under International Financial
Reporting Standards ('IFRS'), 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
condensed consolidated half yearly financial statements, the
Directors are required to consider whether the Group can continue
in operational existence for the foreseeable future.
The Group's business activities, together with factors that are
likely to affect its future development, financial performance and
financial position are set out in the Chief Executive's statement.
The material financial and operational risks and uncertainties that
impact upon the Group's performance are outlined in the principal
risks and uncertainties section of this Half Yearly Financial
Report and their relevance to the Group's strategy and mitigation
of those risks together with the financial risks including
liquidity risk, market risk, credit risk and capital risk are
outlined respectively on pages 41 to 45 and on pages 142 to 145 of
the Group's Annual Report and Accounts for the year ended 30 June
2016, which is available at www.barrattdevelopments.co.uk.
The financial performance of the Group is dependent upon the
wider economic environment in which the Group operates. As
explained in the principal risks and uncertainties, factors that
particularly impact upon the performance of the Group include
changes in the macroeconomic environment including buyer
confidence, availability of mortgage finance for the Group's
customers and interest rates. In forming their conclusion, the
Directors have considered all currently available information about
the potential future outcomes of events and changes in conditions
that are reasonably possible at the time of making this statement.
In doing this they have concluded that no material uncertainties
exist.
The Group has total committed facilities and private placement
notes of GBP848.3m. The maturity of these facilities range from
August 2017 to December 2021, with the GBP700.0m revolving credit
facility maturing in December 2021. The committed facilities and
private placement notes provide sufficient headroom above our
current forecast debt requirements. In addition to these committed
borrowing facilities the Group has secured GBP22.4m of financing
from the Government's 'Get Britain Building' and 'Growing Places
Fund' schemes. These funds are repayable between 31 March 2017 and
31 March 2018. Further committed loan facilities of GBP4.6m are
available under agreements with local government which are due to
be repaid between March 2018 and March 2020.
Accordingly, after making enquiries and having considered
forecasts and appropriate sensitivities, the Directors have formed
a judgement, at the time of approving the condensed consolidated
half yearly financial statements, that it is appropriate to adopt
the going concern basis of accounting for the foreseeable future,
being at least twelve months from the date of these condensed
consolidated half yearly financial statements. For this reason,
they continue to adopt the going concern basis in preparing the
condensed consolidated half yearly financial statements.
1.4 Accounting policies
The unaudited condensed consolidated half yearly financial
statements have been prepared using accounting policies consistent
with IFRS as adopted by the European Union ('EU') and in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the EU.
The unaudited condensed consolidated half yearly financial
statements have been prepared 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
2016.
New standards, amendments and interpretations that have been
published and are therefore mandatory for the Group's accounting
periods beginning on or after 1 July 2016 and later periods are
disclosed on page 116 of the Annual Report and Accounts for the
year ended 30 June 2016. None of the amendments and interpretations
adopted in the period have had any impact on the profit and loss
and net assets or required any additional disclosure in these
condensed consolidated half yearly financial statements.
Section 2 - Results for the year and utilisation
of profits
-------------------------------------------------
2.1 Segmental analysis
The Group consists of two separate segments for management
reporting and control purposes, being housebuilding and commercial
development. The Group presents its segmental information on the
basis of these operating segments. As the Group operates in a
single geographic market, Great Britain, no geographical
segmentation is provided.
Half year ended Half year ended Year ended 31
31 December 2016 31 December 2015 June 2016 (audited)
House- Commercial House- Commercial House- Commercial
building development Total building development Total building development Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Consolidated
Income
Statement:
Revenue 1,789.8 26.4 1,816.2 1,824.8 50.7 1,875.5 4,153.3 81.9 4,235.2
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Profit
from
operations 318.9 5.1 324.0 296.3 5.5 301.8 662.4 6.0 668.4
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Profit
from
operations
including
post-tax
profit/(loss)
from
joint
ventures
and
associates 346.1 4.3 350.4 319.5 5.3 324.8 734.8 5.7 740.5
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Finance
income 1.8 3.3 5.9
=============== ========= ============ ======== ========= ============ ======== ========= ============ ========
Finance
costs (31.2) (33.1) (64.1)
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Profit
before
tax 321.0 295.0 682.3
=============== ========= ============ ======== ========= ============ ======== ========= ============ ========
Tax (61.4) (56.1) (132.0)
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Profit
for the
period 259.6 238.9 550.3
--------------- --------- ------------ -------- --------- ------------ -------- --------- ------------ --------
Profit from operations includes GBP0.3m (31 December 2015:
GBP0.2m; 30 June 2016: GBP0.8m) relating to forfeited deposits and
GBP16.4m (31 December 2015: GBP19.8m; 30 June 2016 GBP51.6m) of
other income. Other income principally comprises management fees
receivable from joint ventures, the sale of freehold reversions,
ground rents and property management income.
