TIDMBDEV
RNS Number : 1346J
Barratt Developments PLC
07 September 2016
Immediate release 7 September 2016
Barratt Developments PLC
Annual Results Announcement for the year ended 30 June 2016
Another year of strong performance and a positive start to
FY17
GBPm unless otherwise Year ended Year ended Change
stated 30 June 30 June
2016 2015
------------------------------- ----------- ----------- --------
Total completions(1)
(plots) 17,319 16,447 5.3%
------------------------------- ----------- ----------- --------
Revenue 4,235.2 3,759.5 12.7%
------------------------------- ----------- ----------- --------
Profit from operations 668.4 576.8 15.9%
------------------------------- ----------- ----------- --------
Operating margin(2) (%) 15.8 15.3 0.5ppts
------------------------------- ----------- ----------- --------
Profit before tax 682.3 565.5 20.7%
------------------------------- ----------- ----------- --------
Basic earnings per share
(pence) 55.1 45.5 21.1%
------------------------------- ----------- ----------- --------
Return on capital employed(3)
(%) 27.1 23.9 3.2ppts
------------------------------- ----------- ----------- --------
Net cash(4) 592.0 186.5 405.5
------------------------------- ----------- ----------- --------
Highlights
-- Disciplined growth in housing completions, delivering our highest total in eight years
-- Private average selling price increased by 10.4% to
GBP289,800 (2015: GBP262,500), predominantly reflecting mix
-- Strong growth in profit before tax, up by 20.7% to GBP682.3m (2015: GBP565.5m)
-- ROCE up 3.2 ppts to 27.1% (2015: 23.9%), reflecting our fast asset turn model
-- Positive cash generation resulting in strong balance sheet
and net cash at 30 June 2016 of GBP592.0m (2015: GBP186.5m)
-- Excellent future land opportunities secured with 24,387 plots
approved for purchase; controlled land supply of 4.5 years at year
end
-- Step up in the delivery of strategic land with 22% (2015:
17%) of completions from strategic land
-- 19% increase in final ordinary dividend per share to 12.3p
(2015: 10.3p) together with 12.4p special dividend per share
-- Total FY16(5) capital return of GBP308m (2015: GBP250m),
equating to 30.7 pence per share (2015: 25.1 pence per share)
Current trading
-- Positive start to the new financial year, with net private
reservations per active outlet per average week from 1 July 2016 of
0.75 (2015: 0.71)
-- Total forward sales including JV's as at 4 September 2016 up
by 4.1% compared to last year, at GBP2,416.5m (6 September 2015:
GBP2,321.9m)
Commenting on the results David Thomas, Chief Executive of
Barratt Developments PLC said:
"The strong operational and financial performance in FY16
reinforces the progress we have made over the last few years as
does our disciplined volume growth. This was underpinned by our
fast asset turn model and our industry leading customer service and
construction excellence.
Barratt starts the new financial year in a good position with a
strong balance sheet, good forward sales and an experienced
management team. Whilst we continue to monitor market conditions
closely, current trading trends are positive, and I remain
confident in the fundamentals of the housing sector and of our
business."
Certain statements in this document may be forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results to differ materially from those expressed or implied
by those statements. Forward looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. Accordingly
undue reliance should not be placed on forward looking
statements.
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 953 1287
International dial in: +44 (0) 1452 560 297
Access code: 65907695
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
Neil Cooper, Chief Financial Officer 020 7299 4862
Analyst/investor enquiries
Abi Genis/Chloe Barnes, Investor Relations 020 7299 4895
Media enquiries
Tim Collins, Head of Corporate Communications 020 7299 4874
Derek Harris, Head of PR 020 7299 4873
Brunswick
Jonathan Glass/Wendel Verbeek 020 7404 5959
Chairman's Statement
A year of strong performance
This has been another year of excellent progress for the Group,
with a strong financial and operational performance. We have grown
completion volumes in a disciplined way, significantly grown profit
and continued our delivery of industry leading build quality and
customer service.
Whilst the outcome of the EU referendum has increased levels of
economic and political uncertainty, the Group is in a strong
position, with a substantial year end net cash balance, healthy
forward sales position and an experienced management team. The
Board will continue to monitor the market and economy and take
appropriate action where necessary. The wider market for new homes
remains healthy across Britain, with a long term undersupply of new
homes, strong government support to the sector and a liquid
mortgage market.
Consequently, we remain confident in the strong fundamentals of
the housing sector and our business.
Operationally, we have delivered our highest completion volumes
for eight years, increasing completions by 5.3% to 17,319 homes, a
performance that highlights the reliability and delivery capability
of our housebuilding operations. This performance is particularly
impressive, given it accompanies our industry-leading quality and
customer service standards.
As a result of this excellent operating performance, we were
able to increase profit before tax by 20.7% and we ended the year
with a net cash balance of GBP592.0m.
The Group's fast asset turn model, supported by a relatively
short consented land bank, the use of deferred payment terms, high
levels of standard products and the ability to sell through both
Barratt and David Wilson Homes on larger sites, ensures a focus on
driving return on capital employed. We made further progress in the
year, driving return on capital employed up to 27.1%, an increase
of 3.2 percentage points.
Investing in land
The land market remained attractive throughout FY16 in terms of
land availability at acceptable prices and we have secured
excellent development opportunities that meet or exceed our minimum
hurdle rates of 20% gross margin and 25% site ROCE. In the year we
approved GBP1,095.6m of operational land for purchase, which we
expect to equate to 24,387 plots. Our long term targets for land
are to hold 3.5 years of owned and consented land and a further 1.0
year of controlled land. This strong performance helped us to end
the year with 3.4 years of owned and consented land and a further
1.1 year of controlled land: 4.5 years in total (2015: 4.5
years).
During the year we have also made good progress in securing a
longer term pipeline of land through strategic options.
Housing policy
The UK Government continues to recognise the need to see more
homes built across the country as evidenced by its policies to
improve land availability, planning and support for buyers.
By increasing the number of homes that we are building, in a
disciplined way, we are not only playing our part in reducing the
housing shortage but are also generating significant economic
activity, creating jobs and enhancing communities. During the year
we estimate that we supported over 55,000 jobs either directly,
indirectly or induced.
Delivering returns for our shareholders
Our dividend plan was announced in September 2014 and aimed to
deliver attractive future cash returns through an ordinary dividend
of one-third of earnings and a special dividend, over three years,
of GBP400m in aggregate.
As a result, the Board is pleased to propose a final dividend of
12.3 pence per share (2015: 10.3 pence per share).
Under our Capital Return Plan, special dividends are proposed in
addition to ordinary dividends with the second special dividend of
GBP125.0m to be paid in November 2016, which equates to 12.4 pence
per share.
The total proposed capital return for the year is therefore 30.7
pence per share (2015: 25.1 pence per share).
Capital returns for the Year ended Year ended
financial year 30 June 30 June
2016 2015
--------------------------- ----------- -----------
Interim ordinary dividend
per share (pence) 6.0 4.8
--------------------------- ----------- -----------
Final ordinary dividend
per share (pence) 12.3 10.3
--------------------------- ----------- -----------
Special dividend per
share (pence) 12.4 10.0
--------------------------- ----------- -----------
Total capital return
per share (pence) 30.7 25.1
--------------------------- ----------- -----------
Capital Return Ordinary Special Total Capital Total pence
Plan(A) dividend dividend Return per share
GBPm GBPm GBPm
------------------ ---------- ---------- -------------- ------------
Paid to date(B) 281 100 381 38.2p
------------------ ---------- ---------- -------------- ------------
Proposed payment
------------------ ---------- ---------- -------------- ------------
November 2016 123 (D) 125 248 24.7p (D)
------------------ ---------- ---------- -------------- ------------
Year to November 159 (C,
2017 D) 175 334 33.2p (D)
------------------ ---------- ---------- -------------- ------------
Total proposed 282 (C,
payment D) 300 582 57.9p (D)
------------------ ---------- ---------- -------------- ------------
Total Capital
Return Plan 563 400 963 96.1p (D)
------------------ ---------- ---------- -------------- ------------
(A) All ordinary and special dividends are subject to
shareholder approval. The second special dividend will be subject
to shareholder approval at the Annual General Meeting in November
2016 and subsequent special dividends will be subject to
shareholder approval.
(B) Comprises FY14 final dividend of 7.1 pence per share
(GBP70m), FY15 interim dividend of 4.8 pence per share (GBP48m),
FY15 final dividend of 10.3 pence per share (GBP103m), FY15 special
dividends of 10.0 pence per share (GBP100m) and FY16 interim
dividend of 6.0 pence per share (GBP60m).
(C) Based on Reuters consensus estimates of earnings per share
of 47.5 pence for FY17 as at 2 September 2016 and applying a three
times dividend cover in line with previously announced policy.
(D) Based upon 30 June 2016 share capital of 1,003,607,066
shares for proposed payments.
Our employees
The outstanding progress made during the year would not have
been possible without the capability and dedication of our
employees whom I would like to thank on behalf of the board for
their contribution.
We are delighted that our site managers were awarded 79 NHBC
Pride in the Job Awards. This is the twelfth year in succession
that we have secured more Pride in the Job Awards than any other
housebuilder.
We are also very pleased that we have maintained the Home
Builders Federation maximum five star rating for the seventh
consecutive year, indicating that 90% of our homeowners would
recommend us to a friend. This is a fantastic achievement and
reflects the strength of our sales and customer service teams.
The Board
During the year there have been a number of significant changes
to the Board.
David Thomas, who joined us as Group Finance Director in 2009,
succeeded Mark Clare as Chief Executive on 1 July 2015.
Neil Cooper joined the Board on 23 November 2015 as Chief
Financial Officer. Neil was previously Group Finance Director of
William Hill PLC and was Group Finance Director of Bovis Homes
Group PLC from 2007 until 2010.
After eight years' distinguished service to the Board, Mark
Rolfe will step down from his position as a Non-Executive Director
of the Company with effect from the conclusion of the forthcoming
AGM to be held in November 2016. Mark will also stand down as the
Senior Independent Director and Chairman of the Audit Committee on
the same date.
Richard Akers will replace Mark Rolfe as the Senior Independent
Director with effect from the conclusion of the Group's AGM in
November 2016. Richard has been a Non-Executive Director of the
Group since 2012 and is also Chairman of the Remuneration
Committee.
The Board appointed Jock Lennox as a Non-Executive Director of
the Company with effect from 1 July 2016. Jock also joined the
Audit, Nomination and Remuneration Committees with effect from the
same date and will succeed Mark Rolfe as Chairman of the Audit
Committee from the conclusion of the 2016 AGM.
The Board is confident that the Executive Directors - David
Thomas, Steven Boyes and Neil Cooper - supported by an experienced
and talented Senior Management team, will continue to lead the
Group effectively.
John Allan
Chairman
6 September 2016
Chief Executive's Statement
Our results
The Group traded successfully throughout the financial year,
delivering a strong performance. We made a record profit before tax
of GBP682.3m, up 20.7% on the prior year (2015: GBP565.5m), and our
highest ROCE in ten years at 27.1% (2015: 23.9%).
We have also significantly strengthened our balance sheet,
ending the year with net cash of GBP592.0m (2015: GBP186.5m) and
with net tangible assets(1) of GBP3,118m (2015: GBP2,819m).
GBPm unless otherwise stated Housebuilding Commercial Total
--------------------------------- -------------- ----------- --------
Total completions including
JV's (plots) 17,319 - 17,319
--------------------------------- -------------- ----------- --------
Revenue 4,153.3 81.9 4,235.2
--------------------------------- -------------- ----------- --------
Gross margin (%) 19.1% 10.3% 18.9%
--------------------------------- -------------- ----------- --------
Profit from operations 662.4 6.0 668.4
--------------------------------- -------------- ----------- --------
Operating margin (%) 15.9% 7.3% 15.8%
--------------------------------- -------------- ----------- --------
Share of post-tax profit/(loss)
from joint ventures and
associates 72.4 (0.3) 72.1
--------------------------------- -------------- ----------- --------
(1) Group net assets less other intangible assets and
goodwill
Our businesses
Our improved financial results have been driven by a strong and
disciplined operational performance in both our housebuilding and
commercial developments businesses.
Housebuilding
Housebuilding results
We saw good consumer demand across our regions throughout our
financial year, with some slowdown in the higher value London
market. Throughout the year, the mortgage market remained positive,
with increased competition amongst lenders and new market entrants
resulting in good availability of attractive mortgage finance for
our customers.
The sales rate in the year was 0.69 (2015: 0.64) net private
reservations per active outlet per week, with a sales rate in the
second half of 0.72 (2015: 0.70) net private reservations per
active outlet per week. During the year, we operated from an
average of 365 active outlets (2015: 380).
In London, we have seen strong demand at price points up to
GBP600,000, reflecting the benefit of the increase in the Help to
Buy (Equity Loan) qualifying value limit to 40% in London. Above
this price point, sales rates have slowed.
We delivered our highest completion volumes for eight years,
being 17,319 units including JV's (2015: 16,447). Private
completions increased by 3.5% to 13,198 (2015: 12,746), affordable
completions were 2,707 (2015: 2,853), and JV completions in which
the Group had an interest were 1,414 (2015: 848).
We continue to increase the proportion of completions that are
on more recently acquired higher margin land and these accounted
for 86% (2015: 76%) of the total in the year.
Our total average selling price ('ASP') increased by 10.5% to
GBP259,700 (2015: GBP235,000) in the financial year with our
private average selling price increasing by 10.4% to GBP289,800
(2015: GBP262,500). The year on year increase predominately
reflects mix changes, with the average size of total completions
rising by 4.6% from 1,013 to 1,060 sq ft and with the selling price
per square foot benefiting from locational improvement and
underlying house price inflation. Affordable average selling price
increased by 0.8% to GBP113,200 (2015: GBP112,300) reflecting
changes in mix, with affordable completions representing 17% (2015:
18%) of total completions (excluding JV's).
Our JV's have performed well and our share of profits from JV's
in the year for the housebuilding business increased to GBP72.2m
(2015: GBP45.6m). As at 30 June 2016 we were selling from 11 (2015:
16) JV outlets. We expect our share of profits from JV's to be
around GBP45m in FY17.
Housing policy
The UK Government recognises the need for more new homes to be
built, given ongoing levels of household formation and historic
undersupply, as evidenced by its policies to improve land
availability, planning and support for buyers. In this regard, we
noted in July this year the publication of the most recent DCLG
publication updating household formation rate projections for
England: now estimated at 210,000 per year through the period
2014-2039.
We were also pleased to see the extension of the Help to Buy
(Equity Loan) programme in England through to 2021, as well as the
increase in February 2016 of the Government's equity loan to 40% in
London. Help to Buy (Equity Loan) provides support on house
purchases up to GBP600,000 in England with equivalent support at
lower house values in Scotland and Wales. Our customers, especially
first time buyers, have found this a very attractive proposition
with 32% (2015: 31%) of our total completions (excluding JV's)
using the scheme during the year. In FY16, 95% of the private homes
(including JV's) that we completed had a selling price below
GBP600,000. In FY17 we expect this to be around 93%, reflecting our
forecast London mix.
Increasing our housing supply
With housing demand remaining strong, we have continued to
invest, in a disciplined way, to increase housing production, with
over GBP4.8bn approved for the purchase of over 93,400 plots of
land over the last five years. There remains a long term housing
shortage of all tenures that can only be addressed through
additional supply; we are committed to playing a leading role in
addressing this issue without compromising our operational or
financial strength.
Over the last five years we have built more than 75,000 homes
(including JV's) of which over 13,600 were affordable homes
(including JV's) sold to registered providers and we have invested
in our employees, including in FY16 268 new apprentices, trainees,
graduates and undergraduates to further expand our skilled
workforce, enabling further delivery of supply.
The key dimensions underpinning delivery of our strategy
In addition to the generally favourable market conditions during
the year, the increase in our housebuilding profitability has
benefited from our successful land investment strategy and from
improvements in operating margin.
Land and planning
A key enabler of the growth of our housebuilding business in
recent years has been our land investment strategy, which has
boosted absolute profit and led to increased completion
volumes.
The land market remained attractive throughout the financial
year and we secured excellent opportunities that meet or exceed our
minimum hurdle rates of 20% gross margin and 25% site ROCE(2) In
the period, we approved the purchase of GBP1,095.6m (2015:
GBP957.0m) of land, equating to 130 sites (2015: 114 sites) and
24,387 plots (2015: 16,956 plots).
We continue, under normal market conditions, to target a
regionally balanced land portfolio with a supply of owned land of
c. 3.5 years and a further c. 1.0 year of controlled land. Our
target for a shorter than sector average land bank reflects our
focus on ROCE and a rapid asset turn. At 30 June 2016 we achieved
this target with a 4.5 years land supply (excluding JV's)
comprising 3.4 years owned land and 1.1 years controlled land, with
the owned land bank including land with both outline and detailed
planning consents.
Following our success with planning over the past 12 months we
are very well positioned, with 99.7% of expected FY17 completions
(2015: 100% of FY16 completions) having outline or full planning
consent.
Improving efficiency and reducing costs
Improving the efficiency of our operations and controlling costs
continues to be a high priority for the Group, as it will further
enhance margin. Efficiency can be improved through increasing
throughput, as we have done in the year, but we are also focused on
improving efficiency through business simplification including
further standardisation of our layouts and product range and
through driving process efficiency across key aspects of our
business, with wide-ranging reviews underway, for example in the
areas of commercial, construction and sales and marketing.
