Chair's Statement

Making sustainable living a reality, creating strong communities

Since taking over as Chair on 30 June 2023, I have met many of our stakeholders, including employees, customers, shareholders, supply chain partners and sub-contractors.

It is evident that we have a strong culture and a desire to ensure colleagues can develop to their full potential within a diverse, safe and inclusive workplace and we are fully committed to delivering high-quality homes to our customers whilst protecting the environment.

Colleagues across the business are passionate and helped in the development and launch, earlier this year, of our new purpose: "Making sustainable living a reality, building strong communities". Our new purpose is also supported by refreshed values which reflect the ever-changing needs of our stakeholders, the environment and our desire to lead the future of housebuilding. Input was also sought from external stakeholders to help shape our new purpose and values.

Our performance

Barratt has delivered a solid operational performance over the past 12 months, at the upper end our expectations against a tough trading backdrop encompassing political, economic and interest rate instability. Importantly, we have done so whilst maintaining our industry-leading quality, customer service and sustainability performance.

Our balance sheet remains strong, with net cash of £868.5m, and provides the financial strength and flexibility to ensure we can manage and deliver the optimal integration of the Redrow business, whilst maintaining a positive and proactive approach to organic growth opportunities.

I am incredibly proud of the external recognition we have received over the past 12 months:

·	We were awarded the Home Builders Federation (HBF) five-star status for the 15th year in a row, making us the only national housebuilder to have achieved this.
·	Our site managers secured 89 NHBC Pride in the Job awards, again more than any other housebuilder for a record 20th year.
·	We maintained our position as the only UK housebuilder on the CDP Climate Change A List for Leadership, one of fewer than 365 companies worldwide.

 

Sustainability

We have continued to deliver against our Building Sustainably framework which is designed to drive positive change for nature, places and people. This is enabling us to drive innovation, reduce costs and enhance our competitiveness.

The housebuilding industry's impact on climate change makes it imperative that we continually scrutinise and challenge the ways in which we operate and reduce our environmental impact. The successful opening of our new Oregon Timber Frame manufacturing facility near Derby has significantly expanded our capacity to build more homes using timber frame and will help towards meeting the requirements of the Future Homes Standard and reduce on-site labour requirements. It will also deliver benefits to the environment by reducing the embodied carbon used in build, and through thermal efficiency, reduce emissions generated when the home is occupied.

Industry collaboration

I am also pleased that Barratt is playing a leading role in the Future Homes Hub with David Thomas, our Chief Executive, chairing the organisation. The Future Homes Hub is enabling collaboration between Government, housebuilders, supply chain partners, mortgage providers, valuers and planners to deliver both the country's legislated targets to 2050 and our own carbon emission reduction targets to 2040.

Board changes

Nigel Webb joined the Board as a Non- Executive Director in October 2023, bringing a wealth of property, construction and land experience to the Board.

Subject to obtaining CMA clearance of the Redrow acquisition, Matthew Pratt, Geeta Nanda and Nicky Dulieu will join the Board in the coming months. Matthew will join as Chief Executive Officer, Redrow and Group Executive Director. Geeta and Nicky will join as independent Non-Executive Directors.

Shareholder returns

The Board paid an interim dividend for FY24 of 4.4 pence per share (FY23: interim dividend 10.2 pence per share) and is pleased to recommend a final FY24 dividend of 11.8 pence per share (FY23: final dividend of 23.5 pence per share) in line with our dividend policy of maintaining cover at 1.75 times adjusted earnings per share. Subject to shareholder approval, the final dividend will be paid on 1 November 2024 to shareholders on the register at the close of business on 27 September 2024. The total proposed dividend for FY24, including the interim dividend, is 16.2 pence per share (FY23: 33.7 pence per share) - lower than last year reflecting the reduction in adjusted basic earnings per share.

The Board regularly reviews its approach to capital allocation. With the Redrow acquisition completed, but CMA clearance outstanding, we will assess the capital requirements for the enlarged group taking into account current market conditions, our obligations with respect to building safety and our desire to be active in the land market. We will provide an update on our policy along with our first half results in February 2025.

CMA Market Study and CMA investigation

The CMA completed its Housing Market Study and issued its final report in February 2024. The CMA drew clear and fair conclusions on how the planning system has negatively impacted the housebuilding industry and its detrimental impact on new housing delivery across the country over successive decades.

On 26 February 2024, the CMA also launched an investigation into suspected breaches of competition law, relating to the exchange of competitively sensitive information by eight housebuilders, including Barratt and Redrow. This investigation remains in its early stages and we continue to co-operate with the CMA.

The future

The housing market faces ongoing challenges. The current interest rate environment continues to impact mortgage affordability and the ability of many first-time buyers to unlock mortgage qualification through deposit savings. There also remain uncertainties around the speed and scale of future economic, employment and earnings growth, which will be key determinants on the future direction of consumer confidence and spending. We welcome the policy changes proposed by the new UK Government which suggest a real commitment to unlock the planning system, drive national targets for housebuilding growth and support the industry in delivering the homes, across all tenures, the country so desperately needs.

The Board recognises that it needs to manage Barratt through what may be another challenging year for the market whilst delivering a smooth, efficient and effective integration of the Redrow business once CMA clearance has been obtained. We remain focused on managing the risks and challenges within our control, whilst ensuring we are in the best possible position to create long-term value for all our stakeholders. Our operating disciplines, forward order book and strong financial position provide us with the platform to adjust to changes in the operating and political environment in the year ahead.

Finally, on behalf of the Board, I would like to express our thanks to all our colleagues, subcontractors and our supply chain partners for their commitment to the Group, both over the last year and as we look forward to the exciting opportunities ahead bringing together the Barratt and Redrow businesses. I look forward to meeting many more colleagues across the enlarged Group in the coming year.

Caroline Silver

Chair

3 September 2024

 

Chief Executive's Statement

Introduction

The past year has proved challenging for both the housebuilding industry and homebuyers, with cost-of-living pressures, much higher mortgage rates and limited consumer confidence having a negative impact on housing market activity. Against this backdrop, we have remained focused on delivering high-quality, energy-efficient and sustainable homes across the country. We have driven revenue to support our business as well as our supply chain partners to position us to meet the growing shortfall in new homes supply. We have been rigorous in controlling our build activity, managing our cost base and being highly selective in our land buying, whilst ensuring we continue to lead the industry through our unwavering commitment to build quality, customer service, social responsibility and sustainability.

We also launched our new purpose during the year which is anchored around sustainability and building strong communities. Our new values are focused on our customers, on doing it right and doing it together, and making things happen. This framework formalises the culture and principles which have driven our success to date. 

The acquisition of Redrow

Against this challenging backdrop, we have proactively considered opportunities to strengthen our business and give us an even stronger platform from which to deliver sustainable growth and meet housing needs throughout Great Britain. This process culminated in the announcement in February 2024 of the proposed acquisition of Redrow plc, which completed on 21 August 2024. We are working with the CMA to address the findings of its Phase 1 competition review which is expected to complete by mid-October 2024.  We are excited about the opportunities for the combined group, which creates an exceptional UK housebuilder with strong quality, customer service and sustainability credentials.

Performance summary

We delivered a solid operating performance in FY24, at the upper end of our expectations, supported by the commitment, flexibility and determination of our employees, sub-contractors and supply chain partners, including:

·	Total home completions of 14,004 (FY23: 17,206).
·	16.5% adjusted gross margin (FY23: 21.2%) and adjusted gross profit of £689.0m (FY23: £1,130.4m). The reduction in adjusted gross profit reflected: ·      stabilisation of customer demand at lower levels; ·      softening house prices; ·      ongoing, but moderating, build cost inflation; and ·      the operational gearing impact of lower home completions.
·	The impact of adjusting items, which reflected legacy property costs associated with building safety-related remediation activities resulted in a reported gross profit of £509.5m (FY23: £974.9m) and a reported gross margin of 12.2% (FY23: 18.3%).
·	Adjusted profit before tax of £385.0m (FY23: £884.3m).
·	Reported profit before tax, after deducting adjusting items, of £170.5m (FY23: £705.1m).
·	Maintained balance sheet strength with year-end net cash of £868.5m (FY23: £1,069.4m) after dividend payments of £270.6m (FY23: £360.0m), legacy property related cash expenditure of £91.5m (FY23: £32.9m) and a £33.9m reduction in land creditors (FY23: £226.9m reduction).
·	ROCE reduced to 9.5% (FY23: 22.2%) reflecting reduced profitability.

 

Anticipating a more challenging backdrop, we set four strategic priorities in summer 2023 which supported our performance through FY24.

Strategic Priorities - FY24 progress

1.     Driving revenue through the targeted use of incentives for private purchasers and increased sales into the private rented and social housing sectors:

·	Price deflation slowed on our underlying private home reservations, from 5.6% in H1 to 2.7% in H2
·	Private rented sector home completions increased by 306.2% to 1,048 homes (FY23: 258 homes).
·	Multi-unit sales, including those to registered providers, increased by 46.9% to 767 homes (FY23: 522 homes).

2.     Controlling build activity and managing our costs:

·	We aligned our site-based construction activity to lower reservations, with an average of 257 equivalent homes (including JVs) constructed each week in FY24, 20.2% below the 322 average equivalent homes, built weekly, in FY23.
·	We reduced our headcount by a cumulative 12% through to 30 June 2024 from 30 September 2022, delivered through our ongoing recruitment freeze. This compared with a 6% cumulative reduction from 30 September 2022 through to 30 June 2023.

