BARRATT report & accounts 2005 financial highlights Consistent growth has been achieved across all key financial performance indicators. Pre-tax Profits Basic Earnings Per Share UK Housing Operating Profit £m pence £m 406.6 123.6 395.7 367.7 111.4 366.4 288.7 89.1 290.5 220.0 68.6 223.3 178.4 55.1 183.8 01 02 03 04 05 01 02 03 04 05 01 02 03 04 05 Year ended 30 June Year ended 30 June Year ended 30 June UK Legal Completions UK Housing Turnover UK Land Bank units £m 000’s plots 14,351 14,021 2,472 54.1 2,327 13,304 49.4 2,033 12,250 45.3 11,310 1,660 1,391 40.1 35.1 01 02 03 04 05 01 02 03 04 05 01 02 03 04 05 Year ended 30 June Year ended 30 June Year ended 30 June 2 contents Barratt Developments PLC Annual Report and Accounts for the year ended 30 June 2005. Registered in England No. 604574. Chairman’s Statement 4-5 Group Balance Sheet 43 Group Chief Executive’s Review 6-18 Group Cash Flow Statement 44 Award Winners 19-21 Accounting Policies 45 Directors and Professional Advisers 22 Notes to the Accounts 46-55 Notice of Annual General Meeting 23-24 Company Balance Sheet 55 Directors’ Report 25-33 Five Year Record and Financial Calendar 56 Remuneration Report 34-41 Auditors’ Report 57 Group Profit and Loss Account 42 Group Structure and Directory 58-59 Statement of Total Recognised Gains and Losses 42 3 chairman’s statement Charles Toner, Group Chairman, Barratt Developments PLC. I am very pleased to report that, notwithstanding the challenging market conditions throughout the year, the Group achieved further growth in volume and margins producing a record £406.6m pre-tax profit. This was our 13th consecutive year of organic growth and we continue to build more homes in total and more homes on brownfield sites than any other housebuilder in Britain. We are also well positioned for the payable on 18 November 2005 to ‘...the Group future, having ended the financial shareholders on the register on 21 year with healthy forward sales of October 2005, against 14.68p the achieved £774m. With further sales progress previous year. This gives a total since 1st July 2005, forward sales dividend for the year of 26.98p, further growth now stand at £900m which, together an increase of 25%, 4.6 times with completions to date, already covered. This increase reflects our in volume secures 52% of our full year progress and the Board’s requirement. confidence in the future and margins performance of the Group. Key features of the results for the • Net cash in hand at the year end producing year ended 30th June 2005 are as was £276.9m (2004: £189.7m follows:- cash in hand) with an average a record gearing over the year of just 2%. • Group pre-tax profit amounted to This was achieved notwithstanding £406.6m £406.6m against £367.7m the a £234.0m increased investment previous year, an increase of 11%. in land stocks and work in pre-tax • UK pre-tax profit, before the progress. profit.’ exceptional item of £15.9m from • On 30 August 2004 we completed the disposal of ground rents, was the disposal of our small Southern £390.7m compared to £358.3m California operation, for net the previous year, up 9%. proceeds of £85m, in line with the • Basic earnings per share Group’s strategy to focus on our amounted to 123.6p against UK operations. 111.4p the previous year, an • Return on average capital increase of 11%. employed continued to be • A final dividend of 17.99p per amongst the highest in the industry share will be recommended, at 31% (2004: 37%). 4 Chatsworth Park, Banstead, Surrey. A development of 24 apartments, carefully designed to cover the “footprint” of a retirement home which previously occupied the site. These robust results demonstrate the teams throughout the Group, both product range, together with our continued success of our organic office and site based, for all their urban regeneration and social growth strategy and the fundamental hard work. Our record performance housing expertise, all contributed to strengths of our Group. is a result of their teamwork, skills a good result for the year. These and enthusiasm. core strengths, together with our The medium and long term healthy forward sales, strong fundamentals of the housing market We are pleased to welcome a new finances and experienced remain sound, bolstered by a Non-Executive Director, Mr Bill management team, leave us well continuing serious shortage of new Shannon, who joined the Board in positioned for the future and able to homes due to the very slow planning September. Mr Shannon has had a quickly respond as market conditions system. The economic outlook in the long and distinguished career with improve. short term, however, remains