26th Sep 2007 07:03
Barratt Developments PLC26 September 2007 26 September 2007 BARRATT DEVELOPMENTS PLC Results for the year ended 30 June 2007 Group Highlights: • Integration of Wilson Bowden is progressing ahead of plan with increased synergy benefits of at least £60m in the second full year after completion. • Completions increased to 17,168 (2006: 14,601) up 17.6%, with an average selling price of £172,800 (2006: £165,800) up 4.2% and a 25.3% increase in Group turnover to £3,046.1m (2006: £2,431.4m) • Housebuild operating margin before restructuring costs* remained robust at 16.7% (2006: 17.0%). • Wilson Bowden Developments achieved a turnover of £44.7m and operating margin** of 14.5%. • Profit before tax and restructuring costs increased by 16% to £454.0m (2006: £391.4m) with pre-tax profit up 9.3% to £427.8m • Adjusted basic earnings per share*** increased 7.4% to 123.8p (2006: 115.3p) with basic earnings per share 116.2p (2006: 115.3p) • Proposed final dividend for the year 24.30p (2006: 20.69p) up 17.5%, bringing total dividends for the year to 35.68p (2006: 31.03p) up 15%, 2.7 times covered. • Land stocks strengthened to 109,700 plots (including 23,300 subject to contract)- 5.1 years supply at current volumes (2006: 66,500 plots (including 7,500 subject to contract)- 4.5 years supply). In addition the Group has access to 12,200 acres of strategic land (2006: 2,800 acres). • Net borrowings of £1,301.2m, including £913.2m to fund the acquisition (2006: net cash of £34.9m). • Forward sales at 30 June were £1,414m (2006: £845m), a new record, 67.3% higher than last year and 14.8% ahead of the proforma combined Barratt and Wilson Bowden total at 30 June 2006 of £1,232m. This has increased to £1,721m as at last week, and together with completions to date we have now secured 53.8% of our full year requirement. * Quoted before restructuring costs of £25.6m for housebuilding. Statutoryoperating margin 15.8% (2006: 17.0%). **Quoted before restructuring costs of £0.6m for commercial development.Statutory operating margin 13.2%. *** Quoted before restructuring costs of £26.2m offset by related tax of £6.5m. Charles Toner, Chairman, commented: "This has been a historic year for Barratt Developments marked by veryconsiderable change. Under a new Chief Executive, Mark Clare, we acquired WilsonBowden. Whilst completing and rapidly integrating this major acquisition, wehave delivered a robust operating performance against a backdrop of increasingUK interest rates. It is a tribute to our Executive team and our employees, fromboth Barratt and Wilson Bowden, who have worked tirelessly with considerableskill to deliver these results." Mark Clare, Group Chief Executive of Barratt Developments PLC, commented: "Good progress was made in 2007 with improved performance across the boarddespite the more challenging market and the complexity of the integration ofWilson Bowden. "Including the impact of Wilson Bowden's results for the two months, turnoverincreased to £3,046.1m, a 25.3% increase on the previous year. Completionnumbers were up by 17.6% at 17,168 and profit from operations beforerestructuring costs increased by 22.7% to £507.2m. "Investment in land, a key driver of future growth, increased during the year to£1,013m from £841m the previous year and the forward land bank increased to109,700 plots, including 23,300 subject to contract, a 5.1 year supply at 2007proforma volumes. "Forward sales continued to grow and we ended the year at £1,414m, 67.3% up onthe previous year. As at the end of last week this figure now stands at £1,721m,and together with completions to date, we have now secured 53.8% of our fullyear requirement. "Our progress with the integration of Wilson Bowden has been stronger thanexpected with the operational structures and management all now in place. A newcombined IT platform is being rolled out across the whole business with thefirst implementations happening in October, completing in June next year. "Through the removal of duplicated functions, reductions in the centralmanagement team, rationalisation of operating divisions and procurement savingswe are now ahead of our original plans. We now expect to make savings of atleast £30m in the first full year post-acquisition and at least £60m in thesecond year, up from £25m and £45m. "Recognising the strength of last year's performance, our commitment to delivergreater shareholder value, and confidence in the future, we are moving towards adividend policy targeted on a reduction in our cover ratio to 2.5 times over theplanning cycle. As a result the Board is recommending an increase in the finaldividend of 17.5% to 24.30p per share, bringing the full year to 35.68p pershare, 15% above last year. "We have already signalled that it would be prudent to assume that thecumulative impact of interest rate increases would result in the housing markettightening in 2007/8. The recent credit squeeze has further affected customersentiment and pressure on lending institutions has led to a tightening oflending criteria and mortgage availability. "It is not yet clear how quickly the market will recover but we have to assumethat there will be downward pressure on volumes and price inflation in theshort-term. "However, the market fundamentals remain strong with demand continuing to exceedsupply with the Government intent on stimulating the sector by accelerating landavailability. "By ensuring that our well respected sales capabilities are being fullyutilised, that costs are being tightly managed and that we prudently manage ourbalance sheet we remain confident that we can continue to compete effectivelygoing forward." For further information please contact: Barratt Developments PLCMark Clare, Group Chief Executive On the day: 020 7067 0700Mark Pain, Group Finance Director Thereafter: 020 7299 4896 Weber Shandwick FinancialTerry Garrett/Nick Dibden 020 7067 0700 The financial analysts' presentation slides and recording of the analystpresentation will be available on the Barratt Developments plc website:www.barrattdevelopments.co.uk from 0900hrs today. Further copies of the announcement can be obtained from the Company Secretary'soffice at Barratt Developments PLC, Rotterdam House, 116 Quayside, Newcastleupon Tyne, NE1 3DA Our 2007 Annual General Meeting will be held on 27 November 2007. Commencing at2.30 pm at the Barber-Surgeons Hall, Monkwell Square, Wood Street, London, EC2Y5BL. Details can be found on the Financial Calendar page of our website atwww.barrattdevelopments.co.uk Business Review (abridged) The Group has achieved another strong performance this year, both from theexisting Barratt operation and from the Wilson Bowden businesses that weacquired on 26 April 2007. Results include Wilson Bowden only from 26 April2007. Overall our housebuilding operation delivered 17,168 completions (2006: 14,601)and profit from operations of £475.1m (2006: £413.5m). The acquired commercialdevelopments business, Wilson Bowden Developments, (excluding its ownhousebuilding completions), delivered a profit from operations of £5.9m. The key performance indicators of the business are discussed in the table below: --------------------------------------------------------------------------------Key performance indicator 2007 2006 Movement--------------------------------------------------------------------------------Operational Residentialcompletion numbers 17,168 14,601 17.6% Discussed in theAverage sales section entitledprice £172,800 £165,800 4.2% 'Housebuilding'Residential turnoverdivided by the number ofcompletions Land bank plots 109,700 66,500 65.0% Discussed in theNumber of residential plot section entitledowned and agreed subject to 'Land'contract Customer recommendation Discussed in thelevels 89% 85% 4% section entitled The percentage of Barratt 'Quality andHomes customers who would service''recommend us to afriend' Reportable accidents 643 672 (4.3%) Discussed in the Number per 100,000 people section entitledemployed in the 'Health and Safety'housebuilding business FinancialRevenue £3,046.1m £2,431.4m 25.3% Discussed in theProfit from operations £481.0m £413.5m 16.3% Financial Review Profit before tax £427.8m £391.4m 9.3%Earnings per share 116.2p 115.3p 0.8%Profit after tax divided bythe weighted average number of ordinary shares in issue -------------------------------------------------------------------------------- Housebuilding Barratt Homes completed 15,517 properties (up 6.3% on the prior year total of14,601), with total revenue for the year of £2,666.5m, an increase of 9.7% overthe prior year. The increase in completions has been driven by a 9% increase inthe average rate of completions per operating site, although planning delaysmeant the average number of operating sites dropped from 461 to 449 during theyear. Average selling price in Barratt Homes increased to £169,600, up 2.3% onthe prior year, which was mainly due to price increases and changes in productmix. Wilson Bowden completed 1,651 properties since acquisition, with revenue of£334.9m. It