Interim Results for the six months ended 31 December 2012

BARRATT DEVELOPMENTS PLC

Half Yearly Financial Report for the six months ended 31 December 2012

Barratt Developments PLC (the „Company‟) is today issuing the Half Yearly Financial Report for the Company and its subsidiary undertakings (the „Group‟) in respect of the six month period ended 31 December 2012 („the period‟).

113% increase in pre-tax profit

First half highlights

• Group revenues of £951.1m (2011: £952.8m) and completions of 5,085 units (2011: 5,117 units)
• Private completions increased by 5.3% on the prior year to 4,241 units (2011: 4,028 units)
• Profit from operations up 32.2% at £80.8m (2011: £61.1m), with operating margin increasing to 8.5% (2011: 6.4%)
• Profit before tax increased by 113.4% on the prior year to £46.1m (2011: £21.6m)
• Significant increase in approvals to acquire higher margin land, with £453.0m of land acquisitions approved in the period equating to 9,320 plots on 67 sites
• Net debt as at 31 December 2012 was £331.7m (31 December 2011: £542.2m) and is forecast to be around £160m at 30 June 2013 (30 June 2012: £167.7m)

Outlook

• Strong start to the second half with the Group delivering 0.64 (FY12: 0.61) net private reservations per active site per week (excluding joint ventures)
• Private forward sales (excluding joint ventures) as at 24 February 2013 up by 34.0% to £897.7m (26 February 2012: £669.9m)
• Joint venture private forward sales as at 24 February 2013 up by 231.0% to £80.1m (26 February 2012:

£24.2m)

• The Board expects to propose a final dividend for the year ended 30 June 2013
• The Board has targets of achieving zero net debt as at 30 June 2015, a dividend cover of around three times for the year ended 30 June 2016 and a substantial improvement in return on capital employed in the medium term

Commenting on the results Mark Clare, Group Chief Executive of Barratt Developments said:

“This has been a good first half performance with a 113% increase in pre-tax profit. Our order book of more than £1.1 billion reflects the strong customer interest we have seen in the early weeks of the year, supported by both NewBuy and better lending conditions. We‟re continuing to invest in new land to drive the future performance of the business and we expect a further significant improvement in profitability in this financial year.”

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The Half Yearly Financial Report contains certain forward-looking statements about the future outlook for the Group. Although the Directors believe that these statements are based on reasonable assumptions, any such statements should be treated with caution as the future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

There will be an analyst and investor meeting at 9.00am today at the Grange St Paul‟s Hotel, 10 Godliman Street, London, EC4V 5AJ. The meeting will be broadcast live on the Barratt Developments corporate website, www.barrattdevelopments.co.uk from 9.00am today. A listen only function will also be available.

Please dial: +44 (0) 1452 555 566

Conference ID: 95079723

The Half Yearly Financial Report for the six month period ended 31 December 2012 is available from today, 27 February 2013, on the Barratt Developments corporate website, www.barrattdevelopments.co.uk via the following address: www.barrattdevelopments.co.uk/barratt/en/investor/results.

Further copies of the announcement can be obtained from the Company Secretary‟s office at:

Barratt Developments PLC, Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire, LE67 1UF.

For further information please contact: Barratt Developments PLC

David Thomas, Group Finance Director	020 7299 4896
Susie Bell, Head of Investor Relations	020 7299 4880
For media enquiries, please contact:
Barratt Developments PLC Patrick Law, Group Corporate Affairs Director	020 7299 4892
Maitland Liz Morley	020 7379 5151

Overview

Market conditions remained stable during the period and the Group has made good progress in increasing profitability and reducing overall indebtedness.

In the period, we achieved a one third increase in operating margin and a 113.4% increase in pre-tax profit on the prior year equivalent period (the „prior year‟). Our net debt at 31 December 2012 was £331.7m, 38.8% lower than at 31 December 2011.

