Barratt Redrow plc

Hi, good morning everyone. I think we're ready to start. So first of all, as usual, I'm joined by Mike Roberts, our Chief Operating Officer. And Mike is going to cover our operational performance. Also, John Messinger, our Investor Relations Director. And John will update you with regard to our financial performance. And then I'll update you in terms of the market. current trading and synergies and just set out how i feel that we're we're well positioned for the future many of you will be aware that dean banks our incoming chief executive has joined us this morning and also rebecca napier are CFO and Rebecca started with us at the beginning of August, so welcome to Dean and Rebecca. So I think first of all I'd just like to take you through some of our key messages. The market conditions have clearly been challenging. I think we've all seen that play out, particularly since the end of February. Barrett Redrow has delivered a very solid performance over the year both operationally and financially I think that performance reflects the strength of our brands but it also reflects our strategy and the sheer hard work and determination of our teams and our supply chain The customer is understandably subdued, so we've made tactical decisions to drive sales and proactively manage our cost base so that overall performance has been in line with expectations. The early signs from our Redrow dual and triple branded sites are encouraging, reinforcing our conviction regarding the multi branded approach. and our balance sheet remains robust facilitating an enhanced capital return which I will talk about shortly. Our focus is now on disciplined execution to deliver the potential we've created through the combination with Redrow and navigate the market as it evolves in FY27. Here are some of the operational highlights from the year. First, the integration of Redrow is now complete. We are already seeing the benefits of that reflected in our performance with the good progress on cost synergies and the future benefits from revenue synergy outlets. We have maintained a strong land bank position with 5.2 years of supply. This is a key advantage. This has enabled us to tactically reduce land investment given the increased market uncertainty, but without impacting our near-term growth plans. And we completed 17,667 homes, which was towards the top end of our September 25 guidance range. I would also like to, as ever, highlight some of our externally accredited awards in the period. Our unique record with 17 years as a five star house builder and 122 NHBC pride in the job awards, which is a testament to the dedication of our teams across the business. as well as the quality of the training that we provide them and the customer first culture we maintain across the group. The quality is also reflected in our Trustpilot scores given by our customers which award all three of our brands the highest rating of excellent. John is going to cover our financial performance in more detail but just to pull out a few highlights. The adjusted PBT was lower than last year at 572.8 million due to higher net interest costs and lower joint venture profits. So return on capital employed was lower than last year at 9.2%. All of the 100 million cost synergy target was confirmed in the second half with a 73 million benefit in the profit loss in FY26. and finally we finished the year with a solid net surplus position of 61.4 million which is net cash adjusted for land creditors this compares to a net indebtedness position of 37 million last year before I hand over to John I'd like to talk you through our capital allocation framework we have three clear priorities maintaining a strong balance sheet investing in our business and delivering sustainable returns to shareholders the board regularly reviews the balance between these to ensure that we are well placed to deliver our strategy so when we look at our balance sheet we consider not just the year end position but the seasonal nature of our business where average net cash is typically much lower than the year end. We target minimal year end net indebtedness which takes account of net cash and line creditors and we are mindful of our building safety obligations which represents a further significant liability for the business. We also recognise that continuing to invest in the business is critical That's why leveraging our multi-brand opportunities which enables us to grow outlet numbers but requires less incremental capital investment is an important focus for us and we continue to be very selective on land opportunities. Our updated shareholder return program is also set out here and I'll now take you through the background to that. When it comes to shareholder returns, we have a strong track record of evolving our position, reflecting the macro environment and the views of our shareholders. Over the last 10 years we have returned nearly $3.5 billion to shareholders, with $1 billion returned through share buyback or special dividends. As we set out in July with our shares trading at a significant discount to tangible net asset value, we saw an opportunity to increase shareholder returns with a larger buyback. As a result, except for a one penny nominal dividend, our ordinary distribution, which is equivalent to 50% of adjusted net earnings, will now be delivered by way of a share buyback, starting with the FY26 final distribution. This will be supplemented by an additional buyback of at least 100 million. for FY27 the total capital return will be 400 million with 386 million delivered through a share buyback. I'm going to pause there and hand over to Mike who's going to take you through the operational performance.