We have a robust and carefully managed supply chain with 90% of
the house build materials sourced by our centralised procurement
function denominated in Sterling. We have effectively sourced the
raw materials required to underpin our controlled volume growth and
the cost of c.75% of our centrally procured materials is now fixed
until the end of FY17.
Whilst we have seen an increase in the supply of skilled
sub-contractors over the past year, there remains an industry
shortage in the UK, with increases in labour costs remaining the
largest driver of overall build cost inflation. We are currently
well placed with the necessary labour to meet our operational and
quality requirements. We are also seeking to increase efficiency
through the use of timber frame on over 1,300 plots during FY17 and
through the use of alternative offsite manufacturing options.
We expect that overall build cost inflation for FY17 will be
c.2-3%.
_________________________________ (2) 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.
Commercial developments
Greater occupier confidence in the second half of calendar year
2015, particularly from within the logistics sector, encouraged
institutional funding back into the market enabling us to enter
into agreements to commit to over 1 million sq. ft. of speculative
forward funded logistics buildings.
During the year we successfully secured a planning permission
for a Regional Distribution Centre on a parcel of strategic land
that we subsequently sold to a supermarket group. We also completed
the final phase of our retail and leisure scheme at Hinckley. This
final phase is 80% let and further transactions are in legals.
As we move forward we will continue to carefully manage our risk
profile by seeking to secure forward commitments; accordingly our
activity levels are very much determined by securing occupiers up
front, which in turn is governed to a large extent by sentiment and
occupier confidence.
Commercial development revenue was GBP81.9m (2015: GBP57.2m)
with an operating profit of GBP6.0m (2015: GBP6.1m).
Going forward our commercial division will continue to work
closely with our housebuilding business to develop mixed-use
schemes, and will seek to develop independent commercial schemes
where they can be forward funded by third parties prior to
commencement.
Our strategic objectives
Our strategic objectives remain clear - maintain disciplined
growth, improve our key financial metrics and continue to deliver
attractive cash returns.
Our key financial metrics
Our gross margin was broadly flat at 18.9% (2015: 19.0%) with an
improvement in margin arising from the reduction in the mix of
legacy assets, offset by adverse business mix and other net
impacts. Operating margin grew by 0.5 ppts, from 15.3% to 15.8%,
reflecting improved overhead leverage levels and an absolute fall
in net administrative expenses.
We have made further good progress against our ROCE objective in
the year with ROCE increasing by 3.2 ppts to 27.1% (2015: 23.9%).
This is benefiting from the absolute reduction in legacy assets:
the disposal of GBP85.4m of loans arising from equity share
programmes early in our second half for GBP82.9m of cash has
contributed. We have also been successful in driving business
growth levels ahead of growth in working capital levels, reflecting
our effective balance sheet discipline. It remains a core part of
our strategy to drive ROCE performance further, in line with our
fast asset turn model.
We remain committed to delivering our FY17 targets of at least
20% gross margin and at least 25% ROCE.
Maintaining an appropriate capital structure
As at 30 June 2016 the Group had a net cash balance of GBP592.0m
(2015: GBP186.5m), reflecting a strong financial year. This was
ahead of expectations, partly driven by our completion volumes and
the timing of land payments. We also benefited from timings of
other working capital payments.
We seek to defer payment for new land where possible to drive a
higher ROCE, and land creditors as at 30 June 2016 were 38% of the
owned land bank (30 June 2015: 35%).
The Group continues to maintain a balanced capital structure
with land and long-term work in progress funded by shareholders'
funds and land creditors. Net tangible assets were GBP3,118m
(GBP3.11 per share) of which land net of land creditors and work in
progress totalled GBP3,180m (GBP3.17 per share).
We continue to secure attractive deferred payment terms on land
and expect land creditors as a proportion of the owned land bank to
be around one-third at 30 June 2017, in line with our operating
framework.
Dividend
Our strong financial performance supports the Group's Capital
Return Plan and dividend policy. We are delighted to propose a
final dividend of 12.3 pence per share (2015: 10.3 pence per share)
resulting in a total ordinary dividend for the year up 21% to 18.3
pence per share (2015: 15.1 pence per share) and the second of our
special dividends totalling GBP125m, equivalent to 12.4 pence per
share, payable in November 2016. This reflects our ordinary
dividend policy of the dividend being covered three times by
earnings, supplemented by the special dividends to November 2017
totalling GBP400m.
Health and safety
We were deeply saddened that two employees of our
sub-contractors lost their lives in separate incidents on two of
our sites during the year. Both of these incidents have been
thoroughly investigated by our internal health and safety (SHE)
team. We are fully co-operating with the Health and Safety
Executive during their ongoing investigations into each of the
incidents.
Increased activity levels across the industry in terms of site
openings and production volumes combined with shortages of skilled
staff has contributed to an increased risk of accidents on sites.
We remain fully committed to the highest standards of health and
safety upon our sites. In the year, our reportable incident rate
has increased slightly with 385 (2015: 381) reportable incidents
per 100,000 employees.
Our priorities
We believe that a strongly performing business benefits from a
focus on its wider priorities which for us are: Customer First,
Great Places, Leading Construction and Investing in our People.
Each of these priorities has a work plan to drive improvements
across the business and they are supported by a set of principles
and financial discipline which underpins all of our operations.
Customer First
We place customers at the heart of our business by building
outstanding homes and anticipating the changing needs of home
buyers.
We are the only major national housebuilder to achieve the HBF 5
Star Customer Satisfaction rating for seven consecutive years, with
over 90% of customers being prepared to recommend us to a
friend.
We continue to improve the quality and efficiency of the way in
which we deal with customers through the sales process. During the
period we invested in our customer service systems to speed up and
improve the efficiency of our service.
We worked with suppliers, customers and industry experts to
produce the 'Future Home Report' to inform design direction in
terms of customer trends and preferences. As well as carefully
defining customer segments and their design preferences, our
project with The Architects' Journal to select new house design
features to meet these requirements concluded in the year.
Great Places
A key focus of our business continues to be building
relationships with landowners to ensure that we can acquire the
right land and then create outstanding places to live. Our
objective is to be the partner of choice for landowners by
demonstrating our ability to achieve planning permission and create
value.
During the period we made significant progress in terms of
securing the right operational 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 continue to be focused on a 'right first time' approach as
the most efficient way of operating across all aspects of our
building processes with a continuous focus on improving build
quality which will reduce remedial costs and improve customer
satisfaction.
We are implementing a number of key initiatives in terms of
increasing construction efficiency, for example we have built 988
timber frame homes in FY16.
Our site managers continue to lead the industry and in 2016 we
won 79 NHBC Pride in the Job awards. This was the 12th year in
succession that our site managers have won more of these awards
than any other housebuilder.
Investing in our People
The building and construction industry continues to face a
shortage of skilled workers and attracting and retaining the best
people is an important priority for the business. We aim to have a
diverse workforce that reflects the communities in which we
operate, delivering excellence for our customers and business by
drawing on a broad range of talents, skills and experience.
We have continued with our graduate and apprentice programmes,
with 268 employees joining us on these programmes in this
period.
We also continue to support the wider industry focus on
addressing the skills shortage.
Current trading
The sales performance of the Group has been positive, with
average weekly net private reservations since 1 July 2016 of 267
(FY16: 265), resulting in net private reservations per active
outlet per average week of 0.75 (FY16: 0.71). Regionally, trading
conditions in the North and Midlands have been stronger than those
seen in the South.
Our total forward sales (including JV's) as at 4 September 2016
were up 4.1% on the strong prior year figures at a value of
GBP2,416.5m (6 September 2015: GBP2,321.9m), equating to 11,364
plots (6 September 2015: 10,755 plots).
Forward 4 September 2016 6 September 2015 Variance
sales
------------ ------------------- ------------------- ---------
GBPm Plots GBPm Plots %
------------ ---------- ------- ---------- ------- ---------
Private 1,545.9 4,723 1,332.3 4,788 16.0
------------ ---------- ------- ---------- ------- ---------
Affordable 707.4 5,957 512.2 4,487 38.1
------------ ---------- ------- ---------- ------- ---------
Sub total 2,253.3 10,680 1,844.5 9,275 22.2
------------ ---------- ------- ---------- ------- ---------
JV 163.2 684 477.4 1,480 (65.8)
------------ ---------- ------- ---------- ------- ---------
Total 2,416.5 11,364 2,321.9 10,755 4.1
------------ ---------- ------- ---------- ------- ---------
We expect FY17 wholly owned completions to grow modestly versus
the comparable period, with around 700 completions delivered
through our JV portfolio.
Outlook
We have started the new financial year in a good position, with
GBP592.0m year end net cash, a healthy forward order position and
an experienced management team in place. We have industry leading
quality and customer service, and talented employees. There remains
an under-supply of new homes, strong government support including
Help to Buy (Equity Loan), and a mortgage market willing to lend.
As a result, we remain confident in the underlying fundamentals of
both the housing sector and our business.
Our sales trends since the start of the new financial year have
been encouraging, and underpin an increasingly 'business-as-usual'
stance whilst we continue to monitor consumer, economic and other
lead indicators closely following the EU referendum vote.
I am proud to lead our first class team and we are all
determined to build on this year's outstanding operational and
financial performance in the future, as well as delivering on our
targets for key financial metrics and our capital return plans in
FY17.
David Thomas
Chief Executive
6 September 2016
Priorities and principles in action
Building excellence by putting customers first
Our priority
Our priority is building great homes and providing an
outstanding customer experience. We seek to anticipate our
customers' evolving needs by continuously improving the homes and
places we build.
KPI
-- HBF 5 Star Homebuilder(1)
(1) Key performance indicator used to assess performance for
annual incentive scheme
Key highlights
-- Only national housebuilder to be awarded HBF 5 Star status for seven consecutive years
-- Continued investment in customer service
-- Mortgage market remains good
The challenge
Britain needs more homes to address its housing shortage, with
continued demand in the market and continued undersupply of new
homes. Home buyers are supported by a good mortgage market in terms
of both availability and rates, as well as by the Government's Help
to Buy (Equity Loan) scheme in England, Scotland and Wales.
The industry is seeking to increase volumes, maintain customer
satisfaction and build quality and at the same time address the
constraint created by a shortage of skilled people.
Affordability of homes and accessibility to home ownership
We build a wide range of product, from homes for first time
buyers to larger family homes. Our private average selling price
for the year was GBP289,800 (2015: GBP262,500); GBP275,000 (2015:
GBP246,800) outside of London.
During the year, the mortgage market remained positive. Our
customers have access to mortgage finance that allows them to buy
with a 5% deposit through the Help to Buy (Equity Loan) scheme and
there is also a range of higher loan to value products which do not
use the Help to Buy scheme available. We continue to work with a
broad set of lenders through our approved brokers to ensure that
our customers have access to independent advice and a wide range of
mortgage products.
We delivered 2,707 (2015: 2,853) affordable homes built for
registered providers, equating to 17% (2015: 18%) of our total
completions (excluding JV's) in the year. We have a team which
engages with housing association partners at local, regional and
national levels.
Customer satisfaction
We place customers at the heart of everything we do, with their
satisfaction being a key performance indicator at all levels of
management. All of our team are responsible for delivering customer
satisfaction and we operate a Customer Service Academy comprising
both classroom and online training to ensure that our employees
understand how to deliver right first time, every time.
We are pleased that we have increased our completions delivery,
including JV's, by 5.3% during the year whilst retaining our HBF 5
Star status for the seventh successive year, the only national
housebuilder to do so. We regularly review the results from the
NHBC customer survey with the insights gained being used to aid our
decision making.
We continue to drive customer service, investing in technology
from developments to our customer service systems and our onsite
systems to aid our quality control inspections. Each home we build
is repeatedly inspected at key stages and, as a minimum, is
approved by the site manager, contracts manager and sales staff
before handover to our customers. Management throughout the
business are responsible for customer service and monitor customer
satisfaction survey performance on a weekly basis.
Increasing customer insight
To ensure that we continuously reflect our customers' needs we
have worked with suppliers, customers and industry experts to
produce the 'Future Home Report' to inform design direction in
terms of customer trends and preferences. As well as carefully
defining customer segments and their design preferences, our
project with The Architects' Journal to select new house design
features to meet these requirements concluded during this financial
year.
Building excellence by developing great places
Our priority
Our priority is building long term relationships to secure good
value land where people aspire to live. We design developments
which look great, are a pleasure to live on, and will enhance local
communities for years to come.
KPI
-- Owned and controlled land bank 4.5 years (2015: 4.5 years)
-- Land approved for purchase 24,387 plots (2015: 16,956 plots)
Key highlights
-- Land market remained attractive throughout FY16
-- Transformation of our land bank to more recently acquired
higher margin land is well progressed
-- Detailed or outline planning permission on 99.7% of FY17
expected completions and 94.2% of FY18 expected completions
The challenge
The future of our business depends upon securing the right land
in the right place that achieves our investment hurdle rates.
Securing the best land
We continue to see high quality land opportunities that at least
meet our required hurdle rates of a gross margin of 20% and a site
ROCE of 25%(1) .
Land approved Year ended 30 Year ended 30
for purchase June 2016 June 2015
--------------- -------------- --------------
Total GBP1,095.6m GBP957.0m
--------------- -------------- --------------
Total (plots) 24,387 16,956
--------------- -------------- --------------
1 Site ROCE on land acquisition is calculated as site operating
profit (site trading profit less overheads less allocated
administrative overheads) divided by average investment in site
land, work in progress and equity share.
Our success in buying land is based on the extensive local
knowledge of our divisional land teams and strong local
relationships with land owners, combined with detailed assessments
of local market conditions. We target locations based on the
availability of land, housing market conditions and the likelihood
of obtaining planning consent.
We continue, under normal market conditions, to target a
regionally balanced land portfolio with a supply of owned land of
c.3.5 years and a further c.1.0 year of controlled land. Our target
is for a shorter than sector average land bank reflecting our focus
on ROCE and a rapid asset turn. At 30 June 2016 we achieved this
target with a 4.5 years land supply (excluding JV's) comprising 3.4
years owned land and 1.1 years controlled land, with the owned land
bank including land with both outline and detailed planning
consents.
Our land bank
The transformation of our land bank from older, lower margin
land to more recently acquired higher margin land is well
progressed. As at 30 June 2016, 93% (30 June 2015: 90%) of our
owned and controlled land is higher margin, newer land. On the 232
sites that we have acquired and completed since 2009 we have
achieved an average site gross margin of 20.9%, and an average site
ROCE of 37.0%, demonstrating sustained delivery above our hurdle
rates on this more recently acquired land.
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 year 4,558 plots
(2015: 5,239 plots) were transferred from strategic land to our
owned land bank and 22% of our completions (2015: 17%) during the
year were on strategically sourced land. We remain on track to
deliver our target of c.25% of completions to be delivered from
strategic land.
We use land creditors to defer payments for land acquisition
where possible to drive a higher ROCE and as at 30 June 2016, the
land creditor position totalled GBP1,086.8m (30 June 2015:
GBP999.0m) representing 38% (30 June 2015: 35%) of the owned land
bank. We are targeting land creditors at around one-third of the
owned land bank for FY17.
Our land bank 30 June 30 June
2016 2015
------------------------------------ ------------ ------------
Owned and unconditional land
bank (plots) 53,849 51,640
------------------------------------ ------------ ------------
Conditionally contracted land
bank (plots) 17,502 18,883
------------------------------------ ------------ ------------
Owned and controlled land bank
(plots) 71,351 70,523
------------------------------------ ------------ ------------
Number of years supply based 4.5 years 4.5 years
upon completions in the financial
year
------------------------------------ ------------ ------------
JV's owned and controlled land
bank (plots) 5,309 6,325
------------------------------------ ------------ ------------
Strategic land (acres) c.11,700 c. 11,100
------------------------------------ ------------ ------------
Land bank carrying value GBP2,880.2m GBP2,826.1m
------------------------------------ ------------ ------------
Effective planning permission
Bringing land through the planning system quickly and into
production is important to support our business objectives. We
support the work the Government is currently doing to speed up the
planning process, in particular in relation to quicker resolution
of planning conditions which can hold up prompt progress. A faster
planning process will enable housing supply to increase faster.
We have maintained good momentum in achieving planning consents,
and during the year we secured planning on 20,249 plots (2015:
17,092 plots). We now have full or outline planning permission in
place for 99.7% of our expected completions in FY17 and 94.2% of
expected production in FY18.
Designing great places
Designing great places is fundamental to our business: our
customers want to live in great places; the vendors of the land we
purchase want to work with developers who leave behind a legacy of
design quality; and local people want developments that enhance
their communities.
We are focused upon 'placemaking' throughout our business and
use our internal 'Great Places' design standards, assessing every
development against these at the pre-application stage. Our 'Great
Places' design standards are aligned to the requirements of
Building for Life, and we run annual awards to recognise our best
developments. We also review our development layouts to ensure they
achieve both design quality and efficient land use, and have an
internal urban design team to provide specialist expertise.
Building excellence by leading construction
Our Priority
We deliver the highest quality homes by focusing on excellence
across all aspects of construction. We are embracing the best new
methods of on and offsite construction to increase build
efficiency.
KPI
-- Total completions including joint ventures 17,319 units (2015: 16,447 units)
Key highlights
-- Focused on a 'right first time' approach to drive operating efficiency
-- Long term relationships with suppliers and sub-contractors
-- Considering and implementing new construction methods where appropriate
The challenge
The housing shortage has increased demand for the building of
new homes, which has resulted in pressures upon the availability of
materials and skilled labour and sub-contractors.
Delivering high quality homes
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 the build process. Our site
managers continue to lead the industry, winning 79 NHBC Pride in
the Job Awards. This is the 12(th) consecutive year that we have
won more of these awards than any other housebuilder.