Whilst the availability of mortgage finance remains the key constraint to industry growth, we have started to see some improvements. NewBuy, which enables customers to borrow at 90-95% loan to value ratios, is in place and is working well. Expectations are that mortgage lending should increase in 2013, supported by the Bank of England‟s Funding for Lending Scheme. We are on track to deliver around half of our full year completions from higher margin land and, combined with our ongoing focus on driving efficiency across the Group, we expect to deliver a significant improvement in performance for the financial year.

Performance

Group revenues for the period were in line with the prior year at £951.1m (2011: £952.8m), with completions (excluding joint ventures („JVs‟)) of 5,085 units (2011: 5,117 units).

Profit from operations for the period increased by 32.2% to £80.8m (2011: £61.1m), with a significant improvement in operating margin to 8.5% (2011: 6.4%). Profit before tax increased by 113.4% to £46.1m (2011: £21.6m). The Group‟s earnings per share were 3.4p (2011: 1.3p).

The Group‟s net debt as at 31 December 2012 was £331.7m (31 December 2011: £542.2m). In line with expected cash generation and normal seasonal trends, net debt is forecast to reduce to around £160m as at 30 June 2013 (30 June 2012: £167.7m).

Assuming a continuing stable housing market, the Board expects to propose a conservatively set final dividend in respect of the financial year ending 30 June 2013. The Board intends to adopt a progressive dividend policy as profitability grows, with the aim of achieving a target dividend cover of around three times for the dividend in respect of the year ending 30 June 2016.

Housebuilding operations

During the period the Group operated across an average of 378 active sites and an average of 5 JV sites (2011: 377 active sites, 4 JV sites). We expect the rate of site openings to increase in the second half and that average site numbers for the year ended 30 June 2013 („FY13‟) will be marginally ahead of the prior financial year (FY12: 381 active, 5 JV).

The Group averaged 186 (2011: 181) net private reservations per week1 during the period, which equates to 0.49 (2011: 0.48) average net private reservations per active site per week. The cancellation rate was 18.8% (2011: 17.9%).

Completions for the period were 5,085 units (2011: 5,117 units). Private completions were up 5.3% on the prior year at 4,241 units (2011: 4,028 units). Affordable housing completions totalled 844 units (2011: 1,089 units) representing 16.6% (2011: 21.3%) of completions. The reduction in volume reflects site phasing and we expect affordable housing completions to account for around 18% of completions for the 2013 financial year as a whole.

Housebuilding revenues for the period were £945.8m (2011: £930.5m). Housebuilding gross margin was 11.5% (2011: 10.3%) with the improvement mainly resulting from increased completions from recently acquired higher margin land and our continued focus upon operational efficiency.

Housebuilding operations saw a significant increase in profit from operations to £78.6m (2011: £59.1m). As a result, the housebuilding operating margin increased to 8.3% up from 6.4% in the prior year. This increased profitability was driven by a substantial improvement in gross margin coupled with tight overhead cost control.

1 Unless otherwise stated all numbers exclude joint ventures.

Commercial development operations

Our commercial development revenue was £5.3m (2011: £22.3m) with a profit from operations of £2.2m (2011: £2.0m). The completion of a profitable land sale helped maintain operating profits in line with the prior year. In addition, we completed a 30,000 square feet office extension in Nottingham and delivered 39,100 square feet of stock property disposals.

Joint ventures

Development on our JV sites is progressing well, with marketing suites recently opened at our Altitude and Queensland Terrace developments in central London and the overseas marketing programme launched for Fulham Wharf. JV completions in the period totalled 109 units (2011: 81 units) with JV profits of £0.5m (2011: loss of £0.6m).

We expect completions and profits from JVs to increase significantly over the next few years, reflecting the construction and delivery profile. Our success in securing JVs in London has increased our presence and has strengthened our market position in the capital. We will continue to assess JV opportunities which allow us either to access sites that may not otherwise be available, or to reduce the investment required and improve the profitability and return on capital employed („ROCE‟) through construction management or marketing fees.