Thanks David and good morning everyone. Today as David said I'll be taking you through our operation performance for the year. Starting here with a private reservation mix on slide 9. As you can see 88% of our private reservations were generated by individual home buyers with 12% coming from PRS and other multi-unit sales. Our first time buyer share of reservations remained stable at 30% and home movers including those choosing to use our part exchange service accounted to 48% of reservations marginally lower than 50% in FY25. As you remember from the half year we've seen a significant increase in the customers using Part Exchange at 21% of all non-affordable reservations in FY26 up 14% in the prior year. This partially reflected a slower market ahead of the November budget when Part Exchange provided customers with greater certainty at a time when buyers had real concerns over conveyancing chains and we've also introduced our Part Exchange capabilities into Redrow in the year. Part Exchange has been a highly effective sales tool, and one we've used for 55 years. Importantly, it's an alternative, not an additional incentive, and our Part Exchange stock is very well managed. Of the £228 million value of Part Exchange properties held on the balance sheet at the year end, all but £22 million have now been sold on. PRS and other multi-unit sales were at a similar level to last year. This follows a strengthening in the sector of the market in the second half. and finally the percentage of customers relying on a mortgage remained unchanged at 75% turning to completions we delivered 17,667 homes an increase of 5% on the performance in FY25 private completions were flat but affordable completions were up 27% reflecting the timing of delivery and overall they accounted for 22% of the total wholly owned completions We expect affordable volumes will return to our more normal levels of around 20% of completions in FY27. PRS completions were 20% ahead reflecting the order book strength entering into the year and joint venture completions were 566, 5.2% ahead of last year. We anticipate this will increase slightly to around 600 units in the current year. and in terms of pricing the wholly owned average selling price was up 2.2% to £351,700 more detail on that is provided in the appendix but this increase was driven by a combination of product and geographic mix with a slightly larger average unit size and a greater contribution from regions with higher average selling prices Based on our matching plots analysis, the majority of our regions saw only minimal underlying price increases, all less than about 1%. Prices in our London division were notably down, consistent with a broader commentary on the London market. And our southern division also experienced some deflation. But overall, we estimate the underlying selling price deflation was just under 1% for the year. Turning to sales performance on slide 11. The underlying private reservation rate was slightly ahead of the aggregated position in FY25 at 0.56 reservations per outlet per week. This good performance was supported by a targeted use of sales incentives to maintain sales momentum in what was a very uncertain macro environment. John will provide more details on this shortly. Customers also benefited from an improvement in mortgage product availability. We're seeing greater competition by mortgage vendors and an increase in higher loan to value mortgages which have helped in what remains an affordability challenge market. PRS and other multi-unit sales has an improved second half and our strong relationships with PRS providers such as Lloyds Living supported our good reservation rate overall. across the year we operate from an average of 405 sales outlets very much in line with our plans and our guidance and the private forward order book at the end of june whilst lower than last year at 4570 has provided a solid start to fy27 david will cover our view on future sales outlet evolution later in the presentation based on our revised average sales outlet guidance at 405 and the encouraging trading performance we've seen in the first 10 weeks of the year we are confident with the guidance for total completions of between 17,500 and 17,900 in the current year we want to give you a bit more flavor on how our home brands are distributed and how our newest multi-brand developments are performing Here you can see that the multi-branded outlets account for 44% of the total at the end of the financial year. We're seeing more and more opportunities to create dual branded combinations and we now have three triple branded developments. The trading performance from these has been really encouraging. Over the first 10 weeks of the year the blended sales rate across our triple branded developments has been in line with the underlying rate for the whole group. Each development is selling more than one and a half homes per week compared to around 0.5 prior to the triple branding. This performance reinforces our conviction in the strength of the multi-brand approach which enables us to optimise land opportunities. Each development is unique and maximising value is done by pricing in the location, the careful plotting of our homes by brand and house type to deliver value and choice for each customer whilst maximising our returns both around margin and return on capital. Of course it's early days and this is just a small sample. We've previously talked about potential for reservation rates to moderate slightly with the addition of further brand outlets but this has not been our experience to date. I want you to say a few words on bill cost inflation. This is a challenge for the whole industry and we've not been immune. As you'd expect we continue to see inflationary pressure on the more energy and oil dependent products such as plastics. But even here we've been able to negotiate some improvement where suppliers have held their price on the back of volume. Where required we're tending to agree surcharges with suppliers which will flex as energy costs move. Other materials worthy of note are timber, which is seeing above average inflation across both engineered and unengineered elements, and blocks and plasterboard, both of which are slightly above the overall average. Importantly, as size and scale are real benefits here, as are the strong relationships we've built up with suppliers over many years. we've guided to three to four percent inflation for the year and as you can see on the slide this is weighted towards materials which is the greater components of our costs we do expect labor to be lower compared to given the spared capacity in the industry in a more subdued market as well as subcontractors desire to lock in future workload we can only give guidance on what we're seeing today clearly the macroeconomic backdrop is highly unpredictable so we'll continue to evolve our expectations and finally as you're aware we're really proud of our industry leading credentials around design build quality and customer service these continue to underpin our brands and can continue contribute to our sales resilience in a more challenging market As David said, we've achieved a five-star rating for customer service in HBF survey for the 17th consecutive year. And our site managers have secured an industry-leading total of 122 pride in the job awards this year. So on that note, I'll pass over to John for an update on the financials. Thank you.

