Barratt Redrow plc

Thank you for being with us this morning for the Barrett FY25 full year results meeting. Just a couple of points of housekeeping. There is no fire alarm expected. So if there is an alarm, follow Mike through that door, because he'll be the first off, or through this door with myself. We're going to start with David in a moment. So David's going to do a first intro, then pass over to Mike, then return to David, and then we'll open up for Q&A. But with that, I'll hand over to David. Thanks, David.

Thanks John and your comparing role. So good morning everyone and welcome to the first full year BAT at Redwell presentation. So as John said, Mike and I are going to take you through our FY25 performance and current trading, as well as updates on sales outlets and also building safety. We'll conclude by looking at the market, and the underlying fundamentals, and why Barrett Redrell is best placed to perform across the cycle. First of all, I'd like to just take you through some of our key messages for today. In FY25, the market clearly remained challenging. Affordability was a constraint for many, and consumer confidence remained low. with political and economic uncertainty persisting. Despite this, the business has produced a very resilient performance, both operationally and financially, alongside completing the majority of the Red Row integration, whilst delivering cost synergies well ahead of target. The business remains financially robust, underpinned by our strong balance sheet. And now, through our acquisition of Redroll, we have three distinct brands that position us well for future growth. So looking in a little more detail at the operational highlights from last year, bringing the Redroll brand into the business was of course a particular highlight. allowing us to reach most of the market as well as capitalize on synergy opportunities. We received CMA clearance in October 2024 and as mentioned have already completed the bulk of the integration. This allows us to concentrate on maximizing the benefits of the combination and driving the total business forward. In the year, we remained active in the land market, enhancing our land position through strong approval levels, utilizing our numerous land channels. We delivered 16,500 homes, which is a significant achievement in what is a challenging market. I would also like to take a moment to highlight some of our externally accredited achievements over the past year. Our repeated success in the HBF ratings and the NHBC Pride in the Job Awards are testament to the dedication of our teams across the business, as well as the quality of the training and the customer first culture we maintain across the group. This quality is also reflected in our Trustpilot scores given by our customers, which award all three brands with the highest rating of Excellent. Mike will cover the financials in much more detail, but just to pull out a few highlights. Whilst our completions came in modestly below guidance, our adjusted profit before tax and PPA was in line with market expectations. This reflected our rapid progress on cost synergy delivery, with 69 million confirmed in the year and 20 million crystallised at FY25, double our previous forecast. Our return on capital employed, excluding PPA, improved to 10.7% from 9.5%. We finished the year with a strong net cash position, supporting our growth and capital allocation plans. Now looking at reservations. Our growing portfolio of PRS partners helped to increase our overall reservation rate to 0.64. Additionally, some improvement in mortgage competition and availability provided a boost to our net private reservation rate, excluding PRS and other multi-unit sales. However, the improvement in the rate was offset by the reduced number of sales outlets and our opening order book. Turning now to completions, our total completions were down 8% compared to the aggregated figure for FY24. This was due to a reduction in affordable completions reflecting the nature and timing of these types of deals. However, we were pleased that our underlying private completions in the year were up around 3.5%. Our average selling prices saw price inflation of around 1%, with customers remaining very sensitive to both increases in headline prices and reductions in incentive levels. Other increases in underlying private ASP were largely due to increased delivery of larger homes outside of London. For more detail on reservation rates, completions and ASPs, please see the information in the appendices. Our land bank supports our medium-term growth ambitions. Our multiple land pipelines allow us to source high quality land throughout the cycle. While planning remains a slow process, We are very optimistic about the reforms and the positive changes we will see once the legislation is passed. Gladman remains an important part of our business and will also benefit from the planning reforms. Being the partner of choice continues to benefit us in the land market as well. In the year we announced the MAID partnership alongside Homes England and Lloyds Banking Group and also the West London partnership with Places for London giving us access to further high quality land opportunities. Moving on to outlets, the proposed planning reforms as I've said are extremely positive However, they have taken longer to come into law than we expected. Therefore, as announced in our July trading update, we expect outlet numbers in FY26 to be largely flat. From FY27, we will start to see organic outlet growth, plus the benefit of our revenue synergy outlets. As seen on this graph, the vast majority of our FY27 outlets are already open or have detailed planning consent. In FY28, there is still a relatively low proportion of forecast outlets that rely on future planning approvals. This provides us with excellent visibility over the next few years and gives us confidence in our growth forecasts. On current trading, in July and August, we saw our net private reservation rate, excluding PRS, increase slightly compared to the same period in FY25. However, we recognise that the market remains subdued And after speculation about stamp duty, some customers are going to wait to see the impact of the budget in late November. Meanwhile, the lack of PRS reservations in the period simply reflects the timing of deals. Our year-to-date completions are marginally ahead of last year's and our forward sold position is in line. So we are very pleased with the solid start to the financial year. So I'm now going to hand over to Mike who will take you through our FY24 performance and financials.