3.     Maintaining our highly selective approach to land buying:

·	We approved 58 net site additions, equating to 12,439 plots in the year with activity weighted to the second half of the year.
·	We continued to rigorously apply our long-standing hurdle requirements for new land investment, at a minimum gross margin of 23% and ROCE of 25%.
·	Through our long-standing relationships, and industry-leading reputation, we have concluded important deals with both public and private landowners, which will deliver significant development pipelines over the coming years.

4.     Leading the industry around customer service, build quality, social responsibility and sustainability:

·	We maintained our five-star HBF customer satisfaction status with the latest rolling annual recommend score of 93%, the highest score for UK national housebuilders.
·	We also maintained our industry leadership position among the major UK housebuilders, registering the lowest NHBC Reportable Items per inspection at 0.13 through FY24 (FY23: 0.16).
·	The Barratt Foundation reached a significant milestone, delivering more than £10m of funding for local and national charities since its launch in 2021.
·	We were recognised, once again, as the leading national sustainable housebuilder by NextGeneration and received their Gold Award for the eighth consecutive year.

These priorities supported our solid operational and financial performance during FY24, protected our balance sheet and our strong financial position, and strengthened our credentials with our customers, building materials suppliers, landowners and wider stakeholders.

Responsible development

Keeping people safe

Our first priority is always to provide a safe working environment for all of our employees and subcontractors, and we are committed to achieving the highest industry health and safety standards.

We were deeply saddened by the tragic accidental death of a sub-contractor at one of our sites in November 2023.

During FY24, despite concerted campaigns to raise health and safety issues, our Injury incidence rate increased to 302 (FY23: 289) per 100,000 workers whilst we improved our SHE audit compliance to 97% (FY23: 96%).

We remain focused on improving our site-based processes and procedures, challenging unsafe behaviours and building on our health and safety performance through on-site induction training, safety awareness for all personnel and developing our site managers' vigilance to health and safety risks on site.

Fire safety and external wall systems

We continue to make progress with the assessment and remediation of buildings covered under the Building Safety Self Remediation Terms and Contract, to which the Group became a signatory on 13 March 2023.

Around 53% of our portfolio under review has been assessed under the Fire Risk Assessment of External Walls ('FRAEW') and has an appropriate PAS 9980 assessment in place. Through inspections and testing in FY24, we identified a further 26 buildings requiring potential remedial works (FY23: 65 buildings) and 42 buildings were either successfully remediated or were assessed as not requiring remediation (FY23: 10 buildings). As a result, at 30 June 2024, we have an ongoing portfolio of 262 buildings across 92 developments under review (30 June 2023: 278 buildings across 89 developments).

Reflecting our commitment to dealing with these buildings as quickly and efficiently as possible, of the 262 buildings under review at 30 June 2024, 137 were in progress at tender, site mobilisation or remediation stage.

In the first half of the year, we recognised a charge of £56.4m to reflect higher than expected tender returns and cost increases on buildings being remediated by the Building Safety Fund. These generally related to buildings with atypical features and costs in relation to the remaining buildings are broadly in line with our initial estimates.

During the second half of the year we recognised a charge of £64.5m, following an initial £5.0m for fire testing recognised in the first half, in relation to a development of three buildings which we had previously disclosed as a contingent liability. We have been unable to develop a testing methodology under the FRAEW for these buildings due to the unique unitised wall system in place, which we now assess will need to be replaced. The provision is based on the current expected method of remediation, designed to minimise disruption to residents, though due to the unique nature of the building, this estimate may vary as the process is further developed.

After incorporating the additional adjusted item charges for fire safety and external wall systems of £125.9m, as well as with remediation costs incurred during FY24 and time discounting adjustments, the provision in relation to fire safety and external wall systems totalled £628.1m at 30 June 2024 (30 June 2023: £535.9m). This reflects our current best estimate of the extent and future costs of remediation work required and we will continue to review these estimates as we gather data and complete the remediation of buildings within our portfolio.

We signed the Scottish Government's Safer Building Accord on 31 May 2023. The process to agree a legally binding, long-form contract to give effect to the Principles of the Accord remains in progress with Homes for Scotland and the Scottish Government. As a result of this uncertainty, our existing provisions for Scottish buildings have been made on a consistent basis with England and Wales but are subject to change depending on the outcome of the contract negotiations.

Reinforced concrete frames

We continued our remediation activities for concrete frame design and construction during FY24.  Work on our developments proceeded in line with our plans and remediation is well advanced.

During FY23, structural issues were identified at two developments where reinforced concrete frames were designed for us by a different engineering firm to that employed at Citiscape. Having initially disclosed these as contingent liabilities, following further analysis during the second half of FY24, we now expect that remediation work will be required. Based on our current assessment of the required work, a further £56.6m has been provided and an additional £7.6m recognised as our share of the costs within joint ventures in respect of these two developments.

After the additional charge of £56.6m, as well as the costs incurred on concrete frame remediation during FY24 and time discounting adjustments, the provision for reinforced concrete frames totalled £102.2m at 30 June 2024 (30 June 2023: £76.4m) and reflects our current best estimate of the scope and future costs of remediation work required.

Building safety considerations are paramount in prioritising and scheduling remediation works. Our dedicated Building Safety Unit manages our ongoing building safety remediation programme, which we expect to deliver over the next five years.

Charitable giving and the Barratt Foundation

As part of our purpose, building strong communities, we recognise we have a role to play both as a business and through the efforts of our employees in the communities in which they live and work across the country. We work with the Barratt Foundation to focus our charitable work on improving our impact across the communities we support. Thanks to Barratt Developments' core funding, every pound raised by the Foundation is available for charitable purposes.

The year has been an exceptional one for charitable giving, thanks to the Barratt Foundation and the fundraising and volunteering efforts of individuals and teams across the Group.

In November 2023, the Barratt Foundation celebrated a significant milestone: it has now delivered more than £10m of funding to more than 1,000 local and national charities since it launched in January 2021. In FY24, we donated £6.4m (FY23: £6.3m) to charitable causes through the Barratt Foundation and employee fundraising.

Our impact and reach

In FY24, the Foundation has:

·	supported over 500 charities, with more than £4m funds donated;
·	supported around 400 local communities through funding and employee volunteering; and
·	positively changed the lives of over 90,000 children and young people through national partnerships and grants.

 

The Barratt Foundation's activities - three areas of charity support:

1.     Our national charity partners

The Foundation supports national charities that positively affect the lives of children, young people and those most disadvantaged in communities across the UK. During FY24, the Foundation donated over £2.5m to national partnerships and grants, including our six national charity partners: Whizz Kidz, Place2Be, The Outward Bound Trust, Bookmark Reading, Magic Breakfast and Street League.

 

2.     The Barratt and David Wilson Community Fund

Through this fund, our divisions and Group offices can donate £1,500 each month to different local charities and organisations that really matter to them and which enhance the lives of people living in their area. Reflecting the additional challenges that communities face in the winter, we also provided a Winter Support Fund in FY24. Our divisions and teams supported 66 selected small and local charities such as hospices, homeless charities and food banks, which each received a donation of £3,000.

 

3.     Match funding for our employees fundraising activities

In FY24, our employees and divisions raised a record £1.4m (FY23: £1.3m) to support local or national charities and good causes, with an additional £0.6m (FY23: £0.8m) from the Barratt Foundation, which provides matched funding of up to £12,000 per division and up to £1,000 per employee. We also partner with Payroll Giving in Action so our employees can make regular, tax-free donations to their chosen charities - UK or international.

Street League

Street League, our new national charity partner, uses the power of sport to support young people into employment. With operations in 35 locations spanning London to Edinburgh, the charity works with unemployed 16 to 24 year olds who face tough life challenges and personal barriers. Many of the deprived areas where Street League operates are the most disadvantaged communities in the UK, where youth unemployment is three times the national average and can exceed 20%.

The Foundation's initial donation of £300,000 in FY24 is targeted to fund at least 700 young people into employment, and is vital to enhancing their life chances, social inclusion and sense of worth and wellbeing.

Employee volunteering

A key component to our charitable activities is our employee volunteering, where we made significant strides in FY24, notwithstanding a 100% increase in volunteering days during FY23. In FY24, our employees gave up 1,935 days to volunteer with projects in their local communities, an advance of 73% on FY23. The Big Barratt Cleanup in April 2024 was our first national volunteering campaign with CleanupUK. It gave our employees the opportunity to take part in a local litter pick to help transform their local community. More than 430 volunteered their time to take part in 25 Big Barratt Cleanup events, removing more than 500 bags of rubbish and litter from local landscapes - equivalent to 2.7 tonnes.

Working together with our charity partners to help the Group deliver for our customers

As part of our drive to create inclusivity and build stronger communities, we aim to improve and enhance the play areas in our developments for children and young people with physical disabilities and neurodiverse conditions.

Through Whizz Kidz and the generous help of families supported by the charity, our designers were able to research, develop and test our newly enhanced play area designs for children with different needs. Specifically designed play areas and tailored play area equipment are set for rollout at various Barratt developments around the UK in FY25.