30 June 2016
31 December 2016 31 December 2015 (audited)
House- Commercial House- Commercial House- Commercial
building development Total building development Total building development Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
Balance
Sheet:
Segment
assets 5,806.8 37.6 5,844.4 5,698.2 37.2 5,735.4 5,648.0 42.2 5,690.2
============== ========== ============ ========== ========== ============= ========== ========== ============ ==========
Elimination
of
intercompany
balances (30.5) (39.9) (30.2)
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
5,813.9 5,695.5 5,660.0
============== ========== ============ ========== ========== ============= ========== ========== ============ ==========
Cash and
cash
equivalents 361.7 195.6 758.0
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
Consolidated
total
assets 6,175.6 5,891.1 6,418.0
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
Segment
liabilities (1,881.4) (64.1) (1,945.5) (1,854.4) (75.7) (1,930.1) (2,114.3) (72.4) (2,186.7)
============== ========== ============ ========== ========== ============= ========== ========== ============ ==========
Elimination
of
intercompany
balances 30.5 39.9 30.2
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
(1,915.0) (1,890.2) (2,156.5)
============== ========== ============ ========== ========== ============= ========== ========== ============ ==========
Loans
and
borrowings (181.4) (177.4) (177.5)
============== ========== ============ ========== ========== ============= ========== ========== ============ ==========
Deferred
tax
liabilities (6.2) (6.6) (10.5)
============== ========== ============ ========== ========== ============= ========== ========== ============ ==========
Current
tax
liabilities (62.7) (53.2) (63.3)
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
Consolidated
total
liabilities (2,165.3) (2,127.4) (2,407.8)
-------------- ---------- ------------ ---------- ---------- ------------- ---------- ---------- ------------ ----------
2.2 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the half year attributable to ordinary shareholders of
GBP259.7m (31 December 2015: GBP238.6m; 30 June 2016: GBP550.3m) by
the weighted average number of ordinary shares in issue during the
half year, excluding those held by the Employee Benefit Trust which
were treated as cancelled, which was 1,003.0m (31 December 2015:
996.3m; 30 June 2016: 998.7m) shares.
Diluted earnings per share is calculated by dividing the profit
for the half year attributable to ordinary shareholders of
GBP259.7m (31 December 2015: GBP238.6m; 30 June 2016: GBP550.3m) 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, giving a figure of 1,015.1m (31 December
2015: 1,012.3m; 30 June 2016: 1,013.0m) shares.
The earnings per share from continuing operations were as
follows:
Half year ended Half year ended Year ended
31 December 2016 31 December 2015 30 June 2016
(audited)
pence pence pence
---------------------------- ------------------ ------------------ --------------
Basic earnings per share 25.9 23.9 55.1
---------------------------- ------------------ ------------------ --------------
Diluted earnings per share 25.6 23.6 54.3
---------------------------- ------------------ ------------------ --------------
2.3 Dividends
Half year ended
Half year ended 31 December Year ended
31 December 2016 2015 30 June 2016
(audited)
GBPm GBPm GBPm
---------------------------------------------------------------- ------------------ ---------------- --------------
Amounts recognised as distributions to equity shareholders:
================================================================ ================== ================ ==============
Final dividend for the year ended 30 June 2016 of 12.3p per 123.6
share - -
================================================================ ================== ================ ==============
Special dividend for the year ended 30 June 2016 of 12.4p per 124.7
share - -
================================================================ ================== ================ ==============
Interim dividend for the year ended 30 June 2016 of 6.0p per
share - - 60.1
================================================================ ================== ================ ==============
Final dividend for the year ended 30 June 2015 of 10.3p per
share - 103.1 103.1
================================================================ ================== ================ ==============
Special dividend for the year ended 30 June 2015 of 10.0p per
share - 100.0 100.0
---------------------------------------------------------------- ------------------ ---------------- --------------
Total dividends distributed to equity shareholders in the
period 248.3 203.1 263.2
---------------------------------------------------------------- ------------------ ---------------- --------------
Proposed interim dividend for the year ending 30 June 2017 of
7.3p per share (year ended 30
June 2016: 6.0p per share) 73.5 60.1 -
---------------------------------------------------------------- ------------------ ---------------- --------------
The interim dividend of 7.3 pence per share was approved by the
Board on 21 February 2017 and has not been included as a liability
as at 31 December 2016.