operated from an average of 154 sites in the period, up 3% from theequivalent period last year. Wilson Bowden's average selling price was £202,800in the period since acquisition. The higher average selling price than BarrattHomes reflects the different mix of market segments in which the David WilsonHomes brand operates. The integration of Wilson Bowden is progressing ahead of schedule, with both thenew operational structure of 35 divisions and its supporting managementstructure in place. The Group is focused on developing its core brands: BarrattHomes for traditional housing, apartments and urban regeneration; and DavidWilson Homes with a reputation for producing larger family homes, along with theWard Homes brand based predominantly in Kent. However, we have decided todiscontinue the use of our KingsOak brand. The rebranding of our sites anddivisions is now complete. Progress is also being made in reducing our headoffice and administrative costs. In our first full year we estimate our synergysavings will be at least £30m, rising to at least £60m in the second full yearfollowing acquisition. Commercial development Wilson Bowden Developments was acquired as part of the acquisition of WilsonBowden, and its trading performance during May and June was in line with ourexpectations. The main highlights were: the handover of East Midlands FireControl Centre at Willow Farm, Castle Donington, which will be used tocoordinate the Fire Service for five counties in the East Midlands; and thecompletion of the redevelopment and extension of the Jackson Square shoppingcentre at Bishop's Stortford. In addition we secured the letting to the HomeOffice of a 76,000 square foot office building at our Riverside Exchange site inSheffield and made continued progress with lettings at the Eagles Meadowshopping centre in Wrexham which is due to open in the second half of 2008. Land The Group land bank has been strengthened during the year and now stands at109,700 plots with a book value of £3,296.6m, representing approximately 5.1years of land usage at the current rate of consumption. The land bank includes23,300 plots which have been purchased subject to contract. Of our land bank at30 June 2007, 72.2% of plots have either detailed or outline planningpermission. We have detailed planning permission on 99.3% of plots for 2007/08and 60.8% of plots for 2008/09. In addition we have 12,200 acres (2006: 2,800acres) of strategic land, which has been considerably increased by theacquisition of Wilson Bowden. Expenditure on land purchases during the year was £1,012.7m compared with £841mfor the previous year. The acquisition of Wilson Bowden, has further strengthened the Group's landbank, bringing with it not only the additional plots acquired but alsostrengthening our expertise in strategic land. The additional focus we shall nowbe able to bring to bear on the delivery of strategic land will enable us todeliver enhanced shareholder value in future years. Core strengths During the past year the Group continued to build upon its core strengths ofgeographic and product diversity, quality and service, and people. We haveinherited strong skills from Wilson Bowden that complemented those in Barratt. Geographic and product diversity The Group offers a wide product range from first time buyer homes to luxuryapartments and family homes with prices ranging from under £90,000 to £1.35million and an average selling price of £172,800. We operate throughout GreatBritain and at 30 June 2007 we were selling from 590 sites spread over 35divisions. The diversity of product and places has been strengthened by ouracquisition of Wilson Bowden. The provision of affordable homes continues to be a key component of ouractivities with the Group completing 2,833 homes for housing associationpartners during the year at an average selling price of £92,800. We are one ofthe leading providers in the industry of affordable homes for rent, sharedownership or low cost homes for sale. We believe that our strength in this areaprovides opportunities for the Group's further growth, especially in light ofdeveloping Government policy. We have continued to invest in our iPad range of homes which provides affordablehousing for first time buyers. During the year 120 (2006: 30) homes were legallycompleted, 330 were under construction, and planning permission has been securedfor a further 634 homes. Our product offering in this area has been furtherenhanced by the addition of the David Wilson Homes' range of iLife homes. We arepleased to have been awarded £30.5m of funding under the English Partnerships'First Time Buyers Initiative, to assist first time buyers who would otherwisehave been unable to afford to buy their own home. Under this initiative theGroup will build 316 homes on developments in Brighton, Bristol, Ely, Gravesend,Leeds, Liverpool, Romford, Southampton and Watford. During the last twelve months we have secured 219 sites, which will deliver26,000 units in future years. A number of these sites are very significant forour plans for future growth. In Northampton, we have won 16 sites that willprovide 1,500 new homes and we shall also help to fund new educationalfacilities in the town. We also recently announced schemes for more than 1,200new homes in Middlesbrough and Stockton. In Telford, in consortium with twoother developers, we are creating the largest single new community in Britain,our contribution to which will exceed 1,200 new homes. In addition, we arecurrently involved in a number of specialist urban regeneration projects. Theseinclude a £240 million development, the Great West Quarter in Brentford, whichwill create over 730 homes, almost half of which will be available for rent orshared ownership, and which will include a hotel and health centre. We arecontinuing to develop two flagship town centre regeneration projects in Felthamand Hounslow, creating 1,150 homes with commercial, retail and communityfacilities. The Feltham scheme, of over 800 homes, has been awarded £5m indirect funding from English Partnerships to enable around 58 homes to be madeavailable to key workers and first time buyers on a shared ownership basis. Weare also in partnership with the specialist regeneration company Artisan,developing over 1,000 homes in Rochdale. Quality and service We are pleased that overall customer satisfaction and the number of ourcustomers who would 'recommend us to a friend' has continued to improve duringthe year. In the year ended 30 June 2007, 89% of Barratt Homes' customersresponded that they would 'recommend us to a friend', which represents animprovement over the result of 85% in 2006 and 80% in 2005. In addition, ourcustomer satisfaction rating has continued to improve from 70% in 2005 to 76% in2006 and is now 81%. We are continually striving to improve our service to our customers and this isnow a feature of senior management remuneration. During the year we alsocompleted a training programme for all 'customer facing' staff covering ourCustomer Charter and Customer Care Personal Code of Practice. We also conductedfull customer service audits of a number of our divisions, and based upon theaudit findings, we have implemented a range of development programmes designedto improve our level of customer care. During the year, the Group alsointroduced a code of practice for all Group suppliers, which emphasises theimportance that the Group places on high standards of customer care. The quality of our product offerings has been recognised by the receipt ofseveral major national industry awards. Barratt Homes was named 'Housebuilder ofthe Year' at the 'What House?' Awards and 'Homebuilder of the Year' in the 'YourNew Home' Awards. Furthermore, Barratt Homes also received Gold Awards forexterior design, landscaping and renovation at the 'What House?' Awards. Our people and expertise We recognise that one of our key strengths as a Group is our people. We haveappointed a new Group Human Resources Director and have strengthened our humanresources team during the year. We have also introduced a number of newinitiatives to benefit our staff, including our Cornerstone induction plan, anew twice-yearly Performance and Development Review and the Barratt LeadershipDevelopment Programme, all of which will assist with the development of theGroup's leaders of the future. We have launched a new Graduate Recruitment and Development Programme. 