Barratt Redrow plc

Okay, good morning everyone and welcome. So I'm going to start with an overview of the first half, then move on to current trading and have a look at our priorities. Stephen will then take you through our operational performance and Mike will cover our financial performance in the half. I will then come back to look at industry fundamentals, sustainability and to conclude. First to reflect on the first half of the year that we're reporting. We delivered a very strong operational and financial performance in the first half. with almost 7% completion growth to 8,626 homes. Adjusted pre-tax profit of 521 million, a record first half profit for the group. And also a further improvement in return on capital employed to 29.6%. This performance reflected the strength of the forward order book coming into the financial year, as well as the really excellent build performance across all of our sites during the period. I would just like to take a moment to acknowledge the tremendous contribution from our employees, our subcontractors and our supply chain. However, we recognise the stark contrast with the very challenging reservation backdrop we have faced in the half, particularly from the end of September. When we move on to look at current trading, I mean, encouragingly, we have seen better trading activity in January relative to the last quarter of 2022. But we also recognise that it is very early days with just four weeks trading so far in 2023. Bringing you up to date on the current trading picture, our reservation rates, outlet and order book are summarized here. Our private sales outlet rate per week over the period through to the 29th of January has been at 0.49. This is clearly a pleasing uplift on the 0.3 we experienced from our AGM update in October. But it is still 45.6% below the 0.9 we saw in the same period last year. Our average active outlet position at 373 is significantly stronger and ahead nearly 15%, which is helping to support the absolute level of reservations. And we are clearly substantially forward sold with respect to our FY23 private completion guidance. Just take a moment to look ahead. I mean, we have a very experienced management team and we clearly understand the levers that we can pull depending on how the market evolves over the coming months. We've already outlined that we've stepped away from the land market and we've introduced a temporary freeze on recruitment. Our clear priority against this backdrop is to trade the business on a week-to-week basis and our teams across the country are focused on driving reservations and future revenues. Our operating costs in any event are under constant review and we will adjust our cost base as necessary. But we also need to keep in mind that the long-term fundamentals remain strong. We face a continued supply-demand imbalance across the country. The mortgage lenders have an appetite to lend. And our homes have clear advantages for our customers. most notably around energy efficiency and the ability to drive down running costs and reduce carbon emissions. Finally, assuming we continue to see the improved reservation activity we have experienced since the start of the new calendar year, we expect to deliver between 16,500 and 17,000 total home completions in FY23. I'm very confident that we will make the right decisions as the market evolves over the coming months to support our business performance in the short term and also to ensure that we are fit for purpose to deliver our continued outperformance in the longer term. With that, I will now hand over to Stephen who will take you through our operational performance.

Thank you, David. And good morning, everyone. Today, I'll take you through the usual operational updates and then provide some additional detail around our land bank position as we manage through the market uncertainty. Our sales performance is detailed here on slide seven. Our wholly owned reservation rate at 0.4 net private reservations per outlet per week was 44.3% below the 0.79 generated in the first half of FY22, with reservations showing sequential weakening, as we've already detailed, to the half. Total average sales outlets were 7% higher at 360. Outlook growth reflected two factors. Firstly, we opened 52 new sales outlets. And secondly, the slower reservation rate has naturally extended the duration of our sales outlets. Looking to the second half, we now expect total average sales outlets in FY23 will be around 8% higher than the 332 average in FY22. Turning now to completions on slide eight. In the half, we delivered 8,626 total completions, almost 7% ahead of the prior first half. The benefit of our strong order book helped support delivering the first half, as well as the tremendous efforts of our employees, subcontractors, and supply chain partners. For the full year, reflecting our revised completion guidance, we now expect a reversal of this normal phasing with the second half now likely to generate between 48% and 49% of total home completions for the year. On pricing, our private average selling price improved by 13.6%. Applying our analysis of light-for-light matching house types and sites, we estimate annual house price inflation was around 8.8%. In terms of the bridge