Group objectives

The Group‟s primary objectives remain to rebuild profitability and reduce overall indebtedness – and we have made considerable progress in both of these areas during the half year. As the financial performance continues to recover we are adding driving ROCE as a published primary objective for the Group.

Rebuilding profitability

We have set out three clear priorities to enable us to rebuild profitability:

• optimise selling prices;
• improve operational efficiency; and
• deliver targeted land buying.

The 32.2% increase in Group profit from operations to £80.8m (2011: £61.1m) in the half year, with operating margin improving to 8.5% (2011: 6.4%), demonstrates the significant progress made on the Group‟s priorities.

Optimise selling prices

We have embedded disciplines within the organisation to ensure we continue to focus on securing the best price for every sale – thereby maximising value rather than just driving volumes.

Average selling price („ASP‟) for the period increased by 2.4% to £185,500 (2011: £181,200) driven by positive changes in mix. Overall, underlying selling prices remained broadly stable, albeit with regional variations. Private ASP increased by 1.0% in the period to £201,900 (2011: £199,900) driven by a small positive change in mix. Affordable housing ASP declined by 7.5% to £103,400 (2011: £111,800) in the period largely due to a lower proportion of London units.

Improve operational efficiency

Driving operational efficiency has remained a significant focus for the Group. We continue to retain a firm control on costs, in particular capitalising on our scale and technical resources to maximise efficiency. We purchase a significant proportion of our materials centrally and our supply contracts for materials continue to be reviewed and renegotiated as appropriate. We continue to review our supply chain to create efficiencies by introducing new suppliers and altering build specifications where appropriate. Standard house-type costs are benchmarked across the Group to strive to ensure that the lowest possible cost is achieved whilst maintaining the quality of our homes. Going forward, it is likely that some pressure will continue to be felt as raw material prices rise due to underlying commodity prices. We will however seek to mitigate this by continuing to drive further efficiency savings and reductions in operating costs across the business.

Group administrative costs for the period were £30.4m (2011: £38.1m). Included within administrative costs is other income of £10.2m (2011: £2.4m), which has increased by £7.8m year on year largely due to the

timing of the sale of freehold reversions. For the full year, we expect administrative costs (net of other income) to be around £110m (FY12: £105.1m).

Deliver targeted land buying

The Group has made further progress in transforming its landbank in the period by utilising historical, lower margin land whilst bringing more recently acquired, higher margin land into production as quickly as possible.

The Group‟s owned and controlled land bank totalled 56,062 plots as at 31 December 2012 (31 December 2011: 58,359 plots). This equates to 4.4 years (2011: 4.6 years) supply based on FY12 completion volumes.

For FY13 as a whole we continue to expect around half of completions to come from more recently acquired higher margin land, increasing to around two thirds in FY14 and c. 85% in FY15. This land continues to deliver in line with or ahead of our required hurdle rates on acquisition, which include a gross margin of at least 20% and a ROCE2 of at least 25%. As at 31 December 2012 more recently acquired land represented 64% (2011: 53%) of the owned and controlled land bank.

We also remain focused on maximising the value of our historical land holdings. We anticipate delivering c. 18% of completions in FY13 as a whole from impaired land which would, in turn, reduce the proportion of impaired plots in the owned and controlled land bank as at 30 June 2013 to around 8% (30 June 2012: 12%). Where appropriate, we will also accelerate the utilisation of impaired land through land sales or swaps. In the first half we realised £28.3m (2011: £3.2m) of proceeds from land sales.

In the first half we have successfully agreed terms on £453.0m (2011: £178.1m) of new land equating to a total of 9,320 plots (2011: 4,671 plots) on 67 sites (2011: 47 sites). We continue to see good land opportunities in prime locations across all regions and for FY13 we expect to agree terms on a total of c. 15,000 plots. Our dual focus remains on ensuring we have the land supply necessary to support business growth over the next few years and delivering it in a way that maximises return on capital.