54successful graduates joined the business in September 2007 selected from 752applicants. They will undertake a two-year multidisciplinary programme. At any one time we have over 500 apprentices within our business. Our intentionis to ensure that we continue to attract and retain the very best apprentices toprovide a pipeline of skills for the future. We are currently working with theLearning and Skills Council and the Apprenticeship Ambassadors Network to ensurewe have an industry leading apprenticeship programme. The Group has continued to make progress towards its target of a fullyConstruction Skills Certificate Scheme (CSCS) carded and qualified workforce,including our subcontractors, by 2010. At present over 60% of our workforce hasachieved this target. The strengths of the Group in terms of people and expertise have been recognisedagain this year with the Group winning a number of national awards. Ourconstruction teams won 71 National House-Building Council (NHBC) 'Pride in theJob' quality awards, a significant improvement on last year's achievement of 53awards. This is more than any other housebuilder and a new record for the Group. The Group's innovative approach to housebuilding was recognised at both the 2006'Housebuilder Innovation' Awards, where Barratt Homes won 'HousebuildingInnovator of the Year', and at the 'British Home' Awards where the 'InnovationAward for Building Technology' was presented for the Group's Elektrondevelopment in London Docklands. Environment During the year the Government announced the requirement for all new homes to bezero carbon by 2016. Whilst this requirement will pose a challenge for allhousebuilders, we are seeking to become industry leaders in this area and wewill launch, later in the year, an environmental charter that sets out how wewill reduce our own impact, improve the environmental quality of what we buildand help our customers to reduce their impact. Building upon the success of our seven home EcoSmart Show Village in Chorley,Lancashire (which included the latest energy efficient technologies) and as partof our commitment to zero carbon housing, we are to build the 'Green House' aprototype home using an award winning design developed by architects GauntFrancis. The zero carbon home will be built at the Building ResearchEstablishment's Innovation Park and will combine outstanding design, highstandards of energy efficiency and the use of innovative microgeneration. Italso includes recycled slag foundations, lime/hemp render walls and pitchedroofs incorporating photovoltaic panels. The central heating will be controlledby a central computer system with internet linked energy efficiency appliances.We now have carbon saving measures on over 35 of our sites and have completed areview of how to improve the environmental impact of our existing housingdesigns. We continue to build the majority of our developments on brownfield sites, with78% of Barratt developments in the year being built upon brownfield land, whichsignificantly exceeds the Government's target of 60%. The Group continues to make progress in certifying our divisions to ISO14001standard for Environmental Management. In last year's Annual Report we statedour target was that all of our divisions would have achieved ISO14001 status by30 June 2007. This has been delivered and we are now beginning the process ofcertifying our newly acquired David Wilson Homes divisions, with a view toachieving ISO14001. Health and Safety As previously reported, the Group is saddened that a fatal accident occurred ona Barratt development on 26 September 2006. The accident took place at ourBattersea Road development in London when a crane collapsed resulting in thetragic death of two people. The Group continues to cooperate with the ongoingHealth and Safety Executive inquiry into the incident. Notwithstanding this tragic event, we have continued to make good progress inthe field of Health and Safety with a reduction in the number of reportableaccidents to 643 per 100,000 persons employed in the housebuilding business, areduction of 4.3% on the previous year. In addition, the average safety standardratings achieved by the Group in the independent NHBC site surveys havecontinued to be ahead of the other housebuilders using this service. The Group continues to make progress with the process of certifying ouroperating divisions under OHSAS18001 in Health and Safety. At 30 June 2007, 19divisions were certified to this level and we have plans to certify another sixdivisions within the next year. Corporate responsibility As outlined in the sections above, the Group has continued to make good progresson corporate responsibility throughout the year. The Group has embedded itscorporate responsibility strategy within Barratt operations and is now applyingthis in the newly acquired operations of the Group. The Group is proud to have gained entry to the FTSE4Good index during the year,which underpins our commitment to corporate responsibility. Barratt is included in the 'Top 100 Companies that Count' list, which is part ofthe Corporate Responsibility Index and was judged by Business in the Communityand the Sunday Times. The Group's new corporate responsibility report will contain further details onour progress in corporate responsibility and will be found on the Group'sinvestor relations website (www.barrattdevelopments.co.uk). Outlook We have already signalled that it would be prudent to assume that the cumulativeimpact of interest rate increases would result in the housing market tighteningin 2007/8. The recent credit squeeze has further affected customer sentiment andpressure on lending institutions has led to a tightening of lending criteria andmortgage availability. It is not yet clear how quickly the market will recover but we have to assumethat there will be downward pressure on volumes and price inflation in theshort-term. However, the market fundamentals remain strong with demand continuing to exceedsupply with the Government intent on stimulating the sector by accelerating landavailability. Financial Review (abridged) The Group has delivered a strong performance in the year with growth in bothrevenue and completions. Key highlights are as follows: • Revenue up 25.3% to £3,046.1m from £2,431.4m in 2006 • Barratt Homes revenue £2,666.5m up from £2,431.4m in 2006 • Wilson Bowden revenue since acquisition £379.6m • Total completions 17,168 (2006: 14,601), up 17.6%, including 1,651 Wilson Bowden completions • Profit from operations (before restructuring costs of £26.2m) £507.2m increased by 22.7% from £413.5m in 2006 • Profit from operations £481.0m (2006: £413.5m) up 16.3% • Barratt Homes profit from operations (before restructuring costs of £13.1m) £440.2m up from £413.5m in 2006 • Wilson Bowden profit from operations (before restructuring costs of £13.1m) since acquisition £67.0m • Operating margin (before restructuring costs) 16.7% broadly consistent with 2006 (17.0%) • Operating margin was 15.8% (2006: 17.0%) • Barratt Homes operating margin (before restructuring costs) 16.5% (2006: 17.0%) • Wilson Bowden operating margin (before restructuring costs) since acquisition 17.7% • Profit before tax £427.8m (2006: £391.4m) up 9.3% • Adjusted earnings per share (before restructuring costs) 123.8p (2006: 115.3p) • Basic earnings per share 116.2p (2006: 115.3p) • Dividend per share up 15% for the full year to 35.68p (2006: 31.03p) Acquisition of Wilson Bowden The Group completed its acquisition of Wilson Bowden on 26 April 2007, at a costof £2,049.6m, financed by cash and loan notes of £930.3m and £1,119.3m ofshares. The acquisition has resulted in a fair value uplift in the value ofWilson Bowden's acquired balance sheet of £98.5m arising primarily from anincrease in the value of inventory of £34.4m, the recognition of £107.0m ofintangible assets related to the David Wilson Homes and Wilson BowdenDevelopments brands, a write off of £3.5m of goodwill, an adjustment to tradepayables of £1.8m, offset by an additional deferred tax liability of £41.2m. Theacquisition has resulted in the Group recognising £816.7m of goodwill. The goodwill arising on acquisition relates to: •the highly complementary geographical fit, which has enabled us to deliver synergies from the rationalisation of the number of operating divisions and consolidate central functions •the acquisition of the skills and experience within the Wilson Bowden workforce •an expanded consented land bank enabling increased operational flexibility •increased access to commercial and mixed-use developments •access to an expanded portfolio of strategic land and the expertise of Wilson Bowden strategic land teams. The carrying value of goodwill of £816.7m is comfortably supported by the cashflows of the underlying business units. During the year to 30 June 2007, the Group incurred £26.2m of one-offrestructuring costs related to the reorganisation of the two former businesses,including redundancies, office reorganisation costs and systems harmonisation.Further restructuring costs will be incurred in 2008, particularly on thesystems side, and we anticipate the overall cost will be in line with ouroriginal estimate of £35m. Segmental analysis Following the acquisition of Wilson Bowden, the Group has, for the first time,two segments, being housebuilding and commercial development. These segmentsreflect the different product offerings and market risks facing these areas ofthe business. The table below shows the respective contributions from these segments to theGroup: -------------------------------------------------------------------------------- Commercial Housebuilding development Total £m £m £m--------------------------------------------------------------------------------Revenue 3,001.4 44.7 3,046.1Profit from operations beforerestructuring costs 500.7 6.5 507.2Profit from operations 475.1 5.9 481.0-------------------------------------------------------------------------------- Tax The Group corporation tax charge for the year was £127.4m, an effective rate of29.8%. This is lower than the standard rate of 30% due to the impact of theannounced reduction in the corporation tax rate to 28% from April 2008 upondeferred tax, and the tax charge benefiting from employee share schemes reliefand from contaminated land relief. Offsetting these benefits there has been anadditional tax charge due to costs that are not allowable for tax purposes,including certain transaction related costs. Dividend At the half year, the Directors approved an increase in the interim dividend pershare of 10% from 10.34 pence per share to 11.38 pence per share. The Directors propose a final dividend per share of 24.30 pence, a 17.5%increase on the 2006 final dividend per share of 20.69 pence per share. Thisreflects our progressive dividend policy of reducing, over time, dividend coverto around 2.5 times. Balance sheet The net assets of the Group increased by £1,371.1m to £2,911.0m. The increase innet assets is due to retained profits and the shares issued in the year.Significant movements in the balance sheet are: •The Group's book value of land was £3,296.6m, an increase of £1,299.3m over 2006, of which £1,098.6m, at fair value, is due to the acquisition of Wilson Bowden. The remaining increase reflects our continued strategy to invest in sufficient land to drive organic growth. •Work in progress of the Group at 30 June 2007 was £1,368.5m, an increase of £767.4m on 2006, of which £602.2m was due to the acquisition of Wilson Bowden. Against this, the Group had a strong forward sales position of £1,414m, which was 14.8% up on the combined Group at June 2006. •Group net debt increased by £1,336.1m during the year, from net cash of £34.9m to net debt of £1,301.2m, of which £811.6m was the cash outflow on acquisition, added to which there were loan notes issued of £101.6m and debt acquired of £332.7m. •The Group recognised £816.7m of goodwill and £107.0m of intangible assets related to brands on its acquisition of Wilson Bowden. •The pension fund deficit on the Barratt Homes defined benefit pension scheme included in the Group balance sheet reduced by £9.6m in the year to £78.3m, reflecting the additional contributions that the Group has been making to reduce the deficit. •Other assets and liabilities have decreased by £290.1m during the year. Borrowings, cashflow and treasury Group net debt at the year end was £1,301.2m. The increase in net debt in theyear arising from financing the Wilson Bowden acquisition and refinancingexisting Wilson Bowden debt was £1,245.9m. To support the continuing acquisitionof land and efficiently manage our balance sheet, we are targeting a fundinglevel of around 2.5 times net debt/earnings before interest, tax, depreciationand amortisation (EBITDA). At the year end, the Group's committed facility had an average life of 3.5 yearsand headroom of £1,162.4m. £800m of the facilities arranged to finance theWilson Bowden acquisition was provided on a 364-day basis, but with the abilityfor the Group to extend the facility for a further twelve months and the Groupaims to refinance these through the debt capital markets. Group borrowings increased by £1,336.1m in the year from net cash of £34.9m tonet debt of £1,301.2m. The reasons for the increase are: -------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Net cash at start of year 34.9 276.9 ---------- ----------Operating cash flow 139.5 (58.5)Tax and net interest paid (148.3) (121.6) ---------- ----------Free cash flow (8.8) (180.1) Acquisition of Wilson Bowden (1,245.9) -Investments in joint ventures (14.2) -Net fixed asset purchases (4.6) (1.3)Dividends (77.1) (67.5)Share issue and disposals 14.5 6.9--------------------------------------------------------------------------------Net debt at end of period (1,301.2) 34.9-------------------------------------------------------------------------------- An analysis of the Group's free cash flow is as follows: 2007 2006 £m £m--------------------------------------------------------------------------------Operating profit 481.0 413.5Total non-cash items (7.6) (14.3)Working capital (333.9) (457.7)--------------------------------------------------------------------------------Operating cash flow 139.5 (58.5) Net interest paid (27.8) (8.7)Taxation (120.5) (112.9)--------------------------------------------------------------------------------Free cash flow (8.8) (180.1)-------------------------------------------------------------------------------- The most significant increase in borrowings in the year was the acquisition ofWilson Bowden at £1,245.9m, consisting of the cash paid and loan notes issued aspart of the consideration, transaction fees paid, plus debt and cash acquired.In addition, we have invested £14.2m in the year in joint ventures mainlyundertaking urban regeneration activities. There was an increase in net debt of £333.9m (2006: £457.7m) due to workingcapital movements. The majority of this increase was due to increasedinventories, reflecting our continued land acquisition strategy and theadditional work in progress requirements of the enlarged Group. Other cash movements include net interest payments of £27.8m (2006: £8.7m), taxpayments of £120.5m (2006: £112.9m), dividend payments of £77.1m (2006: £67.5m),proceeds from the issue of share capital and disposal of own shares of £14.5m(2006: £6.9m). The Group has a centralised treasury operation into which all Wilson Bowdentreasury operations have now been integrated. The Board approves treasurypolicies and certain day-to-day treasury activities have been delegated to aTreasury Operating Committee that in turn regularly reports to the Board. TheGroup has a conservative treasury risk management strategy which includes atarget for fixed rates of interest of 60-80% of year end debt. As at 30 June2007 63.0% was fixed. The Group uses swaps and fixed rate debt instruments tofix interest rates. Net bank interest was 12.0 times covered(2006: 47.5 times covered). Consolidated Income Statementfor the year ended 30 June 2007 -------------------------------------------------------------------------------- Note 2007 2006 £m £m--------------------------------------------------------------------------------Continuing operationsRevenue 2 3,046.1 2,431.4Cost of sales (2,452.2) (1,940.6)--------------------------------------------------------------------------------Gross profit 593.9 490.8Operating expenses before restructuring costs (86.7) (77.3)Restructuring costs 3 (26.2) ---------------------------------------------------------------------------------Total operating expenses (112.9) (77.3)--------------------------------------------------------------------------------Profit from operations 481.0 413.5Finance income 4 3.5 2.0Finance costs 4 (55.7) (24.1)Share of post tax loss from joint venture (1.0) ---------------------------------------------------------------------------------Profit before tax 427.8 391.4Tax 5 (127.4) (116.4)-------------------------------------------------------------------------------- Profit for the year from continuing operations 300.4 275.0-------------------------------------------------------------------------------- Profit for the year attributable to equityshareholders 300.4 275.0-------------------------------------------------------------------------------- Proposed/paid dividends per ordinary share Interim 6 11.38p 10.34p Final 6 24.30p 20.69p-------------------------------------------------------------------------------- Earnings per share from continuing operations Basic 7 116.2p 115.3p Diluted 7 114.3p 113.3p-------------------------------------------------------------------------------- Consolidated Statement of Recognised Income and Expensefor the year ended 30 June 2007 -------------------------------------------------------------------------------- 2007 2006 £m £m-------------------------------------------------------------------------------- Profit for the year 300.4 275.0Revaluation of available for sale financial assets (0.7) (4.5)Gains on swap arrangements 12.3 -Tax credited to reserves 0.8 1.3--------------------------------------------------------------------------------Total recognised income for the year attributable to equityshareholders 312.8 271.8-------------------------------------------------------------------------------- Group balance sheetat 30 June 2007 -------------------------------------------------------------------------------- Note 2007 2006 £m £m-------------------------------------------------------------------------------- AssetsNon-current assetsIntangible assets 107.0 -Goodwill 816.7 -Property, plant and equipment 37.4 12.1Investments - -Investments accounted for using the equitymethod 