Thanks David, morning everyone. So as David said I'll take you through our FY25 performance and also spend a few minutes this morning on building safety. This slide shows FY25 performance against the reported position for FY24 which obviously excludes any impact of the red row acquisition. I'll touch on the P&L metric shortly, but you can see here our total home completions of 16,565 homes and strong closing that cash position of £773 million after the payment of £249 million of dividends, £50 million spent on the share buyback and just over £100 million spent on building safety remediation. So if I move on now to a more meaningful comparison of performance as Barrett Red Row. As we did at the half year, we're focusing on the FY25 performance, stripping out the impact of deal purchase price allocation adjustments, which I'll touch on later. And these are non-cash accounting adjustments which largely fall away from FY26 onwards. We think this is the best view of underlying trading in the business during the year. In the comparative for FY24, we're including red row here from the 24th of August 2023, but without any adjustment for accounting policies. And we've put a more detailed slide in the appendices, if anyone has the appetite, which shows the reconciliation of all of these amounts to ensure you've got full transparency. So several points to highlight. First of all, total home completions, as David said, were down 7.8% as a result of lower outlet numbers during the year. Despite the lower volume, adjusted gross profit was broadly flat at £970.3 million, and gross margin improved by 30 basis points to 17.4%, which mainly reflected modest sales price inflation and the positive mix effect of more recently acquired land coming into production. Adjusted operating profit was up 2.9% at 595.4 million, with margin up 50 basis points at 10.7%, reflecting the benefit of cost synergy delivery during the year. Adjusted profit before tax was 591.6 million, slightly ahead of guidance in July, and adjusted EPS was 30.8 pence, which delivers a full year dividend up 8.6% to 17.6 pence. So overall, we're pleased with the performance the combined group delivered in the year, despite the reduced total home completions, and particularly positive to see both gross and operating margins moving in the right direction. This slide updates on the accounting fair value adjustments that have been finalised since our provisional position at the half year, and four changes to draw out here. First of all, the uplift on land and work in progress is now £120.4 million, that's up from £93 million at the half year, and that reflects the final valuation of sites in the opening balance sheet. Secondly, as I mentioned back in February, the recognition threshold for building safety liabilities is lower than normal for Red Row, because we were required to bring contingent liabilities onto the balance sheet by the accounting rules. As we detailed in the July trading statement, we have increased Redrose building safety provisions to take into account concrete frame issues in London, and this has increased this adjustment to the £144.5 million shown here. The final changes relate to the tax effect of the fair value adjustments, resulting in a £94 million adjustment to deferred tax. So goodwill recognised on the red row transaction is therefore £321.9 million, and that's up from the provisional estimate of £259 million. So again, just to note that most of these fair value impacts have actually already unwound in FY25, with a reduction of £103.3 million in adjusted profit before tax. We're expecting a further £20 million charge in FY26 before this becomes immaterial to future years. So moving on to land, and this is the updated position on embedded gross margin in the land bank. And pleasingly, the land bank margin continues to improve, up 90 basis points this half year to 19.2% at the end of June. So with little net inflation impact, roughly a third of the improvement came from the utilisation of land in the half, and the remaining two thirds from the new sites that we've added to the land bank. As you know, we remain focused on improving this position over the medium term to our current gross margin hurdle rate of 23% by optimising price, managing bill cost inflation effectively and bringing new land into production. So moving on to look at adjusted operating margin in FY25 and from last year's Barrett only operating margin, we saw a reduction of 120 basis points from reduced volume. That was almost all offset by improved pricing across the year. And as we've said previously, build cost inflation was broadly flat in FY25. Looking at our same site, same house type measure of inflation, which covers around a third of our volume, like for like sales price inflation was around 1.4% in the year. Last year, we saw a step up in completed development costs, but these have normalised this year, resulting in a positive margin benefit of 80 basis points. The impact of other mix effects, including red row coming into the group, contributed 70 basis points, together with a further 30 basis points from the cost synergies we realised during the year. Our adjusted operating margin before the impact of fair value PPA adjustments was therefore 10.7%, and you can see the impact of those PPA adjustments, which take margin to 9%, flat on the Barrett-only margin from last year. So now just to update on cost synergies, we're making really good progress on realising the cost synergies target of at least £100 million, with £20 million included in the income statement in FY25. With nine office closures confirmed, six were completed by year end and three are in the final stages of closing at the end of June, with £23 million of savings confirmed. The head office rationalisation is also underway and will complete shortly with £21 million confirmed at the 29th of June and on procurement we're making good progress in aligning pricing and terms across key materials categories with £25 million confirmed at the 29th of June. As we said our operational leadership was aligned and effective from the 1st of July 2025 and the IT integration is in progress with the migration of six remaining divisions expected to complete in FY26. Having crystallised 20 million of cost synergies in FY25, we're well on track to deliver an incremental 45 million in FY26. So in revenue synergies, just to give you the latest numbers to date, we've now submitted 25 planning applications at the end of August, and we've already received planning permission on nine of those sites. We expect to submit the remaining applications during the course of FY26, and we're very much on track