Contents

1.0. Introduction Page 2

2.0. Performance Page 4
3.0. Ratio Analysis Page 6
4.0. Cash Flow Page 11
5.0. Non-Financial Performance Indicator Page 11
6.0. Conclusion and Recommendations Page 13
References Page 15

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1.0. Introduction

The report is related towards the analysis of financial statements of two companies which are
the Bellway and Barratt Company in UK. The companies are engaged in dealing with the
business related with property dealing. Bellway is 4th largest company in UK and Barratt
developers are considered to be the largest residential property developers in the United
Kingdom. (Ycharts.com, 2016) The following analysis will review the financial statements of
Bellway and Barratt Company for the past five years:

Bellway Company Income Statement

Income 31/7/2015 31/7/2014 31/7/2013 31/7/2012 31/7/2011

Statement
£ £ £ (Millions) £ (Millions) £ (Millions)
(Millions) (Millions)

Revenue 1,765.41 1,484.82 1,110.68 1,004.23 886.09

Operating 367.32 255.62 151.07 114.63 75.21
Profit/Loss
Net Interest (13.08) (9.92) (10.14) (9.35) (8.05)
Profit before Tax 354.19 246.00 140.93 105.28 67.16
Profit after tax 283.15 191.42 108.57 79.26 50.14
from continuing
operations

Barratt Company Income Statement

Income 30/6/2015 30/6/2014 30/6/2013 30/6/2012 30/6/2011

Statement
£ £ £ (Millions) £ (Millions) £ (Millions)
(Millions) (Millions)

Revenue 3,759.50 3.157.00 2,606.20 2,323.40 2,035.40

Operating 576.80 409.80 249.90 191.10 127.30

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Profit/Loss
Net Interest (57.00) (59.70) (147.60) (80.80) (138.90)
Profit before Tax 565.50 390.60 104.50 100.00 (11.50)
Profit after tax 450.30 305.40 74.70 67.40 (13.80)
from continuing
operations

Barratt Company and Bellway Company are related with housing and building and in terms
of revenue the year 2015 showed that Barratt has more revenue which is £ 3,759.5 million
while Bellway has £1,765.4 million. The profit level of Barratt Company is more than
Bellway as Barratt has £565.5 million profit in the year 2015 while Bellway £ 360 million
this shows that the performance of Bellway is better than Barratt. The profit level of Barratt
Company is higher than Bellway. Bellway has been facing considerable fluctuations in terms
of growing trends in the economy and this decline continued after the year 2009 but Barratt
Company has maintained its stability during the period of analysis.

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2.0. Performance

The performance analysis over the past three year’s comparison has shown that Barratt
Company has better financial management and has sustained more profit rather than Bellway.
There has been rising demand of homes which has made Barratt Company to be the
proposing their profit levels to rise by the year 2016 by 45%. (Ycharts.com, 2016) .The
performance of Barratt Company is very much precise and there has been completion of
several projects which can be compared as the past years have shown the progression as
follows:

Year 2013 2014 2015

Projects completed 13,663 14,838 16, 447
(Plots)
2,606.2 3, 157.0 3, 759.5
Revenue (£)
Barratt Company Progress Report

The chart shows the increase in the performance level by Barratt Company as the year passes
the company has shown the increase in the number of projects completion along with the
increase in the revenue which depicts that 2013 has 2,606.2 million revenue that was raised to
3, 157.0 million in the year 2014 and the year 2015 has shown remarkable progress of 3,
759.5 million showing the increase in revenue and Barratt Company has been performing
well with the passage of time. (Shares.telegraph.co.uk, 2016)

Year 2013 2014 2015

Homes sold 5,652 6,851 7,752
Revenue (£) 1,1107 1,484.4 1,765.4
Bellway Company Progress Report

The report regarding the performance of Bellway company is shows progress in terms of the
houses being sold as the revenue has been considerably increasing in year 2013 sold 5, 652
homes and obtained a revenue of £ 1,1107 million which was increased in the tear 2014 to £
1, 484.4 by selling 6, 851 homes and the year 2015 showed increase by selling 7,752 homes
earning a revenue of £1, 765.4 million showing the progress of the company each year in
terms of performance yet the company still lags behind in terms of progress because Barratt

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Company has more profit level and the projects completed are also more showing increase in
performance of Barratt Company. (Hailmaryam, 2013)

Opportunities

There have been a lot of opportunities which have been striking positively Barratt Company
and this has been its new acquisitions of the projects that have assisted it to retain strong
position in the market. The company had been provided with more new opportunities to
acquire land and also build up commercial residential areas while Bellway Company has
opportunity in the aspect of having new land acquisitions, growth rates and profitability level
along with the introduction of new products and services. Bellway Company has shown a lot
of potential growth for expanding in future and their income level has been showing
considerable increase and is in line with the global market competition. (Guibourg, 2015)