20.9 -Available for sale financial assets 37.3 31.3Trade and other receivables 5.0 3.5Deferred tax - 40.4Derivative financial instruments - swaps 12.3 --------------------------------------------------------------------------------- 1,036.6 87.3--------------------------------------------------------------------------------Current assetsInventories 4,769.6 2,644.4Trade and other receivables 141.7 39.5Cash and cash equivalents 182.1 43.3Current tax asset - --------------------------------------------------------------------------------- 5,093.4 2,727.2----------------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 6,130.0 2,814.5-------------------------------------------------------------------------------- LiabilitiesNon-current liabilitiesLoans and borrowings (1,456.6) (2.5)Trade and other payables (111.7) (124.3)Retirement benefit obligations (78.3) (87.9)Deferred tax (3.1) --------------------------------------------------------------------------------- (1,649.7) (214.7)--------------------------------------------------------------------------------Current liabilitiesLoans and borrowings (26.7) (5.9)Trade and other payables (1,484.4) (988.3)Current tax liabilities (58.2) (65.7)-------------------------------------------------------------------------------- (1,569.3) (1,059.9)----------------------------------------------------------------------------------------------------------------------------------------------------------------Total liabilities (3,219.0) (1,274.6)-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Net assets 2,911.0 1,539.9-------------------------------------------------------------------------------- EquityShare capital 8 34.7 24.3Share premium 8 206.1 202.3Merger reserve 8 1,107.7 -Retained earnings 8 1,562.5 1,313.3--------------------------------------------------------------------------------Total equity 2,911.0 1,539.9-------------------------------------------------------------------------------- Group cash flow Statementfor the year ended 30 June 2007 -------------------------------------------------------------------------------- Group Note 2007 2006 £m £m--------------------------------------------------------------------------------Net cash outflow from operating activities (12.3) (182.1) Cash flows from investing activities Purchase of property, plant and equipment (7.9) (3.3)Proceeds from sale of property, plant and equipment 3.3 2.0Acquisition of subsidiary net of cash acquired (811.6) -Investments accounted for using the equity method (14.2) -Interest received 3.5 2.0--------------------------------------------------------------------------------Net cash (outflow)/inflow from investing activities (826.9) 0.7-------------------------------------------------------------------------------- Cash flows from financing activitiesProceeds from issue of share capital 3.9 4.5Disposal of own shares 10.6 2.4Dividends paid 6 (77.1) (67.5)Loan drawdowns 1,040.6 0.2--------------------------------------------------------------------------------Net cash inflow/(outflow) from financing activities 978.0 (60.4)-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Net increase/(decrease) in cash and cash equivalents 138.8 (241.8)----------------------------------------------------------------------------------------------------------------------------------------------------------------Cash and cash equivalents at beginning of year 43.3 285.1-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Cash and cash equivalents at end of year 182.1 43.3-------------------------------------------------------------------------------- Notes to the Financial Information 1. Accounting Policies Detailed below is an extract of the full accounting policies that will beincluded in the audited financial statements. Basis of preparationThese financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS), International Financial ReportingInterpretations Committee (IFRIC) interpretations and Standing InterpretationsCommittee (SIC) interpretations endorsed by the European Union (EU) and withthose parts of the Companies Act 1985 applicable to companies reporting underIFRS. The financial statements have been prepared under the historical costconvention as modified by the revaluation of available for sale financialassets, derivative financial instruments and share-based payments. A summary ofthe more significant Group accounting policies is set out below. The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Although these estimates are based on the Directors' bestknowledge of the amounts, event or actions, actual results ultimately may differfrom those estimates. The most significant estimates made by the Directors inthese financial statements are set out in 'Critical accounting judgements andkey sources of estimation uncertainty'. Basis of consolidationThe Group financial statements include the results of the holding company andall its subsidiary undertakings made up to 30 June. The financial statements ofsubsidiary undertakings are consolidated from the date when control passes tothe Group using the purchase method of accounting and up to the date controlceases. All transactions with subsidiaries and inter-company profits or lossesare eliminated on consolidation. Business combinationsAll of the subsidiary's identifiable assets and liabilities, includingcontingent liabilities, existing at the date of acquisition are recorded attheir fair values. All changes to those assets and liabilities, and theresulting gains and losses that arise after the Group has gained control of thesubsidiary are included in the post-acquisition income statement. Jointly controlled entitiesA jointly controlled entity is an entity in which the Group holds an interestwith one or more other parties where a contractual arrangement has establishedjoint control over the entity. Jointly controlled entities are accounted forusing the equity method of accounting. Jointly controlled operationsThe Group enters into jointly controlled operations as part of its housebuildingand property development activities. The Group's share of profits and lossesfrom its investments in such jointly controlled operations are accounted for ona direct basis and are included in the consolidated income statement. TheGroup's share of its investments' assets and liabilities is accounted for on adirectly proportional basis in the consolidated balance sheet. RevenueRevenue is recognised at legal completion in respect of the total proceeds ofbuilding and development and an appropriate proportion of revenue fromconstruction contracts is recognised by reference to the stage of completion ofcontract activity. The sale proceeds of part exchange houses are not included inrevenue. Revenue is only recognised on a construction contract where the outcome can beestimated reliably. Revenue and costs are recognised by reference to the stageof completion of contract activity at the balance sheet date. This is normallymeasured by surveys of work performed to date. Contracts are only treated asconstruction contracts when they have been specifically negotiated for theconstruction of a development or property. Restructuring costsThe acquisition of Wilson Bowden has lead to significant restructuring costs,including redundancy payments. The Group has classified these as a separate linein the income statement as they are material and it does not consider them to bea part of trading performance but rather an investment in the future of thebusiness. These costs are recognised when the Group has a detailed plan that hasbeen communicated to the affected parties. A liability is accrued for unsettledrestructuring costs. DividendsInterim dividends are recognised in the financial statements at the time thatthey are paid, and final dividends are recognised at the time of agreement bythe shareholders at the Annual General Meeting. Segmental reportingFollowing the acquisition of Wilson Bowden, the Group consists of two separatesegments for management reporting and control purposes, being housebuilding andcommercial development. The Group manages these segments separately due to thedifferent operational and commercial risks that they face. These segmentstherefore comprise the primary reporting segments within the financialstatements. As all of the Group's operations are within the United Kingdom,which is one economic environment in the context of the Group's activities,there are no geographic segments to be disclosed. GoodwillGoodwill arising on consolidation represents the excess of the fair value of theconsideration over the fair value of the separately identifiable net assets andliabilities acquired. Goodwill arising on acquisition of subsidiary undertakings and businesses iscapitalised as an asset and reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of thecash-generating units of the Group at acquisition. Cash-generating units towhich goodwill has been allocated are tested for impairment at least annually.If the recoverable amount of the cash-generating unit is less