We have been particularly successful within the London market and have recently acquired three new major sites in central London with an aggregate gross development value of c. £480m. These projects in Blackfriars Road in Southwark, Cannon Wharf in Surrey Quays and Great Minster East in Westminster, will provide more than 1,100 new homes for the capital.

Cash expenditure on land in the period was £231m (2011: £261m). The Group anticipates that total cash expenditure on land for the full financial year will be around £700m (FY12: £397m).

We continue to seek to defer payment for new land where possible to drive a higher return on capital. Land creditors as at 31 December 2012 were £790.1m (31 December 2011: £627.3m) representing 37% (31 December 2011: 29%) of the owned land bank. The year on year increase in land creditors reflects the significant proportion of newly acquired land that has been acquired on deferred terms. Land creditors due within the next 12 months total £488.9m (31 December 2011: £297.9m), with £301.2m (31 December 2011:

£329.4m) due thereafter. In the second half, we expect land creditors to remain a fairly constant proportion of the land bank, however this is dependent upon the timing of planning consents and land contracts.

Reducing indebtedness

The reduction of indebtedness remains a key objective and we reaffirm our target of achieving zero balance sheet net debt by June 2015.

Net debt as at 31 December 2012 was £331.7m (31 December 2011: £542.2m), considerably below the prior year. In line with expected cash generation and normal seasonal trends, we expect the level of net debt to reduce significantly in the second half of this financial year. Although we have recently increased our expected cash expenditure on land by around £50m, net debt as at 30 June 2013 is still expected to be c.

£160m (30 June 2012: £167.7m).

2 ROCE on land acquisition is calculated as site operating profit (site trading profit less sales overheads less allocated administrative overheads) divided by average investment in site land and work in progress.

The Group‟s net finance charge in the first half was £35.2m (2011: £38.9m). This includes a net non-cash finance charge of £10.6m (2011: £9.5m). The Group expects that its full year net finance charge will be around £72m (FY12: £80.8m), consisting of cash finance charges of around £51m on net debt (including term debt) and around £21m of non-cash finance charges.

We recognise that for historical reasons the effective cost of the Group‟s facilities is higher than market norms and we continue to review strategies to address this.

We have £1 billion in aggregate of committed facilities to May 2015, with some of the Group‟s arrangements extending as far as 2021. This provides the Group with appropriate funding levels.

ROCE

As we rebuild profitability we are increasingly focused on driving the Group ROCE. Barratt has a strong track record of delivering a high ROCE and we believe our fast asset turn business model positions us well to drive ROCE going forward. We are targeting a substantial improvement in ROCE for the Group in the medium term.

Balance sheet

The net assets of the Group increased by £32.4m to £3,006.2m between 30 June and 31 December 2012, primarily reflecting the Group‟s profit after tax of £33.0m during the period.

Net tangible asset value increased by 1.6% to £2,114.0m (30 June 2012: £2,081.6m) and net tangible asset value per share at 31 December 2012 was £2.16 (30 June 2012: £2.13 per share).

Significant balance sheet movements since 30 June 2012 include:

• Land holdings increased by £40.0m to £2,117.3m. This increase reflects net land additions of £268.1m offset by land usage.
• Work in progress increased by £128.5m to £1,194.0m mainly due to the phasing of London developments. The Group maintains tight control over its work in progress and at 31 December 2012 the Group had 865 (30 June 2012: 955) unreserved stock units, equating to 2.2 (30 June 2012: 2.6) unreserved stock units per active site.
• Investments in JVs and associates increased by £22.8m to £108.4m mainly due to a large investment to fund land and work in progress in the new Fulham Wharf JV.
• Non-current available for sale financial assets increased by £4.7m to £193.9m reflecting the 859 completions that used FirstBuy or the Group‟s own shared equity products during the period.
• Group net debt increased by £164.0m to £331.7m reflecting normal seasonal operational trends.
• Trade and other payables decreased by £5.4m to £1,355.9m mainly reflecting the net reduction in trade payables from £291.4m to £259.3m partially offset by an increase in land payables to £790.1m.
• Goodwill and intangible assets remained at £892.2m as the impairment review of the housebuilding business indicated that no impairment was required.
• Deferred tax assets decreased by £9.8m to £108.8m mainly due to the impact of tax rate changes and the current year tax charge.