from 8.8% to the reported 13.6% increase in the private sales price, we had a positive impact from the step-up in home completions from London and this added 3.2% and the balance related to a shift in product mix towards larger family homes in our regional operations. Our estimate of annual house price inflation at around 8.8% was also remarkably uniform across the UK, with our West, Scotland and Southern regions ahead of the group average, and London the weaker region. Our affordable average selling price at just over £170,000 increased by 8.5%, but this also reflected a shift in mix with more London completions. In the second half, we expect the affordable average selling price will move back to the average reported in FY22 at around £159,000, reflecting a return to a more normal mix of anticipated completions. Our total wholly owned average selling price improved by 14.6%, reflecting the lower proportion of affordable homes at 21% of completion mixed in the half, compared to 23% in the prior period. This will reverse in the second half. Now a look at the profile of our home buyers on slide 9. Not surprisingly, the help to buy share of completions has fallen materially from 21% to 16%. This has been taken up by both an increased share from traditional private buyers at 52%, as well as a significant increase in investor buyers, which grew to 8% of completions in the first half. The geographic mix of completions with increased London content was naturally one driver of the increased investor share of completions. But we continue to promote our homes to the private rental sector, which is likely to represent a growing share of completions, given the more uncertain market backdrop for traditional private buyers, and in particular, first-time buyers. Help to Buy reservations ended on the 31st of October 2022, and as a result of the closure of the scheme in England, will only contribute to completions through to the 31st of March. In Wales, we welcome the devolved Labour government's decision to continue Help to Buy at an enhanced price gap of £300,000, where its impact will be far reduced for the group as a whole going forward. It's worth noting that whilst Part Exchange supported a stable share of completions at 3%, this share is expected to increase. Barrett pioneered Part Exchange more than 50 years ago. It's an important sales tool when the wider market slows and is used in a controlled and disciplined way. Part exchange was typically 15% to 16% of our completion mix in the three years preceding help to buy, and we expect it will grow towards this historic norm over the next couple of years. Now turning to slide 10, and I want to update you on our build performance, customer service, and build quality. On build, our teams have done a tremendous job in the first half. We began the year looking to grow construction output to meet our customer commitments, and we constructed 365 equivalent homes per week in the first quarter, more than 10% ahead of the same period in FY22. Reflecting the changes in the market in late September, our site-based teams moved quickly to adjust construction activity through the second quarter. Through careful management of build programmes and material supply scheduling, helped by our strong supply relationships, we managed to slow construction output by almost 14% year on year in the second quarter, to 302 equivalent homes and 333 for the first half of FY23. Across the half, total legal completions equated to an average of £332 per week. So whilst the value of WIP has increased, which Mike will cover, this is a reflection of bill cost inflation rather than volume on the ground. On HPF customer satisfaction scoring, building on our 13 year record, I can report we remain comfortably five star year to date. The one area where our performance dipped in calendar 2022 and where we need to improve was our injury incidence rate, which increased in the year to 301. And whilst the increase centered on minor slips and trips, we are challenging all our divisions to find new ways to change behaviors. We've also recently engaged with our employees to help instigate further targeted plans to drive our injury incident rate lower. The 2022 NHBC Pride in the Job Awards program concluded in January. Back in the autumn at the regional awards, our site managers secured 34 Seals of Excellence, as well as five of the nine regional awards. And in January, our site manager at Dursley Park in our Mercia division was named Supreme Winner in the Large Builder category. And Barrett has secured this award in six of the last eight years. Industry-leading build quality was maintained throughout calendar 2022. We consistently rank first amongst the major house builders group with average reportable items, RIs, at 0.16, the most frequent and independent measurement of build quality. Looking ahead, we are aiming to align construction activity with reservations as they evolve over the coming months to ensure we maintain an efficient but responsive build position on our sites and on our balance sheet. Turning now to slide 11 and bill cost inflation. Here you have the usual breakdown of our costs on the left. As a reminder, based on delivery of a 23% gross margin in line with our land