Partnering with our supply chain
We have a centralised procurement team which has built long term
relationships with our suppliers. This ensures the consistency of
specification and technical performance of the materials used in
our homes. Long term relationships have enabled us to ensure the
continuous availability of materials as demand increased. We also
use many local sub-contractors in the construction of our homes,
who our divisions partner with at a local level to ensure the
availability of the skilled trades that we require.
We engage in continuous communication with our suppliers and
hold regular performance and business reviews, training days and an
annual supplier conference. We are a signatory of the Prompt
Payment Code.
We purchase substantial amounts of timber and have implemented a
sustainable procurement and timber sourcing policy. Since December
2013, all timber and timber products that we purchase via group
agreements are FSC/PEFC certified and originate from well managed
forestry sources. Further information is available in the
Sustainability Report for 2016.
Innovating to improve efficiency
The majority of our homes are built with traditional brick and
block construction, although we are increasing the use of timber
frame on some of our sites and have built 988 homes using this
method during FY16. We have also completed a successful small scale
trial of Light Gauge Steel Frames which are lighter, safer and
quicker to put together than traditional construction methods. In
addition, as the parts are manufactured offsite, the level of waste
generation is reduced. We will be undertaking a larger scale trial
of this technology in FY17.
Another offsite technology that we have successfully trialled in
FY16 is the use of prefabricated utility cupboards, with
pre-installed features such as boilers, storage tanks and heating
controls. These take 1-2 hours to install rather than a whole day,
enabling us to make better use of skilled tradespeople and increase
build speed.
We have engaged with our suppliers to find, understand and
consider innovative products and services including foundation
systems, roofing and mechanical and electrical solutions.
We are also researching smart technologies and their use in
future homes to improve the ability of customers to save energy and
have undertaken divisional pilots of smart thermostats, which give
customers the ability to remotely control their heating systems. We
will be extending their availability to customers in FY17.
Building excellence by investing in our people
Our priority
We aim to attract and retain the best people by investing in
their development and success. We seek to create a great place to
work, founded on an open and honest culture that embraces diversity
and inclusion.
KPI
-- Upper quartile employee engagement at 77% (2015: 78%)(1)
(1) Assessed against the UK all sectors comparator group by IBM
Kenexa
Key highlights
-- Focus upon employee retention
-- Highly engaged workforce
-- Committed to providing an inclusive working environment
The challenge and our response
The building and construction industry continues to face a
shortage of skilled workers and attracting and retaining the best
people is a key priority for our business.
Attracting people to our industry
Together with other housebuilders we are working with the HBF,
the Construction Industry Training Board and schools, universities
and the West Midlands University Technical College ('UTC') upon
targeted projects to help address the industry-wide skills
shortage.
Employee retention
During the year employee turnover reduced by 2% to 17% (2015:
19%) reflecting our focus in this area. However, there is
significant demand and many opportunities for skilled employees
elsewhere in the industry. We therefore continue to focus upon
developing talent within our business, including succession
planning, to ensure that we have the necessary skills within our
business for continued operational delivery as well as focusing on
remuneration and benefits to ensure retention measures are in place
and effective.
Developing talent
We are committed to the development of our people in order to
drive our success. We offer both vocational and leadership training
programmes, as well as in-house schemes promoting employee
development, engagement and recognition.
We continue to invest in and develop our 'Future Talent'
strategy, recruiting graduates, apprentices and paid interns into
our business. We have local Apprentice Champions who oversee the
apprenticeship experience from attracting new trainees, to working
with our sub-contractors and aiding our apprentices'
development.
The Barratt Academy continues to provide structured, bespoke
training to support individual development across three separate
disciplines; apprentices, site managers and technical/commercial
roles. Courses combine professional training (on site and in the
classroom) with industry recognised qualifications.
Engaging our people
As a business we believe that an engaged workforce is critical
to our success. We conduct an annual employee engagement survey in
order to gain valuable insight into how our people feel about
working for us. We are delighted that in our annual employee
engagement survey we achieved our upper quartile target with an
index of 77%, which is 5% above the UK employers' norm of 72%. We
develop and implement action plans following each survey to
strengthen our business and to continue our position of being an
employer of choice.
We recognise the outstanding contributions of our people through
quarterly awards for sales staff, apprentices and site managers as
well as through individual and team excellence awards.
Diversity and inclusion
We are committed to providing an inclusive working environment
where everyone feels valued and respected. We aim to have a diverse
workforce that reflects the communities in which we operate,
delivering excellence for our customers and business by drawing on
a diverse range of talents, skills and experience.
The table below shows the number of men and women employed, as
at 30 June 2016, across our business split between PLC Directors,
Senior Managers and Employees.
The diversity policy relating to the appointment of PLC
Directors is set out on page 65 of the Annual Report and
Accounts.
30 June 2016 30 June 2015
------------ ----------------------------------- -----------------------------------
Men Women Total Men Women Total
------------ ------------ ------------ ------- ------------ ------------ -------
Number % Number % Number Number % Number % Number
------------ ------- --- ------- --- ------- ------- --- ------- --- -------
PLC
Directors 7 78 2 22 9 6 75 2 25 8
------------ ------- --- ------- --- ------- ------- --- ------- --- -------
Senior
Managers 251 87 36 13 287 250 87 37 13 287
------------ ------- --- ------- --- ------- ------- --- ------- --- -------
Employees 4,103 69 1,810 31 5,913 3,875 68 1,801 32 5,676
------------ ------- --- ------- --- ------- ------- --- ------- --- -------
Total
workforce 4,361 70 1,848 30 6,209 4,131 69 1,840 31 5,971
------------ ------- --- ------- --- ------- ------- --- ------- --- -------
After a successful pilot last year, we have started diversity
and inclusion training across our business, which we will continue
to rollout during FY17. Our 2015 graduate cohort have also been
promoting a campaign called 'Built by Both' to encourage women into
the industry and have held a number of work experience days for
women studying at universities.
Human rights
We support the United Nations' Universal Declaration of Human
Rights and have policies and processes in place to ensure that we
act in accordance with our principles in relation to areas such as
anti-corruption, diversity, whistleblowing and the requirements of
the Modern Slavery Act 2015.
Keeping people safe
Our principle
We are committed to achieving the highest industry health and
safety standards. Health and safety is a key principle for which
all of our people are responsible.
KPI
-- Health and safety compliance rate 96% (2015: 96%)(1)
-- Reportable injury incidence rate per 100,000 employees
including sub-contractors 385 (2015: 381)
(1) Key performance indicator used to assess performance for
annual incentive scheme
Key highlights
-- Achieved target health and safety compliance rate
-- Positive external recognition for our performance from NHBC and British Safety Council
The challenge and our response
Increased activity levels across the industry in terms of site
openings and production volumes combined with shortages of skilled
staff has contributed to an increased risk of accidents on sites.
We seek to maintain stringent safety standards and have a
continuous focus on health and safety. Getting the basics right,
good leadership, and commitment to health and safety from all
levels of management is what delivers good health and safety
performance in our business.
Our Safety, Health and Environmental management system ('SHE')
is subject to continuous review and improvement. All of our trading
divisions are certified to OHSAS 18001 (Occupational Health and
Safety Management Systems) and adhere to our SHE guidelines with
their ongoing compliance being verified by a programme of internal
and external audits. During the year, we carried out 6,184 (2015:
6,269) monitoring visits and achieved an average compliance rate of
96% (2015: 96%). We also maintained our 5 Star rating from the
British Safety Council for the second year in succession.
Our overall aim is to have an injury free working environment,
and whilst we believe that all injuries are avoidable, our
objective for the year was to have an improvement in our reportable
Injury Incidence Rate ('IIR'). During the year, our IIR increased
slightly to 385 (2015: 381) per 100,000 persons employed (including
sub-contractors). We have continued to operate our 5 Steps to
Safety Campaign and during the year have reviewed and restructured
our health and safety training strategy for employees at all levels
within our business, in order to continue to seek to improve our
performance.
Our site managers have again been successful at the NHBC Health
and Safety Awards, achieving more awards than any other
housebuilder, with nine commendations and five going on to receive
the highly commended status.
We were deeply saddened that two employees of our
sub-contractors lost their lives in separate incidents on two of
our sites during the year. Both of these incidents have been
thoroughly investigated by our internal health and safety (SHE)
team. We are fully co-operating with the Health and Safety
Executive during their ongoing investigations into each of the
incidents.
Being a trusted partner
Our principle
We build meaningful, long term relationships that make us the
developer of choice for our partners. We are innovating with our
supply chain to drive efficiency and meet our customers' needs.
Key highlights
-- Continue to work with a variety of partners to bring forward land for development
-- Continue to invest in the relationship with our suppliers and sub-contractors
The challenge and our response
Housebuilding is a long term business and the development of
sustained business partnerships with landowners, suppliers and
sub-contractors, is critical to our success.
We continue to work with private landowners, operators and
agents to identify and bring forward land for development.
Divisional land teams continue to work hard to try and ensure we
are regarded as the housebuilder of choice by the local landowners
and agency community.
Our suppliers and sub-contractors are critical to the delivery
of our strategic objectives and we invest in our relationships with
them. We hold a national supply chain conference and regular review
meetings with our suppliers and seek to develop long term business
relationships. We also work with our suppliers to help them to
introduce the new technologies that we need to meet increasingly
challenging building standards. We also work with our
sub-contractors to help them to improve their environmental and
safety performance.
Building strong community relationships
Our principle
We engage fully with local communities and customers when
creating new developments. We seek to ensure that our work creates
a positive legacy that helps local communities to thrive.
Key highlights
-- Estimated that our activities support over 55,000 jobs
directly, indirectly or induced in the economy
-- Work closely with local authorities
-- Actively engage with local communities
The challenge and our response
Housebuilding has a direct impact upon local communities. It is
therefore important that they are engaged in the creation process
and that our development creates a positive legacy.
As a Group we contribute social and economic benefits to the
communities in which we are working, which are far-reaching and
long-lasting. By building more homes we are generating substantial
amounts of economic activity and we estimate that during the year
we supported over 55,000 jobs either directly, indirectly or
induced. The homes we build for new communities are high quality:
for example, the average size of new private homes sold in the year
by Barratt was 1,114 sq ft, 12% larger than the average UK
home.
We work closely with local planning authorities to negotiate and
deliver or fund social infrastructure such as highways and public
transport improvements, new schools and school places, sports
facilities and medical centres.
Engagement with local communities to seek to address any impact
that our developments may have on the environment is also
important. By holding public consultations, we invite stakeholders
to talk to our specialist planners and architects about their
concerns and aspirations for our developments. We believe that a
genuinely collaborative approach will deliver more land and housing
and in this regard 62% (2015: 54%) of our active developments have
held a public consultation.
We continue to support and promote a wide range of charitable
giving and community volunteering initiatives with each division
focusing on the charitable activities that best reflect the needs
of their local community and the issues that impact upon their
employees. We have launched a Charity of the Year Scheme, where we
match every pound raised for each division's charity of the year up
to a set maximum. Our employees have raised GBP603,776 for charity
this year, including GBP46,402 donated by Barratt through the
Charity of the Year Scheme. In addition we have launched a
volunteering policy whereby every employee can take one days paid
leave to volunteer for a charity of their choice.
Safeguarding the environment
Our principle
We strive to minimise the environmental impact of our operations
and supply chain, which increases the energy and resource
efficiency of our homes. We seek to enhance habitats, biodiversity
and local environments across all of our developments.
KPI
-- 95% of construction waste segregated on site for recycling (2015: 95%)
-- Carbon intensity reduced by 5.5% to 2.23 tonnes CO2 per 1,000 Sq ft (2015: 2.36 tonnes)
Key highlights
-- Focused on waste reduction through reducing waste generation
The challenge and our response
As the demand for new housing increases, we recognise the need
for our business to become more resource and energy efficient and
to produce less waste and generate fewer carbon emissions. All of
our divisions are certified to ISO 14001, the environmental
management standard.
Designing out construction waste
During the year, we have been focussing upon waste elimination
and seeking to significantly reduce both waste tonnage and costs,
rather than increasing recycling rates.
A key to waste reduction is designing waste out and one area
where we have been successful is plasterboard. We engaged with
other members of our industry and worked with our supplier to
re-size plasterboard to meet the requirements of modern builds.
This means that 100mm no longer needs to be cut off every
plasterboard section, which reduces our costs, and is expected to
cut our waste by 1,300 tonnes each year. We segregate waste for
recycling as standard across our sites and have achieved a
recycling rate of 95% (2015: 95%) for the year.
Being energy efficient and reducing emissions
Our direct and indirect operational greenhouse gas emissions are
shown in the table below. This is based on the energy used in our
offices, on our live developments and for business travel.
Greenhouse Year ended Year ended Year ended
gas emissions 30 June 2016 30 June 2015 30 June 2014
(Tonnes CO(2e)
)
--------------------- -------------- -------------- --------------
Scope 1 emissions 20,211 18,224 17,315
--------------------- -------------- -------------- --------------
Scope 2 emissions 10,804 11,843 14,053
--------------------- -------------- -------------- --------------
Scope 3 emissions 9,303 9,150 8,981
--------------------- -------------- -------------- --------------
Total 40,318 39,217 40,349
--------------------- -------------- -------------- --------------
Tonnes of emissions
per 1,000 sq.
ft. 2.23 2.36 2.78
--------------------- -------------- -------------- --------------
Our operational greenhouse gas emissions have reduced to 2.23
(2015: 2.36) tonnes of emissions per 1,000 sq. ft. this year. We
continue to drive awareness and seek to improve energy and
greenhouse gas performance across our business.
Enhancing habitats, biodiversity and local environments across
our developments
During the year we built 48% (2015: 57%) of our homes on
brownfield sites. We have continued our national partnership with
the RSPB, the UK's largest nature conservation charity. Our 'Great
Places' guide includes ecology and biodiversity to help ensure that
they are considered from project inception through to completion.
During the year within our developments, 521 (2015: 634) hectares
of open space were created and 638,136 (2015: 554,819) trees or
shrubs were planted or retained.
Ensuring the financial health of our business
Our principle
Our people take individual responsibility appropriate to their
level of seniority for driving the financial management and
performance of the business. We maintain financial discipline
across all aspects of our operations.
KPI
-- Profit before tax GBP682.3m (2015: GBP565.5m)(1)
-- Earnings per share 55.1 pence (2015: 45.5 pence)(2)
-- Return on capital employed 27.1% (2015: 23.9%)(2)
-- Total shareholder return(2) for the three years ended 30 June
2016 88.7% (three years ended 30 June 2015: 362.9%)
-- Year end net cash GBP592.0m (2015: GBP186.5m)
-- Land creditors as a percentage of owned land bank 38% (2015: 35%)
(1) Key performance indicator used to assess performance for
annual incentive scheme
(2) Key performance indicator used to assess performance for
long term incentive schemes
Key Highlights
-- Continued to build profitability, increasing operating margin
by 0.5 ppts to 15.8%
-- Achieved a 3.2 ppt increase in ROCE to 27.1%
-- On track for our targets of at least 20% gross margin and at
least 25% ROCE
-- Maintained an appropriate capital structure
Our performance
Our strategic objectives remain to maintain disciplined growth,
deliver on our targets for key financial metrics and continue to
deliver attractive cash returns.
We have made significant progress on these objectives during the
year, achieving a 5.3% growth in completion volumes, a 20.7%
increase in profit before tax, a 3.2 ppt improvement in ROCE to
27.1% and are proposing a 22.3% increase in total dividend per
share, including special dividend, to 30.7 pence per share for the
financial year.
Profit for the year
The improved performance in our housebuilding business resulted
in an operating profit of GBP668.4m (2015: GBP576.8m) at an
operating margin of 15.8% (2015: 15.3%).
The finance charge for the year was GBP58.2m (2015: GBP57.0m),
consisting of a cash finance charge of GBP24.1m (2015: GBP27.4m)
and GBP34.1m (2015: GBP29.6m) of non-cash charges: the main
component of the non-cash charge relates to the unwind of the
discount factor from deferred terms land creditors.
Profit before tax for the year was GBP682.3m (2015: GBP565.5m),
the highest profit the Group has ever achieved. The increase of
GBP116.8m was driven by increased completion volumes, growth in
average selling prices, an increased contribution from joint
ventures and from an increase in sundry income.
The tax charge for the year was GBP132.0m (2015: GBP115.2m) at
an effective tax rate of 19.3% (2015: 20.4%). The rate of tax
assessed for the year is slightly below the standard effective rate
of corporation tax of 20.0% (2015: 20.75%) mainly due to land
remediation relief and the tax rate reduction on deferred tax.
Profit after tax for the year was GBP550.3m (2015: GBP450.3m),
resulting in a basic earnings per share of 55.1p (2015: 45.5p).
Return on capital employed
The Group's fast asset turn model, supported by a relatively
short consented land bank, deferred payment terms, high levels of
standard product, and the ability to sell through our David Wilson
Homes and Barratt brands on larger sites, is focused on driving
ROCE.
For FY16 ROCE increased by 3.2 ppts to 27.1% (2015: 23.9%). This
growth benefited from reductions in legacy assets following the
disposal of GBP85.4m of our available for sale assets in the second
half of 2016 together with rates of profit growth running ahead of
working capital growth rates.
Net cash and capital structure
We maintain an appropriate capital structure, with land and long
term work in progress funded by shareholders' funds and land
creditors, and with net cash at our year end. During the year we
generated GBP652.9m (2015: GBP184.0m) of cash inflow from operating
activities and GBP12.7m of cash inflow from investing activities.