than the carryingamount of the unit, the impairment loss is allocated first to reduce thecarrying amount of any goodwill allocated to the unit and then to the otherassets of the unit pro-rata on the basis of the carrying amount of each asset inthe unit. Any impairment is recognised immediately in the income statement andis not subsequently reversed. Intangible assetsBrandsInternally generated brands are not capitalised. The Group has capitalised asintangible assets brands that have been acquired. Acquired brand values arecalculated using discounted cash flows. Where a brand is considered to have afinite life, it is amortised over its useful life on a straight line basis.Where a brand is capitalised with an indefinite life, it is not amortised. Thefactors that result in the durability of brands capitalised is that there are nomaterial legal, regulatory, contractual, competitive, economic or other factorsthat limit the useful life of these intangible assets. The Group carries out an annual impairment review of indefinite life brands byperforming a value-in-use calculation, using a discount factor based upon theGroup's pre-tax weighted average cost of capital. InvestmentsInterests in subsidiary undertakings are accounted for at cost less anyprovision for impairment. Where share-based payments are granted to the employees of subsidiaryundertakings, by the parent company, they are treated as a capital contributionto the subsidiary and the Company's investment in the subsidiary is increasedaccordingly. Property, plant and equipmentProperty, plant and equipment is carried at cost less accumulated depreciation.Depreciation is provided to write off the cost of the assets on a straight linebasis to their residual value over their estimated useful lives. Residual valuesand asset lives are reviewed annually. Freehold properties are depreciated on a straight line basis over twenty fiveyears. Plant is depreciated on a straight line basis over its expected usefullife, which ranges from one to seven years. InventoriesInventories are valued at the lower of cost and net realisable value. Costscomprises direct materials, direct labour costs and those overheads, which havebeen incurred in bringing the inventories to their present location andcondition. Land held for development, including land in the course of development, isinitially recorded at fair value. Where, through deferred purchase credit terms,the fair value differs from the amount that will ultimately be paid in settlingthe liability, this difference is charged as a finance cost in the incomestatement over the period of settlement. Due to the scale of the Group'sdevelopments, the Group has to allocate site-wide development costs betweenunits built in the current year and in future years. It also has to estimatecosts to complete on such developments. In making these assessments there is adegree of inherent uncertainty. The Group has developed internal controls toassess and review carrying values and appropriateness of estimates made. LeasesOperating lease rentals are charged to the income statement in equal instalmentsover the life of the lease. Leases as lessorThe Group enters into leasing arrangements with third parties following thecompletion of constructed developments until the date of the sale of thedevelopment to third parties. Rental income from these operating leases isrecognised in the income statement on a straight line basis over the term of thelease. Initial direct costs incurred in negotiating and arranging an operatinglease are added to the carrying amount of the leased asset and recognised in theincome statement on a straight line basis over the lease term. Share-based paymentsThe Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value is expensed in the income statement on a straight linebasis over the vesting period, based on the Group's estimate of shares that willeventually vest. TaxThe tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on the profit for the year. Taxable profitdiffers from net profit as reported in the income statement because it excludesitems of income or expense that are tax deductible in other years and it furtherexcludes items that are never taxable or deductible. The Group's liability forcurrent tax is calculated using tax rates that have been enacted orsubstantially enacted by the balance sheet date. Deferred tax is recognised in respect of all temporary differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future or a right topay less tax in the future have occurred at the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognisedonly when, on the basis of all available evidence, it can be regarded as morelikely than not that there will be suitable taxable profits from which thefuture reversal of the underlying timing differences can be deducted. PensionsDefined contributionThe Group operates defined contribution pension schemes for certain employees.The Group's contributions to the schemes are charged against profits in the yearin which the contributions are made. Defined benefitThe assets of the defined benefit pension scheme are measured at fair value. Theliabilities of the defined benefit pension scheme are measured on an actuarialbasis and discounted to present value. The net obligation is calculated by aqualified independent actuary and is recognised as a liability in the balancesheet. The Group uses a corridor approach when accounting for actuarial gains andlosses. The corridor used is the greater of:- 10% of the present value of the defined benefit obligation at the end of the previous year; or- 10% of the fair value of plan assets at the end of the previous year. The amount recognised in the income statement is the excess of unrecognisedactuarial gains and losses over the corridor spread over the expected averageworking lives of members of the scheme. The operating and financing costs of the defined benefit pension scheme arerecognised in the income statement. Financial instrumentsFinancial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. The carrying amounts of the Group's financial assets and financial liabilitiesapproximate to fair value. Available for sale financial assetsThese financial assets are initially recognised at the transaction price, andsubsequently measured at each balance sheet date at fair value, with movementsin the fair value of the assets being recognised directly in equity. On disposal of these financial assets the difference between the carrying valueand the consideration received (including any cumulative gain or loss previouslyrecognised directly in equity) is included in the income statement. Trade receivablesTrade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Amounts recoverable on construction contracts are included in trade receivablesand stated at cost plus attributable profit less any foreseeable losses.Payments received on account for construction contracts are deducted fromamounts recoverable on construction contracts. Trade payablesTrade payables on normal terms are not interest bearing and are stated atamortised cost. Trade payables on extended terms, particularly in respect of land, are recordedat their fair value at the date of acquisition of the asset to which theyrelate. The discount to nominal value, which will be paid in settling thedeferred purchase terms liability, is amortised over the period of the creditterm and charged to finance costs using the 'effective interest rate' method. Payments received in excess of amounts recoverable on construction contracts areincluded in trade payables. Cash and cash equivalentsCash and cash equivalents includes cash and balances in bank accounts with nonotice or less than three months notice from inception. Bank borrowingsInterest bearing bank loans and overdrafts are recorded as the proceedsreceived, net of direct issue costs. Where bank agreements include a legal right to offset in hand and overdraftbalances, and the Group intends to net settle the outstanding position, theoffset arrangements are applied to record the net position in the balance sheet. Finance income and charges are accounted for using the 'effective interest rate'method in the income statement. Derivative financial instruments - swapsThe Group has entered into derivative transactions in the form of swaparrangements to manage the interest rate risk arising from the Group'soperations and its sources of finance. The use of financial derivatives isgoverned by the Group's policies approved by the Board of Directors as detailedin a note to the financial statements. The swap arrangements are designated as a hedge against changes in future cashflows as a result of interest rate movements. To the extent that these hedgesare effective, gains and losses on the fair value of these swap arrangements aretaken to reserves until realised. On realisation such gains and losses arerecognised in the income statement. To the extent that any hedge is ineffective,gains and losses on the fair value of these swap arrangements are recognised inthe income statement. Government grantsGovernment grants are recognised in the income statement so as to match withrelated costs that they are intended to compensate. Grants related to assets arededucted from the carrying amount of the asset. Grants related to income arededucted from the related expense in the income statement. 