acquisition target and a 19% operating margin. On total bill cost inflation, our view for FY23 has not changed with inflation estimated at between nine and 10%. Our centralised procurement teams have been particularly busy managing the slowdown in material scheduling to sites, and they continue to manage around 90% of our build materials from foundation level to finishing trades across our standard house type ranges. On material pricing, we still see upward pressure on a number of materials, with energy and labour being the ongoing cost pressure for our suppliers. but rates of increase have slowed considerably from those we've been experiencing over the past 18 months. We've seen deflation in timber products, particularly CLS, or Canadian Lumber Standard. In steel-related products, we're seeing prices broadly held, and in products using plastics, price escalation is now single digit. Heavier masonry products, notably those using cement, are seeing continued upward pressure, but again rates of inflation have slowed. Now looking at labour costs. As you'd expect, we are seeing some signs of softening, particularly in trades at the front end of new site development, where activity is clearly declining. Subcontractors, reflecting their desire to secure future workload, are becoming more flexible, and we do expect in a number of new build-dominated trades, like ground workers and bricklayers, to see some further softening in labour rates. So we still see 9-10% as very much the range for our total build cost inflation in the current year, and we will have a clearer view on FY24 with our May update. Turning out our land bank on slide 12. As you're aware, we've pulled back from almost all our land buying activity and reported negative net approvals in the half of 290 plus. Reflecting both growth in completions and the pause in our land buying activity, our owned and controlled land bank, however, remains strong at 4.4 years supply. In contrast, our strategic land bank has grown and now sits at 16,221 acres. This, we believe, can unlock some 93,600 plots in the coming years. And we also hold almost 94,000 promotional plots through Gladman. We now expect minimal land approvals in FY23, reflecting current market conditions. Given our pause in land approvals and land buying, I wanted to lay out our thinking around our land bank position, its length, and what this may mean in different scenarios looking forward. And this is charted here in slide 13. The sustainable reservation rate for both ourselves and the industry remains uncertain with the end of Help to Buy and the resulting deposit constraints for first-time buyers, along with mortgage availability and wider affordability constraints. To provide a range, we've modeled reservations and completions on steady-state scenarios at either 0.4 or 0.6 private sales per site per week, and assume no further land buying almost equidistant from our latest rate at 0.49. As you can see, in the upbeat scenario at 0.6, we still hold four years of land supply at the end of FY24 and arguably only need to consider land buying some 12 months from now. On the downbeat scenario at 0.4, we will see our trailing land bank length extend well above our target with six and a half years and five and a half years respectively at the end of FY24 and FY25. Where we do have specific divisions operating with more constrained land bank positions, we have the ability to transfer sites between adjacent divisions, given our nationwide coverage, to ensure adequate land bank supply. Or alternatively, we can also look at the potential drawdown of strategic land bank plots into our current land bank, where planning and site purchase makes commercial sense. We are monitoring both the new build housing market and land market on a weekly basis, but we certainly do not have any operational pressure to step back into the land market. So to summarise on slide 14, we have delivered an excellent operating performance in the first half in terms of both managing our construction activity quarter by quarter and delivering strong home completion growth. Our customer satisfaction and build quality continue to lead amongst industry majors. The health and safety of anyone with whom we interact is also our first priority, and we are redoubling our efforts as well as seeking out employees input for further targeted actions. Build cost inflation remains a challenge, but we are seeing inflationary pressures easing, most notably in labor related costs and specific areas in build materials. Whilst we've paused our land buying, we feel under no pressure to resume land purchases given our current land bank position, the plot drawdown potential from our growing strategic land bank, our site pipeline, and the uncertainties faced. The coming months will see some degree of balance established between a sustainable private reservation rate for the industry and new home pricing. But until this becomes clearer, we will look to optimize our existing land banks. And finally, we have an incredibly strong management team, steeped in house building experience, whom I have no doubt will make the right operational decisions as we manage through the months ahead. So thank you, everyone. And with that, I'll hand over to Mike.