This was in part applied to GBP268.0m of financing activities: of
which GBP263.2m related to dividends paid during the year. Together
with opening cash of GBP360.4m, the Group's net cash increase in
the year of GBP397.6m led to closing cash of GBP758.0m and net cash
at 30 June 2016 of GBP592.0m (2015: GBP186.5m). At 30 June 2016
land creditors were 38% (2015: 35%) of the owned land bank.
The factors behind the strong growth in cash inflow from
operating activities include increased profit from operations,
GBP82.9m of cash inflow from the disposal of the bulk of our
available for sale assets and favourable movements in trade and
other payables.
As we make scheduled payments on agreed new land and build work
in progress to deliver spring 2017 completions, we expect net cash
at 31 December 2016 to be in line with normal seasonal trends (31
December 2015: GBP24.2m). It remains our objective for FY17 to
maintain an appropriate capital structure with year end net cash
and land creditors at around one-third of the owned land bank.
Capital Return Plan
The Board proposes to pay a final ordinary dividend of 12.3
pence (2015: 10.3 pence) per share for the financial year ended 30
June 2016, which subject to shareholder approval, will be paid on
21 November 2016 to shareholders on the register at the close of
business on 28 October 2016. Together with the interim ordinary
dividend of 6.0 pence per share, which was paid in the year, this
gives a total ordinary dividend for the year of 18.3 pence per
share (2015: 15.1 pence per share). The ordinary dividend was
covered around three times by basic earnings per share.
Under the special cash payment programme the Board is proposing
a payment of GBP125.0m (12.4 pence per share), which subject to
shareholder approval, will be paid by way of a special dividend on
21 November 2016 to shareholders on the register at the close of
business on 28 October 2016. The Board anticipates a further
payment of GBP175.0m to be proposed with our FY17 results payable
in November 2017.
In total, the Capital Return Plan is expected to return around
GBP963m of cash through ordinary dividends (based on consensus
earnings) and special dividends to the Company's shareholders over
the three years ending November 2017.
Consolidated Income Statement
Year ended 30 June 2016
2016 2015
Continuing operations Notes GBPm GBPm
--------------------------------------------------------------- ------ ---------- ----------
Revenue 2.1 4,235.2 3,759.5
=============================================================== ====== ========== ==========
Cost of sales (3,434.8) (3,045.2)
--------------------------------------------------------------- ------ ---------- ----------
Gross profit 800.4 714.3
=============================================================== ====== ========== ==========
Administrative expenses (132.0) (137.5)
--------------------------------------------------------------- ------ ---------- ----------
Profit from operations 2.1 668.4 576.8
=============================================================== ====== ========== ==========
Finance income 5.2 5.9 7.6
=============================================================== ====== ========== ==========
Finance costs 5.2 (64.1) (64.6)
--------------------------------------------------------------- ------ ---------- ----------
Net finance costs 5.2 (58.2) (57.0)
=============================================================== ====== ========== ==========
Share of post-tax profit from joint ventures 71.9 45.4
=============================================================== ====== ========== ==========
Share of post-tax profit from associates 0.2 0.3
--------------------------------------------------------------- ------ ---------- ----------
Profit before tax 682.3 565.5
=============================================================== ====== ========== ==========
Tax 2.4 (132.0) (115.2)
--------------------------------------------------------------- ------ ---------- ----------
Profit for the year 550.3 450.3
--------------------------------------------------------------- ------ ---------- ----------
Profit for the year attributable to the owners of the Company 550.3 449.4
--------------------------------------------------------------- ------ ---------- ----------
Profit for the year attributable to non-controlling interests - 0.9
--------------------------------------------------------------- ------ ---------- ----------
Earnings per share from continuing operations
=============================================================== ====== ========== ==========
Basic 2.2 55.1p 45.5p
--------------------------------------------------------------- ------ ---------- ----------
Diluted 2.2 54.3p 44.6p
--------------------------------------------------------------- ------ ---------- ----------
Statement of Comprehensive Income
Year ended 30 June 2016
Group
----------------------------------------------- ------ ---------------
2016 2015
Notes GBPm GBPm
----------------------------------------------- ------ ------ -------
Profit for the year 550.3 450.3
----------------------------------------------- ------ ------ -------
Other comprehensive income/(expense):
=============================================== ====== ====== =======
Items that will not be reclassified
to profit or loss
=============================================== ====== ====== =======
Actuarial loss on defined benefit
pension scheme 6.1 (9.0) (11.5)
=============================================== ====== ====== =======
Fair value adjustment on available
for sale financial assets 3.2 0.5 5.1
=============================================== ====== ====== =======
Tax credit relating to items not
reclassified 1.7 1.3
----------------------------------------------- ------ ------ -------
Total items that will not be reclassified
to profit or loss (6.8) (5.1)
----------------------------------------------- ------ ------ -------
Items that may be reclassified
subsequently to profit or loss
=============================================== ====== ====== =======
Amounts deferred in respect of
effective cash flow hedges 5.2 6.3 (0.5)
=============================================== ====== ====== =======
Amounts reclassified to the Income
Statement in respect of hedged
cash flows 5.2 (1.1) 2.9
=============================================== ====== ====== =======
Tax charge relating to items that
may be reclassified (1.2) (0.5)
----------------------------------------------- ------ ------ -------
Total items that may be reclassified
subsequently to profit or loss 4.0 1.9
----------------------------------------------- ------ ------ -------
Total comprehensive income recognised
for the year 547.5 447.1
----------------------------------------------- ------ ------ -------
Total comprehensive income recognised
for the year attributable to the
owners of the Company 547.5 446.2
----------------------------------------------- ------ ------ -------
Total comprehensive income recognised
for the year attributable to non-controlling
interests - 0.9
----------------------------------------------- ------ ------ -------
Statement of Changes in Shareholders' Equity
Group
Retained Total
earnings retained
due earnings
to due Non-
Share Own shareholders to controlling
capital shares of shareholders interests
(note Share Merger Hedging (note Share-based the of the (note Total
5.5.1) premium reserve reserve 5.5.2) payments Group Group 4.1) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
At 1 July
2014 98.5 214.8 1,109.0 (15.6) (3.2) 24.6 1,917.9 1,939.3 8.0 3,354.0
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
Profit for
the year - - - - - - 449.4 449.4 0.9 450.3
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Amounts
deferred
in respect
of effective
cash flow
hedges - - - (0.5) - - - - - (0.5)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Amounts
reclassified
to the Income
Statement
in respect
of hedged
cash flows - - - 2.9 - - - - - 2.9
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Fair value
adjustments
on available
for sale
financial
assets - - - - - - 5.1 5.1 - 5.1
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Actuarial
losses on
pension
scheme - - - - - - (11.5) (11.5) - (11.5)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Tax on items
above taken
directly
to equity - - - (0.5) - - 1.3 1.3 - 0.8
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
Total
comprehensive
income
recognised
for the
year ended
30 June
2015 - - - 1.9 - - 444.3 444.3 0.9 447.1
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Dividend
payments - - - - - - (117.7) (117.7) - (117.7)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Issue of
shares 1.0 4.3 - - - - (0.7) (0.7) - 4.6
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Share-based
payments - - - - - 11.6 - 11.6 - 11.6
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Disposal
of own shares - - - - 0.5 - - 0.5 - 0.5
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Transfer
of share-based
payments
charge for
exercised/lapsed
options - - - - - (3.6) 3.6 - - -
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Tax on
share-based
payments - - - - - 1.4 9.8 11.2 - 11.2
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
At 30 June
2015 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 year - - - - - - 550.3 550.3 - 550.3
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Amounts
deferred
in respect
of effective
cash flow
hedges - - - 6.3 - - - - - 6.3
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Amounts
reclassified
to the Income
Statement
in respect
of hedged
cash flows - - - (1.1) - - - - - (1.1)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Fair value
adjustments
on available
for sale
financial
assets - - - - - - 0.5 0.5 - 0.5
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Actuarial
losses on
pension
scheme - - - - - - (9.0) (9.0) - (9.0)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Tax on items
above taken
directly
to equity - - - (1.2) - - 1.7 1.7 - 0.5
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
Total
comprehensive
income
recognised
for the
year ended
30 June
2016 - - - 4.0 - - 543.5 543.5 - 547.5
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Dividend
payments - - - - - - (263.2) (263.2) - (263.2)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Issue of
shares 0.9 3.6 - - - - (0.6) (0.6) - 3.9
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Share-based
payments - - - - - 12.8 - 12.8 - 12.8
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Net purchase
of own shares - - - - (0.8) - - (0.8) - (0.8)
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Transfer
of share-based
payments
charge for
exercised/lapsed
options - - - - - (10.8) 10.8 - - -
================== ======== ======== ======== ======== ======= ============ ============= ============= ============ ========
Tax on
share-based
payments - - - - - (8.5) 7.2 (1.3) - (1.3)
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
At 30 June
2016 100.4 222.7 1,109.0 (9.7) (3.5) 27.5 2,554.9 2,578.9 8.9 4,010.2
------------------ -------- -------- -------- -------- ------- ------------ ------------- ------------- ------------ --------
Balance Sheet
At 30 June 2016
Group
-------------------------------------------------- ------ ----------------------
2016 2015
Notes GBPm GBPm
-------------------------------------------------- ------ ---------- ----------
Assets
================================================== ====== ========== ==========
Non-current assets
================================================== ====== ========== ==========
Other intangible assets 100.0 100.0
================================================== ====== ========== ==========
Goodwill 4.2 792.2 792.2
================================================== ====== ========== ==========
Property, plant and equipment 9.6 8.2
================================================== ====== ========== ==========
Investments in joint ventures and associates 255.9 200.0
================================================== ====== ========== ==========
Retirement benefit assets 6.1 8.1 5.3
================================================== ====== ========== ==========
Available for sale financial assets 3.2 3.8 96.8
================================================== ====== ========== ==========
Trade and other receivables 1.6 3.3
================================================== ====== ========== ==========
Derivative financial instruments - swaps 5.3 11.8 2.3
-------------------------------------------------- ------ ---------- ----------
1,183.0 1,208.1
-------------------------------------------------- ------ ---------- ----------
Current assets
================================================== ====== ========== ==========
Inventories 3.1 4,326.6 4,173.6
================================================== ====== ========== ==========
Available for sale financial assets 3.2 0.8 10.2
================================================== ====== ========== ==========
Trade and other receivables 149.6 158.8
================================================== ====== ========== ==========
Cash and cash equivalents 5.1 758.0 360.4
-------------------------------------------------- ------ ---------- ----------
5,235.0 4,703.0
-------------------------------------------------- ------ ---------- ----------
Total assets 6,418.0 5,911.1
-------------------------------------------------- ------ ---------- ----------
Liabilities
================================================== ====== ========== ==========
Non-current liabilities
================================================== ====== ========== ==========
Loans and borrowings 5.1 (171.5) (163.3)
================================================== ====== ========== ==========
Trade and other payables (629.9) (605.9)
================================================== ====== ========== ==========
Deferred tax liabilities (10.5) (1.2)
================================================== ====== ========== ==========
Derivative financial instruments - swaps 5.3 (7.5) (17.0)
-------------------------------------------------- ------ ---------- ----------
(819.4) (787.4)
-------------------------------------------------- ------ ---------- ----------
Current liabilities
================================================== ====== ========== ==========
Loans and borrowings 5.1 (6.0) (13.2)
================================================== ====== ========== ==========
Trade and other payables (1,513.5) (1,349.8)
================================================== ====== ========== ==========
Derivative financial instruments - swaps 5.3 (5.6) -
================================================== ====== ========== ==========
Current tax liabilities (63.3) (49.4)
-------------------------------------------------- ------ ---------- ----------
(1,588.4) (1,412.4)
-------------------------------------------------- ------ ---------- ----------
Total liabilities (2,407.8) (2,199.8)
-------------------------------------------------- ------ ---------- ----------
Net assets 4,010.2 3,711.3
-------------------------------------------------- ------ ---------- ----------
Equity
================================================== ====== ========== ==========
Share capital 5.5 100.4 99.5
================================================== ====== ========== ==========
Share premium 222.7 219.1
================================================== ====== ========== ==========
Merger reserve 1,109.0 1,109.0
================================================== ====== ========== ==========
Hedging reserve (9.7) (13.7)
================================================== ====== ========== ==========
Retained earnings 2,578.9 2,288.5
-------------------------------------------------- ------ ---------- ----------
Equity attributable to the owners of the Company 4,001.3 3,702.4
-------------------------------------------------- ------ ---------- ----------
Non-controlling interests 4.1 8.9 8.9
-------------------------------------------------- ------ ---------- ----------
Total equity 4,010.2 3,711.3
-------------------------------------------------- ------ ---------- ----------
Cash Flow Statement
Year ended 30 June 2016
Group
------------------------------------- ------ ------------------
2016 2015
Notes GBPm GBPm
------------------------------------- ------ -------- --------
Profit from operations 668.4 576.8
------------------------------------- ------ -------- --------
Depreciation 4.5 3.3
===================================== ====== ======== ========
Loss on disposal of fixed assets 0.2 -
===================================== ====== ======== ========
Impairment of inventories 8.6 11.7
===================================== ====== ======== ========
Impairment/(reversal of impairment)
of available for sale financial
assets 2.1 (1.4)
===================================== ====== ======== ========
Share-based payments charge 12.8 11.6
===================================== ====== ======== ========
Imputed interest on deferred
term payables* 5.2 (34.5) (31.6)
===================================== ====== ======== ========
Imputed interest on available
for sale financial assets and
interest free loans* 5.2 2.9 4.6
===================================== ====== ======== ========
Amortisation of facility fees 5.2 (2.9) (3.0)
===================================== ====== ======== ========
Finance income related to employee
benefits 5.2 0.4 0.4
------------------------------------- ------ -------- --------
Total non-cash items (5.9) (4.4)
------------------------------------- ------ -------- --------
Increase in inventories (161.6) (676.7)
===================================== ====== ======== ========
Increase in trade and other
receivables (0.9) (57.5)
===================================== ====== ======== ========
Increase in trade and other
payables 188.5 394.7
===================================== ====== ======== ========
Decrease in available for sale
financial assets 100.8 21.9
------------------------------------- ------ -------- --------
Total movements in working
capital 126.8 (317.6)
------------------------------------- ------ -------- --------
Interest paid (26.8) (28.1)
===================================== ====== ======== ========
Tax paid (109.6) (42.7)
------------------------------------- ------ -------- --------
Net cash inflow from operating
activities 652.9 184.0
------------------------------------- ------ -------- --------
Investing activities:
Purchase of property, plant
and equipment (6.1) (5.4)
===================================== ====== ======== ========
(Increase)/decrease in investments
accounted for using the equity
method (11.9) 18.3
===================================== ====== ======== ========
Dividends received from investments
accounted for using the equity
method 28.1 27.0
===================================== ====== ======== ========
Interest received 2.6 2.3
===================================== ====== ======== ========
Net cash inflow from investing
activities 12.7 42.2
------------------------------------- ------ -------- --------
Financing activities:
Dividends paid 2.3 (263.2) (117.7)
===================================== ====== ======== ========
(Net purchase)/disposal of
own shares (0.8) 0.5
===================================== ====== ======== ========
Proceeds from issue of share
capital 3.9 4.6
===================================== ====== ======== ========
Loan repayments (7.9) (27.9)
------------------------------------- ------ -------- --------
Net cash outflow from financing
activities (268.0) (140.5)
------------------------------------- ------ -------- --------
Net increase in cash and cash
equivalents 397.6 85.7
===================================== ====== ======== ========
Cash and cash equivalents at
the beginning of the year 360.4 274.7
------------------------------------- ------ -------- --------
Cash and cash equivalents at
the end of the year 5.1 758.0 360.4
------------------------------------- ------ -------- --------
*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.
Section 1 - Basis of preparation
---------------------------------
1.1 Cautionary statement
The Chairman's Statement, Chief Executive's Statement and
'Priorities and principles in action' commentary contained in this
Annual Results Announcement, including the principal risks and
uncertainties (note 7.5), have 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 Annual Results Announcement 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 in the
consolidation taken as a whole.
1.2 Basis of preparation
Whilst the financial information included in this Annual Results
Announcement has been prepared in accordance with International
Financial Reporting Standards ('IFRS') as issued by the
International Accounting Standards Board ('IASB'), International
Financial Reporting Interpretations Committee ('IFRIC')
interpretations and Standing Interpretations Committee ('SIC')
interpretations as adopted and endorsed by the European Union
('EU'), this announcement does not itself contain sufficient
information to comply with IFRS. Full Financial Statements that
comply with IFRS are included in the 2016 Annual Report and
Accounts which will be circulated to shareholders in October 2016
and made available at www.barrattdevelopments.co.uk at that
point.
The accounting policies adopted are consistent with those
followed in the preparation of the Group's 2016 Annual Report and
Accounts which have not changed significantly from those adopted in
the Group's 2015 Annual Report and Accounts.
This Annual Results Announcement has been prepared under the
historical cost convention as modified by the revaluation of
available for sale financial assets, derivative financial
instruments and share-based payments.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of condensed financial statements in conformity
with generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the Financial Statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on the Directors' best
knowledge of the amounts, actual results may ultimately differ from
those estimates. The Directors have made no individual judgements
that have a significant impact upon the Financial Statements, apart
from those involving estimations.
The most significant estimates made by the Directors in these
condensed consolidated financial statements are set out with the
relevant notes.