to see the first incremental outlets ready to open at the start of FY27. So now I'd like to spend a few minutes just updating on building safety. So as you know, our approach from the start of this issue has been to focus on the safety of the buildings we've built and the people who live in them. We've been very engaged with government and we were the first house builder to create a unit dedicated to remediation and we commit significant time and resources to support it in delivering our programme. We apply a rigorous process in assessing buildings within the scope of our obligations. That includes using reputable fire engineers and seeking peer reviews of all fire risk assessments undertaken on our buildings. We're also making some progress with recoveries from the supply chain, where we have a robust case to pursue them for substandard workmanship or design. So looking at our building safety provisions, we currently have £886 million on the balance sheet relating to fire and external wall system issues. During the year, we brought the red row provision of £184 million onto our balance sheet. And as we announced in July, within the Barrett legacy portfolio, we've provided £109 million across three areas. Firstly, £76 million in relation to the development in our southern region, which related to a specific build typology we don't think is repeated anywhere else in the group. We've also seen £17 million of incremental costs at an existing remediation project in London. But other than that, the underlying position was relatively stable, with a net £16 million movement of costs, which was offset elsewhere in the income statement by supply chain recovery. Moving on to look at the provision for concrete frame issues, we carry a provision of £187 million at the end of June. During the year, no new buildings came into scope in the Barrett portfolio. As we updated in July, we identified concrete frame issues similar to those identified on legacy Barrett developments at up to four Red Row developments, and we booked £105 million to the opening balance sheet provision for these issues. Based on the reviews we've carried out to date, we don't expect any further buildings to come into scope for these frame-related issues going forward. So on to the balance sheet, and here's our usual balance sheet breakout. And in the appendices, we've included a slide which reflects the impact of the consolidation of Red Row at fair value and also the movements from underlying trading. So two points to highlight here. First of all, the ongoing organic investment in land. And as well as bringing Red Row's land into the balance sheet, we invested an incremental £181 million across FY25. The significance increase in land creditors, so an additional £167 million added over and above red rose consolidation. So land creditors remain below the target range of 20 to 25%, but moved up to 15.9% this year, and we're looking to ensure that we add land on deferred terms to take us into that 20 to 25% range. Part exchange has increased by £39 million, which is a reflection of its importance as a selling tool in a tough market. But more than two thirds of the 549 homes in our portfolio had already been sold by the 29th of June. And as you know, we keep tight control of part exchange stock. So here's the cash flow bridge for Barrett Red Row from reported operating profit on the left to the net cash outflow on the right. And really just a couple of things to point out from this slide. Firstly, a step up in tax payments was the prime driver of the £101 million outflow on interest and tax. And as I've already noted, building safety spend totalled £101 million. Our operating cash inflow was £50 million and we brought Redrose cash onto the balance sheet and also made some further investment into additional timber frame facilities at our Oregon factory in Scotland. With dividends paid and the share buyback of £50 million, the net cash outflow for the year was £96 million. So just to update on capital allocation and just reiterating our unchanged capital allocation priorities here. Clearly our enhanced scale and balance sheet strength with net cash of £772 million and committed lending facilities of £700 million put us in a very strong financial position looking forward. We're focused on investing in our business to drive our future growth. David detailed our sales outlet profile and we're focused on delivering land to accelerate development using our three brands. We remain committed to innovation and development and will continue to invest in opportunities like the timber frame facilities and also our sustainability initiatives. And finally, we have a clear approach on shareholder returns, including our ordinary dividend at two times cover and the ongoing share buyback programme of at least £100 million per annum. So turning now to guidance, most of these points have been covered, but just to highlight, we expect our adjusted administrative costs to be around £400 million. This reflects the additional period of Red Row's overhead base, which will impact FY26. underlying cost inflation and the benefit of incremental synergies of approximately £30 million. We're anticipating total synergies of £45 million with the balance of £15 million crystallised in cost of sales. A finance charge of approximately £50 million, which is dominated by non-cash charges in relation to land creditors and legacy property provisions, as well as modest cash interest income on our reducing cash balance. In relation to land, we expect to operate at broadly replacement levels and spend between £800 and £900 million on land and land creditors in FY26. On building safety spend, we estimate spend will be around £250 million for FY26. And within this, I'm assuming that around half of our building safety fund costs will be paid during the year. So that's around £70 million. Looking at net cash at the end of June 2026, we expect to be between £400 and £500 million. So finally, to summarise, we believe we've delivered a solid financial performance in FY25 in what was a tough market. Adjusted profit before tax was delivered slightly ahead of expectations for the year, and notwithstanding the tough market backdrop, our balance sheet remains strong. We've delivered cost synergies ahead of schedule, whilst also making good progress on revenue synergies and the wider integration programme. Our land bank and strong balance sheet give us a great platform to grow the business. And finally, we've put in place both clear capital allocation plans with an updated dividend policy alongside the annual £100 million buyback programme. And with that, I'll hand back to David.