2. Segmental Analysis Following the acquisition of Wilson Bowden, the Group consists of two separatesegments for management reporting and control purposes, being housebuilding andcommercial development. The Group presents its primary segment information onthe basis of these operating segments. As the Group operates in a singlegeographic market, the United Kingdom, no secondary segmentation is provided. --------------------------------------------------------------------------------------------- Commercial Commercial Housebuilding development Total Housebuilding development Total 2007 2007 2007 2006 2006 2006 Units Units Units Units Units Units---------------------------------------------------------------------------------------------Residentialcompletions 17,168 - 17,168 14,601 - 14,601--------------------------------------------------------------------------------------------- £m £m £m £m £m £m---------------------------------------------------------------------------------------------Revenue 3,001.4 44.7 3,046.1 2,431.4 - 2,431.4--------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- Commercial Commercial Housebuilding development Total Housebuilding development Total 2007 2007 2007 2006 2006 2006Result £m £m £m £m £m £m--------------------------------------------------------------------------------------------- Profit from operationsbefore restructuringcosts 500.7 6.5 507.2 413.5 - 413.5Restructuring costs (25.6) (0.6) (26.2) - - ----------------------------------------------------------------------------------------------Profit fromoperations 475.1 5.9 481.0 413.5 - 413.5Share of posttax loss fromjoint venture (0.9) (0.1) (1.0) - - ---------------------------------------------------------------------------------------------- Profit from operationsincluding share of post tax loss fromjoint venture 474.2 5.8 480.0 413.5 - 413.5--------------------------------------------------------------------------------------------- Finance income 3.5 2.0Finance costs (55.7) (24.1)--------------------------------------------------------------------------------------------- Profit before tax 427.8 391.4Tax (127.4) (116.4)--------------------------------------------------------------------------------------------- Profit for the yearfrom continuingoperations 300.4 275.0--------------------------------------------------------------------------------------------- Other information £m £m £m £m £m £m--------------------------------------------------------------------------------------------- Capital additions 7.9 - 7.9 3.3 - 3.3Depreciation 4.8 0.1 4.9 2.1 - 2.1--------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- Commercial Commercial Housebuilding development Total Housebuilding development Total 2007 2007 2007 2006 2006 2006 £m £m £m £m £m £m-----------------------------------------------------------------------------------------------Balance sheet-----------------------------------------------------------------------------------------------Segment assets 5,654.6 314.6 5,969.2 2,730.8 - 2,730.8--------------------------------------------- ------------------------Elimination ofintercompany balances (21.3) - ----------------------------------------------------------------------------------------------- 5,947.9 2,730.8Deferred tax assets - 40.4Cash and cash equivalents 182.1 43.3-----------------------------------------------------------------------------------------------Consolidatedtotal assets 6,130.0 2,814.5----------------------------------------------------------------------------------------------- Segmentliabilities (1,576.2) (119.5) (1,695.7) (1,200.5) - (1,200.5)--------------------------------------------- ------------------------Elimination ofintercompany balances 21.3 ------------------------------------------------------------------------------------------------ (1,674.4) (1,200.5)Deferred tax liabilities (3.1) -Current tax liabilities (58.2) (65.7)Loans and borrowings (1,483.3) (8.4)-----------------------------------------------------------------------------------------------Consolidated total liabilities (3,219.0) (1,274.6) ----------------------------------------------------------------------------------------------- 3. Restructuring costs Following the acquisition of Wilson Bowden on 26 April 2007, the Group hasincurred £26.2m of costs in relation to reorganising and restructuring thebusiness, including redundancy costs. Where existing employees could not beretained within the Group, redundancy costs of £12.2m have been incurred. Of thecosts incurred at 30 June 2007, £23.8m was accrued. 4. Net finance costs-------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Finance income on short-term bank deposits (3.5) (2.0)--------------------------------------------------------------------------------Interest on bank overdrafts and loans 43.5 10.7Imputed interest on deferred term land payables 9.3 9.5Finance costs related to employee benefits 2.9 3.9--------------------------------------------------------------------------------Finance costs 55.7 24.1--------------------------------------------------------------------------------Net finance costs 52.2 22.1-------------------------------------------------------------------------------- Finance costs related to employee benefits of £3.9m have been reclassified fromoperating expenses to finance costs in the prior year. 5. Tax-------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Current tax 120.1 117.9Deferred tax 7.3 (1.5)-------------------------------------------------------------------------------- 127.4 116.4-------------------------------------------------------------------------------- Corporation tax is calculated at 30% (2006: 30%) of the estimated assessableprofit for the year. 6. Dividends-------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Prior year final dividend of 20.69p per share (2005: 17.99p) 49.7 42.8Interim dividend 11.38p per share (2006: 10.34p) 27.4 24.7-------------------------------------------------------------------------------- 77.1 67.5 -------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Proposed final dividend for the year ended 30 June 2007 of 24.30p (2006: 20.69p) per share 84.2 49.7-------------------------------------------------------------------------------- The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability as at 30 June 2007. It is proposed to pay the final dividend of 24.30p per share on 28 November 2007to shareholders on the register on the close of business on 2 November 2007. 7. Earnings per share Basic earnings per share is calculated by dividing the profit for the yearattributable to ordinary shareholders of £300.4m (2006: £275.0m) by the weightedaverage number of ordinary shares in issue during the year, excluding those heldby the Employee Benefit Trust which are treated as cancelled, which were 258.6m(2006: 238.5m). Diluted earnings per share is calculated by dividing the profit for the yearattributable to ordinary shareholders of £300.4m (2006: £275.0m) by the weightedaverage number of ordinary shares in issue adjusted to assume conversion of allpotentially dilutive ordinary shares from the start of the year, giving a figureof 262.8m (2006: 242.8m). -------------------------------------------------------------------------------- 2007 2006 pence pence--------------------------------------------------------------------------------The earnings per share from continuing operations are asfollows: --------------------------------------------------------------------------------Basic earnings per share 116.2 115.3--------------------------------------------------------------------------------Adjusted basic earnings per share 123.8 115.3--------------------------------------------------------------------------------Diluted earnings per share 114.3 113.3--------------------------------------------------------------------------------Adjusted diluted earnings per share 121.8 113.3-------------------------------------------------------------------------------- The calculations of basic, diluted, adjusted basic and adjusted diluted earningsper share are based upon the following data: -------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Earnings for basic and diluted earnings per share 300.4 275.0Add restructuring costs 26.2 -Less tax effect of above item (6.5) --------------------------------------------------------------------------------- 320.1 275.0-------------------------------------------------------------------------------- Earning are adjusted, removing restructuring costs and the related tax, toreflect the Group's underlying profit. 