1.3 Going concern
In determining the appropriate basis of preparation of the
condensed consolidated 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 which the
Directors consider are likely to affect its future development,
financial performance and financial position are set out in the
Chief Executive Statement and 'Priorities and principles in action'
sections of this report. The material financial and operational
risks and uncertainties that may have an impact upon the Group's
performance and their mitigation are outlined in note 7.5 and
financial risks including liquidity risk, market risk, credit risk
and capital risk are outlined in note 5.4 to these condensed
consolidated financial statements.
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' section in
note 7.5, factors that particularly affect 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.
The Group has total committed bank facilities and private
placement notes of GBP848.3m. The final maturity dates of these
facilities range from August 2017 to July 2021, with GBP150.0m of
the revolving credit facility maturing in December 2017 and
GBP550.0m of the revolving credit facility maturing in December
2019. The committed facilities and private placement notes provide
appropriate headroom above our current forecast debt
requirements.
In addition to these committed borrowing facilities the Group
has GBP22.5m of financing from the Government's 'Get Britain
Building' and 'Growing Places Fund' schemes. The outstanding funds
are repayable between December 2016 and 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
financial statements, that there is a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from
the date of these condensed consolidated financial statements. For
this reason, they continue to adopt the going concern basis in the
preparation of these condensed consolidated financial
statements.
1.4 Adoption of new and revised standards
In the year ended 30 June 2016, the Group has adopted the
following standards, amendments and interpretations, none of which
have had a material impact on the Group:
-- Annual Improvements Cycle 2012 - 2014
-- Amendments to IAS 16: Property, Plant and Equipment
-- Amendments to IAS 38: Intangible Assets - Clarification of
Acceptable Methods of Depreciation and Amortisation
-- Amendments to IFRS 11: Accounting for the Acquisitions of Interests in Joint Operations
-- Disclosure Initiative (Amendments to IAS 1)
-- Amendments to IAS 27: Equity Method in Separate Financial Statements
Section 2 - Results for the year and utilisation of
profits
----------------------------------------------------
Recognition of profit where developments are accounted for under
IAS 11 'Construction Contracts' - The Group applies its policy on
contract accounting when recognising revenue and profit on
partially completed contracts. Revenue and costs are recognised by
reference to the stage of completion of contract activity at the
balance sheet date. This is normally measured by surveys of work
performed to date. When it is probable that the total costs on a
construction contract will exceed total contract revenue, the
expected loss is recognised as an expense in the Income Statement
immediately. The application of this policy requires judgements to
be made in respect of the total expected costs to complete for each
site. The Group has in place established internal control processes
to ensure that the evaluation of costs and revenues is based upon
appropriate estimates.
Estimation of costs to complete - In order to determine the
profit that the Group is able to recognise on its developments in a
specific period, the Group has to allocate site-wide development
costs between units built in the current year and in future years.
It also has to estimate costs to complete on such developments. In
making these assessments there is a degree of inherent uncertainty.
The Group has developed internal controls to assess and review
carrying values and the appropriateness of estimates made.
2.1 Segmental analysis
The Group consists of two separate segments for management
reporting and control purposes, being housebuilding and commercial
developments. The segments are considered appropriate for reporting
under IFRS 8 'Operating Segments' since these segments are
regularly reviewed internally by the Board without further
significant categorisation. The Group presents its primary segment
information on the basis of these operating segments. As the Group
operates in a single geographic market, Great Britain, no secondary
segmentation is provided.
House- Commercial 2016 House- Commercial 2015
building developments Total building developments Total
Units Units Units Units Units Units
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Residential
completions* 15,905 - 15,905 15,599 - 15,599
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Consolidated
Income Statement GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Revenue 4,153.3 81.9 4,235.2 3,702.3 57.2 3,759.5
========================= ========== ============== ========== ========== ============== ==========
Cost of sales (3,361.3) (73.5) (3,434.8) (2,999.2) (46.0) (3,045.2)
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Gross profit 792.0 8.4 800.4 703.1 11.2 714.3
========================= ========== ============== ========== ========== ============== ==========
Administrative
expenses (129.6) (2.4) (132.0) (132.4) (5.1) (137.5)
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Profit from
operations 662.4 6.0 668.4 570.7 6.1 576.8
========================= ========== ============== ========== ========== ============== ==========
Share of post-tax
profit/(loss)
from joint ventures
and associates 72.4 (0.3) 72.1 45.9 (0.2) 45.7
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Profit from
operations including
post-tax profit/(loss)
from joint ventures
and associates 734.8 5.7 740.5 616.6 5.9 622.5
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Finance income 5.9 7.6
========================= ========== ============== ========== ========== ============== ==========
Finance costs (64.1) (64.6)
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Profit before
tax 682.3 565.5
========================= ========== ============== ========== ========== ============== ==========
Tax (132.0) (115.2)
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
Profit for the
year from continuing
operations 550.3 450.3
------------------------- ---------- -------------- ---------- ---------- -------------- ----------
*Residential completions exclude joint venture completions of
1,414 (2015: 848) in which the Group has an interest.
House- Commercial 2016 House- Commercial 2015
building developments Total building developments Total
Balance Sheet GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
Segment assets 5,648.0 42.2 5,690.2 5,511.5 50.1 5,561.6
====================== ========== ============== ========== ========== ============== ==========
Elimination
of intercompany
balances (30.2) (10.9)
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
5,660.0 5,550.7
====================== ========== ============== ========== ========== ============== ==========
Cash and cash
equivalents 758.0 360.4
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
Consolidated
total assets 6,418.0 5,911.1
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
Segment liabilities (2,114.3) (72.4) (2,186.7) (1,916.2) (67.4) (1,983.6)
====================== ========== ============== ========== ========== ============== ==========
Elimination
of intercompany
balances 30.2 10.9
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
(2,156.5) (1,972.7)
====================== ========== ============== ========== ========== ============== ==========
Loans and borrowings (177.5) (176.5)
====================== ========== ============== ========== ========== ============== ==========
Deferred tax
liabilities (10.5) (1.2)
====================== ========== ============== ========== ========== ============== ==========
Current tax
liabilities (63.3) (49.4)
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
Consolidated
total liabilities (2,407.8) (2,199.8)
---------------------- ---------- -------------- ---------- ---------- -------------- ----------
House- Commercial 2016 House- Commercial 2015
building developments Total building developments Total
Other information GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ---------- -------------- ------- ---------- -------------- -------
Capital additions 6.1 - 6.1 5.4 - 5.4
------------------- ---------- -------------- ------- ---------- -------------- -------
Depreciation 4.5 - 4.5 3.3 - 3.3
------------------- ---------- -------------- ------- ---------- -------------- -------
2.2 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to ordinary shareholders of GBP550.3m
(2015: GBP449.4m) by the weighted average number of ordinary shares
in issue during the year, excluding those held by the Employee
Benefit Trust which are treated as cancelled, which was 998.7m
(2015: 987.2m) shares.
Diluted earnings per share is calculated by dividing the profit
for the year attributable to ordinary shareholders of GBP550.3m
(2015: GBP449.4m) 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
1,013.0m (2015: 1,008.4m) shares.
The earnings per share from continuing operations were as
follows:
2016 2015
pence pence
---------------------------- ------- -------
Basic earnings per share 55.1 45.5
---------------------------- ------- -------
Diluted earnings per share 54.3 44.6
---------------------------- ------- -------
2.3 Dividends
2016 2015
GBPm GBPm
--------------------------------------------------------------------------------- ------ ------
Amounts recognised as distributions to equity shareholders in the year:
================================================================================= ====== ======
Final dividend for the year ended 30 June 2015 of 10.3p (2014: 7.1p) per share 103.1 70.2
================================================================================= ====== ======
Special dividend for the year ended 30 June 2015 of 10.0p (2014: nil) per share 100.0 -
================================================================================= ====== ======
Interim dividend for the year ended 30 June 2016 of 6.0p (2015: 4.8p) per share 60.1 47.5
--------------------------------------------------------------------------------- ------ ------
Total dividends distributed to equity shareholders in the year 263.2 117.7
--------------------------------------------------------------------------------- ------ ------
2016 2015
GBPm GBPm
------------------------------------------------------------------------------------------ ------ ------
Proposed final dividend for the year ended 30 June 2016 of 12.3p (2015: 10.3p) per share 123.3 102.3
------------------------------------------------------------------------------------------ ------ ------
Proposed special dividend for the year of 12.4p (2015: 10.0p) per share 125.0 100.0
------------------------------------------------------------------------------------------ ------ ------
The proposed final dividend and the special dividend are subject
to approval by shareholders at the Annual General Meeting. The cost
has been calculated based on the issued share capital at 30 June
2016 and has not been included as a liability at 30 June 2016.
2.4 Tax
All profits of the Group are subject to UK corporation tax.
The current year tax charge has been provided for at an
effective rate of 20.0% (2015: 20.75%) and the closing deferred tax
assets and liabilities have been provided in these condensed
consolidated financial statements at a rate of between 18.0% and
20.0% (2015: 20.0%) of the temporary differences giving rise to
these assets and liabilities, dependent upon when they are expected
to reverse.
2.4.1 Tax recognised in the Income Statement
The tax expense represents the sum of the tax currently payable
and deferred tax.
Analysis of the tax charge for the year
2016 2015
GBPm GBPm
--------------------------------------------------- ------ ------
Current tax:
=================================================== ====== ======
UK corporation tax for the year 135.1 102.9
=================================================== ====== ======
Adjustment in respect of previous years (2.6) (8.3)
--------------------------------------------------- ------ ------
132.5 94.6
--------------------------------------------------- ------ ------
Deferred tax:
=================================================== ====== ======
Origination and reversal of temporary differences (0.4) 13.3
=================================================== ====== ======
Adjustment in respect of previous years 1.7 7.3
=================================================== ====== ======
Impact of reduction in corporation tax rate (1.8) -
--------------------------------------------------- ------ ------
(0.5) 20.6
--------------------------------------------------- ------ ------
Tax charge for the year 132.0 115.2
--------------------------------------------------- ------ ------
Factors affecting the tax charge for the year
The tax rate assessed for the year is lower (2015: lower) than
the standard effective rate of corporation tax in the UK of 20.0%
(2015: 20.75%). The differences are explained below:
2016 2015
GBPm GBPm
---------------------------------------------------------------------------------------------- ------ ------
Profit before tax 682.3 565.5
---------------------------------------------------------------------------------------------- ------ ------
Profit before tax multiplied by the standard rate of corporation tax of 20.0% (2015: 20.75%) 136.5 117.3
============================================================================================== ====== ======
Effects of:
============================================================================================== ====== ======
Other items including non-deductible expenses 1.2 1.0
============================================================================================== ====== ======
Additional tax relief for land remediation costs (2.0) (1.3)
============================================================================================== ====== ======
Adjustment in respect of previous years (0.9) (1.0)
============================================================================================== ====== ======
Tax in respect of joint ventures (1.0) (0.8)
============================================================================================== ====== ======
Impact of change in tax rate on deferred tax asset (1.8) -
---------------------------------------------------------------------------------------------- ------ ------
Tax charge for the year 132.0 115.2
---------------------------------------------------------------------------------------------- ------ ------
2.4.2 Tax recognised in equity
In addition to the amount charged to the Consolidated Income
Statement, a net current and deferred tax charge of GBP0.8m (2015:
GBP12.0m credit) was recognised directly in equity.
Section 3 - Working capital
----------------------------
3.1 Inventories
Carrying value of land and work in progress - The Group's
principal activities are housebuilding and commercial development.
The majority of the development activity is not contracted prior to
the development commencing. Accordingly, the Group has in its
Balance Sheet at 30 June 2016 current assets that are not covered
by a forward sale. The Group's internal controls are designed to
identify any developments where the balance sheet value of land and
work in progress is more than the projected lower of cost or net
realisable value.
During the year the Group has conducted six-monthly reviews of
the net realisable value of specific sites identified as at high
risk of impairment, based upon a number of criteria including low
site profit margins and sites with no forecast completions. Where
the estimated net realisable value of a site was less than its
current carrying value within the Balance Sheet, the Group has
impaired the land and work in progress value.
During the year, due to performance variations, changes in
assumptions and changes to viability on individual sites, there
were gross impairment charges of GBP11.0m (2015: GBP17.9m) and
gross impairment reversals of GBP2.4m (2015: GBP6.2m), resulting in
a net impairment charge of GBP8.6m (2015: GBP11.7m) included within
profit from operations.
The key judgements in these reviews were estimating the
realisable value of a site, which is determined by forecast sales
rates, expected sales prices and estimated costs to complete. The
estimation of future sales prices and costs to complete included
zero net inflation for the next three years and then low single
digit net inflation thereafter. During the year the Group benefited
from favourable market conditions, but increased uncertainty due to
Brexit. If the UK housing market were to change beyond management
expectations in the future, in particular with regards to the
assumptions around sales prices and estimated costs to complete,
further adjustments to the carrying value of land and work in
progress may be required.
The land held at the balance sheet date that has already been
impaired is most sensitive to the judgements being applied and the
potential for further impairment or reversal. Forecasting risk also
increases in relation to those sites that are not expected to be
realised in the short to medium term.
Group
------------------------------------------------ ------------------
2016 2015
GBPm GBPm
------------------------------------------------ -------- --------
Land held for development 2,880.2 2,826.1
================================================ ======== ========
Construction work in progress 1,386.3 1,287.4
================================================ ======== ========
Part-exchange properties and other inventories 60.1 60.1
------------------------------------------------ -------- --------
4,326.6 4,173.6
------------------------------------------------ -------- --------
3.1.1 Nature of inventories
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
variables such as consumer demand and planning permission
delays.
3.1.2 Expensed inventories
The value of inventories expensed in the year ended 30 June 2016
and included in cost of sales was GBP3,233.7m (2015:
GBP2,903.5m).
3.2 Available for sale financial assets
Available for sale financial assets principally comprise
interest free loans that are granted as part of sales transactions
and for which the cash flows receivable are based on the value of
the property at redemption. These loans are secured by way of a
second legal charge on the respective property (after the first
mortgage charge).
Group
---------------------------------------------------------------- -----------------
2016 2015
GBPm GBPm
---------------------------------------------------------------- -------- -------
Secured loans
================================================================ ======== =======
At 1 July 107.0 122.4
================================================================ ======== =======
Additions 0.6 1.2
================================================================ ======== =======
Disposals (at cost) (163.6) (29.6)
================================================================ ======== =======
Imputed interest 2.1 4.6
================================================================ ======== =======
Other provision movements 58.0 3.3
================================================================ ======== =======
Fair value adjustment taken through other comprehensive income 0.5 5.1
---------------------------------------------------------------- -------- -------
At 30 June 4.6 107.0
---------------------------------------------------------------- -------- -------
Balance at 30 June analysed as:
Current 0.8 10.2
================================================================ ======== =======
Non-current 3.8 96.8
---------------------------------------------------------------- -------- -------
On 5 February 2016, the Group disposed of the majority of its
available for sale assets to funds managed by PMM Advisers for cash
of GBP82.9m. The fair value of these assets on disposal was
GBP85.4m generating a loss on disposal of GBP2.5m. The gross value
of the loans disposed of is included within the 'Disposals (at
cost)' line and the provision against this is included in the
'Other provision movements' line. The valuation of these assets was
based on the price expected to be achieved at disposal.
The fair value of the remaining portfolio has been calculated on
a loan by loan basis using the present value of expected future
cash flows of each loan.
Section 4 - Business combinations and other
investing activities
--------------------------------------------
4.1 Business combinations
4.1.1 Non-controlling interests
At 30 June 2016 the following subsidiaries of the Group had
non-controlling interests:
Voting Country Principal
Percentage rights of place Principal
Subsidiary owned controlled registration of business activity
-------------------------- ----------- ------------ -------------- ------------- --------------
SQ Holdings Limited 90.0% 90.0% Guernsey* UK Housebuilding
-------------------------- ----------- ------------ -------------- ------------- --------------
The Tin Hat Regeneration England Commercial
Partnership LLP 90.0% 50.0% and Wales UK development
-------------------------- ----------- ------------ -------------- ------------- --------------
*Subject to UK corporation tax (see note 2.4)
Group
------------------------------------------------------------------------------------------------- --------------
Movement in non-controlling interest share of net assets recognised in the Consolidated Balance 2016 2015
Sheet GBPm GBPm
------------------------------------------------------------------------------------------------- ------ ------
At 1 July 8.9 8.0
================================================================================================= ====== ======
Share of profit for the year recognised in the Consolidated Income Statement - 0.9
================================================================================================= ====== ======
At 30 June 8.9 8.9
------------------------------------------------------------------------------------------------- ------ ------
4.2 Goodwill
Group
GBPm
----------------------------------------------- ------
Cost
=============================================== ======
At 1 July 2014, 30 June 2015 and 30 June 2016 816.7
----------------------------------------------- ------
Accumulated impairment losses
=============================================== ======
At 1 July 2014, 30 June 2015 and 30 June 2016 24.5
----------------------------------------------- ------
Carrying amount
=============================================== ======
At 30 June 2015 and 30 June 2016 792.2
----------------------------------------------- ------
The Group's goodwill has a carrying value of GBP792.2m relating
to the housebuilding segment. The goodwill relating to the
commercial developments segment, with a cost of GBP24.5m, was fully
impaired in the year ended 30 June 2008.
4.2.1 Impairment of goodwill and intangibles
The Group conducts an annual impairment review of goodwill and
intangibles together for the housebuilding segment.