Thanks Stephen, morning everybody. So let me take you through some of the key aspects of our financial performance in the half. So a look at the numbers on slide 16 and they show that we've delivered a strong financial performance in the first half as we work through the order book that we had in place at the end of last year. Group revenue was £2.8 billion, up 23.9%, driven by both the volume and pricing improvements touched on by Stephen earlier. Adjusted gross profit was £648 million, up 15.2% on half-year 22. Our adjusted gross margin was 170 basis points lower, at 23.3%, partly reflecting the very strong margin delivered last year, and as we guided, more in line with our medium-term target. Adjusted operating profit was £512 million, 13.8% ahead of the prior year, with the adjusted operating margin at 18.4%. Administrative expenses were £22 million higher than last year, and I'll come back to that in more detail in a few minutes. Our half year results include adjusted items, mainly relating to our reinforced concrete frame review. That totals £20 million due to updated costings and some changes in the scope of that review. Adjusted EPS was 39.2 pence. That's 9.2% ahead of the 35.9 pence we delivered last year. And based on our dividend policy of cover of two times adjusted earnings, we'll pay a dividend of 10.2 pence for the first half. And that's in line with our recent practice of paying 30% of the dividend in the first half based on full year consensus adjusted earnings. Our balance sheet remains very strong, and we closed the half with a net cash position of £969 million. And finally, our return on capital saw a significant improvement to 29.6%, reflecting both tight working capital control and the increase in profits delivered in the half. So moving on to slide 17, this is a familiar slide and breaks down the movements in our adjusted operating margin. So you can see here the impact of our 7.7% volume growth, which contributed 40 basis points to margin in the half. The impact of net inflation contributed a further 40 basis points, with sales price inflation at 8.8%, more than offsetting total bill cost inflation at around 10%. Our London developments equated to 12% of completions in the half, compared to only 3% last year, and this reduced margin by 70 basis points, as some of these completions came from developments that we'd previously impaired. We saw a further reduction of 80 basis points from other costs, which largely arose from increased sales and marketing expenditure and some abortive land costs, as we made proactive decisions on land buying given market conditions. And finally, increased administrative expenses reduced the operating margin by 90 basis points. So with these and a combination of mix and other smaller movements, we delivered half-year adjusted operating margin of 18.4%. So moving on to slide 18, we've broken out some of the key components of the administrative expenses and the adjusted items. So administrative expenses increased by £22.4 million to £136.9 million in the half. Around a third of this increase relates to the incremental costs of Gladman, which we acquired in the second half last year, including amortisation costs. The operating costs of our dedicated building safety unit increased by around £6 million as we increased activity on the remediation of historical buildings. Our people costs increased by around £10 million, reflecting an increase in headcount, the 5% salary increase that we announced in April, and the £1,000 cost of living supplement that we announced for all of our employees below senior management level. And this was offset by some reductions in forecast incentive payments. We also incurred additional costs related to the new divisions that we announced in Sheffield and Anglia, and they became operational in the second half of the prior year. So looking forward to the full year, we now expect total administrative costs of around £285 million, reflecting lower incentive payments in line with expected performance and some reduction in headcount coming from our recruitment freeze. And as I mentioned earlier, we incurred a further 20 million charge in adjusted items predominantly related to reinforced concrete frame remediation costs. So moving on now to our cash flow on slide 19, and this chart highlights the strength of our operating cash generation in the half. If I take you through the detail from left to right, starting with operating profit of £494.2 million, we invested £144 million in WIP and part exchange properties, reflecting the increase in active outlets and, as Stephen said, the impact of build cost inflation. We've broken out the net land spend in more detail, and you'll see that cash land spend in the half was £440 million, driven by the payment of land creditors and land approvals from the previous year, which we moved through to completion in the half. We made interest and tax payments of £109 million, which together with some other small net movements resulted in £210 million being generated from operations. This cash flow performance means that our balance sheet is well placed as we head into a more uncertain market in the rest of the year. We invested £20 million in our new timber frame facility in Derby, and after the payment of £260 million in dividends and buying back shares worth £100.5 million, we saw a net cash outflow of £169.5 million in the half. And looking forward, we now expect cash land spend of between 900 million and a billion pounds for the full year and expect a closing net cash balance of around 800 to 900 million. If I turn now to the balance sheet on slide 20 and some of the notable changes. So first of all, our gross