8. Reconciliation of Movements in Consolidated Equity -------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Balance at 1 July 1,539.9 1,325.6Profit for the year 300.4 275.0Disposal of own shares 10.6 2.4Dividends (77.1) (67.5)Issue of share capital 1,122.0 4.5Share issue costs (0.1) -Share-based payments 4.4 3.1Revaluation of available for sale financial assets (0.7) (4.5)Gains on hedged swap arrangements 12.3 -Amounts transferred to the income statement (1.5) -Tax credited to reserves 0.8 1.3--------------------------------------------------------------------------------Balance at 30 June 2,911.0 1,539.9-------------------------------------------------------------------------------- 9. Acquisition On 26 April 2007, the Group acquired 100% of the issued share capital of WilsonBowden for total consideration of £2,049.6m. Wilson Bowden is the parent companyof a group of companies involved in housebuilding and property development. Thistransaction has been accounted for using the purchase method of accounting. -------------------------------------------------------------------------------- Book Fair value Fair value adjustments value £m £m £m--------------------------------------------------------------------------------Net assets acquiredIntangible assets 3.5 103.5 107.0Property, plant and equipment 23.1 - 23.1Available for sale financial assets 8.7 - 8.7Investments accounted for under the equity method 7.7 - 7.7Inventories 1,828.5 34.4 1,862.9Trade and other receivables 93.6 - 93.6Cash and cash equivalents 17.1 - 17.1Trade and other payables (526.4) 1.8 (524.6)Current tax 3.8 - 3.8Bank loans and overdrafts (322.2) - (322.2)Derivative financial liabilities (10.5) - (10.5)Deferred tax 7.5 (41.2) (33.7)-------------------------------------------------------------------------------- 1,134.4 98.5 1,232.9--------------------------------------------------------------------Goodwill 816.7--------------------------------------------------------------------------------Total consideration 2,049.6-------------------------------------------------------------------------------- Satisfied by:Cash 814.8Loan notes alternative to cash 101.6Issue of BarrattDevelopments PLC shares- issued 1,118.0- to be issued 1.3Directly attributable costs 13.9-------------------------------------------------------------------------------- 2,049.6-------------------------------------------------------------------------------- Net cash outflow arising on acquisitionCash consideration 828.7Cash and cashequivalents acquired (17.1)-------------------------------------------------------------------------------- 811.6-------------------------------------------------------------------------------- Barratt Developments PLC issued 102,571,785 ordinary shares of 10p nominal valueto shareholders of Wilson Bowden as part of the acquisition consideration. Thefair value of the shares issued was £1,118.0m which was determined using theclosing bid share price on 25 April 2007. In addition, at 30 June 2007, theCompany has a liability to issue shares with a fair value of £1.3m to satisfythe remaining Wilson Bowden plc 2003 Savings Related Share Option Schemeoptions. The fair value adjustments comprise: •The £103.5m adjustment to intangible assets relates to the write-off of £3.5m of goodwill on the Wilson Bowden balance sheet at acquisition and the recognition of £107.0m of intangible assets related to the brands acquired with Wilson Bowden. •A £34.4m uplift to the carrying value of inventories to reflect the fair value of land and work in progress acquired. •A £1.8m fair value adjustment to trade and other payables. •A £41.2m adjustment to deferred tax, including £32.1m related to the brands acquired, £10.3m related to the fair value uplift on inventories and other adjustments related to deferred tax of (£1.2m). The goodwill arising on the acquisition of Wilson Bowden plc is attributable tothe anticipated profitability of the individual sites acquired, the highlycomplementary geographic fit, increased access to commercial developmentopportunities and the anticipated future operating synergies from thecombination including flexibility in relation to the expanded strategic andconsented land bank. Wilson Bowden contributed £379.6m revenue and £50.5m (including restructuringcosts of £13.1m) to the Group's profit before tax for the period between thedate of acquisition and the balance sheet date. If the acquisition of Wilson Bowden had been completed on the first day of thefinancial year, Group revenues for the period would have been £4,088.6m andGroup profit attributable to equity shareholders, excluding the costs incurredby Wilson Bowden in its sale and restructuring costs of £48.9m, would have been£557.2m. As a result of the acquisition of Wilson Bowden, the Directors have reviewedGroup operations and as a result the Group has closed certain divisionaloperations. Wilson Bowden had guaranteed the repayment of bank loans, overdrafts andfinancial guarantees made available to its subsidiary undertakings. At 26 April2007, liabilities outstanding under these bank loans and overdrafts amounted to£10.3m. Contingent liabilities in respect of Wilson Bowden subsidiaryundertakings' financial guarantees amounted to £37.5m. In addition, WilsonBowden had entered into counter indemnities in the normal course of business inrespect of performance bonds. Certain of the Wilson Bowden subsidiaryundertakings had commitments for the purchase of trading stock entered into inthe normal course of business. 10. Statutory Accounts The financial information given above does not constitute the Company'sstatutory accounts. Statutory accounts for the years ended 30 June 2007 and 30June 2006 have been reported on without qualification by the Company's auditorsand without a reference to S237 (2) or (3) of the Companies Act 1985. Statutoryaccounts for the year ended 30 June 2006 have been delivered to the Registrar ofCompanies and statutory accounts for the year ended 30 June 2007 will bedelivered to the Registrar after the Company's Annual General Meeting. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRS), this announcement does not itself contain sufficient information tocomply with IFRS. --------------------------------------------------------------------------------Supplemental information on Wilson Bowden Wilson Bowden was acquired on 26 April 2007. Barratt Developments' statutoryresults for the year ending 30 June 2007 include the results of Wilson Bowdenfor the two months from the date of acquisition. To assist investors inunderstanding the performance of the Group for the year, Barratt Developments isalso providing unaudited financial information for Wilson Bowden for the sixmonths to 30 June 2007 split between the period before and after acquisition.This information has been prepared on the same basis as the audited results forBarratt Developments. Accounting Under Barratt accounting policies and including fair policy Underlying value adjustments adjustments and Wilson ---------------------------------------------------------------------- fair value Bowden Four months to Two months to Six months to Six months to Six months to 26 April 2007 30 June 2007 30 June 2007 30 June 2007 30 June 2007---------------------------------------------------------------------------------------------------------------------Completions 984 1,651 2,635 - 2,635Average selling price £221,600 £202,800 £209,800 - £209,800 £m £m £m £m £m---------------------------------------------------------------------------------------------------------------------Revenue 236.3 379.6 615.9 - 615.9Cost of Sales (230.4) (298.4) (528.8) 60.8 (468.0) ---------------------------------------------------------------------------------------------------------------------Gross profit 5.9 81.2 87.1 60.8 147.9Administrativeexpenses (32.6) (14.2) (46.8) - (46.8)---------------------------------------------------------------------------------------------------------------------Profit before company salecosts and restructuringcosts (26.7) 67.0 40.3 60.8 101.1Company sale costsand restructuring costs (21.0) (13.1) (34.0) - (34.0)---------------------------------------------------------------------------------------------------------------------Profit from operations (47.7) 53.9 6.3 60.8 67.1Net Finance costs (10.1) (3.3) (13.5) - (13.5)Post tax share of jointventure loss (0.1) (0.1) (0.2) - (0.2)---------------------------------------------------------------------------------------------------------------------Profit before tax (57.9) 50.5 (7.4) 60.8 53.4 --------------------------------------------------------------------------------------------------------------------- Note: included in the above are the results of Wilson Bowden Developments(excluding its own housing completions) which generated revenue of £63.0m andgross profit of £14.0m in the six months to 30 June 2007. In the four months to26 April 2007, revenue was £18.3m and gross profit was £5.3m. In the two monthsfrom 26 April 2007 to 30 June 2007, revenue was £44.7m and gross profit was£8.7m. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Barratt Developments