Impairment of goodwill and brands - The impairment review for
the goodwill of the housebuilding business and the Group's
indefinite life brand, David Wilson Homes, requires an estimation
of the value-in-use of the housebuilding segment. The value-in-use
calculation requires an estimate of the future cash flows expected
from the housebuilding business, including the anticipated growth
rate of revenue and costs, and requires the determination of a
suitable discount rate to calculate the present value of the cash
flows. The discount rate used is based on the average capital
structure of the Group, current market assessments of the time
value of money and risks appropriate to the Group's housebuilding
business. Changes in these may impact upon the Group's discount
rate in future periods.
An impairment review was performed at 30 June 2016 and compared
the value-in-use of the housebuilding segment with the carrying
value of its tangible and intangible assets and allocated
goodwill.
The value-in-use was determined by discounting the expected
future cash flows of the housebuilding segment. The first three
years of cash flows were determined using the Group's approved
detailed site-by-site business plan. The cash flows for the fourth
and fifth years were determined using Group level internal
forecasted cash flows based upon expected volumes, selling prices
and margins, taking into account available land purchases and work
in progress levels. The cash flows for year six onwards were
extrapolated in perpetuity using an estimated growth rate of 2.5%,
which was based upon the historical long term growth rate of the UK
economy.
The key assumptions for the value-in-use calculations were:
-- Discount rate: this is a pre-tax rate reflecting current
market assessments of the time value of money and risks appropriate
to the Group's housebuilding business. Accordingly, the rate of
14.2% (2015: 14.0%) is considered by the Directors to be the
appropriate pre-tax risk adjusted discount rate, being the Group's
estimated long term pre-tax weighted average cost of capital. The
rate used in the 30 June 2016 impairment review is calculated using
the average capital structure of the Group during the financial
year, consistent with the prior year, due to the cyclicality of the
Group's borrowing requirements.
-- Expected changes in selling prices for completed houses and
the related impact upon operating margin: these are determined on a
site-by-site basis for the first three years dependent upon local
market conditions and product type.
-- Sales volumes: these are determined on a site-by-site basis
for the first three years dependent upon local market conditions,
land availability and planning permissions.
-- Expected changes in site costs to complete: these are
determined on a site-by-site basis for the first three years
dependent upon the expected costs of completing all aspects of each
individual development.
The conclusion of this impairment review was that given the
current position of the housebuilding segment and the expectations
as to its future performance based upon current forecasts for sales
volumes and expected changes in both selling prices and costs to
complete, the housebuilding segment's goodwill and intangible
assets were not impaired. The recoverable value of goodwill and
intangible assets exceeded its carrying value by GBP1,424.6m (2015:
GBP1,547.4m).
If the UK housing market and expectations regarding its future
were to deteriorate with either operating margins reduced each year
by 4.2% versus management expectations (2015: 4.5% per annum) or
the appropriate discount rate were to increase by 4.5% (2015: 4.3%)
and all other variables were held constant, then the recoverable
value of goodwill and intangible assets would equal its carrying
value.
Section 5 - Capital structure
and financing
------------------------------
5.1 Net cash
Net cash is defined as cash and cash equivalents, bank
overdrafts, interest bearing borrowings and foreign exchange
swaps.
Net cash at 30 June is shown below:
Group
-----------------------------------------------------------------------
2016 2015
Notes GBPm GBPm
----------------------------------------- -------- -------- --------
Cash and cash equivalents 5.1.1 758.0 360.4
----------------------------------------- -------- -------- --------
Drawn debt
Non-current borrowings
========================================= ======== ======== ========
Term loans (90.9) (88.2)
========================================= ======== ======== ========
Government loans (21.0) (24.7)
========================================= ======== ======== ========
Private placement notes (59.6) (50.4)
----------------------------------------- -------- -------- --------
Total non-current borrowings (171.5) (163.3)
----------------------------------------- -------- -------- --------
Current borrowings
========================================= ======== ======== ========
Bank overdrafts - -
========================================= ======== ======== ========
Government loans (6.0) (13.2)
----------------------------------------- -------- -------- --------
Total current borrowings (6.0) (13.2)
----------------------------------------- -------- -------- --------
Total borrowings being total drawn debt (177.5) (176.5)
----------------------------------------- -------- -------- --------
Derivative financial instruments
========================================= ======== ======== ========
Foreign exchange swaps 5.3 11.5 2.6
----------------------------------------- -------- -------- --------
Net cash 592.0 186.5
----------------------------------------- -------- -------- --------
Included within non-current borrowings are prepaid facility
arrangement fees of GBP9.5m (2015: GBP12.3m).
Movement in net cash is analysed as follows:
Group
---------------------------------------------------------------- --------------
2016 2015
GBPm GBPm
---------------------------------------------------------------- ------ ------
Net increase in cash and cash equivalents 397.6 85.7
================================================================ ====== ======
Net loan repayments/(drawdown) including foreign exchange loss (1.0) 23.7
================================================================ ====== ======
Foreign exchange gain on swaps 8.9 4.1
================================================================ ====== ======
Other fees relating to amendment of financing arrangements - (0.1)
---------------------------------------------------------------- ------ ------
Movement in net cash in the year 405.5 113.4
================================================================ ====== ======
Opening net cash 186.5 73.1
---------------------------------------------------------------- ------ ------
Closing net cash 592.0 186.5
---------------------------------------------------------------- ------ ------
5.1.1 Cash and cash equivalents
Cash and cash equivalents are held at floating interest rates
linked to the UK bank rate, LIBOR and money market rates as
applicable. Cash and cash equivalents comprise cash held by the
Group and short term bank deposits with an original maturity of
three months or less from inception and are subject to an
insignificant risk of changes in value.
5.1.2 Borrowings and facilities
All debt (excluding Get Britain Building loans) is
unsecured.
The principal features of the Group's debt facilities at 30 June
2016 and 30 June 2015 were as follows:
Amount drawn
------------------------
30 June 30 June
Facility 2016 2015 Maturity
---------------------- ---------- ----------- ----------- ----------------------
Committed facilities
====================== ========== =========== =========== ======================
- GBP150.0m on
29 December 2017
Revolving credit GBP550.0m on
facility (RCF) GBP700.0m - 17 December 2019
====================== ========== =========== =========== ======================
GBP100.0m Repayments scheduled:
25% on 1 July
2019; 25% on
1 July 2020;
and 50% on 1
Term loan GBP100.0m GBP100.0m July 2021
====================== ========== =========== =========== ======================
Repayments due
between 6 December
2016 and 31 March
Government loans* GBP22.5m GBP22.5m GBP27.9m 2018
====================== ========== =========== =========== ======================
GBP4.6m GBP10.0m Repayments due
including including between 31 March
Local government GBP0.1m GBP0.2m 2018 and 31 March
loan agreements GBP4.6m interest interest 2020
====================== ========== =========== =========== ======================
Fixed rate US$
private placement
notes $80.0m $80.0m $80.0m 23 August 2017
---------------------- ---------- ----------- ----------- ----------------------
*Government loans comprise:
-- Get Britain Building -The Group has received cash upon
specific sites under the Government's 'Get Britain Building'
scheme, which is repayable as described in the table above.
-- Growing Places Fund - The Group has received cash under a
local government 'Growing Places Fund' scheme which is repayable
over four years in eight six-monthly instalments, the first of
which was in December 2013.
The Group also uses various bank overdrafts and uncommitted
borrowing facilities that are subject to floating interest rates
linked to UK bank rate, LIBOR and money market rates as
applicable.
Weighted average interest rates are disclosed in note 5.2.
5.2 Net finance costs
Recognised in the Consolidated Income Statement:
2016 2015
Notes GBPm GBPm
--------------------------------------------------------------------------------- ------ ------ ------
Finance income
================================================================================= ====== ====== ======
Finance income on short term bank deposits (0.7) (0.1)
================================================================================= ====== ====== ======
Imputed interest on available for sale financial assets and interest free loans (2.9) (4.6)
================================================================================= ====== ====== ======
Finance income related to employee benefits 6.1 (0.4) (0.4)
================================================================================= ====== ====== ======
Other interest receivable (1.9) (2.5)
--------------------------------------------------------------------------------- ------ ------ ------
(5.9) (7.6)
--------------------------------------------------------------------------------- ------ ------ ------
Finance costs
================================================================================= ====== ====== ======
Interest on loans and borrowings 14.1 19.1
================================================================================= ====== ====== ======
Imputed interest on deferred term payables 34.5 31.6
================================================================================= ====== ====== ======
Amounts reclassified to the Income Statement in respect of hedged cash flows (1.1) 2.9
================================================================================= ====== ====== ======
Foreign exchange losses on US Dollar debt 8.9 4.1
================================================================================= ====== ====== ======
Amortisation of facility fees 2.9 3.0
================================================================================= ====== ====== ======
Other interest payable 4.8 3.9
--------------------------------------------------------------------------------- ------ ------ ------
64.1 64.6
--------------------------------------------------------------------------------- ------ ------ ------
Net finance costs 58.2 57.0
--------------------------------------------------------------------------------- ------ ------ ------
Recognised in equity:
2016 2015
GBPm GBPm
------------------------------------------------------------------------------ ------ ------
Amounts deferred in respect of effective cash flow hedges (6.3) 0.5
------------------------------------------------------------------------------ ------ ------
Total fair value movement on cash flow swaps included in equity (6.3) 0.5
------------------------------------------------------------------------------ ------ ------
Amounts reclassified to the Income Statement in respect of hedged cash flows 1.1 (2.9)
------------------------------------------------------------------------------ ------ ------
Total fair value movement on cash flow swaps transferred from equity 1.1 (2.9)
------------------------------------------------------------------------------ ------ ------
The weighted average interest rates, excluding fees, paid in the
year were as follows:
Group
------------------------------------ ----- ------
2016 2015
% %
------------------------------------ ----- ------
Bank loans excluding swap interest 2.1 2.4
==================================== ===== ======
Net swap payment 5.2 5.1
==================================== ===== ======
Government loans 2.2 2.4
==================================== ===== ======
Term loans 4.7 4.9
==================================== ===== ======
Private placement notes 8.2 8.1
------------------------------------ ----- ------
5.3 Derivative financial instruments - swaps
The Group has entered into derivative financial instruments in
the form of interest rate swaps and cross currency swaps to manage
the interest rate and foreign exchange rate risk arising from the
Group's operations and sources of finance. The use of financial
derivatives is governed by the Group's policies approved by the
Board of Directors as detailed in note 5.4 to the condensed
consolidated financial statements. The Group does not enter into
any derivatives for speculative purposes.
Hedge accounting - The Group has adopted hedge accounting for
its swaps. If it ceases to be highly probable that there is
sufficient forecast debt to match with the period of the interest
rate swaps or if the cross currency hedges cease to be highly
effective, any changes in fair value of the swaps would be
recognised in the Consolidated Income Statement, rather than
equity.
The Group includes foreign exchange swaps within net debt. These
swaps were entered into to hedge the foreign exchange exposure upon
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 and only the exchange rate element on the
notional amount of the swap is included within the net cash note
above.
The Group's derivative financial instruments at 30 June are
shown below:
Group
----------------------------------------------- ----------------
2016 2015
Designated as cash flow hedges: GBPm GBPm
----------------------------------------------- ------- -------
Foreign exchange swap - exchange rate element 11.5 2.6
=============================================== ======= =======
Foreign exchange swap - interest rate element 0.3 (0.3)
----------------------------------------------- ------- -------
Non-current asset 11.8 2.3
----------------------------------------------- ------- -------
Interest rate swaps - non-current liability (7.5) (17.0)
----------------------------------------------- ------- -------
Interest rate swaps - current liability (5.6) -
----------------------------------------------- ------- -------
Total liability (13.1) (17.0)
----------------------------------------------- ------- -------
Net derivative financial instruments (1.3) (14.7)
----------------------------------------------- ------- -------
5.3.1 Interest rate swaps
The Group enters into derivative transactions in the form of
swap arrangements to manage the cash flow risks, related to
interest rates, arising from the Group's sources of finance.
As at 30 June 2016, the Group had outstanding floating rate
Sterling debt and overdrafts, excluding fees, of GBP122.0m (2015:
GBP126.9m). In obtaining this funding, the Group sought to achieve
certainty as to the availability of, and income statement charge
related to, a designated proportion of anticipated future debt
requirements.
The Group has entered into swap arrangements to swap GBP137.0m
(2015: GBP137.0m) of this debt into fixed rate Sterling debt in
accordance with the Group Treasury policy outlined in note 5.4.
After taking into account swap arrangements, the fixed interest
rates applicable to the debt were as follows:
2016 2015
------------------------------- --------------------------------
Fixed rate Fixed rate
payable payable
GBPm % Maturity GBPm % Maturity
------ ----------- ---------- ------ ----------- -----------
60.0 6.06 2017 60.0 6.06 2017
====== =========== ========== ====== =========== ===========
19.5 6.18 2017 19.5 6.18 2017
====== =========== ========== ====== =========== ===========
32.5 5.83 2017 32.5 5.83 2017
====== =========== ========== ====== =========== ===========
25.0 5.61 2022 25.0 5.61 2022
------ ----------- ---------- ------ ----------- -----------
137.0 137.0
------ ----------- ---------- ------ ----------- -----------
During the year ended 30 June 2016 hedging ineffectiveness of
GBP0.7m (2015: GBPnil) was charged to the Consolidated Income
Statement.
5.3.2 Foreign exchange swaps
The Group enters into derivative transactions in the form of
swap arrangements to manage the cash flow risks related to foreign
exchange arising from the Group's sources of finance denominated in
US Dollars.
As at 30 June 2016, the Group had outstanding fixed rate US
Dollar loan notes of $80.0m (2015: $80.0m).
The Group has entered into swap arrangements to swap all of this
debt into fixed rate Sterling debt in accordance with the Group
treasury policy outlined in note 5.4. After taking into account
swap arrangements, the fixed interest rates applicable to the debt
were as follows:
2016 2015
----------------------------- -------------------------------
Fixed rate Fixed rate
payable payable
$m % Maturity $m % Maturity
----- ----------- --------- ----- ----------- -----------
80.0 8.14 2017 80.0 8.14 2017
----- ----------- --------- ----- ----------- -----------
There was no ineffectiveness to be taken through the
Consolidated Income Statement during the year or the prior
year.
5.4 Financial risk management
The Group's approach to risk management and the principal
operational risks of the business are detailed in note 7.5. The
Group's derivative financial instruments are detailed in note
5.3.
The Group's operations and financing arrangements expose it to a
variety of financial risks that include the effects of changes in
debt market prices, credit risks, liquidity risks and interest
rates. The most significant of these to the Group is liquidity risk
and, accordingly, there is a regular, detailed system for the
reporting and forecasting of cash flows from the operations to
Group management to ensure that risks are promptly identified and
appropriate mitigating actions taken by the Treasury department.
These forecasts are further stress-tested at a Group level on a
regular basis to ensure that adequate headroom within facilities
and banking covenants is maintained. In addition, the Group has in
place a risk management programme that seeks to limit the adverse
effects of the other risks on its financial performance, in
particular by using financial instruments, including debt and
derivatives, to hedge interest rates and currency rates. The Group
does not use derivative financial instruments for speculative
purposes. See principal risks and uncertainties section for more
details.
The Board approves treasury policies and certain day-to-day
treasury activities have been delegated to a centralised Treasury
Operating Committee, which in turn regularly reports to the Board.
The Treasury department implements guidelines that are established
by the Board and the Treasury Operating Committee.
5.4.1 Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet
its liabilities as they fall due. The Group actively maintains a
mixture of long term and medium term committed facilities that are
designed to ensure that the Group has sufficient available funds
for operations. The Group's borrowings are typically cyclical
throughout the financial year and peak in April and May; and
October and November of each year, due to seasonal trends in
income. Accordingly, the Group maintains sufficient facility
headroom to cover these requirements. On a normal operating basis,
the Group has a policy of maintaining a minimum headroom of
GBP150.0m. The Group identifies and takes appropriate actions based
upon its regular, detailed system for the reporting and forecasting
of cash flows from its operations. The Group's drawn debt,
excluding fees, represented 20.0% (2015: 21.0%) of available
committed facilities at 30 June 2016. In addition, the Group had
GBP758.0m (2015: GBP360.4m) of cash and cash equivalents.
The Group was in compliance with its financial covenants at 30
June 2016. At the date of approval of the condensed consolidated
financial statements, the Group's internal forecasts indicate that
it will remain in compliance with these covenants for the
foreseeable future, being at least 12 months from the date of
approval of the condensed consolidated financial statements.
One of the Group's objectives is to minimise refinancing risk.
The Group therefore has a policy that the average maturity of its
committed bank facilities and private placement notes is at least
two years on average with a target of three years. At 30 June 2016,
the average maturity of the Group's facilities was 3.0 years (2015:
4.0 years).
The Group maintains certain committed floating rate facilities
with banks to ensure sufficient liquidity for its operations. The
undrawn committed facilities available to the Group, in respect of
which all conditions precedent had been met, were as follows:
Group
----------------------------------------------------- --------------
2016 2015
Expiry date GBPm GBPm
----------------------------------------------------- ------ ------
In less than one year - -
===================================================== ====== ======
In more than one year but not more than two years 150.0 -
===================================================== ====== ======
In more than two years but not more than five years 550.0 701.7
===================================================== ====== ======
In more than five years - -
----------------------------------------------------- ------ ------
700.0 701.7
----------------------------------------------------- ------ ------
In addition, the Group had GBP71.2m (2015: GBP71.2m) of undrawn
uncommitted facilities available at 30 June 2016.
5.4.2 Market risk (price risk)
5.4.2.1 Interest rate risk
The Group has both interest bearing assets and interest bearing
liabilities. Floating rate borrowings expose the Group to cash flow
interest rate risk and fixed rate borrowings expose the Group to
fair value interest rate risk.