2.4 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:
Year ended
Half year ended Half year ended 30 June 2016
31 December 2016 31 December 2015 (audited)
-------------------------------------------------------------- ------------------ ------------------ --------------
Effective rate of corporation tax for the period 19.1% 19.0% 19.3%
============================================================== ================== ================== ==============
Effective rate of corporation tax for the period excluding
the impact of rate changes and
prior year adjustments 19.5% 19.7% 19.7%
-------------------------------------------------------------- ------------------ ------------------ --------------
As at 31 December 2016 the Group recognised a deferred tax
liability of GBP6.2m (31 December 2015: GBP6.6m; 30 June 2016:
GBP10.5m).
Section 3 - Working capital
----------------------------
3.1 Inventories
30 June
31 December 2016 31 December 2015 2016
(audited)
GBPm GBPm GBPm
------------------------------------------------ ----------------- ----------------- -----------
Land held for development 2,801.3 2,860.1 2,880.2
================================================ ================= ================= ===========
Construction work in progress 1,673.8 1,448.8 1,386.3
================================================ ================= ================= ===========
Part-exchange properties and other inventories 64.3 46.1 60.1
------------------------------------------------ ----------------- ----------------- -----------
4,539.4 4,355.0 4,326.6
------------------------------------------------ ----------------- ----------------- -----------
The Directors consider all inventories to be essentially current
in nature although the Group's operational cycle is such that a
proportion of inventories will not be realised within twelve
months. It is not possible to determine with accuracy when specific
inventory will be realised as this will be subject to a number of
issues such as consumer demand and the timing of achievement of
planning permissions.
During the half year, the Group conducted a review of the net
realisable value of specific sites identified as at high risk of
impairment. Due to performance variations and changes to viability
on individual sites, there were gross impairment charges of GBP6.7m
and gross impairment reversals of GBP1.1m resulting in a net
impairment charge of GBP5.6m (31 December 2015: GBP0.9m; 30 June
2016: GBP8.6m) included within profit from operations.
The value of inventories expensed in the half year ended 31
December 2016 and included in cost of sales was GBP1,351.5m (31
December 2015: GBP1,430.2m; 30 June 2016: GBP3,233.7m).
Section 4 - Business combinations and other investing
activities
------------------------------------------------------
4.1 Investments accounted for using the equity method
The Group entered into no new joint ventures during the
period.
Section 5 - Capital structure and financing
--------------------------------------------
5.1 Net cash
Drawn debt and net cash at the period end are shown below:
31 December 2016 31 December 2015
GBPm GBPm 30 June 2016 (audited) GBPm
----------------------------------------- ----------------- ----------------- ----------------------------
Cash and cash equivalents 361.7 195.6 758.0
----------------------------------------- ----------------- ----------------- ----------------------------
Drawn debt
Non-current borrowings
========================================= ================= ================= ============================
Term loans (89.4) (89.5) (90.9)
========================================= ================= ================= ============================
Government loans (21.2) (26.6) (21.0)
========================================= ================= ================= ============================
Private placement notes - (53.9) (59.6)
----------------------------------------- ----------------- ----------------- ----------------------------
Total non-current borrowings (110.6) (170.0) (171.5)
----------------------------------------- ----------------- ----------------- ----------------------------
Current borrowings
========================================= ================= ================= ============================
Bank overdrafts (0.4) (1.5) -
========================================= ================= ================= ============================
Government loans (5.8) (5.9) (6.0)
========================================= ================= ================= ============================
Private placement notes (64.6) - -
----------------------------------------- ----------------- ----------------- ----------------------------
Total current borrowings (70.8) (7.4) (6.0)
----------------------------------------- ----------------- ----------------- ----------------------------
Total borrowings being total drawn debt (181.4) (177.4) (177.5)
----------------------------------------- ----------------- ----------------- ----------------------------
Derivative financial instruments
========================================= ================= ================= ============================
Foreign exchange swaps 16.4 6.0 11.5
----------------------------------------- ----------------- ----------------- ----------------------------
Net cash 196.7 24.2 592.0
----------------------------------------- ----------------- ----------------- ----------------------------
Included within non-current borrowings are prepaid facility
arrangement fees of GBP10.8m (31 December 2015: GBP10.9m; 30 June
2016: GBP9.5m). The Group includes foreign exchange swaps within
net cash as these swaps were entered into to hedge the foreign
exchange exposure on the Group's US Dollar denominated private
placement notes. The Group's foreign exchange swaps have both an
interest rate and an exchange rate element, but only the exchange
rate element on the notional amount of the swap is included within
the net cash note.