Operational review

Reservation activity

Our net private reservation rate in FY24 was 0.58 (FY23: 0.55). The 5.5% improvement across FY24 reflected a pick-up in activity as mortgage interest rates moved lower from August 2023. Month-to-month reservation rates thereafter showed relative stability, but with a greater degree of sensitivity to mortgage interest rate movements. This sensitivity reflected the mortgage affordability and qualification challenges faced by prospective homebuyers, the majority of whom depended on access to mortgages.

Net private reservation rate	H1	H2	FY
FY24 - reported private reservation rate	0.48	0.69	0.58
Of which: PRS and other multi-unit sales	0.06	0.10	0.08
Private reservation rate excluding PRS and other multi-unit sales	0.42	0.59	0.50
FY23 - reported private reservation rate	0.44	0.65	0.55
Of which: PRS and other multi-unit sales	0.05	0.13	0.10
Private reservation rate excluding PRS and other multi-unit sales	0.39	0.52	0.45
Change FY24 vs FY23
Reported private reservation rate	9.1%	6.2%	5.5%
Of which: PRS and other multi-unit sales	20.0%	(23.1%)	(20.0%)
Private reservation rate excluding PRS and other multi-unit sales	7.7%	13.5%	11.1%

Reservation activity during the year reflected stabilising demand from first-time buyers. This, despite many first-time buyers finding it hard to both raise deposits, given cost of living pressures, and secure income and affordability qualification, given the higher mortgage rates available. Rental cost inflation has, however, also been a continuing challenge for first-time buyers and a key driver for those in rental accommodation looking to move into home ownership as and when mortgage qualification metrics are met.

There was resilient demand from existing homeowners with accrued equity in their current homes. Reservation activity from existing homeowners did, however, require additional sales support with 16% (FY23: 11%) of the Group's reservations in the year utilising part-exchange. At the end of the year we held 120 unsold part-exchange homes, lower than the 146 held at the end of the prior year.

Increased sales into the private rented sector, along with additional multi-unit sales to registered providers of social housing and others, partly mitigated the weakness in traditional private reservations, supported our construction activity and ensured more of our homes were made available for both the private rented and affordable homes markets. The net private reservation rate into the private rented sector, along with additional multi-unit sales contributed 0.08 (FY23: 0.10) to the reservation rate in the year.

Sales outlets

During the year, we operated from an average of 346 active sales outlets (FY23: 367), including 9 active JV sales outlets (FY23: 8). Whilst average sales outlets were ahead in the first half, the decline in active outlets through the second half reflected two factors:

·	A conscious decision within the Group to slow site openings to ensure our new sales outlets were launched to create maximum market impact. Notwithstanding this decision, as well as ongoing planning delays, we launched a total of 57 new sales outlets (including JVs) in the year (FY23: 104); and
·	Whilst the average life of our sales outlets has been extended by the lower private sales rate experienced since Autumn 2022, we saw a significant proportion of these "extended" outlets close, as they sold through from late 2023 through to June 2024.

 

At 30 June 2024 we were operating from 326 active sales outlets (FY23: 389), including 10 JV outlets (FY23: 9).

As previously announced, in FY25 we expect average active sales outlets will reduce by approximately 9% due to lower land buying activity in 2022 and 2023 and the annualised impact of sales outlets closing in the second half of FY24. We expect this reduction to be temporary with significant net sales outlet growth in Q4 FY25 and throughout FY26 supporting average sales outlets for FY26 above FY24 levels.

Home completions

Total home completions including JVs reduced by 18.6% in FY24 to 14,004 (FY23: 17,206). Our reduced private forward order book at the start of FY24, in combination with the ongoing rate of weekly reservation activity, crystallised a 24.2% decline in our private wholly owned home completions (excluding homes for PRS and other multi-unit sales). Our deliberate decision to seek growth through PRS and other multi-unit sales limited the decline in total home completions, with PRS home sales advancing 306.2% and other multi-unit sales completions increasing by 46.9%.

The affordable housing share of wholly owned home completions reduced to 20.8% (FY23: 23.9%). Many registered providers are facing operational and financial constraints due to the higher interest environment, as well as increased scrutiny on maintenance, repair and improvement of their existing housing portfolios. As a result, registered providers are less eager to secure additional affordable housing through the homes we deliver through Section 106 arrangements. In FY25 we anticipate the affordable housing share of wholly owned completions will be in the high teens.

Completions (homes) (2)	FY24	FY23	Change
Private excluding PRS and other multi-unit sales	8,851	11,676	(24.2%)
PRS	1,048	258	306.2%
Other multi-unit sales	767	522	46.9%
Total private	10,666	12,456	(14.4%)
Affordable	2,802	3,922	(28.6%)
Wholly owned	13,468	16,378	(17.8%)
JV	536	828	(35.3%)
Total(3) (including JVs)	14,004	17,206	(18.6%)

The average selling price (ASP) of wholly owned completions reduced by 4.0% to £306.8k (FY23: £319.6k). The total private ASP reduced by 6.4% to £343.9k (FY23: £367.6k).

Within our total private completions, we completed 1,048 PRS homes (FY23: 258). The ASP of these PRS completions was £285.1k (FY23: £280.9k) with the ASP movement reflecting the diverse geographic spread of the homes completed in the period.

We also completed 767 other multi-unit home sales (FY23: 522) including home completions for registered providers, meeting their demand for additional homes using Government grant funding, and incremental to affordable homes provided under Section 106 requirements. The ASP of other multi-unit sales completions was £292.3k (FY23: £284.7k), with geographic mix accounting for the larger part of the ASP movement.

The ASP of our affordable home completions reduced by 1.1% to £165.3k (FY23: £167.2k), reflecting a reduced proportion of completions from our London operations offset by site mix.

We expect the affordable ASP in FY25 will be similar to that reported in FY24.

Our customers

Back in 2014, we first introduced Barratt Developments' vision. It cemented our commitment to our customers by setting down our aims and ambitions: "To lead the future of housebuilding by putting customers at the heart of everything we do". Over the past decade, this vision has been a constant: driving our actions and behaviours, our culture and our decision making - but first and foremost, it prioritised our unwavering commitment to our customers.

Yet, we recognise that the needs of our many customers are constantly changing, as well as the communities in which we operate and play a key role in creating, and that we have an increasing responsibility to protect our environment. Through engagement with customers, our employees and teams, as well as our wider stakeholders, we have formulated our new purpose: "Making sustainable living a reality, building strong communities."

This evolution in our purpose is supported by our new values centred on "We do it for our customers" and "We do it right". These values reflect not only the unwavering focus we have on our customers, but also a broadening of the expectations set by our customers and upon which we ourselves should aspire to meet and exceed.

We put our customers and their new homes, as well as their communities and local environment, at the heart of everything we do.

Great choice for potential customers

Through our existing housebuilding brands, we offer a wide range of homes for our customers: from one-bedroom apartments to five and six-bedroom homes. Barratt London is our award-winning operation within the M25. Barratt Homes and David Wilson Homes operate across Great Britain outside London. Depending on the size of the development and local market dynamics, they operate single-branded sites or as dual-branded locations, creating greater variety and choice for potential homebuyers through development design, street scenes, house types and price points. As a result, dual-branded developments generate higher sales rates than those offering a single brand.

During FY24, we operated with 252 developments on average across Great Britain: 97 developments under the Barratt Homes brand; 54 under the David Wilson Homes brand; and 101 dual-branded developments with both Barratt and David Wilson Homes. We are continually looking to enhance choices for our customers and increase the variety and diversity of our developments through our branded house types.

The acquisition of Redrow, along with CMA approval, will support the further development of our portfolio of strong brands, with recognisable house types and reputations for great quality and customer service. It will also create greater choice for both Redrow and Barratt customers, accelerate the pace of housebuilding across our developments and is a key ingredient in making our land banks work efficiently for all stakeholders.

Great service through the buying process and beyond

We believe our industry leadership in customer service is fundamental to our success. We are the only major housebuilder to have been awarded the maximum five-star rating by our customers in the HBF Customer Satisfaction Survey for 15 consecutive years, with our latest customer satisfaction rating at 93%.

We want our customers to receive the best possible service, not only throughout their home buying journey but also post-completion. We invest in training and workshops to enhance our service and our customers' experience beyond the handover of their new home.

New Homes Quality Code

We operate under the New Homes Quality Code (the Code) as a registered developer with the New Homes Quality Board. Introduced in 2023, the Code covers the period from initial homebuyer enquiry through to completion and then two years post-occupation of the new home. It centres on fairness throughout the customer journey, and not simply the achievement of technical standards around build quality and defects. Since becoming a registered developer under the Code, there have been no adjudications required by the New Homes Ombudsman Service.

New build advantages for our customers

We are continually seeking to improve the energy and water efficiency, as well as the sustainability of our homes and adapting our home designs to respond to both changing homebuyer demands, as well as the Future Homes Standard and other changes to building regulations. We aim to build high-quality homes that optimise internal space, deliver excellent energy and water efficiency and, as a result, unlock lower lifetime costs for our customers.

We actively promote the lower running costs and wider environmental benefits such as biodiversity features and transport connections of our homes across all our communication channels and in our sales centres. This is an increasingly important purchasing consideration for our customers. A typical Barratt or David Wilson house, built from June 2023 under latest Building Regulations, can unlock annual energy bill savings estimated at more than £2,570⁽⁵⁾ annually when compared to an average existing house. In FY24 more than 99% of our home completions were EPC rated "B" or above, a level of energy efficiency shared by just 3.3%⁽⁶⁾ of the existing housing stock.