The Group has a conservative treasury risk management strategy
and the Group's interest rates are fixed using both swaps and fixed
rate debt instruments. The Group's policy target is for 0-40% of
average borrowings over the three-year plan period to be at fixed
rates of interest. Due to the seasonality of the Group's funding
requirements, 108.6% (2015: 105.4%) of the Group's gross borrowings
were fixed as at 30 June 2016 and the average over the three-year
plan period is 42.4% (2015: 43.2%). Group interest rates are fixed
using both swaps and fixed rate debt instruments.
The exposure of the Group's financial liabilities to interest
rate risk is as follows:
Floating rate financial Fixed rate financial Non-interest bearing
liabilities liabilities financial liabilities Total
Group GBPm GBPm GBPm GBPm
-------------------------- ------------------------- -------------------------- ------------------------- --------
2016
========================== ========================= ========================== ========================= ========
Financial liabilities
(excluding derivatives) 112.8 64.7 1,870.2 2,047.7
========================== ========================= ========================== ========================= ========
Impact of interest rate
swaps (137.0) 137.0 - -
-------------------------- ------------------------- -------------------------- ------------------------- --------
Financial liability
exposure to interest
rate risk (24.2) 201.7 1,870.2 2,047.7
-------------------------- ------------------------- -------------------------- ------------------------- --------
2015
========================== ========================= ========================== ========================= ========
Financial liabilities
(excluding derivatives) 115.1 61.4 1,707.8 1,884.3
========================== ========================= ========================== ========================= ========
Impact of interest rate
swaps (137.0) 137.0 - -
-------------------------- ------------------------- -------------------------- ------------------------- --------
Financial liability
exposure to interest
rate risk (21.9) 198.4 1,707.8 1,884.3
-------------------------- ------------------------- -------------------------- ------------------------- --------
Floating interest rates on Sterling borrowings are linked to the
UK bank rate, LIBOR and money market rates. The floating rates are
fixed in advance for periods generally ranging from one to six
months. Short term flexibility is achieved through the use of
overdraft, committed and uncommitted bank facilities. The weighted
average interest rate for floating rate borrowings in 2016 was 3.6%
(2015: 3.1%).
US Dollar denominated private placement notes of GBP59.6m (2015:
GBP50.4m) were arranged at fixed interest rates and exposed the
Group to fair value interest rate risk. The weighted average
interest rate for fixed rate US Dollar denominated private
placement notes, after the effect of foreign exchange rate swaps,
for 2016 was 8.2% (2015: 8.1%) with, at 30 June 2016, a weighted
average period of 1.2 years (2015: 2.2 years) for which the rate is
fixed.
Sensitivity analysis
In the year ended 30 June 2016, if UK interest rates had been 50
basis points higher/lower, as this is a reasonably possible change,
and all other variables were held constant, the Group's pre-tax
profit would decrease/increase by GBP0.1m (2015: GBP0.9m), the
Group's post-tax profit would decrease/increase by GBPnil (2015:
GBP0.6m) and the Group's equity would decrease/increase by GBPnil
(2015: GBP0.6m).
5.4.2.2 Foreign exchange rate risk
As at 30 June 2016, the Group had fixed rate US Dollar
denominated private placement notes of $80.0m (2015: $80.0m). In
order to mitigate risks associated with the movement in the foreign
exchange rate the Group has entered into foreign exchange swap
arrangements all of which are designated as cash flow hedges, which
fully hedge the principal of its US Dollar denominated debt and the
US Dollar interest payments.
Details of the Group's foreign exchange swaps are provided in
note 5.3.2.
5.4.3 Credit risk
In the majority of cases, the Group receives cash upon legal
completion for private sales and receives advance stage payments
from registered providers for affordable housing. The Group has an
investment of GBP23.1m (2015: GBP25.6m) in a joint venture that
holds available for sale financial assets, which exposes the joint
venture to credit risk, although this is spread over a large number
of properties. Included within trade and other receivables GBP48.8m
(2015: GBP45.9m) is due from the Homes and Communities Agency in
respect of the Help to Buy scheme. Since this receivable is due
from a UK Government agency, the Group considers that this
receivable has an insignificant risk of default. Other than this,
the Group has no significant concentration of credit risk, as its
exposure is spread over a large number of counterparties and
customers.
The Group manages credit risk in the following ways:
-- The Group has a credit policy that is limited to financial
institutions with high credit ratings, as set by international
credit rating agencies, and has a policy determining the maximum
permissible exposure to any single counterparty.
-- The Group only contracts derivative financial instruments
with counterparties with which the Group has an ISDA Master
Agreement in place. These agreements permit net settlement, thereby
reducing the Group's credit exposure to individual
counterparties.
The maximum exposure to any counterparty at 30 June 2016 was
GBP144.4m (2015: GBP64.4m) of cash on deposit with a financial
institution.
5.4.4 Capital risk management (cash flow risk)
The Group's objectives when managing capital are to safeguard
its ability to continue as a going concern in order to provide
returns for shareholders and meet its liabilities as they fall due
whilst maintaining an appropriate capital structure.
The Group manages its share capital as equity, as set out in the
Statement of Changes in Shareholders' Equity; and its bank
borrowings (being overdrafts, loan notes and bank loans) and its
private placement notes as other financial liabilities.
The Group is subject to the prevailing conditions of the UK
economy and the quantum of the Group's earnings are dependent upon
the level of UK house prices. UK house prices are determined by the
UK economy and economic conditions including employment levels,
interest rates, consumer confidence, mortgage availability and
competitor pricing. The management of these operational risks is
set out in the principal risks and uncertainties in note 7.5.
In addition, the other methods by which the Group can manage its
short term and long term capital structure include: adjusting the
level of dividends and special cash payments paid to shareholders
(assuming the Group is paying a dividend or a special cash
payment); issuing new share capital; arranging debt to meet
liability payments; and selling assets to reduce debt.
5.5 Share capital
5.5.1 Ordinary share capital
2016 2015
GBPm GBPm
------------------------------------------------------------------------ ------ ------
Allotted and issued ordinary shares:
======================================================================== ====== ======
10p each fully paid: 1,003,607,066 ordinary shares (2015: 995,452,663) 100.4 99.5
------------------------------------------------------------------------ ------ ------
2016 2015
Options over the Company's shares granted during the year number number
----------------------------------------------------------- ---------- ----------
Options granted:
=========================================================== ========== ==========
Long Term Performance Plan 1,880,862 2,176,347
=========================================================== ========== ==========
Savings-Related Share Option Scheme 1,782,338 2,542,574
=========================================================== ========== ==========
CFO Scheme 121,880 -
=========================================================== ========== ==========
Deferred Bonus Plan 305,468 813,663
=========================================================== ========== ==========
Senior Management Incentive Scheme - 639,148
----------------------------------------------------------- ---------- ----------
4,090,548 6,171,732
----------------------------------------------------------- ---------- ----------
2016 2015
Allotment of shares during the year number number
------------------------------------------------------------- -------------- ------------
Allotted and issued ordinary shares:
============================================================= ============== ============
At 1 July 995,452,663 984,983,475
============================================================= ============== ============
Issued to satisfy early exercises under Sharesave schemes 106,614 218,051
============================================================= ============== ============
Issued to satisfy exercises under matured Sharesave schemes 1,968,683 3,622,372
============================================================= ============== ============
Issued to satisfy vesting of LTPP awards 4,620,159 6,590,688
============================================================= ============== ============
Issued to satisfy exercises under the Deferred Bonus Plan 1,458,947 38,077
------------------------------------------------------------- -------------- ------------
1,003,607,066 995,452,663
------------------------------------------------------------- -------------- ------------
5.5.2 Own shares reserve
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
Plan. 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.
2016 2015
--------------------------------------------------------------------------- ------------- --------------
Ordinary shares in the Company held in the EBT (number) 1,367,707 1,860,071
--------------------------------------------------------------------------- ------------- --------------
Market value of shares held in the EBT at 405.4p (2015: 614.5p) per share GBP5,544,684 GBP11,430,136
--------------------------------------------------------------------------- ------------- --------------
During the year the EBT purchased 150,000 shares and disposed of
642,364 shares in settlement of exercises under the Senior
Management Share Option Plan 2009/10 and the Senior Management
Incentive Scheme.
Section 6 - Directors and
employees
--------------------------
6.1 Retirement benefit obligations
The Group operates defined contribution and defined benefit
pension schemes.
Defined benefit pension scheme - The Directors engage a
qualified independent actuary to calculate the Group's asset in
respect of its defined benefit pension scheme. In calculating this
asset, it is necessary for actuarial assumptions to be made, which
include discount rates, salary and pension increases, price
inflation, the long term rate of return upon scheme assets and
mortality. As actual rates of increase and mortality may differ
from those assumed, the pension asset may differ from that included
in these condensed consolidated financial statements.
6.1.1 Defined contribution schemes
The Group operates defined contribution retirement benefit
schemes for all qualifying employees, under which it pays
contributions to an independently administered fund. Contributions
are based upon a fixed percentage of the employee's pay and once
these have been paid, the Group has no further obligations under
these schemes.
2016 2015
GBPm GBPm
------------------------------------------------------------------------- ------ ------
Contributions during the year
========================================================================= ====== ======
Group defined contribution schemes Consolidated Income Statement charge 8.4 8.1
------------------------------------------------------------------------- ------ ------
At the balance sheet date, there were outstanding contributions
of GBP0.6m (2015: GBP0.9m), which were paid on or before the due
date.
6.1.2 Defined benefit scheme
The Group operates a funded defined benefit pension scheme in
Great Britain, the Barratt Group Pension & Life Assurance
Scheme (the 'Scheme'), which, with effect from 30 June 2009, ceased
to offer future accrual of defined benefit pensions. Alternative
defined contribution pension arrangements are in place for current
employees.
The Scheme provides benefits to members based on their length of
service and their salary in the final years leading up to
retirement or date of ceasing active accrual if earlier. The Group
operates the Scheme under the UK regulatory framework, with a
legally separate fund that is Trustee administered. The Trustees
are responsible for ensuring that the Scheme is sufficiently funded
to meet current and future benefit payments and for the investment
policy with regard to scheme assets.
The Trustees must agree a funding plan with the Group such that
any funding shortfall is expected to be met by additional
contributions and investment performance. In order to assess the
level of contributions, triennial valuations are carried out using
prudent assumptions.
The most recent full actuarial valuation of the Scheme was
carried out at 30 November 2013. The results of this valuation have
been updated to 30 June 2016 by a qualified independent actuary.
The Group agreed with the Trustees of the Scheme to make
contributions to the Scheme of GBP13.3m per annum until 30 November
2015 and then GBP9.5m per annum until 31 December 2016 to address
the Scheme's actuarial deficit. The Group also continues to meet
the Scheme's administration expenses and Pension Protection Fund
levy.
At the balance sheet date, there were outstanding contributions
of GBP0.8m (2015: GBP1.1m).
The Scheme exposes the Group to a number of risks, the most
significant being:
Risk Description
----------------------- ---------------------------------------------------------------------------------------------
Volatile asset returns The defined benefit obligation ('DBO') is calculated using a discount rate set with
reference
to high quality corporate bond yields. If assets underperform this discount rate, this will
create a plan deficit. The Scheme holds a proportion of its assets in equities and other
growth
assets which are expected to outperform corporate bonds in the long term. However, returns
are likely to be volatile in the short term, potentially resulting in short term cash
requirements
and an increase in the defined benefit obligation recorded on the Balance Sheet. The
allocation
to growth assets is monitored to ensure it remains appropriate given the Scheme's long term
objectives.
----------------------- ---------------------------------------------------------------------------------------------
Changes in bond yields A decrease in corporate bond yields will increase the funding and accounting liabilities,
although this will be partially offset by an increase in the value of the Scheme's
investments
in corporate and government bonds.
----------------------- ---------------------------------------------------------------------------------------------
Inflation risk A significant proportion of the DBO is indexed in line with price inflation, with higher
inflation
leading to higher liabilities.
----------------------- ---------------------------------------------------------------------------------------------
Life expectancy The majority of the Scheme's obligations are to provide a pension for the life of each of
the members, so increases in life expectancy will result in an increase in the liabilities.
----------------------- ---------------------------------------------------------------------------------------------
For the purposes of calculating the accounting costs and
obligations of the Scheme, the assets of the defined benefit scheme
have been calculated at fair (bid) value. The liabilities of the
Scheme have been calculated at each balance sheet date using the
following assumptions:
Principal actuarial assumptions 2016 2015
--------------------------------------------------------------- ------ ------
Weighted average assumptions to determine benefit obligations
=============================================================== ====== ======
Discount rate 2.90% 3.80%
=============================================================== ====== ======
Rate of price inflation 2.80% 3.30%
--------------------------------------------------------------- ------ ------
Weighted average assumptions to determine net cost
=============================================================== ====== ======
Discount rate 3.80% 4.30%
=============================================================== ====== ======
Rate of price inflation 3.30% 3.30%
--------------------------------------------------------------- ------ ------
Members are assumed to exchange 19% of their pension for cash on
retirement. The assumptions have been chosen by the Group following
advice from Mercer Limited, the Group's actuarial advisers.
The following table illustrates the life expectancy for an
average member on reaching age 65, according to the mortality
assumptions used to calculate the Scheme liabilities:
Assumptions Male Female
------------------------------------------------------------ ----------- -----------
Retired member born in 1951 (life expectancy at age 65) 23.4 years 25.9 years
------------------------------------------------------------ ----------- -----------
Non-retired member born in 1971 (life expectancy at age 65) 25.2 years 27.9 years
------------------------------------------------------------ ----------- -----------
The base mortality assumptions are based upon the S1NA mortality
tables with an adjustment to allow for the Scheme members being 1.5
years younger than the population of the S1NA mortality tables.
Allowance for future increases in life expectancy is made in line
with the CMI 2014 projections with a long term trend of 1.25% per
annum (2015: 1.25% per annum).
The sensitivities regarding the principal assumptions used to
measure the Scheme liabilities are set out below:
Increase in Scheme
liabilities
Assumptions Change in assumption GBPm %
------------------- ---------------------- ----- -------------------
Discount rate Decrease by 0.1% 8.5 2.1
------------------- ---------------------- ----- -------------------
Rate of inflation Increase by 0.1% 4.6 1.1
------------------- ---------------------- ----- -------------------
Life expectancy Increase by 1 year 15.3 3.8
------------------- ---------------------- ----- -------------------
The amounts recognised in the Consolidated Income Statement were
as follows:
2016 2015
GBPm GBPm
------------------------------------------------------------------------------------------- ------- -------
Interest cost 13.6 13.9
=========================================================================================== ======= =======
Interest income (14.0) (14.3)
------------------------------------------------------------------------------------------- ------- -------
Total pension income recognised in net finance costs in the Consolidated Income Statement (0.4) (0.4)
------------------------------------------------------------------------------------------- ------- -------
Total pension income recognised in the Consolidated Income Statement (0.4) (0.4)
------------------------------------------------------------------------------------------- ------- -------
The amounts recognised in the Group Statement of Comprehensive
Income were as follows:
2016 2015
GBPm GBPm
-------------------------------------------------------------------------------------------------- ------- -------
Expected return less actual return on Scheme assets (34.9) (25.1)
================================================================================================== ======= =======
Loss arising from changes in the assumptions underlying the present value of benefit obligations 43.9 36.6
================================================================================================== ======= =======
Total pension cost recognised in the Group Statement of Comprehensive Income 9.0 11.5
-------------------------------------------------------------------------------------------------- ------- -------
The amount included in the Group Balance Sheet arising from
obligations in respect of the Scheme is as follows:
2016 2015
GBPm GBPm
-------------------------------------------------------------------------------------- -------- --------
Present value of funded obligations 405.4 367.5
====================================================================================== ======== ========
Fair value of Scheme assets (413.5) (372.8)
-------------------------------------------------------------------------------------- -------- --------
Surplus for funded Scheme/net asset recognised in the Group Balance Sheet at 30 June (8.1) (5.3)
-------------------------------------------------------------------------------------- -------- --------
2016 2015
GBPm GBPm
------------------------------------------------------------------- ------- -------
Net asset for defined benefit obligations at 1 July (5.3) (3.1)
=================================================================== ======= =======
Contributions paid to the Scheme (11.4) (13.3)
=================================================================== ======= =======
Income recognised in the Consolidated Income Statement (0.4) (0.4)
=================================================================== ======= =======
Amounts recognised in the Group Statement of Comprehensive Income 9.0 11.5
------------------------------------------------------------------- ------- -------
Net asset for defined benefit obligations at 30 June (8.1) (5.3)
------------------------------------------------------------------- ------- -------
A deferred tax liability of GBP1.6m (2015: GBP1.1m) has been
recognised in the Group Balance Sheet in relation to the pension
asset.