The Group's derivative financial instruments at the period end
are shown below:
31 December 2016 31 December 2015
GBPm GBPm 30 June 2016 (audited) GBPm
----------------------------------------------- ----------------- ----------------- ----------------------------
Foreign exchange swap - exchange rate element 16.4 6.0 11.5
=============================================== ================= ================= ============================
Foreign exchange swap - interest rate element 0.5 (0.5) 0.3
----------------------------------------------- ----------------- ----------------- ----------------------------
Non-current asset - 5.5 11.8
----------------------------------------------- ----------------- ----------------- ----------------------------
Current asset 16.9 - -
----------------------------------------------- ----------------- ----------------- ----------------------------
Interest rate swaps - non-current liability (6.5) (14.3) (7.5)
----------------------------------------------- ----------------- ----------------- ----------------------------
Interest rate swaps - current liability (2.5) - (5.6)
----------------------------------------------- ----------------- ----------------- ----------------------------
Total liability (9.0) (14.3) (13.1)
----------------------------------------------- ----------------- ----------------- ----------------------------
Net derivative financial instruments 7.9 (8.8) (1.3)
----------------------------------------------- ----------------- ----------------- ----------------------------
Movement in net cash is analysed as follows:
Year
ended
30 June
Half year ended Half year ended 2016
31 December 2016 31 December 2015 (audited)
GBPm GBPm GBPm
------------------------------------------------------------ ------------------- ------------------ -----------
Net (decrease)/increase in cash and cash equivalents (396.3) (164.8) 397.6
============================================================ =================== ================== ===========
Net loan drawdown including foreign exchange loss and fees (3.9) (0.9) (1.0)
============================================================ =================== ================== ===========
Foreign exchange gain on swaps 4.9 3.4 8.9
============================================================ =================== ================== ===========
Movement in net cash in the period (395.3) (162.3) 405.5
============================================================ =================== ================== ===========
Opening net cash 592.0 186.5 186.5
------------------------------------------------------------ ------------------- ------------------ -----------
Closing net cash 196.7 24.2 592.0
------------------------------------------------------------ ------------------- ------------------ -----------
5.2 Net finance costs
Year
ended
Half year ended Half year ended 30 June
31 December 2016 31 December 2015 2016
(audited)
GBPm GBPm GBPm
--------------------------------------------------------------- ------------------- ------------------- -----------
Recognised in the Income Statement:
=============================================================== =================== =================== ===========
Finance income
=============================================================== =================== =================== ===========
Finance income on short term bank deposits (0.6) (0.2) (0.7)
=============================================================== =================== =================== ===========
Imputed interest on available for sale financial assets and
interest free loans - (1.8) (2.9)
=============================================================== =================== =================== ===========
Finance income related to employee benefits (0.2) (0.2) (0.4)
=============================================================== =================== =================== ===========
Other interest receivable (1.0) (1.1) (1.9)
--------------------------------------------------------------- ------------------- ------------------- -----------
(1.8) (3.3) (5.9)
--------------------------------------------------------------- ------------------- ------------------- -----------
Finance costs
=============================================================== =================== =================== ===========
Interest on loans and borrowings 6.4 6.8 14.1
=============================================================== =================== =================== ===========
Imputed interest on deferred term payables 16.5 18.7 34.5
=============================================================== =================== =================== ===========
Amounts reclassified to the Income Statement in respect of
hedged cash flows (1.5) 0.2 (1.1)
=============================================================== =================== =================== ===========
Foreign exchange losses on US Dollar debt 4.9 3.4 8.9
=============================================================== =================== =================== ===========
Amortisation of facility fees 1.5 1.5 2.9