Threats

Barratt Company is facing threat from the growing market competition in which there have
been new companies introduced that have been reducing their rates to gain pace in the market
which poses threat to Barratt Company because the profitability factor gets lower. Bellway
Company is facing a lot of threats in the technological aspect and the increase in the interest
rates affects its financial performance. The changes in the prises are a strong external risk that
is faced by Bellway Company and the competition trends in market has impact on its profit
levels. (Londonstockexchange.com, 2016)

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3.0. Ratio Analysis

a) Profitability ratios

Company Name Year Year Year

2013 2014 2015
Barratt Company 11.5% 19.5% 23.9%
Bellway 12.3% 19.6% 23.9%
Return on Capital Employed (ROCE)

Company Name Year Year Year

2013 2014 2015
Barratt Company 2.48% 9.52% 12.75%
Bellway 9.17% 14.46% 18.97%
Return on Shareholder’s Fund (Return on Equity)

Company Name Year Year Year

2013 2014 2015
Barratt Company 38.2% 40 % 44.8%
Bellway 32% 42.7% 44%
Profit before Tax Percentage

Company Name Year Year Year

2013 2014 2015
Barratt Company £ 359.2 m £ 529.4 m £ 685 m
Bellway £ 203.3m £316.4 m £427.9 m
Gross Profit (£) Millions

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Company Name Year Year Year
2013 2014 2015
Barratt Company 10.4% 13.0 % 15.3%
Bellway 13.6% 17.2% 20.4%
Operating Profit Percentage

b) Liquidity Ratio Analysis

Company Name Year Year Year

2013 2014 2015
Barratt Company 1.44 0.82 0.85
Bellway 4.21 3.56 3.43
Current Ratio

Company Name Year Year Year

2013 2014 2015
Barratt Company 0.32 0.32 0.37
Bellway 4.21 3.56 3.43
Quick Ratio

c) Efficiency Ratio Analysis

Company Name Year Year Year

2013 2014 2015
Barratt Company 45 49 52
Bellway 47 40 36
Stock Holding Period (Days)

Company Name Year Year Year

2013 2014 2015
Barratt Company 37 37 40
Bellway 42 36 32
Debtors Payment Period (Days)

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Company Name Year Year Year
2013 2014 2015
Barratt Company 59 58 56
Bellway 60 58 61
Creditors Payment Period (Days)

Company Name Year Year Year

2013 2014 2015
Barratt Company 42 49 50
Bellway 57 38 50
Cash Conversion Cycle (Days)

d) Financial Structure

Company Name Year Year Year

2013 2014 2015
Barratt Company 27.34% 29.9% 31.12%
Bellway 22.45% 25.43% 29.35%
Gearing Ratio

Company Name Year Year Year

2013 2014 2015
Barratt Company 1,037 1, 162 1, 3750
Bellway 1, 673 1, 939 2, 289
Retained Earnings

Bellway Dividend History

Ex-Date Pay Date Net Dividend Total for Year

22 May 2013 01 July 2013 9.00 0.00
11 December 2013 15 January 2013 21.00 30.00
28 May 2014 01 July 2014 16.00 0.00
11 December 2014 14 January 2015 36.00 52.00

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28 May 2015 01 July 2015 25.00 0.00
03 December 2015 13 January 2016 52.00 77.00

Barratt Dividend History

Ex-Date Pay Date Net Dividend Total for Year

23 October 2013 20 November 2013 2.50 2.50
16 April 2014 20 May 2014 3.20 0.00
30 October 2014 20 November 2014 7.10 10.30
23 April 2015 20 May 2015 4.80 0.00
29 October 2015 20 November 2015 10.00 0.00

Discussion

The comparison between Barratt and Bellway shows that Bellway Company is having long
time spending and takes more profit on the collection of receivables while it has the most
risky and ineffective policy regarding collecting receivables. There is lack of liquidity in
Bellway and is not able to achieve success by considering the short-term safety aspect
because Bellway is unable to meet the short-term liability factor by making use of the current
assets which is done fairly by Barratt Company. (Guibourg, 2015)

There have been a total of 7, 626 homes sold by the end of December in six months by
Barratt Company in 2015 and this has been at an average selling price of GBP 254, 000
which marks up to 11% of the average price that has incurred in the first half of the financial
year. The shares in Bellway has been rising up to 3.5% in the year 2015 and has crossed the
expectations limit and has been selling up to 7, 752 homes with 13.2 % prices that have been
arising from the average 5% to £ 224,000. (Financials.morningstar.com, 2016)