Movements in the present value of defined benefit obligations
were as follows:
2016 2015
GBPm GBPm
------------------------------------------------- ------- -------
Present value of benefit obligations at 1 July 367.5 327.0
================================================= ======= =======
Interest cost 13.6 13.9
================================================= ======= =======
Actuarial loss 43.9 36.6
================================================= ======= =======
Benefits paid from Scheme (19.6) (10.0)
------------------------------------------------- ------- -------
Present value of benefit obligations at 30 June 405.4 367.5
------------------------------------------------- ------- -------
Movements in the fair value of Scheme assets were as
follows:
2016 2015
GBPm GBPm
---------------------------------------- ------- -------
Fair value of Scheme assets at 1 July 372.8 330.1
======================================== ======= =======
Interest income 14.0 14.3
======================================== ======= =======
Actuarial gain on Scheme assets 34.9 25.1
======================================== ======= =======
Employer contributions 11.4 13.3
======================================== ======= =======
Benefits paid from Scheme (19.6) (10.0)
---------------------------------------- ------- -------
Fair value of Scheme assets at 30 June 413.5 372.8
---------------------------------------- ------- -------
The analysis of Scheme assets was as follows:
2016 2015
GBPm % GBPm %
-------------------------- ------ ------ ------ ------
Quoted equity securities 96.3 23.3 91.8 24.6
========================== ====== ====== ====== ======
Debt securities 315.8 76.4 279.7 75.0
========================== ====== ====== ====== ======
Other 1.4 0.3 1.3 0.4
-------------------------- ------ ------ ------ ------
Total 413.5 100.0 372.8 100.0
-------------------------- ------ ------ ------ ------
The actual return on Scheme assets was as follows:
2016 2015
GBPm GBPm
-------------------------------- ------ ------
Actual return on Scheme assets 48.9 39.4
-------------------------------- ------ ------
The expected employer contribution to the Scheme in the year
ending 30 June 2017 is GBP9.5m.
The Group has obtained legal advice on the rights to the Group's
defined benefit pension scheme's assets after the death of the last
member. Based on this advice, the Group has concluded that it is
appropriate to recognise an asset related to this scheme.
Section 7 - Contingencies, related parties,
seasonality and principal risks
--------------------------------------------
7.1 Contingent liabilities
7.1.1 Contingent liabilities related to subsidiaries
Certain subsidiary undertakings have commitments for the
purchase of trading stock entered into in the normal course of
business.
In the normal course of business, the Group has given
counter-indemnities in respect of performance bonds and financial
guarantees. Management estimate that the bonds and guarantees
amount to GBP482.0m (2015: GBP588.6m), and confirm that at the date
of these condensed consolidated Financial Statements the
possibility of cash outflow is considered minimal and no provision
is required.
Following correspondence with an industry-wide final salary
pension scheme, there is a risk of an obligation arising in respect
of section 75 pension scheme funding for employees of a subsidiary
who left the Group on disposal of their business and assets. No
provision has been recognised in relation to this matter as it is
not considered probable that this will result in an outflow of
economic resources at present and the amount of any potential
outflow cannot be reliably estimated.
7.1.2 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 GBP56.5m at 30 June 2016 (2015: GBP39.8m). The Group has
also provided principal guarantees of GBP9.0m (2015: GBP12.0m) and
cost and interest overrun guarantees in relation to the borrowings
of a number of the Group's London joint ventures. At 30 June 2016,
no cost or interest overruns had been incurred (2015: GBPnil). The
Group's maximum exposure under these cost and interest overrun
guarantees is estimated at GBP17.7m as at 30 June 2016 (2015:
GBP15.7m).
At 30 June 2016, the Group has an obligation to repay GBP0.9m
(2015: 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.
There are no contingent liabilities in relation to associates at
30 June 2016.
7.1.3 Contingent liabilities related to legal claims
Provision is made for the Directors' best estimate of all known
material legal claims and all legal actions in progress. The Group
takes legal advice as to the likelihood of success of claims and
actions and no provision is made (other than for legal costs) where
the Directors consider, based on such advice, that claims or
actions are unlikely to succeed, or a sufficiently reliable
estimate of the potential obligations cannot be made.
No contingent liability in respect of such claims has been
recognised.
7.2 Related party transactions
7.2.1 Remuneration of key personnel
Disclosures related to the remuneration of key personnel as
defined in IAS 24 'Related Party Disclosures' will be provided in
the 2016 Annual Report and Accounts.
7.2.2 Transactions between the Group and its joint ventures
The Group has 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 GBP14.3m (2015: GBP11.1m) and GBP1.3m (2015:
GBP2.2m) 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.
During the year the Group received dividends totalling GBP28.1m
(2015: GBP27.0m) from its joint ventures.
The Group has made loans of GBP84.9m (2015: GBP87.6m) to its
joint ventures which are included within Group investments
accounted for using the equity method. The amount of other
outstanding payables to the Group from its joint ventures at 30
June 2016 totalled GBP0.4m (2015: GBP6.9m).
The amount of outstanding loans and other amounts due from the
Group to its joint ventures totalled GBP47.6m (2015: GBPnil).
The Group's contingent liabilities relating to its joint
ventures are disclosed in note 7.1.2.
7.2.3 Transactions between the Group and its associates
The amount of outstanding loans due to the Group from its
associates at 30 June 2016 was GBPnil (2015: GBPnil). There were no
other amounts outstanding to the Group from its associates as at 30
June 2016.
The Group's contingent liabilities relating to its associates
are disclosed in note 7.1.2.
7.2.4 Property purchase by a Director of Barratt Developments PLC
The Board and certain members of Senior Management are related
parties within the definition of IAS 24 (Revised) 'Related Party
Disclosures' ('IAS 24') and the Board are related parties within
the definition of Chapter 11 of the UK Listing Rules ('Chapter
11').
The Group entered into the following transaction which, for the
purposes of IAS 24 is considered to be a 'related party
transaction'.
In August 2014, Mark Clare, at the time, Group Chief Executive,
reserved a flat (including a car parking space) from Fulham Wharf
LLP, a joint venture partnership between BDW Trading Limited (the
Group's main trading subsidiary) and London and Quadrant Housing
Trust (L&Q), at a purchase price of GBP1,692,350. This purchase
was conducted at a fair and reasonable market price based on four
independent market valuations and similar comparable transactions
at that time. An amount of GBP2,500 was paid on reservation and a
deposit of GBP166,735 was paid on 13 October 2014. The remaining
balance was paid on completion on 17 June 2016 in accordance with
the Group's normal terms of trading.
Fulham Wharf LLP is not controlled by and is not a 'subsidiary
undertaking' of the Group.
On notification by Mark Clare of the above transaction, the
Board sought advice from its legal advisers and corporate brokers
in respect of the application of Chapter 11 and section 190 did not
extend to LLPs and therefore the provisions of Chapter 11 and
section 190 did not apply to this transaction. Consequently, no
shareholder approval was required for this transaction.
In June 2016, David Thomas notified the Board of his and his
daughter's intention to buy one property each at the BDW Trading
Limited site at Cane Hill. These transactions have not impacted
these condensed consolidated financial statements and further
information relating to this can be found in the Annual Report and
Accounts.
There have been no 'smaller related party transactions' as
defined in Listing Rule 11.1.10R for the year ended 30 June 2016 or
in the year ended 30 June 2015.
7.3 Seasonality
The Group, in common with the rest of the housebuilding
industry, is subject to the main spring and autumn house selling
seasons, which also result in peaks and troughs in the Group's debt
profile and working capital requirements. Therefore, any weakness
in the macroeconomic environment which affects these peak selling
seasons can have a disproportionate impact upon the Group's results
for the year.
7.4 Statutory accounts
The condensed consolidated financial statements for the year
ended 30 June 2016 have been approved by the Directors and prepared
in accordance with International Financial Reporting Standards
('IFRS') as issued by the International Accounting Standards Board
('IASB'), International Financial Reporting Interpretations
Committee ('IFRIC') interpretations and Standing Interpretations
Committee ('SIC') interpretations as adopted and endorsed by the
European Union ('EU').
Barratt Developments PLC's 2016 Annual Report and Accounts will
be circulated to shareholders in October 2016 and will be made
available on its website www.barrattdevelopments.co.uk at that
point. The financial information set out herein does not constitute
the Company's statutory accounts for the year ended 30 June 2016
(as defined in Sections 434 and 436 of the Companies Act 2006) but
is derived from the 2016 Annual Report and Accounts and the
accounts contained therein. Statutory accounts for 2016 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting which will be held on 16 November 2016. The
auditor has reported on these accounts; their report was
unqualified and did not contain statements under Section 498 (2) or
(3) of the Companies Act 2006.
The comparative figures for the year ended 30 June 2015 are not
the Company's statutory accounts for the financial year but are
derived from those accounts which have been reported on by the
Company's auditor and which were delivered to the Registrar of
Companies. The 2015 report of the auditor is unqualified and does
not contain statements under Section 498 (2) or (3) of the
Companies Act 2006.
Whilst the financial information included in this Annual Results
Announcement has been prepared in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS as adopted for use in the EU.
7.5 Principal risks and uncertainties
Our performance is subject to a number of risks. The Board has
conducted a robust assessment of the principal risks facing the
business. Whilst the principal risks for the Group related to the
execution of its business strategy have not changed since 2015, the
likelihood of the risk factors occurring may have changed.
The principal risks are set out in the table below.
Risk A: Economic environment, B: Land Purchasing C: Liquidity
including housing
demand and mortgage
availability
------------- ------------------------- ----------------------- --------------------
Potential Changes in the The ability Unavailability
impact UK and European to secure sufficient of sufficient
macroeconomic consented land borrowing
environments, and strategic facilities
including but land options to enable
not limited to at appropriate the servicing
unemployment, cost and quality of liabilities
flat or negative to provide profitable (including
economic growth, growth. pension funding)
buyer confidence, and the inability
availability to refinance
of mortgage finance facilities
particularly as they fall
for higher loan due, obtain
to values including surety bonds,
government backed or comply
schemes, interest with borrowing
rates, competitor covenants.
pricing, falls Furthermore,
in house prices there are
or land values, risks from
may lead to a management
fall in the demand of working
or price achieved capital such
for houses, which as conditional
in turn could contracts,
result in impairments build costs,
of the Group's joint ventures
inventories, and the cash
goodwill and flows related
intangible assets. to them.
------------- ------------------------- ----------------------- --------------------
Mitigation Board, Executive All potential Committed
Committee, regional land acquisitions bank facilities
and divisional are subject and private
management review to formal appraisal placement
Quarterly site and approval notes of around
valuations by the Land GBP850m with
Comprehensive Committee maturities
sales policies Divisional, ranging from
and procedures regional and 2016 to 2021
including transparency Group review Regular forecasts
towards mortgage of land currently of working
lenders owned, committed capital and
and identified cash requirements
against requirements and compliance
with banking
covenants
Policy requiring
minimum headroom
of GBP150m
of drawings
against committed
facilities
------------- ------------------------- ----------------------- --------------------
The The majority Securing more Availability
opportunity of our customers sites that at of sufficient
require mortgages least meet our committed
to purchase their hurdle rates and surety
new home. Buyer of 20% gross facilities
confidence, the margin and 25% ensures that
availability ROCE will enable the Group
of mortgages disciplined can manage
and mortgage volume growth. changes in
interest rates the economic
are affected environment
by the economic and take advantage
environment. of appropriate
land buying
and operational
opportunities
and deliver
sustainable
shareholder
value.
------------- ------------------------- ----------------------- --------------------
Risk D: Attracting E: Availability F: Government
and retaining of raw materials, regulation
high-calibre sub-contractors and planning
employees and suppliers policy
---------------- ---------------------- -------------------------- ----------------------
Potential Inability to Shortages or Inability
impact recruit and/or increased costs to adhere
retain employees of materials to the increasingly
with appropriate and skilled stringent
skill sets labour, the and complex
or sufficient failure of a regulatory
numbers of key supplier environment,
such employees. or the inability including
to secure supplies planning and
upon appropriate technical
credit terms requirements
could increase affecting
costs and delay the housing
construction. market and
regulatory
requirements
more generally.
---------------- ---------------------- -------------------------- ----------------------
Mitigation Comprehensive Centralised Considerable
Human Resources team procures in-house technical
programme including the majority and planning
apprenticeship of the Group's expertise
schemes, a materials from devoted to
graduate development within the UK complying
programme, including sub-contractor with regulations
succession materials, ensuring and achieving
planning and consistent quality implementable
training academies and costs and planning consents
tailored to security of Rigorous design
each discipline supply standards
Monthly monitoring for the homes
of employee Seek to establish and places
statistics and maintain we develop
including turnover long term supplier Policies and
and absence and sub-contractor technical
Exit interviews partnerships guidance manuals
Annual employee with all of for employees
engagement our significant on regulatory
survey supply agreements compliance
Remuneration fixed in advance, and the standards
benchmarked usually for of business
against industry 12 months conduct expected
competitors
Group policies
include tendering,
the requirement
for multiple
suppliers for
both labour
contracts and
material supplies
and establish
contingency
plans should
any key supplier
fail
---------------- ---------------------- -------------------------- ----------------------
The opportunity Skilled employees Sufficient material Securing sufficient,
are critical and skilled appropriate
to deliver sub-contractor planning permissions
the Group's availability upon new sites
strategy of will enable will enable
disciplined disciplined the Group
growth, improving volume growth. to deliver
key financial disciplined
metrics through volume growth.
a focus on
efficiency
and the continued
delivery of
attractive
cash returns.
---------------- ---------------------- -------------------------- ----------------------
Risk G: Construction H: Joint I: Safety, J: IT
and new technologies ventures health and
and consortia environmental
---------------- ----------------------- ------------------- --------------------- -----------------
Potential Failure to Large development Health and Failure
impact identify and projects, safety or of the
achieve key some of environmental Group's
construction which involve breaches IT systems
milestones, joint ventures can result (whether
due to factors or consortia in injuries due to
including arrangements to employees, cyber-attacks
the impact and/or commercial sub-contractors or other
of adverse developments, and site causes)
weather conditions, are complex visitors, in particular
the failure and capital delays in those
to identify intensive construction relating
cost overruns and changes or increased to surveying
promptly, may negatively costs, reputational and valuation,
design and impact upon damage, could
construction cash flows criminal adversely
defects, and or returns. prosecution impact
exposure to and civil the performance
environmental litigation. of the
liabilities, Group.
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.
---------------- ----------------------- ------------------- --------------------- -----------------
Mitigation Executive All potential Health and Centrally
Committee, joint ventures safety team maintained
regional and are subject Regular IT systems
divisional to formal health and Fully-tested
reviews appraisal safety audits disaster
Any alternative and approval and development recovery
forms of construction by the Group's monitoring programme
and building Land Committee visits Regular
technologies and the Group health reviews
and the quality Board and safety to seek
of materials Once operational, and environmental to reduce
are subject the performance policies the risk
to evaluation of joint and procedures of successful
by external ventures cyber-attacks
and internal and consortia Board health
technical are subject and safety
experts, including to regular visits reinforces
the NHBC, review the importance
to ensure of Health,
compliance Safety and
with all building Environmental
and other compliance
regulations
Quarterly
site valuations
Monitoring
of environmental
impact indicators
Maintenance
of appropriate
insurance
cover
---------------- ----------------------- ------------------- --------------------- -----------------
The opportunity Modern construction Securing Continued Integrated
methods are more joint focus upon IT systems
being assessed venture health and enhance
and implemented sites that safety to business
where appropriate at least seek to control
to reduce meet our reduce injury and drive
the risks hurdle rates rates and efficiency.
inherent in of 20% gross manage the
the construction margin and risks inherent
process and 25% ROCE in the construction
to help address will enable process.
the shortage disciplined
of skilled volume growth.
trades people.
---------------- ----------------------- ------------------- --------------------- -----------------
Statement of Directors' Responsibilities
Financial Statements and accounting records
The Directors are responsible for preparing the Annual Report
and Accounts including the Directors' remuneration report and the
Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. The Directors are required by
the International Accounting Standards Regulation (the 'IAS
Regulation') to prepare the Group Financial Statements under
International Financial Reporting Standards as adopted by the
European Union ('IFRS') and have also elected to prepare the Parent
Company Financial Statements in accordance with IFRS. The Financial
Statements are also required by law to be properly prepared in
accordance with the Companies Act 2006 and Article 4 of the IAS
Regulation. Under the Disclosure and Transparency Rules, the
Directors must not approve the Accounts unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
International Accounting Standard 1 requires that Financial
Statements present fairly for each financial year the Company's
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and presentation
of financial statements'. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable
IFRS. Directors are also required to:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Fair, balanced and understandable
The Board considers, on the advice of the Audit Committee, that
the Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company's position, performance,
business model and strategy.
Directors' responsibility statement
The Directors confirm that, to the best of each person's
knowledge:
a) the Group and Parent Company Financial Statements in the
Annual Report and Accounts, which have been prepared in accordance
with IFRS, Standing Interpretation Committee interpretations as
adopted and endorsed by the European Union, International Financial
Reporting Interpretations Committee interpretations and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and of the
Group taken as a whole; and
b) the Annual Report and Accounts includes a fair review of the
development and performance of the business and the position of the
Company and the Group taken as a whole, together with a description
of the principal risks and uncertainties they face.
The Directors of the Company and their functions are listed on
pages 46 and 47 of the Annual Report and Accounts.
By order of the Board
David Thomas Neil Cooper
Chief Executive Chief Financial Officer
6 September 2016 6 September 2016
The Directors' Report from pages 46 to 104 inclusive of the
Annual Report and Accounts was approved by the Board on 6 September
2016 and is signed on its behalf by:
Tina Bains
Company Secretary
(1) Includes joint venture ('JV') completions in which the Group
has an interest
(2) Operating margin is profit from operations divided by
revenue
(3) 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
obligations and derivative financial instruments
(4) Net cash is defined as cash and cash equivalents, bank
overdrafts, interest bearing borrowings and foreign exchange
swaps.
(5) FY refers to the Financial Year ended 30 June
Note: In this Annual Results Announcement, the 'Company' is
defined as Barratt Developments PLC and the 'Group' relates to the
Company together with its subsidiary undertakings.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSDFAMFMSESU
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