In addition, all of our homes are designed to a water use standard of 105 litres per person per day, creating the potential to reduce consumption by 25% when compared to the national average⁽⁷⁾ and creating further cost savings for our homeowners.

Green mortgage development reflecting new build advantages

The financial and environmental advantages of new build homes have never been as significant as they are today, and we are committed to enhancing both the access and affordability of our new homes in partnership with both mortgage lenders and surveyors.

Mortgage lenders, driven by their own sustainability initiatives, the growing recognition of future retrofit costs in relation energy efficiency for existing homes, and the scale of annual savings from new build home ownership, are increasingly engaging with the housebuilding industry around green mortgages.

The surveying industry is critical in developing a consistent and enduring valuation framework that will allow the recognition of the financial and environmental advantages of high-quality, new build homes.

As the leading national sustainable housebuilder, we have a dual approach to green mortgage development:

·

We work directly with mortgage lenders to develop enhanced mortgage products that recognise the advantages of our new build, energy-efficient homes. During FY24, Accord (The Yorkshire Building Society) joined The Leeds Building Society with the launch of a new green mortgage product. Both mortgage lenders recognise the advantages inherent in new energy efficient homes, and their mortgage products have the potential to unlock up to a 10% uplift in lending.

·

We collaborate with the wider industry and the Government, notably through the Future Homes Hub. Barratt's Head of Mortgage Lender Relations also chairs the "Valuation Group", which is considering how the value of sustainable benefits of new homes can be recognised in the mortgage valuation process.

 

Our people

We are seeking to build a diverse and inclusive workforce that reflects the communities in which we operate, delivering excellence for our customers by drawing on a broad range of life experience, talents and skills. This approach is embedded within our new purpose and values, our Building Sustainably Framework and in our Diversity and Inclusion Strategy, through which we aim to improve the representation of all groups across the business and drive an inclusive culture, where difference is valued.

Engaging with our employees

Our annual employee engagement survey was completed in October 2023. It delivered an engagement score of 74.9% (2022: 84.4%), reflecting:

·	our ongoing recruitment freeze, which has created additional workload and responsibilities; and
·	the lower FY23 bonus compared to previous years.
·	a return to more normal engagement levels following a strong score in 2022 which was supported by two cost-of-living support payments that ended in July 2023;

 

Following the 2023 engagement survey, we conducted workshops and consultations, reflecting our desire to respond positively and engage with our workforce to improve engagement. A follow-up shorter 'pulse' survey conducted in April 2024 showed a positive impact on engagement, which improved to 78.9%.

Investing in development and training

Against a skills shortage backdrop in the industry, it is important we not only attract and retain the best people with a diverse range of skills and experience but also play a leading role in tackling industry recruitment and retention challenges.

We invest for the future through our numerous award‑winning schemes including those for graduates, apprentices and former Armed Forces personnel. We have four Degree Apprenticeships delivered in partnership with Sheffield Hallam University, encompassing Construction, Quantity Surveying and Technical Design and Real Estate. Our development programmes included 353 participants at 30 June 2024 (FY23: 483), around 6% (FY23: 7%) of our workforce, highlighting our commitment to future talent development.

Retaining the best talent

It is vital for us to retain the most talented people within our business to ensure we have the necessary skills for continued operational delivery and future growth. Identifying and supporting our leaders of the future, along with effective succession planning, are important elements in our long-term success. Our "Rising Stars" programme seeks to identify, motivate and develop our high-potential employees and in total 344 employees have attended our "Rising Stars" programme.

With the ongoing pause in recruitment, we continue to work to improve the visibility of our employees' career paths across all functions, through individual development plans, line manager development, developing over 500 managers through our management development programme to date, and the prioritising and tracking of internal promotions. Remuneration and benefits are an important element of employee retention. We continue to review our employee packages to ensure they are effective and industry competitive.

Expanding share ownership for our employees

In April 2024, we invited all eligible employees to participate in the 16th grant under the Group's Sharesave scheme, which allows eligible employees to contribute a maximum of £500 per month in one or more Sharesave schemes. As at 30 June 2024, approximately 52.1% (FY23: 51.4%) of our employees participated in one or more of the active schemes. In recognition of the continued dedication and commitment of our employees, in FY24 the Board agreed that an annual share award would be made to all employees below Managing Director level. Accordingly, in July 2024, an award of shares equating to £750 (FY23: £1,250) was made to all qualifying employees. This award will vest in July 2026.

Reflecting the challenges faced by our industry and as well as our recruitment freeze throughout FY24, our total employee turnover reduced to 13% for the year to 30 June 2024 (FY23: 15%). Our target over the medium term remains at 15%.

Accredited Living Wage Employer

We continue to operate as an accredited Living Wage Employer and we promote the payment of the real Living Wage within our UK supply chain through our standard subcontractor terms and conditions.

Our standard sub-contractor terms and conditions also mandate the payment of the real Living Wage within our supply chain. To ensure this real Living Wage commitment is adhered to, we implement spot checks on higher risk trades and operate internal remediation feedback reporting. Where we find instances of non-compliance, we require this to be rectified, with follow-up audits conducted to ensure full compliance. For those working in jurisdictions other than the UK, our expectation, included within our contract requirements, is that local statutory minimum wage terms are met.

Employee networking

Our employee networks remain a key element of the wider work to listen to our people, helping us create a truly inclusive culture through peer-to-peer support, learning and feedback. We have six employee network groups: Gender; Women on sites; Ethnicity, Culture and Religion; Disability; Families (including carers); and LGBTQ+, offering a range of activities from webinars, face-to-face events, leading discussions, marking of key calendar events, religious festivals and signposting support.

All our networks are open to allies, and we have seen a strong increase in membership over the year. A member of the Executive Committee sponsors each network.

We recognise that our employees are all a unique blend of different identities. We encourage our networks to combine on actions in support of this.

Gender and ethnicity pay gap reporting

In December 2023, we published our annual Gender Pay Gap Report and, for the second year, our Ethnicity Pay Gap Report, as part of our commitment to transparency and to support our Diversity and Inclusion Strategy to improve the representation of all groups across the business.

Despite our ongoing commitment to gender pay equality both our mean and median gender pay gaps increased compared to 2022, rising to 9.6% (from 8.8%) and 7.4% (from 6.3%), respectively. Challenging conditions in the wider housing market led to a 17% reduction in sales commissions, predominantly affecting our sales teams, where the majority of colleagues are female. The construction skills shortage also continues to impact the industry as a whole, with increasing demand for, and scarcity of, skilled site-based tradespeople, triggering a wage increase in the UK. This prompted us to raise hourly rates for trade roles in some of our regions, primarily occupied by male site-based colleagues. This helped to address external economic pressures but contributed to the pay gap increase.

Although our mean gender pay gap is smaller than the average for UK businesses in 2023 at 13.2%, as we navigate changes in the market, we remain committed to continuous improvement, implementing proactive measures to address any pay disparities and delivering against our 2025 Diversity and Inclusion Strategy.

Although we are not statutorily required to disclose our ethnicity pay gap data, we are committed to diversity and inclusion, as well as being transparent with our people and ensuring we measure our impact.

In 2023, the mean ethnicity pay gap decreased to 6.6% from 7.7%, and the median gap decreased to 3.6% from 5.9%. This shift was partly attributed to an increased willingness from colleagues to identify their self-declared ethnicity, notably a change in declaration from "Do not wish to state" to identifying with an Ethnic Minority Community (EMC). The median ethnicity pay gap has also reduced due to comparatively larger salary increases for middle managers within the EMC community compared to white colleagues.

To deliver change in both areas, we will continue to build on the work in place to support our teams through our recruitment processes, talent programmes, employee networks, succession planning and early careers development. We also remain committed to implementing proactive measures to address any pay disparities based on either gender or ethnicity.

Physical health and mental wellbeing

As a market leader and responsible employer, we are continually exploring how we can best support our employees whilst positively influencing the construction industry and beyond. We have delivered programmes and services for a number of years to support and enhance the health and wellbeing of our people, including mental health. We have been signatories of the Building Mental Health Charter since 2022, a member of the Zero Suicide Alliance since 2023 and we are active members of the Home Building Skills Partnership Mental Health Awareness Group.

We also support our employees through a sector-leading benefits package, including pension with death in service benefit, access to discounts on fitness memberships, high street savings, the ability to purchase additional holiday, financial education, access to savings and loans through payroll and a suite of family-friendly policies.

Our new purpose and, in particular, the new values we seek to extol, emphasise a supportive culture based on positive behaviours, inclusion and respect.

Diversity and inclusion

We are committed to developing an environment that is inclusive for everyone. We want everyone who works with us or for us to feel valued, that they are treated equally and fairly, and that they can succeed in their role - regardless of their background. We believe there are two elements that create a workplace where everyone feels valued and that they belong:

·	Diversity is the representation of all of our differences, and how we differentiate ourselves as individuals and as groups. Striving for diversity provides the widest access to talent and reflects our customers and the communities we serve. We know our people want to see role models that reflect them across the organisation.
·	Inclusion is about building a culture of belonging by actively inviting colleagues to contribute and participate, which is proven to increase business performance. We believe every person's voice adds value and it is vital that all our current colleagues, and any prospective colleagues, feel respected and valued.