=============================================================== =================== =================== ===========
Other interest payable 3.4 2.5 4.8
--------------------------------------------------------------- ------------------- ------------------- -----------
31.2 33.1 64.1
--------------------------------------------------------------- ------------------- ------------------- -----------
Net finance costs 29.4 29.8 58.2
--------------------------------------------------------------- ------------------- ------------------- -----------
The weighted average interest rates paid (excluding amortised
fees and non-utilisation fees) were as follows:
31 December 2016 31 December 2015 30 June 2016
(audited)
% % %
------------------------------------ ----------------- ----------------- -------------
Bank loans excluding swap interest N/A 2.1 2.1
==================================== ================= ================= =============
Net swap payment 5.4 5.2 5.2
==================================== ================= ================= =============
Government loans 2.0 2.2 2.2
==================================== ================= ================= =============
Term loans 4.5 4.7 4.7
==================================== ================= ================= =============
Private placement notes 8.1 8.1 8.2
------------------------------------ ----------------- ----------------- -------------
5.3 Financial instruments' fair value disclosures
The fair values of financial assets and liabilities are
determined as follows:
-- The fair value of the available for sale financial assets
portfolio has been calculated on a loan by loan basis using the
present value of the expected future cash flows of each loan. The
fair values of other non-derivative 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.
-- All of the Group's interest rate and cross currency swaps are
designated as cash flow hedges. Derivative financial instruments
are measured at the present value of future cash flows estimated
and discounted based on the applicable yield curves derived from
quoted interest rates.
The carrying values and fair values of financial assets and
liabilities are as follows:
Half year ended 31 December 2016 Half year ended 31 December 2015 Year ended 30 June 2016
(audited)
GBPm GBPm GBPm
-------------- ----------------------------------- ----------------------------------- ----------------------------
Fair value Carrying value Fair value Carrying value Fair value Carrying value
============== ============== =================== ============== =================== =========== ===============
Financial
assets
============== ============== =================== ============== =================== =========== ===============
Derivative
financial
instruments 16.9 16.9 5.5 5.5 11.8 11.8
============== ============== =================== ============== =================== =========== ===============
Cash and cash
equivalents 361.7 361.7 195.6 195.6 758.0 758.0
============== ============== =================== ============== =================== =========== ===============
Trade and
other
receivables 62.4 62.4 60.1 60.1 106.9 106.9
============== ============== =================== ============== =================== =========== ===============
Non-current
available
for sale
financial
assets 3.7 3.7 3.0 3.0 3.8 3.8
============== ============== =================== ============== =================== =========== ===============
Current
available
for sale
financial
assets 0.6 0.6 89.3 89.3 0.8 0.8
-------------- -------------- ------------------- -------------- ------------------- ----------- ---------------
Total
financial
assets 445.3 445.3 353.5 353.5 881.3 881.3
-------------- -------------- ------------------- -------------- ------------------- ----------- ---------------
Financial
liabilities
============== ============== =================== ============== =================== =========== ===============
Derivative
financial
instruments 9.0 9.0 14.3 14.3 13.1 13.1
============== ============== =================== ============== =================== =========== ===============
Bank
overdrafts 0.4 0.4 1.5 1.5 - -
============== ============== =================== ============== =================== =========== ===============
Trade and
other
payables 1,650.8 1,638.1 1,687.1 1,664.7 1,883.2 1,870.2
============== ============== =================== ============== =================== =========== ===============
Loans and
borrowings 182.1 181.4 178.8 177.4 179.0 177.5
-------------- -------------- ------------------- -------------- ------------------- ----------- ---------------
Total
financial
liabilities 1,842.3 1,828.9 1,881.7 1,857.9 2,075.3 2,060.8
-------------- -------------- ------------------- -------------- ------------------- ----------- ---------------
The following table provides an analysis of financial assets and
financial liabilities that are measured subsequent to initial
recognition at fair value, grouped into levels 1 to 3 based on the
degree to which the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
There have been no transfers between levels during the half
year.