Quality, service and sustainability

The Group remains committed to delivering excellent customer service and our most recent customer survey indicated that 97% (2011: 98%) of customers would recommend us to a friend. We are a Home Builders Federation Five Star housebuilder and in 2012 won 75 National House-Building Council „Pride in the Job‟ Quality Awards, 29 „Seal of Excellence Awards‟ and 4 Regional Awards.

We were named „Sustainable Developer of the Year‟ at both the What House and Housebuilder Awards recognising the significant progress we have made around sustainability and endorsing our achievement in this area.

Government housing strategy

Government support for the UK housebuilding industry remains strong with a range of initiatives in place designed to support house purchases and stimulate growth. The Government is also putting in place longer term reforms designed to increase the supply of new homes.

The NewBuy mortgage indemnity scheme is now in place and working well, supported by reductions in mortgage rates for the product. We saw an increase in interest in NewBuy during the autumn and this continued throughout the period, with 7.7% of private reservations (excluding Scotland and Wales where NewBuy is not available) during the period supported by that scheme. Since the start of the 2013 calendar year, we have seen a further step up in interest in the scheme and we expect reservations using NewBuy to be 10% to 15% of total private reservations in the second half of the financial year.

Although the use of shared equity is carefully controlled, the Group is pleased to have secured a substantial additional allocation as part of the Government‟s latest FirstBuy funding round. We are targeting the use of FirstBuy on sites where affordability remains a key issue, with a focus on driving sales on older and impaired developments.

In the period 16.9% (2011: 19.0%) of completions (excluding JVs) were supported by shared equity, of which around three quarters were Government-backed schemes. At 31 December 2012 the net balance sheet value of all of the Group‟s shared equity loans was £193.9m (31 December 2011: £177.5m; 30 June 2012: £189.2m).

The Group will also receive c. £30m in low-cost development loans in 2013 from the Government‟s Get Britain Building Scheme which is designed to kickstart developments.

The Government continues to place emphasis on the accelerated release of surplus public land („Build Now Pay Later‟) and in December announced that the Homes and Communities Agency‟s role in the process would be enhanced. The Group is well-positioned to capitalise on this initiative as it has significant expertise in the complex process of bidding and securing public sector land.

There has been considerable change to the UK planning system in recent years and whilst the impact of these changes will take time to be fully realised, there is growing evidence that the planning process is now being aided by the requirement for Local Authorities to have a five year land supply. During the period we received detailed planning consents covering 70 sites. Looking forward, we have detailed consents for 87% of our expected FY14 completions and outline consents on a further 8%.

Current trading

In the first eight weeks of the second half of the current financial year, the sales performance across the Group has been strong. Average net private reservations per active site per week have increased by 4.9% on the prior year equivalent period to 0.64 (FY12 equivalent period: 0.61). Overall underlying selling prices have remained broadly stable. Cancellation rates have remained low at an average of 13.3% (FY12 equivalent period: 14.1%).

As at 24 February 2013, total forward sales (excluding JVs) for the Group were up 21.4% at £1,119.1m (26 February 2012: £921.8m), equating to 6,030 plots (26 February 2012: 5,733 plots). Private forward sales as

at 24 February 2013 increased by 34.0% to £897.7m (26 February 2012: £669.9m).