 

We are committed to giving full, fair and transparent consideration to applications for employment made by those with disabilities and ensuring continued employment of those who may become disabled during their employment. As an organisation we seek to ensure that training, career development and promotion is fair in all circumstances.

 

Our Diversity and Inclusion Strategy

Our Diversity and Inclusion Strategy aims to improve both the representation of all groups across the business, as well as our ability to listen and communicate to them all, and is focused on three key areas:

·	Talent: increasing our representation through the attraction, recruitment and development of diverse skills and experience at all levels.
·	Leadership: taking accountability for change and creating an inclusive environment where everyone can thrive.
·	Attitudes: supporting our people to understand and value difference, with respect and kindness.

 

Gender and ethnic diversity

Improving our gender and ethnic diversity is a key focus and we continue to ensure we have gender balanced and diverse recruitment shortlists, and provide inclusive hiring training for all recruiting managers. Additionally, to drive improvement, we:

·	are measuring gender and ethnic representation in each function and level within the Group on a quarterly tracking basis;
·	are operating with a specified group of preferred recruiters, who have all committed to provide balanced and diverse shortlists; and
·	have increased the female and ethnic minority background cohorts on our Accelerated Leadership Programme, which is designed to identify our future Managing Directors.

 

Catalyst

"Catalyst", our long-standing development and support programme, designed to help high-potential female employees develop their careers within the Group, is a key part of our gender diversity strategy. This programme continues to show positive results with eight divisional directors who are alumni from the programme and 18% of the last cohort, in FY23, already promoted or having their roles extended. Our Catalyst programme in FY24 has been our largest, since inception, with 110 participants. As at 30 June 2024, women held 20% (FY23: 18%) of senior manager roles within the Group.

Increasing the ethnic diversity of our organisation remains a clear target for the Group's leadership teams and as at 30 June 2024, 8% (FY23: 7%) of employees were from ethnic minority backgrounds and 3% (FY23: 3%) of senior leadership positions were held by ethnic minority employees.

Human rights and anti-bribery

Our respect for human rights is embedded within our new purpose and values. Our policies and procedures support the core values of the UN Universal Declaration of Human Rights and the UN Guiding Principles of Business and Human Rights, and we act in accordance with our principles regarding diversity and the Modern Slavery Act 2015.

Our non-financial KPIs for health and safety and employee engagement reflect our belief that it is a fundamental human right to work in a safe and supportive environment. Our employees undertake training on modern slavery, which was updated this year ready for launch in FY25. Concerns can be raised anonymously via our externally managed whistleblowing process which is available to agency staff and subcontractors as well as our employees and promoted in site welfare cabins.

This year we began to develop a framework for risk assessing and managing our supply chain human rights risks.

We have a strict Anti-Bribery and Corruption Policy and conduct our business in a fair, open and transparent manner. All our employees are required to undertake regular training on our Anti-Bribery and Corruption Policy, and it is a condition of all our supplier and subcontractor contracts that they comply with the Bribery Act and this policy.

Our land position

Since stepping back from the land market in September 2022, we have adopted a highly selective approach to incremental investment in land. Our stance reflects our strong land bank position, uncertainty on house prices, build cost inflationary pressures and limited movement in wider market reported land prices to reflect these changed market dynamics. However, since the start of 2024, we have seen an uptick in the quantity of land made available that meets our rigorous land buying requirements and is centred on a minimum gross margin of 23% and 25% ROCE.

Gross and net land approvals

As a result, gross site approvals have increased to 69 new sites during the year. These were partially offset by 11 previously approved sites no longer proceeding to purchase, resulting in a net increase of 58 site approvals in FY24 (FY23: net cancellation of two sites).

Approved sites along with planning amendments added 15,233 plots (FY23: 4,821), at a cost of £771.7m (FY23: £345.2m), with 2,794 plots (FY23: 5,633) removed for sites no longer proceeding, at an agreed cost of £124.8m (FY23: £360.1m). This resulted in a net increase of 12,439 plots in FY24 (FY23: net reduction of 812 plots) and a net increase in our land approval commitments of £646.9m (FY23: net decrease of £14.9m).

Given the subdued but more stable market backdrop and the growing number of land opportunities available we expect to increase our land approvals significantly in FY25 whilst maintaining our rigorous land investment requirements.

Land investment

We invested £674.3m (FY23: £822.8m) on land acquisitions and the settlement of land creditors during FY24, and we currently expect to spend c. £800m on land in FY25.

We continue to target a regionally balanced land portfolio in the medium term with a supply of owned land of c. 3.5 years and a further c. 1.0 year of controlled land. We are broadly in line with this target, with our land bank comprising 4.3 years of owned land (30 June 2023: 3.6 years) and 0.6 years of controlled land at 30 June 2024 (30 June 2023: 0.7 years).

 

Our land bank

Planning and ownership or control status	30 June 2024	30 June 2023
Plots with detailed planning consent	40,030	48,270
Plots with outline planning consent	15,239	9,658
Plots with resolution to grant and other	2,363	1,320
Owned and unconditional land bank (plots)	57,632	59,248
Conditionally contracted land bank (plots)	8,607	11,142
Total owned and controlled land bank (plots)	66,239	70,390
Number of years' supply	4.9	4.3
JVs owned and controlled land bank (plots)	4,631	4,356
Strategic land bank (acres)	16,865	16,431
Strategic land bank (plots)	106,516	101,784
Promotional land bank (plots)	105,359	96,844
Land bank carrying value (£m)	3,233.6	3,139.9

 

At 30 June 2024, the estimated ASP of plots in our owned land bank was £328k (30 June 2023: £331k) and the estimated gross margin in our land bank, based on current estimated sales prices and build costs at 30 June 2024 was 18.6% (30 June 2023: 19.7%).

Land market activity

Notable development transactions in FY24:

·	ASDA Park Royal, London: a major regeneration scheme in Ealing which, over a number of years, will see the development of 1,505 mixed tenure homes as well as a new ASDA superstore.
·	Fort Halstead, Kent: a significant redevelopment of former MOD research facility to deliver 635 homes near Sevenoaks.
·	Durieshill village, Stirling: a major new village development on the outskirts of Stirling to develop more than 1,500 homes in a 50:50 partnership with Springfield Properties.

 

Planning permission activity

Despite the challenging planning backdrop across the country, we secured planning consents on 9,026 plots across 54 developments during the year (FY23: 12,969 plots on 81 developments). As well as standard applications, which received planning approval at a local level, we took three planning refusals to appeal and were successful in overturning them.

Whilst our business and the wider industry continue to experience significant challenges with the ineffective and highly unpredictable state of the planning system, more than 69% (30 June 2023: 81%) of our owned and unconditional land bank plots have detailed planning consent, supporting our sales outlets position and future  home completions. We are also well positioned for the coming financial year with almost all budgeted FY25 home completions (FY24: all budgeted FY24 home completions) having outline or detailed planning consent.

Strategic land

Our strategic land teams were focused on securing additional strategic land to support future growth and 4,477 plots across 30 strategic sites were approved during FY24 (FY23: 21,802 plots and 70 sites). Plots secured through our strategic land bank delivered 3,290 (FY23: 3,938) or 24% (FY23: 24%) of our wholly owned home completions in FY24. We converted 3,723 plots (FY23: 777) of strategic land into our owned and controlled land bank during FY24. After significantly expanding our strategic land bank over the past few years, our strategic land and planning teams (with input from Gladman) will now increasingly focus on securing planning consent by promoting strategic land through Local Plan reviews, as well as speculative planning applications.

At 30 June 2024, around 20% (30 June 2023: around 23%) of our strategic land is allocated or included in draft Local Plans.

We target around 30% of wholly owned completions from strategic and promotional land in the medium term. This reflects the development and planning prospects in our strategic land portfolio, our business model and our targeted land bank length and focus on ROCE.

Land promotion

Our promotional land portfolio is held through Gladman Developments Limited (Gladman) and consists of 105,359 plots (30 June 2023: 96,844 plots), with Gladman operating at arm's length and as a standalone business within the Group.

Over FY24, Gladman secured an estimated 9,239 plots, (FY23: 9,453 plots) through new promotional agreements with landowners. Following several successful planning applications, Gladman received planning consents on 2,804 plots during the year (FY23: 2,437 plots). Whilst wider market demand for land remained weak in FY24, Gladman secured land sales equating to 773 plots (FY23: 1,813 plots), dominated by demand from smaller developers.

Gladman generated revenue of £13.1m and an operating profit, before amortisation of intangible assets, of £0.2m during FY24 (FY23: sales of £20.4m and operating profit, before amortisation of intangible assets, of £3.8m). The reduction in revenue and profitability reflected the low level of land market activity across the year as many housebuilders limited or paused their land buying plans. We expect Gladman's performance to recover as land market activity increases over the coming months.

Gladman, with the benefit of the Group's financial, legal and development resources, continues to engage with new and existing land promotion partners around the most attractive routes to unlock value from their land positions. Gladman also offers the ability to convert promotional agreements into option, hybrid or freehold sale arrangements for all, or part, of their land promotion partners' holdings, to meet their changing needs and aspirations.

Our build performance

Maintaining the efficiency of our operations and controlling costs, whilst also retaining our capacity to deliver the homes that the country needs, has remained a key area of consideration throughout the year.