Half year ended 31 December 2016
------------------------------------------------- ------------------------------------------------------------------
Fair value measurements at 31 December 2016 using:
Level 2 Level 3
GBPm GBPm GBPm
------------------------------------------------- ----------- -------------------------- -------------------------
Financial assets
================================================= =========== ========================== =========================
Derivative financial instruments 16.9 16.9 -
================================================= =========== ========================== =========================
Non-current available for sale financial assets 3.7 - 3.7
================================================= =========== ========================== =========================
Current available for sale financial assets 0.6 - 0.6
------------------------------------------------- ----------- -------------------------- -------------------------
21.2 16.9 4.3
------------------------------------------------- ----------- -------------------------- -------------------------
Financial liabilities
================================================= =========== ========================== =========================
Derivative financial instruments 9.0 9.0 -
------------------------------------------------- ----------- -------------------------- -------------------------
9.0 9.0 -
------------------------------------------------- ----------- -------------------------- -------------------------
5.4 Share capital
31 December 2016 31 December 2015 30 June 2016 (audited)
----------------------------------------------- ----------------- ----------------- -----------------------
Allotted and issued ordinary shares (GBPm):
=============================================== ================= ================= =======================
10p each fully paid 100.7 100.2 100.4
=============================================== ================= ================= =======================
Allotted and issued ordinary shares (number):
=============================================== ================= ================= =======================
10p each fully paid 1,006,940,985 1,002,277,333 1,003,607,066
----------------------------------------------- ----------------- ----------------- -----------------------
Year ended 30 June
Half year ended 31 December 2016 Half year ended 31 December 2015 2016
(audited)
number number number
--------------------------- --------------------------------- --------------------------------- -------------------
Options over the Company's
shares granted during the
period:
=========================== ================================= ================================= ===================
Long Term Performance Plan
("LTPP") 2,594,923 1,880,862 1,880,862
=========================== =================================
Savings-Related Share
Option Scheme
("Sharesave") - - 1,782,338
=========================== =================================
CFO Scheme - 121,880 121,880
=========================== ================================= ================================= ===================
Deferred Bonus Plan
("DBP") 520,442 305,468 305,468
--------------------------- --------------------------------- --------------------------------- -------------------
3,115,365 2,308,210 4,090,548
--------------------------- --------------------------------- --------------------------------- -------------------
Year ended 30 June
Half year ended 31 December 2016 Half year ended 31 December 2015 2016
(audited)
number number number
--------------------------- --------------------------------- --------------------------------- -------------------
Allotment of shares during
the period:
=========================== ================================= ================================= ===================
At the beginning of the
period 1,003,607,066 995,452,663 995,452,663
=========================== ================================= ================================= ===================
Issued to satisfy early
exercise under Sharesave
schemes 48,368 53,503 106,614
=========================== ================================= ================================= ===================
Issued to satisfy
exercises under matured
Sharesave schemes 406,225 693,820 1,968,683
=========================== ================================= ================================= ===================
Issued to satisfy vesting
of LTPP awards 2,126,790 4,620,159 4,620,159
=========================== ================================= ================================= ===================
Issued to satisfy
exercises under the DBP 471,535 1,457,188 1,458,947
=========================== ================================= ================================= ===================
Issued to the Employee 281,001
Benefit Trust - -
--------------------------- --------------------------------- --------------------------------- -------------------
1,006,940,985 1,002,277,333 1,003,607,066
--------------------------- --------------------------------- --------------------------------- -------------------
Employee Benefit Trust
The own shares reserve represents the cost of shares in Barratt
Developments PLC purchased in the market and held by the Barratt
Developments PLC Employee Benefit Trust (the 'EBT') on behalf of
the Company in order to satisfy options and awards that have been
granted under the Barratt Developments PLC Executive and Employee
Share Option Plans, Long Term Performance Plans and Deferred Bonus
Plans. These ordinary shares do not rank for dividend and do not
count in the calculation of the weighted average number of shares
used to calculate earnings per share until such time as they are
vested to the relevant employee.