JV total forward sales at 24 February 2013 were £105.3m (26 February 2012: £34.2m), equating to 365 plots (26 February 2012: 151 plots). JV private forward sales were £80.1m (26 February 2012: £24.2m).

Outlook

Although we remain cautious as to whether the thaw in lending conditions will be sustained, improvements in mortgage lending and the success of the NewBuy scheme have supported a strong start to the 2013 calendar year.

New land is continuing to perform well and combined with our continued focus on operational performance we are on track to deliver significantly increased profitability for this financial year. We are focused on driving our ROCE by increasing profitability and reducing our asset base and expect ROCE will substantially improve in the medium term.

We are making good progress towards our target of achieving zero balance sheet net debt by June 2015 whilst continuing to take the opportunity to invest in higher margin land to drive future profit growth.

Mark Clare

Group Chief Executive 27 February 2013

The Group‟s financial and operational performance and reputation is subject to a number of potential risks and uncertainties, which could have a material impact on the Group‟s performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts for the year ended 30 June 2012. A detailed explanation of the relevance to the Group‟s strategy and mitigation of the risks outlined below can be found on pages 36 to 39 of the Annual Report and Accounts for the year ended 30 June 2012 which is available at www.barrattdevelopments.co.uk.

Economic environment, including housing demand and mortgage availability

Changes in the UK and European macroeconomic environments, including unemployment, austerity measures, flat economic growth, buyer confidence, availability of mortgage finance, the ability of purchasers to repay shared equity loans, interest rates, competitor pricing, falls in house prices or land values or a failure of the housing market to recover, may lead to a fall in the demand for houses which in turn could result in impairments of the Group‟s inventories, goodwill and intangible assets.

Cost reduction measures may adversely affect the Group‟s business or its ability to respond to future improvements in market conditions.

Liquidity

Unavailability of sufficient borrowing facilities to enable the servicing of liabilities (including pension funding) and the inability to refinance facilities as they fall due, obtain surety bonds, or comply with borrowing covenants. Furthermore, there are risks to management of working capital such as conditional contracts, build costs, joint ventures and the cash flows related to them.

Attracting and retaining high calibre employees

Inability to recruit and/or retain employees with appropriate skill sets or sufficient numbers of such employees.

Availability of raw materials, subcontractors and suppliers

Shortages or increased costs of materials and skilled labour, the failure of a key supplier or the inability to secure supplies upon appropriate credit terms could increase costs and delay construction.

Land purchasing

The ability to secure sufficient consented land at appropriate cost and quality to provide profitable growth.

Government regulation and planning policy

Inability to adhere to the increasingly stringent and complex regulatory environment, including planning and technical requirements affecting the housing market and regulatory requirements more generally.

Construction and new technologies

Failure to identify and achieve key construction milestones, due to factors including the impact of adverse weather conditions, the failure to identify cost overruns promptly, design and construction defects, and exposure to environmental liabilities which could delay construction, increase costs, reduce selling prices and result in litigation and uninsured losses. Also there are risks associated with climate change and the use of new technology in the build process e.g. materials related to carbon reduction.

Joint ventures and consortiums

Large development projects, some of which involve joint ventures or consortium arrangements and/or commercial developments, are complex and capital intensive and changes may negatively impact upon cash flows or returns.

Health and safety

Health and safety breaches can result in injuries to employees, subcontractors and site visitors, delays in construction/increased costs, reputational damage, criminal prosecution and civil litigation.

Information technology (‘IT’)

Failure of the Group‟s IT systems, in particular those relating to surveying and valuation, could adversely impact the performance of the Group.

Financial risk management and contingent liabilities

Details of the Group‟s management of liquidity risk, market risk, credit risk and capital risk in relation to financial instruments are provided in the Annual Report and Accounts for the year ended 30 June 2012 on pages 109 to 114.

Details of contingent liabilities including litigation are provided in note 18 of the condensed consolidated half yearly financial statements.