Managing site-based construction

Coming into FY24, our reduced order book and limited improvement in the reservation rates necessitated further adjustments to construction activity. We also sought to manage customer commitments for home completions, our finished homes inventory and the investment in new site infrastructure to support future sales outlet openings. As a result, our annual build activity reduced by 20.2% to an average 257 (FY23: 322) equivalent homes (including JVs) built per week.

In FY25, we will seek to balance construction activity between the expansion in sales outlets for FY26 and the anticipated reduction in completion volumes.

Controlling our cost base

We proactively managed our operating cost base throughout FY24, particularly in areas where activity levels have stepped materially lower. Our site-based teams have inherent flexibility through the use of our sub-contractor workforce. With respect to our directly employed team members, we began a headcount freeze in September 2022, which has reduced our number of employees by 12.2% cumulatively through to the year end (30 June 2023: 6.0% cumulatively).

Headcount reductions have been most significant across our divisional network of offices, where reduced activity has not warranted recruitment as team members have moved either to new opportunities or reached retirement. We have continued to invest in priority areas, including sustainability, building safety and our IT infrastructure. However, we are only recruiting where we need additional skills. We continue to scrutinise and limit discretionary spend in all areas.

Build quality

Throughout FY24, we maintained our unwavering attention to build quality throughout our divisions. Once again - and for a fifth consecutive year - we were rated industry leader among the major housebuilders by the NHBC, registering the lowest Reportable Items (RIs) per NHBC inspection at 0.13 (FY23: 0.16)^(8).

The NHBC has also introduced a new Construction Quality Index (CQI), which takes into consideration the Reportable Items index, based on the five-stage inspection of our new homes as well as Construction Quality Reviews, which are an in-depth review of quality across a site and focus only on build stages available at the time of the review. NHBC views this new CQI measure as a valuable tool in managing quality across housebuilders' operations.

On this additional metric, we have ranked a clear industry leader among the major housebuilders throughout FY24. Our build quality was also recognised through the NHBC Pride in the Job Awards for site management. At the 2023 Regional NHBC Pride in the Job Awards, 30 of our site managers won "Seals of Excellence". At the NHBC Pride in the Job Supreme Awards in January 2024, Sean O'Regan, Site Manager at Waldmers Wood in our Manchester division, was named "Supreme Runner Up" in the "Large Builder" category.

At the 2024 National NHBC Pride in the Job Awards, 89 of our site managers secured awards, more than any other housebuilder for the 20th consecutive year. No other major housebuilder has achieved this level of consistent success, recognising our management of excellent site standards and build quality. All our sites operate under our certification to the Environmental Management System standard ISO 14001, and Health and Safety standard, OHSAS 18001.

MMC expansion through timber frame

We are looking to drive construction efficiency through standardising our house types and increased use of modern methods of construction (MMC). The adoption of MMC, particularly timber frame construction, helps to mitigate the long-term challenges posed by the shortage of skilled workers within the industry, as well as increasing build efficiency, reducing embodied carbon and on-site construction waste. Our new timber frame facility, near Derby, continued to grow its timber frame production to support our growing migration to timber frame construction.

 

MMC	FY24	FY23
Timber frame	4,107	4,564
Roof cassettes	199	224
Offsite ground floors	268	560
Large format block	94	230
TotalA	4,668	5,578
Percentage of completionsA	33%	32%

^A Total and percentage of completions includes JVs and has been adjusted for homes where more than one technology has been used.

Our supply chain and cost inflation

Our supply chain, on which our build activity relies, is robust and carefully managed. Approximately 95% of our building materials are sourced by our centralised procurement function and approximately 90% of our building materials are either manufactured or assembled in the UK. We are committed to our supply chain partners and seek to secure not only sustainable but also competitive pricing, whilst maintaining security of supply to support our site-based operations.

During FY24, overall building material cost inflation slowed sharply on a spot purchasing basis, moving to a relatively flat to slightly deflationary position at the half year with this position being broadly maintained through to year end. This recent purchasing position is complemented by our future supply agreements which cover 85% of our material requirements to 31 December 2024 (FY24: 73% to 31 December 2023) and 19% of our requirements until 30 June 2025 (FY24: 14% to 30 June 2024).

Whilst we saw the inflationary pressures around skilled labour recede during the year, the industry still has a longstanding need for skilled tradespeople, combined with limited access to overseas labour and more opportunities for workers to either shift to alternative sectors or to leave the industry. These factors, along with the broader cost of living backdrop, meant wage inflation proved stickier and we anticipate labour inflation will remain the more inflationary component of our total costs in FY25.

During FY24, total build cost inflation (including infrastructure costs, materials and labour) reported through our income statement was approximately 5%, with the rate of inflation moving sequentially lower throughout the year. Reflecting the current market backdrop, and assuming no further significant changes in the costs of key commodities or energy, we anticipate total costs will be broadly flat in FY25.

Further improvement in our waste performance

Waste reduction and resource efficiency remain clear priorities within the Group targets. In FY24 we delivered a further improvement in our waste intensity with a 12% reduction to 3.83 tonnes per 100m² of housebuild equivalent build area (FY23: 4.34 tonnes per 100m² of housebuild equivalent build area). Over FY24, our absolute waste tonnage decreased by 29.1% (FY23: decreased by 17.1%).

We promote the segregation of waste and the efficient use of skips across our sites; our diversion of waste from landfill increased during the year to 97% (FY23: 96%).

Future homes for our customers

Our Group Design and Technical team continues to develop plans to meet the requirements of the Future Homes Standard in 2025/2026. The team is developing and evolving our house types to meet a step change in the materials used in the homes we build, as well as the design of them, as a result of the new standard.

Our eHome2 project continues to provide invaluable insights and solutions. It is now providing data on how it is performing across various external temperatures and weather conditions, controlled within the Energy House 2.0 chamber at the University of Salford.

Current trading and outlook

Long-term housing market fundamentals reflect a significant imbalance between housing supply and demand. Despite this imbalance, the market in FY24 remained constrained by significant macroeconomic headwinds, most notably higher interest rates and inflation. The higher interest rate environment is impacting mortgage affordability and qualification, as well as the cumulative cost-of-living squeeze, which has depressed real disposable incomes and constrained economic growth, employment, consumer confidence and discretionary spending.

Whilst the new Government has only been in place for two months, we are encouraged by early activity on housing and the focus on improving the planning system, as well as tackling the funding challenges in the affordable housing sector. They will create greater permissioned land supply, mortgage access, predictability and confidence for homebuyers. However, these supply-side changes will take time to be implemented effectively.

We entered FY25 with a solid forward sales position, and at 25 August 2024 we are 42% forward sold with respect to private wholly owned home completions for FY25 (27 August 2023 for FY24: 45%), with 52% of the private order book exchanged (27 August 2023: 51%).

 

 

Forward order book	25 August 2024		27 August 2023		Variance %
	£m	Homes	£m	Homes	£m	Homes
Private	1,467.0	4,159	1,527.6	4,440	(4.0%)	(6.3%)
Affordable	579.6	3,519	752.0	4,691	(22.9%)	(25.0%)
Wholly owned	2,046.6	7,678	2,279.6	9,131	(10.2%)	(15.9%)
JVs	151.1	399	157.7	477	(4.2%)	(16.4%)
Total	2,197.7	8,077	2,437.3	9,608	(9.8%)	(15.9%)

Since the start of FY25, our net private reservation rate per active outlet per week through to 25 August 2024 has been 0.58 (FY24: 0.42). Whilst the prior year period was particularly impacted by available mortgage rates, the current year reservation rate reflects the continuing affordability challenges faced by potential homebuyers. During the period to 25 August 2024, reservations into the private rented sector and other multi-unit sales contributed 0.03 (FY24: 0.02) to the weekly reservation rate.

Based on trading year to date and current market conditions, we continue to target total home completions of between 13,000 and 13,500 in FY25, including c. 600 completions from our JVs, whilst ensuring we maintain our industry-leading standards of build quality and customer service. We also currently estimate that around 42% of our completions will be delivered in the first half of the financial year.

We were delighted to complete the acquisition of Redrow plc in August 2024 and are working with the CMA to obtain competition clearance. We look forward with confidence; we have created a leading UK housebuilder focused on quality, service and sustainability which will deliver more homes across the UK than the two companies on a stand-alone basis, as well as delivering significant cost synergies from the combination.

 

David Thomas

Chief Executive

3 September 2024

 

1 Refer to Glossary for definition of key financial metrics.

2 Unless otherwise stated, all numbers quoted exclude JVs.                                                                                                                                                    

3 Including JVs in which the Group has an interest.

4 In addition to the Group using a variety of statutory performance measures, it also measures performance using alternative performance measures (APMs). Definitions of APMs and reconciliations to the equivalent statutory measures are detailed in the Glossary and Definitions. Net cash definition in note 11.

5 Data based on HBF "Watt a Save" report updated and published 19 August 2024 available at: https://www.hbf.co.uk/policy/wattasave/

6 Based on EPC registrations to 30 June 2024, published 30 July 2024.

7 Statista data at: https://www.statista.com/statistics/1211708/liters-per-day-per-person-water-usage-united-kingdom-uk/

8 Measured by the NHBC amongst the 14 major housebuilders constructing more than 1,000 homes annually over the year to 30 June 2024.