30 June
2016
31 December 2016 31 December 2015 (audited)
----------------------------------------------------------------- ----------------- ----------------- -------------
Ordinary shares in the Company held in the EBT (number) 1,567,202 1,486,849 1,367,707
----------------------------------------------------------------- ----------------- ----------------- -------------
Market value of shares held in the EBT at 462.4p (31 December
2015: 626.0p; 30 June 2016: GBP7,246,742
405.4p) per share GBP9,307,675 GBP5,544,684
----------------------------------------------------------------- ----------------- ----------------- -------------
During the period the EBT purchased 664,653 (31 December 2015:
nil; 30 June 2016: 150,000) shares and 2,879,326 (31 December 2015:
nil; 30 June 2016: nil) shares were issued to the EBT. The EBT
disposed of 3,344,484 (31 December 2015: 373,222; 30 June 2016:
642,364) shares in settlement of exercises under the Long Term
Performance Plan, the Deferred Bonus Plan, the CFO scheme, the
Senior Management Share Option Plan 2009/10 and the Senior
Management Incentive Scheme.
Section 6 - Contingencies, related parties, seasonality
and principal risks
--------------------------------------------------------
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, which at 31 December 2016 amounted to GBP456.4m (31
December 2015: GBP601.1m; 30 June 2016: GBP482.0m), and confirm
that the possibility of cash outflow is considered minimal and no
provision is required.
As disclosed in the Group's Annual Report and Accounts for 30
June 2016 following correspondence with an industry wide final
salary pension scheme, there is a risk of an obligation arising in
respect of pension scheme funding pursuant to s75 of the Pensions
Act 1995 for employees of a subsidiary who left the Group following
disposal of its business and assets. The Directors consider that
whilst it is increasingly probable that a liability could result in
the future; at present the amount of any such provision cannot be
reliably estimated given the fundamental uncertainties underlying
any such calculation. No provision has been recognised in relation
to this matter at 31 December 2016.
The Group is currently engaging with legal and professional
advisors in its efforts to understand the position of the Trustee's
and how they might reach a reliable estimate of any potential
liability following a court determination scheduled to take place
in late Spring. The Group will then re-consider its options in
respect of any obligation arising in this matter. Therefore
disclosure on this matter is made in accordance with Note 6.1.3
below.
6.1.2 Contingent liabilities related to joint ventures and
associates
The Group has given counter-indemnities in respect of
performance bonds and financial guarantees to its joint ventures
totalling GBP66.5m (31 December 2015: GBP56.7m; 30 June 2016:
GBP56.5m). The Group has also provided principal guarantees of
GBP9.0m (31 December 2015: GBP9.0m; 30 June 2016: GBP9.0m), and
cost and interest overrun guarantees in relation to the borrowings
of a number of the Group's London joint ventures. At 31 December
2016, no cost or interest overruns had been incurred (31 December
2015: GBPnil; 30 June 2016: GBPnil). The Group's maximum exposure
under these cost and interest overrun guarantees is estimated at
GBP18.4m as at 31 December 2016.
At 31 December 2016, the Group has an obligation to repay
GBP0.9m (31 December 2015: GBP0.9m; 30 June 2016: GBP0.9m) of grant
monies received by a joint venture upon certain future disposals of
land.
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.
6.1.3 Contingent liabilities related to legal claims
Provision is made for the Directors' best estimate of all known
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 where the Directors consider, based on
that advice, that the action is 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 2016.
6.2 Related party transactions
Related party transactions for the period to 31 December 2016
are detailed below:
6.2.1 Transactions between the Group and its joint ventures
The Group has principally entered into transactions with its
joint ventures in respect of development management/other services
(with charges made based on the utilisation of these services) and
funding. These transactions totalled GBP6.2m (31 December 2015:
GBP7.2m; 30 June 2016: GBP14.3m) and GBP1.0m (31 December 2015:
GBP0.7m; 30 June 2016: GBP1.3m) respectively. 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 total amount of LLP capital, outstanding loans and interest
due to the Group from its joint ventures at 31 December 2016 was
GBP191.3m (31 December 2015: GBP189.7m; 30 June 2016: GBP185.3m).
The amounts outstanding are unsecured and will be settled in cash.