Thank you, Mike, and good morning, everyone. Today I'll take you through our FY26 performance and update two on our land bank and on building safety Here is the overview of our FY26 performance. We've set out the three profit measures adjusted PBT before PPA impact the adjusted PBT after and then finally the statutory reported pre-tax profit after adjusted items Consistent with the approach adopted at the half year both adjusted measures are now stated prior to the impact of the non-cash interest charges on legacy property provisions. We also show both the aggregated comparable which includes Redrow in the seven and a half weeks prior to the acquisition on the 21st of August back in 2024 and the reported comparables. I'll focus on our performance relative to the aggregated performance in FY25. I'll now take you through the P&L on the next slide. Here on slide 17 we detail profitability and margin performance in more detail. There are several points to highlight. Firstly the increase in home completions coupled with an increase in our average selling price increased revenues to more than £6 billion. However, the adjusted gross margin was lower at 15.3%, giving an adjusted gross profit of £926.6 million. There were three drivers behind the movement. First, we benefited from the growth in completion volumes and higher average selling prices, although we did experience softer underlying pricing, as Mike mentioned. Second, the targeted use of incentives. with financial incentives impacting the top line and non-financial incentives such as customer upgrades impacting cost of sales but both having a negative impact on the gross margin third we experienced underlying bill cost inflation across the year of two percent net of procurement synergies note this was closer to three percent in the second half and this effectively offset the usual benefit of second half completion volume gearing adjusted operating profit was slightly ahead at 598.1 million pounds revenue growth the benefit of integration cost synergies and business as usual cost discipline moderated the year-on-year margin impact to 60 basis points giving an operating margin of 9.9 percent adjusted finance charges at 31.5 million pounds compared to finance income last year at 4.9 million This change encompassed lower cash balances, the utilisation of our RCF for part of the year and higher interest rates supplied to new land creditors relative to the rates on those that were being settled in the year. Including JV income, PBT before the impact of PPA adjustments was the £572.8 million David mentioned at the start. In summary, we saw good momentum on home completions, the cost synergy benefits of the Redrow integration as well as our own cost reduction actions coming through to the bottom line looking now at the movements in our adjusted operating margin aggregated on a pre-PPA basis this was 10.5% in FY25 in FY26 we then saw a benefit of 20 basis points due to the gearing of effective higher volume then the combination of softer pricing underlying build cost inflation and targeted use of additional non-financial incentives created a negative net impact of 200 basis points acquisition related cost synergies added 90 basis points and our business as usual cost reduction actions including our recruitment freeze as well as reduced performance related pay and one-offs delivered a further 60 basis point benefit the resulting operating margin before PPA impacts was 9.9% and 9.1% after PPA The movement in our administrative expenses from £398.5 million last year to the £329.8 million is set out on this slide. You can see the various drivers but I would highlight firstly the positive impact of acquisition related cost synergies at £37 million there. below target employee performance pay reduced expenses by 15.3 million pounds and business as usual cost savings mentioned earlier contributed another 14.3 million we then had 17.3 million pounds of one-off positive items 10.1 million related to the re-measurement of cost accruals and 7.2 million pounds reflecting a year-on-year decline in internal project activity where internal project teams redeployed on completing the Redrow integration and these internal resources have been deployed back into the operations in FY27. In the current year we expect administrative expenses will move to approximately £360 million taking account of the absence of the one-off items underlying cost inflation residual synergy savings and assuming a return to on-target levels of performance pay. Now to look at our land bank. A slower pace of land acquisition has seen the duration of our owned and controlled land bank move down to 5.2 years at the year end. This remains a strong position and is very consistent with our plans to optimise our capital employed as David will cover later. and we remain above our medium term target of four and a half years and our detailed consented plot to sales rate outlet ratio sat at 135 at the end of the year and we are looking to ensure our land bank is efficient with sales outlets sized to drive sales over a typical three to four year period. Finally with 118 strategic land applications covering more than 31,000 plots submitted to local planning authorities we expect to see significant conversions and drawdowns from our strategic