 

Chief Financial Officer's Review

Despite the UK housing market stabilising at significantly lower activity levels, following the sharp rise in mortgage interest rates in the Autumn of 2022 and the ongoing pressures created by the cost of living, we have delivered a solid financial performance.

Our financial results reflect the Group's clear operational priorities set at the start of the year centred around driving revenue, controlling costs, maintaining land buying discipline and continuing to lead the industry around customer service, build quality and sustainability.

Our disciplined operating framework has ensured that, despite the challenging trading conditions, the Group remains in a strong financial position, well placed to take operational and financial advantage of any market recovery.

Results to 30 June 2024

Income statement

Group revenue was £4,168.2m in FY24 (FY23: £5,321.4m), with Group wholly owned completions 17.8% lower at 13,468 (FY23: 16,378), reflecting our lower order book at the start of the year and ongoing slower rate of reservations throughout the financial year.

The average selling price of our wholly owned completions reduced by 4.0% to £306.8k (FY23: £319.6k), with a reduced proportion of affordable homes, accounting for 20.8% (FY23: 23.9%) of wholly owned completions, diluting the degree of reported ASP decline. Our private average selling price reduced by 6.4% to £343.9k (FY23: £367.6k), due to underlying house price decline, a reduced proportion of completions in London and the dilutive impact of PRS growth, offset by minor changes in product and geographic mix.

Adjusted gross profit reduced by 39% to £689.0m (FY23: £1,130.4m) and adjusted gross margin reduced by 470 bps to 16.5% (FY23: 21.2%). This was a result of the combined impact of increased sales incentives, build cost inflation and a decline in completion volumes, which reduced fixed cost efficiencies. In FY24, our contribution margin was c. 29% (FY23: c. 32%) after land and direct build costs.

After adjusted items charged through cost of sales, totalling £179.5m (FY23: £155.5m) and relating to legacy property costs, reported gross profit was £509.5m (FY23: £974.9m) and reported gross margin was 12.2% (FY23: 18.3%).

Administrative expenses before adjusting items were £314.5m (FY23: £270.8m) and included:

·	Group-wide inflationary salary increases at an average of c. 5%, effective in FY24;
·	A reduction in Building Safety Unit running costs as we insourced support;
·	An increase in group-wide performance related pay compared to FY23;
·	Project-related IT and digital investment; and
·	Reduced sundry income of £14.8m, when compared with £16.7m in FY23.

 

After deducting administrative expenses before adjusting items and a modest net gain of £2.1m on part-exchange activities (FY23: £3.3m), the Group delivered an adjusted profit from operations of £376.6m (FY23: £862.9m), with an adjusted operating margin of 9.0% (FY23: 16.2%). The 720 bps decline in the adjusted operating margin reflected:

·	Completion volumes: a decline in our wholly owned completion volumes of 17.8% or 2,910 homes created a 300 bps negative impact (FY23: 30 bps negative impact).
·	Net inflation: adverse sales price movements compounded by higher underlying build cost inflation produced a 430 bps negative impact (FY23: 170 bps negative impact).
·	London: a significant decrease in completions from our London operations to 2% in FY24 (FY23: 8%), where margins are lower than our regional business resulted in a 60 bps positive margin impact (FY23: 20 bps negative impact).
·	Completed developments provision: after incurring significantly higher charges in FY23 due to lengthening timescales for local authority adoption of roads and public spaces on completed developments, a more normal movement in this provision created a 20 bps positive margin impact (FY23: 60 bps negative margin impact).
·	Mix and other items: changes in sales mix, increased selling costs, reduced abortive costs in relation to land transactions no longer proceeding and other smaller items created a 30 bps positive impact (FY23: 70 bps negative impact).
·	Net administrative expenses: the small decrease in part-exchange income and the increase in administrative expenses deducted 100 bps (FY23: deducted 30 bps) from the adjusted operating margin.

 

After deducting adjusted items, on a reported basis, profit from operations reduced to £174.7m (FY23: £707.4m), with a reported operating margin of 4.2% (FY23: 13.3%).

Net finance charges were £6.5m (FY23: £11.1m), reflecting increased interest received on cash balances throughout FY24. The cash component of the finance charge was an increased credit of £37.1m (FY23: £13.4m credit) with non-cash charges of £43.6m (FY23: £24.5m). The increase in non-cash finance charges reflected the impact of the increase in legacy property provisions and the higher discount rate applied to these provisions, arising from the movement in the gilt rate. In FY25, we expect finance costs will be c. £25m, reflecting a cash component credit of c. £15m and non-cash charges of c. £40m.

Our JVs delivered lower adjusted profit for the year of £14.9m (FY23: £32.5m). Including adjusted charges for JV legacy properties of £12.6m (FY23: £23.7m), JV reported profits reduced to £2.3m (FY23: £8.8m). Consequently, reported profit before tax for the year declined to £170.5m (FY23: £705.1m).

The Group's tax charge for the year reduced to £56.4m (FY23: £174.8m). This included the full year impact of the increase in the rate of corporation tax from 19% to 25%, effective from 1 April 2023. The tax charge comprised:

·	A corporation tax charge on adjusted profit before tax of £104.7m (FY23: £188.1m);
·	Residential Property Developer Tax of £6.1m (FY23: £26.0m); and,
·	A tax credit for adjusted items totalling £54.4m in FY24 (FY23: £39.3m credit).

Adjusted basic earnings per share decreased by 57.9% to 28.3 pence per share (FY23: 67.3 pence) due to a 56.5% decline in adjusted pre-tax profitability and a 6.0% impact from the increased corporate tax rate and was partially offset by a 2.8% benefit from the reduced average share count, reflecting the impact of our share buyback completed in June 2023.

Basic earnings per share reduced by 77.8% to 11.8 pence per share (FY23: 53.2 pence).

Reflecting the decline in adjusted profitability as well as the slowing in asset turn - notwithstanding the disciplined management of capital employed throughout the year - our ROCE declined to 9.5% (FY23: 22.2%).

Adjusted items

Adjusted items recognised in the year related to costs associated with legacy properties of £192.1m (FY23: £179.2m), as well as initial costs in relation to the Redrow transaction of £22.4m, where the balance of transaction costs will be recorded in FY25. Of the total charge related to legacy properties, £125.3m (FY23: £117.7m) related to future fire safety and external wall systems commitments, with a further £66.8m (FY23: £51.5m) relating to remedial works arising from the review of reinforced concrete frames.

Our commitment to addressing fire safety and concrete frame design and construction is clear and evidenced by further investment in our dedicated Building Safety Unit, which manages our ongoing building safety remediation programme across the country. Whilst the regulatory backdrop and assessment regime remain subject to variability and subjective interpretation, we are focused on the efficient delivery of both suitable and sustainable remediation solutions, which we anticipate will be delivered over the next five years, with building safety considerations paramount in prioritising and scheduling remediation works.

Fire safety and external wall systems

Reflecting our commitment to dealing with these buildings as quickly and efficiently as possible, of the 262 buildings under review at 30 June 2024, 137 were in progress at tender, site mobilisation or remediation stage.

In the first half of the year, we recognised a charge of £56.4m to reflect higher than expected tender returns and cost increases on buildings being remediated by the Building Safety Fund. These generally related to buildings with atypical features and costs in relation to the remaining buildings are broadly in line with our initial estimates.

During the second half of the year we recognised a charge of £64.5m, following an initial £5.0m for fire testing recognised in the first half, in relation to a development of three buildings which we had previously disclosed as a contingent liability. We have been unable to develop a testing methodology under the FRAEW for these buildings due to the unique unitised wall system in place, which we now assess will need to be replaced. The provision is based on the current expected method of remediation, designed to minimise disruption to residents, though due to the unique nature of the building, this estimate may vary as the process is further developed.

After incorporating the additional adjusted item charges for fire safety and external wall systems of £125.9m, as well as with remediation costs incurred during FY24 and time discounting adjustments, the provision in relation to fire safety and external wall systems totalled £628.1m at 30 June 2024 (30 June 2023: £535.9m). We believe this reflects our current best estimate of the extent and future costs of remediation work required and we will continue to review these estimates as we gather data and complete the remediation of buildings within our portfolio.

We signed the Scottish Government's Safer Building Accord on 31 May 2023. The process to agree a legally binding, long-form contract to give effect to the Principles of the Accord remains in progress with Homes for Scotland and the Scottish Government. As a result of this uncertainty, our existing provisions for Scottish buildings have been made on a consistent basis with England and Wales but are subject to change depending on the outcome of the contract negotiations.

Reinforced concrete frames

Our remediation activities for concrete frame design and construction continued during FY24 with developments proceeding in line with our plans.

As highlighted earlier, in the Chief Executive's report, during FY23 and separate from the original concrete frame review, structural issues were found at two developments where reinforced concrete frames were designed for us by a different engineering firm to that employed at Citiscape. Following preliminary work on these developments and further analysis, undertaken during the second half of FY24, it is now considered probable that extensive concrete frame remediation will be required. Based on a high-level risk review, an additional £56.6m has been provided for by the Group and £7.6m recognised as a share of loss from joint ventures in respect of these two developments.

Whilst charges for legacy properties reflect our current best estimates of the extent and future costs of work required, we may have to update these figures as assessments and work progress.