In addition loans of GBP13.3m (31 December 2015: GBP9.2m; 30 June
2016: GBP47.6m) were owed by the Group to its joint ventures.
The amount of other outstanding payables to the Group from its
joint ventures at 31 December 2016 was GBP0.1m (31 December 2015:
GBP0.9m; 30 June 2016: GBP0.4m).
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 associates
There were no outstanding loans due to the Group from its
associates at 31 December 2016 or during either comparative period.
Other amounts due to the Group from its associates amounted to
GBPnil (31 December 2015: GBPnil; 30 June 2016: GBPnil). The
Group's contingent liabilities relating to its associates are
disclosed in note 6.1.2.
6.2.3 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.
Other than as described below transactions between the Group and
key management personnel in the first half of the year ending 30
June 2017 were limited to those relating to remuneration,
previously disclosed as part of the Director's Remuneration report
within the Group's Annual Report and Accounts for 30 June 2016 and
as outlined in note 5.4 above. Options granted to senior management
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.
6.2.4 Property purchases by related parties
During the half year ended 31 December 2016, the Group entered
into the following transactions which, for the purposes of IAS 24
are considered to be 'related party transactions':
In December 2016, David Thomas, Chief Executive, exchanged and
completed on a Barratt showhome at a BDW Trading Limited site.
Details of the transaction are as included on page 99 of the
Group's Annual Report and Accounts for 30 June 2016. Payment for
the property was made in accordance with the Group's normal terms
of trading. As at 31 December 2016, there was no outstanding
balance on this transaction.
In December 2016, a connected person of David Thomas, Chief
Executive, exchanged on a David Wilson house from BDW Trading
Limited. Details of the transaction are as included on page 99 of
the Group's Annual Report and Accounts for 30 June 2016. The
property exchanged on 29 December 2016 and a balance of GBP490,500
remained outstanding which is due to be paid on legal completion,
which is now expected to be in April 2017, in accordance with the
Group's normal terms of trading.
The transactions were conducted in the ordinary course of
business at a fair and reasonable market price based on independent
market valuations and similar comparable transactions. They have
been subject to the usual level of scrutiny and review applied to
proposed purchases by other employees, and have included a review
by Internal Audit, the Company Secretary and the Group's legal
advisers.
The Company's shareholders approved the transactions at the 2016
Annual General Meeting.
There have been no 'smaller related party transactions' as
defined in Listing Rule 11.1.10R for the period ended 31 December
2016.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge these
condensed consolidated half yearly 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 during the half year
were:barr
J M Allan, Chairman
D F Thomas, Chief Executive
N Cooper, Chief Financial Officer (resigned 19 January 2017)
S J Boyes, Chief Operating Officer and Deputy Chief
Executive
M E Rolfe, Senior Independent Director (resigned 16 November
2016)
R J Akers, Senior Independent Director
T E Bamford, Non-Executive Director
N Bibby, Non-Executive Director
J F Lennox, Non-Executive Director (appointed 1 July 2016)
The Half Yearly Financial Report was approved by the Board on 21
February 2017.
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 2016 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
changes in shareholders' equity, the condensed consolidated balance
sheet, the condensed consolidated cash flow statement and related
notes 1 to 6.2. 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.
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 Auditing Practices
Board. 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.
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 and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 1.4, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this Half Yearly Financial Report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
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 Auditing Practices Board 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 Ireland) 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 2016 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
21 February 2017
[1] Includes joint venture ('JV') completions in which the Group
has an interest
[2] Gross margin is calculated as gross profit divided by
revenue
[3] Operating margin is calculated as profit from operations
divided by revenue
[4] Return on capital employed ('ROCE') is calculated as
earnings before interest, tax, operating charges relating to the
defined benefit pension scheme and operating 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
[5] Net cash / debt is defined as cash and cash equivalents,
bank overdrafts, interest bearing borrowings and foreign exchange
swaps
[6] FY is financial year ending 30 June
[7] Site ROCE on land acquisition is calculated as site
operating profit (site trading profit less sales overheads less
allocated administrative overheads) divided by average investment
in site land, work in progress and equity share
[8] Based upon completions in the 12 months ended 31
December
This information is provided by RNS
The company news service from the London Stock Exchange
END
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