Whitbread PLC, serving as an uncertain notwithstanding the recent Executive Director between 1994 0.25% cut in interest rates. With and 2004. He is also a Non- over nine months of our financial Executive Director of Aegon UK PLC year yet to run it is, therefore, too and Matalan PLC and brings with early to accurately assess the market him a wealth of experience in the for the year ahead, although we are business sector. well placed to achieve further growth in completions if market conditions Looking ahead, we are well placed allow. to continue to progress. Despite the short term economic uncertainties, Our experienced management team our long term strategy remains across Britain has, once again, unchanged and undoubtedly there demonstrated its ability to succeed in will be many growth opportunities a very competitive market place. going forward. Our wide Charles Toner, I would like to thank all of our local geographic spread and extensive Group Chairman 28 September 2005 5 group chief executive’s review David Pretty, Group Chief Executive, Barratt Developments PLC with the 2005 Major Housebuilder of the Year Award, presented by the influential Building magazine. Our teams across the country successfully adapted to a more demanding and competitive market place, achieving yet another record result for the Barratt Group - our 13th consecutive year ‘...yet another of organic growth. record result for the Barratt Group - our We built more new homes in total and more homes on regenerated 13th consecutive brownfield land than any other housebuilder for the third consecutive year of organic year. We also strengthened our leading position in the provision of social housing. No housebuilder growth.’ does more to create sustainable communities than Barratt. In addition, during the year, we had the pleasure of handing over the keys to the 300,000th Barratt home completed since our Group was formed in 1958 by Sir Lawrie Barratt. At the same time as growing our business, our work has been recognised this year by a record number of design, quality and environmental awards. 6 UK HOUSING A total of 14,351 new homes were housing activity increased to We continue to benefit from the completed, an increase of 2%, £395.7m, up 8%, with the operating strength of our long-standing helping increase UK housebuild margin increasing again from 15.7% national purchase agreements with turnover by 6% to a new record of to 16.0%. our main suppliers. These helped us £2,472.4m (2004: £2,327.6m). A maintain our stringent control of Our average selling price increased further improvement in our margin, costs. We are also taking positive by 4% to £172,200. Total private combined with the £15.9m action to reduce costs further in completions were 1% down, at every part of our business. exceptional profit from the sale of 12,591 units, with an increased our freehold ground rent portfolio selling price of £182,100, up 5%. and low gearing, produced a record Social housing completions Group pre-tax profit of £406.6m, an increased by 35% to 1,760, at an increase of 11%. The underlying average selling price of £101,700, operating profit from our core UK up 14%. Oyster Wharf, Battersea, London SW11. This award-winning development is creating 150 apartments, including affordable housing, live-work units and commercial and leisure space. HOUSING MARKET The housing market throughout our financial year was certainly one of the most challenging for years, but one which we had anticipated and prepared for. As a result, and despite the weaker general economic situation and buyer hesitancy, we were able to compete well in all of our operational areas. Forward sales at the year end stood at a healthy £774m. Whilst down on last year’s all time record, which reflected the previous year’s over- 1 heated market, in percentage terms this remains at the upper end of our historic norm. This has now increased to £900m which together with completions to date, secures 52% of our full year requirement, with 9 months of the financial year yet to come. The fundamentals of the housing market remain sound, supported by low interest rates and good employment levels. These are underpinned by restricted supply caused by constant planning delays, and the enormous need for new housing which will have to be met in due course. Quite apart from these factors, our Group greatly benefits from a number of core strengths which continue to boost our performance and provide valuable protection from market fluctuations. 2 1 Scholar’s Walk, Kingsbridge, Devon. On a former school site, this development provided a wide mix of 2, 3 and 4 bedroom homes to meet local housing needs.