 

Cash flow

Net cash decreased to £868.5m at 30 June 2024 (30 June 2023: £1,069.4m). The main components of the change in net cash position were:

·	a £96.2m net cash inflow from operating activities (FY23: £465.5m cash inflow);
·	a £12.0m net cash inflow from investing activities (FY23: inflow of £55.4m), with the reduction reflecting reduced cash received from joint ventures; and
·	a £308.6m net cash outflow from financing activities (FY23: outflow of £590.6m), principally reflecting dividends paid of £270.6m (FY23: £360.0m) and the absence of any share buyback activities in FY24 (FY23: £201.3m share buyback including stamp duty charges of £1.3m).

 

The major driver of the decline to £96.2m net cash inflow from operating activities in the year was the reduction in our profit from operations, which reduced to £174.7m (FY23: £707.4m). This was partially offset by a reduced net cash outflow from working capital and provisions of £12.0m (FY23: £64.9m outflow) and net interest and tax payments, which reduced to £73.7m (FY23: £196.3m outflow).

The net £12.0m outflow (FY23: £64.9m outflow) with respect to working capital and provisions included:

·	A £38.0m outflow (FY23: £48.9m inflow) with respect to inventories where a reduction in construction work in progress of £77.7m was offset by additional net land investment of £93.7m and investment at Gladman and additional part-exchange property costs.
·	A £87.2m decrease (FY23: £337.6m decrease) in payables, with land creditor balances reducing by a more modest £33.9m (FY23: £226.9m reduction) and a more modest reduction in trade and other payables of £53.3m (FY23: £110.7m).
·	A £132.8m increase in provisions (FY23: £163.4m increase) created in large part by the additional legacy building safety charges incurred in FY24. During FY24, we spent £91.5m (FY23: £32.9m) on the remediation of legacy properties.

 

Balance sheet

The Group's net assets at 30 June 2024 were £5,439.1m (30 June 2023: £5,596.4m) after the payment of dividends totalling £270.6m (30 June 2023: £360.0m).

Goodwill and intangible assets reduced to £1,037.4m (30 June 2023: £1,047.8m), reflecting amortisation charges in the year.

Our balance sheet assets showed limited movement over the year with:

·	The investment in our land bank increasing by £93.7m to £3,233.6m (30 June 2023: £3,139.9m);
·	Construction work in progress tightly controlled and reducing by £77.7m to £1,829.4m (30 June 2023: £1,907.1m);
·	Increased investment in land promotion activity at Gladman resulting in a £13.8m increase in promotional agreement work in progress to £111.5m (30 June 2023: £97.7m); and
·	Part-exchange properties and other inventories tightly controlled at £103.7m (30 June 2023: £93.3m).

Adjusted item charges in relation to legacy properties were the most significant factor impacting our balance sheet liabilities.

Our provisions on the balance sheet increased to £921.2m at 30 June 2024 (30 June 2023: £788.4m) and included £730.3m (30 June 2023: £612.3m) of provisions to cover future costs in connection with the remediation of external wall systems and reinforced concrete frames.

Net tangible assets were £4,401.7m (452 pence per share) at 30 June 2024 (30 June 2023: £4,548.6m; 467 pence per share). Land, net of land creditors, and work in progress totalled £4,590.2m (471 pence per share) at 30 June 2024 (30 June 2023: £4,540.3m; 466 pence per share).

At 30 June 2024, the Group held net cash balances of £868.5m (30 June 2023: £1,069.4m). Whilst we continue to defer payment for some land purchases to optimise ROCE, the pause in land buying has led to a reduction in land creditors. At 30 June 2024, land creditors were £472.8m (30 June 2023: £506.7m) and equated to 14.6% (30 June 2023: 16.1%) of the owned land bank.

Our minimal year-end total net indebtedness target was achieved with a net surplus of £395.7m at 30 June 2024 (30 June 2023: £562.7m net surplus).

During FY25, £307.8m of land creditors will fall due for payment (30 June 2023, during FY24: £321.5m). Land creditors due beyond 30 June 2025 totalled £165.0m at 30 June 2024 (30 June 2023: £185.2m due beyond 30 June 2024).

Capital returns

The Board has reviewed capital allocation as is customary as part of its annual cycle. Having recently completed the Redrow acquisition, we will assess the capital requirements for the enlarged group taking into account current market conditions including the positive supply-side developments, our obligations with respect to building safety and our desire to be proactive in the land market. In principle we continue to believe that when appropriate, that excess capital will be returned to shareholders and the timing of any such returns remains under review.

 

Operating framework and capital structure

Our operating framework and appropriate capital structure continue to deliver a stable and solid foundation for the Group. We target an appropriate capital structure as part of our disciplined operating framework, with shareholders' funds and land creditors funding the longer term land requirements of our business, and term loans and bank debt funding the shorter-term requirements for working capital.

Our highly selective approach to land buying since the summer of 2022 has limited investment in land and the creation of additional land creditor obligations. Reflecting the calendar-based settlement of previously agreed land creditor obligations, but the limited investment in new land up until the final quarter of FY24, land creditors have reduced to 14.6% of our land bank. This situation is expected to reverse as land buying activity increases over the medium term.

Our operating framework remains unchanged, and our performance against targets at 30 June 2024 and 2023 is summarised below:

	Operating framework	Position at 30 June 2024	Position at 30 June 2023
Land bank	c. 3.5 years owned and c. 1.0 year controlled	4.3 years owned and 0.6 years controlled	3.6 years owned and 0.7 years controlled
Land creditors	Maintain at 15 - 25% of the land bank over medium term	14.6%	16.1%
Net cash	Modest average net cash over the financial year	FY24: average net cash of £732.3m	FY23: average net cash of £759.1m
	Year-end net cash	£868.5m	£1,069.4m
Total indebtedness	Minimal year-end total indebtedness in the medium term	Total net surplus of £395.7m.	Total net surplus of £562.7m
Treasury	Appropriate financing facilities	£700m Revolving Credit Facility extended to November 2028 £200m US Private Placing Notes maturing August 2027	£700m Revolving Credit Facility extended to November 2027 £200m US Private Placing Notes maturing August 2027
Dividend Policy	Dividend cover of 1.75x adjusted basic earnings per share	FY24: total ordinary dividend of 16.2 pence per share	FY23: total ordinary dividend of 33.7 pence per share

In pursuing this clear framework we have ensured that, even through challenging trading conditions, the Group has remained in a strong financial position, ready to take both operational and financial advantage of both market recovery and organic investment opportunities looking forward.

Treasury

The Board sets and approves the Treasury Policy and senior management controls day-to-day operations. The Group's Treasury Policy seeks to maintain an appropriate capital structure and provide the right platform for the business to manage both operating risks and opportunities.

Cash management and relationships with our banking partners are co-ordinated centrally by the Group Head of Treasury. During the year, we extended our £700m Revolving Credit Facility to November 2028 with one further one-year extension period through to November 2029 available, if agreed between the Group and its lenders.

Tax

The Group does not enter into business transactions for the sole purpose of reducing potential tax liabilities. The Group's tax strategy is to only use any available reliefs and exemptions, which have been set out in any current tax legislation, to minimise the Group's tax liabilities.

The rate of corporation tax, including RPDT, for the year ended 30 June 2024 was 33.1% (FY23: 24.8%), which, reflecting the impact of the non-deductible Redrow transaction expenses, was above the standard effective rate of tax of 29% (inclusive of RPDT at 4%) (FY23: 24.5% inclusive of RPDT at 4%).

Looking ahead, the Group's tax charge and underlying effective rate of tax is expected to be approximately 29.0% in FY25.

Pensions

Defined contribution pension arrangements are in place for current employees. Defined contribution scheme charges for qualifying employees totalled £21.2m (FY23: £19.2m). Pension contributions are based upon a fixed percentage of each qualifying employee's pay and, once paid, the Group has no further obligations under these schemes.

Guidance for FY25

Looking to FY25, for regulatory reasons we are unable to provide guidance for the combined group at the date of our Annual Report and Accounts. We provide below guidance with respect to Barratt Developments PLC as it would have applied on a standalone basis, before considering the potential impact of the acquisition of Redrow plc:

Completions	c. 13,000 - 13,500 total home completions including c. 600 JV completions Affordable mix expected to be in the high teens
Average sales outlet movement (inc. JVs)	c. 9% decline
Build cost inflation	c. Broadly flat
Adjusted administrative expenses	c. £310m, excluding integration costs, (including amortisation of intangible asset charges of c. £10m)
Interest cost	c. £25m charge (c. £15m cash credit, c. £40m non-cash charge)
Land approvals	Return to normal approval activity during the year
Land cash spend	c. £0.8bn
Year-end net cash	c. £0.5bn
Taxation	Effective underlying tax rate of 29%, reflecting current corporation tax rate at 25% and 4% RPDT
Ordinary dividend cover	1.75x ordinary dividend cover based on adjusted basic earnings per share

Well placed for FY25, despite continuing economic and political uncertainties

Despite limited economic growth and the ongoing affordability challenges for our customers, the Group is in a strong position. We entered FY25 with an excellent net cash position, our forward sales position is solid, albeit reduced and we have maintained a strong land bank. Our operating framework and our strong financial position are the foundations for our divisions to focus on delivering high-quality, sustainable homes and developments throughout the country, as well as giving us the flexibility to react to changing market conditions and opportunities as they evolve.

 

Mike Scott

Chief Financial Officer

3 September 2024