land bank has decreased by £86 million since June, and that really reflects land consumed in completions and the pause in land buying activity. Land creditors have decreased by £111 million, again reflecting payments made in the half of £222 million and lower levels of land activity. Our work in progress was £126 million higher than the end of last year, and again, that was mainly driven by build cost inflation and the modest increase in outlet numbers. We're moving to align the build rate to lower sales rates during the second half, but that will take a little bit of time to be reflected in the balance sheet. Gladman's work in progress has remained broadly flat, with activity slowing due to reduced activity in the land market at large. The net cash movement I've already covered, and the reduction in trade payables essentially reflects the reduction in build activity on site. And finally, our legacy property provisions increased by £5.8 million, with the £20 million additional provision offset by spend incurred during the half. Our net asset position at the end of December was £5.7 billion, and that's up £25 million over the six months, with our retained profit offset by the impact of dividend and the share buyback. So we've had quite a lot of questions over recent months about the land bank and in particular the portfolio impairment risk as house prices begin to fall, as well as the distribution of gross margin across our developments. So we put a new slide in here at 21 to give you some additional colour on that land bank and the distribution of margin. So as you would expect, the profile is a relatively normal distribution across the portfolio. And you can see that around 80% of the owned land bank plots are carried with an estimated gross margin in excess of 20%. Just 5% of our plots are carried with an estimated gross margin of 15% or less. The estimated gross margin across the whole land bank was in excess of our target level of 23% at the end of the half year. So in the context of the carrying value of the gross land bank at £3.2 billion, we believe the impairment risk to be relatively low. And for example, a 5% fall in house prices would generate an impairment cost of around £16 million, and that's only 0.5% of the carrying value of the land bank. So if I can move on then to slide 22, and our business remains focused on some very clear operating guide rails which you'll be familiar with and we've set out again here on slide 22. The operating framework drives discipline in the business and it's helped us to deliver our strong financial performance this half year whilst retaining the financial strength and flexibility to react to challenges and opportunities in the market. Our land bank has moved more in line with the framework, reflecting the pullback from additional land buying in the face of the more challenging backdrop. This has also seen the land creditor level reduce further to 19.1% at the end of December. Depending on reservation activity and resulting completions looking forward, as Stephen highlighted, our land bank length is likely to extend further in the near term. As already discussed, the business remains in a strong position with a healthy cash balance and a total indebtedness net surplus of nearly £350 million at the half year. During the half, we also extended our £700 million revolving credit facility out to November 2027, with two further one-year extensions to November 29, if agreed between the Group and our lenders. We're also pleased that this extended RCF now includes annually verified sustainability-linked performance measures, which align with our Building Sustainably strategy. So just to move on to some changes to guidance for FY23, and we've detailed those on the slide. So based on current trading levels and assuming a normal uplift in the spring selling season, we now expect to deliver between 16,500 and 17,000 total home completions for the year. The affordable share of our wholly owned completion mix is expected to be around 24%, with fewer private completions expected to be delivered. Alongside a successful sales outlet opening programme, the slowdown in our reservation rate is extending the average life of our sales outlets, and as a result, average outlets for the year are now expected to be around 8% higher than FY22 at around 360%. Our guidance on admin expenses has reduced, as I mentioned earlier, and we now expect our net interest costs to be lower as well at around £20 million, with some benefit coming from the higher interest rate on our cash balances. As I mentioned also earlier, we now expect net cash to end the year at around £800 to £900 million. As we said earlier, we intend to recommence the share buyback shortly as we exit the closed period today. Now this guidance is clearly dependent on how the market evolves over the coming few months. And as David touched on, we'll continue to monitor the market closely and react to those circumstances accordingly. So then just to summarise on slide 24, our business delivered a strong financial performance in the first half, supported by the order book entering the year and excellent execution on build. We're in a very robust financial position with just under a billion pounds of net cash balances at the half year and 700 million of undrawn facilities secured through to at least 2027. We also have a strong land bank with limited exposure to house price declines should they materialise over the months ahead. And we continue to monitor market conditions closely and have a range of detailed action plans to manage our operations and cost base as the market evolves over the coming months. So thank you, and I'll now hand back to David.