land bank portfolio into our current land bank over the coming years. Now to look at our lambank gross margin and how that's moved over the six months since December. There are three moving parts to flag in terms of the movement. First, we've seen a positive 50 basis point impact reflecting the plot mix traded out through completions in the second half of the year at a 14.5% gross margin after PPA impacts. Second, We've had a negative impact of 220 basis points from the flow through of softer pricing, build cost inflation and incremental sales incentives. And thirdly, a 10 basis point improvement from the modest amount of land plots acquired in the half at a 23% gross margin. These plots were just over 2,800. In combination, the embedded gross margin ended the year 160 basis points lower at 17.3% relative to the 18.9 reported at the end of December. Improving the embedded gross margin is a clear priority. With little movement on pricing, we have to focus on self-help, which David will come back to later. Turning to legacy building safety where we've seen little change to the net provision position but there are some moving parts to flag. Here tabled are the movements on the two portfolios where we recorded a net adjusted item charge of 96.8 million pounds there. In our building safety provision we've taken a charge of 105 million pounds. covering cost inflation and scope revisions at two active developments in our reinforced concrete frame provision we saw a net release of 8.2 million pounds this included firstly the release of a provision on several developments where further investigation concluded remediation works were not required and an additional provision on one building where additional remediation works were identified Completing the picture is the unwanted imputed cash interest, non-cash interest of 40.5 million and the provision utilization of 153.8 million pounds. We ended FY26 with a total provision of 1.05 billion and we expect to spend approximately 300 million pounds in FY27 and 450 million pounds in FY28. on our direct remediation related works as well as payments the building safety fund at cash flow here we set up the cash flow bridge and a few points to highlight first cash outflows included payments around tax an interest of 84 million outflows on trade receivables and payables totaling ninety million pounds and the building safety expenditure which you've seen already second we saw the reversal of all of our first half construction whip outflow so a disciplined performance and an underlying improvement up and above the typical sales cycle and construction seasonality that you'd expect from Barrett Redrow thirdly our reduced investment in land and locked 328 million pounds of cash fourth we increased our investment in JVs at a net 102 million pounds this encompassed our building investment in the made partnership and our new JV with places for people at Gilston in East Hertfordshire finally after the dividend payment of 242 million pounds and share buybacks of 101 million including taxes the net movement in cash was broadly flat We currently anticipate that FY27 year-end cash will be between £400 million and £500 million, subject of course to any changes in land activity and guidance on that as the year develops. Here is our usual balance sheet breakout. Just a couple of points on this one. You can see our gross land investment reduced by £464 million and then with land creditors £98 million lower, our net land investment position reduced by 366 million pounds and stood at 3.93 billion land creditors funded 15.3 percent of our land bank this is below our target range of 20 to 25 percent and we expect this to remain the case over the coming year as we limit our investment in land longer term it remains a clear intention to manage our land bank more efficiently including land cost deferral using land creditors but this will depend on the scale of land buying and the deferral terms available in the land market as we move forward. Finally I am really pleased that we have been able to announce that we have amended and extended our revolving credit facility with our existing providers. We have increased the RCF from 700 million pounds to 900 million pounds and if you remember Redrow's old facility of £350 million was cancelled at acquisition. We've also now extended this facility to July 20, 2031 with two potential extensions subject to lender approval which would take the facility through to July 2033. So to summarise, our financial performance in the year has been resilient and that's despite the macro uncertainties faced. our balance sheet remains strong and the cost synergies from the Redrow acquisition are making a positive impact on performance turning to guidance you will see find a detailed slide in the appendices but I thought it helpful to have the key points here and then finally on the key movements around cash up and above the seasonal cash flow movements in our house building operations we do expect to spend approximately 300 million pounds on legacy property remediation and 340 million pounds settling line creditors and to finish the year with between 400 and 500 million pounds of net cash subject to the land market and opportunities happy to take questions later but I'll now hand back to David thank you