This shows that Bellway has beaten up Barratt as far as selling of the houses is concerned
because the results at end of year showed differences which were not expected by Bellway.
(Financials.morningstar.com, 2016)

The dividend results for Bellway has shown that there is matching in the profitability factor
by increase in the proposed dividend. There is increase in the final dividend by 71.4% to
36.0p per ordinary share in the year 2015 and there have been consecutively paying the

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dividends every year and there is an unbroken record maintained by Bellway. Barratt
Company has recognized considerably the needs and demands of dividend offerings by the
company and therefore it has been sustaining in the market as there is need in UK due to the
growing trends in the need of residency. (Anon, 2016)

Barratt Company has been showing consistency in the performance over the past three years
as there had been effective and positive profit by ROCE which shows the return on capital
employed and this combines effectively the dividend policies making the business to excel.
Barratt Company has shown 18% return on capital employed and the future target set is 25%
which will be achieved in the near future. (BBC News, 2016)

The key performance indicators for Barratt Company have shown that there has been profit
before tax to be £ 565.5 million with earning per share to be 45.5 pence and the returns on the
capital employed to be 23.9% while Bellway Company has obtained the returns of 19.6% by
the year 2015 which was 12.3% in 2013.

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4.0. Cash Flow

Cash flow operations in Bellway Company have brought significant changes in the normal
business operations and there has been a lot of investment related with the changes in the
activities that has been resulting in the changes of the financing activities. There has been a
net income from the continuity of operations which was $244 million that had been extended
six months till July 2015 while there had been changes in the working capital and the cash
flow from the deferred tax had been 460 million ending up the Bellway Company operations
for the next six months which concluded in July 2015 and was 4134 million.

Barratt Business company had been providing the net change and the cash equivalent that has
the detailed study of -7.1 M which is for the latest quarter study of the year 2015 and the
ability of firm to grow its cash has been associated with having positive signal and if Barratt
company tends to keep a lot of cash in hand will provide the company to have limited growth.
The cash flow from the financing activities showing the flow of cash between the creditors
and owners which is -2.33 million for the year 2015 and these activities assist in raising the
capital of the company.

5.0. Non-financial performance indicators

The non-financial performance indicators are considered to be very important from the
customer perspective as these indicators and the financial performance indicators are solely
not sufficient for obtaining the idea for the future direction of the company. (Hailmaryam,
2013). The following non-financial performance indicators supported significantly Barratt
Company:

a) Customer perspectives

The needs and demands of the customers need to be identified by Barratt Company which
enabled Barratt group to gain the trust and loyalty of the company and helped it to sustain in
the long run for further development and growth in the business sector. (Hailmaryam, 2013)

b) New customer acquisition

The new customer acquisition is the top priority of Barratt Company because it intends to
have strong demand of the customers will be aligned and they will be focused more to meet

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the targets. Barratt Company has strong focus on attracting the attention of the customers and
provides them with the best services in order to keep them intact with the management and
their decisions. (Hailmaryam, 2013)

c) Influence of external markets

Barratt Company keeps in view the external changes in the market level because it plays a
very important role as in case of inflation in the country there will be unemployment at its
peak and Barratt Company needs to keep itself able to meet up the different political and
economic changes in the country. The share price of Barratt Company tend to decrease in the
situation of inflation because there will not be many people demanding for houses as the
current economic trend will not be suitable for it to do the required changes. (Hailmaryam,
2013)

The following non-financial performance indicators influence Bellway Company and they
respond effectively to the need of changes:

a) Sustainability

Bellway Company is very much strategic and makes every effort for making its place in the
market whether it requires modifications in the pricing policies and there has been a lot of
success obtained by sustaining in the business making it acceptable in the business market.
(Hailmaryam, 2013)

b) Innovations and Learning

The infrastructure of Bellway Company has been revised and there has been a lot of need of
technological development in the business which has also assisted it to have sustainability in
the business market. Bellway Company has been investing successfully in re-skilling the
employees by providing them with the training lessons that will enhance the performance
level of the company. (Hailmaryam, 2013)

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6.0. Conclusion and Recommendations

The best measure to improve the performance of the company is to focus more on the non-
financial indicators and show the concern of the customer’s needs because this will help in
improving the performance. The maximum attraction of the customers and the training
lessons to the employees will develop the firm in its performing skills and this strategic
development is very much effective for the business. (Head, 2015)

The house builders have been showing the current reports that Bellway pay-out has increased
by 19% in 2016 which is the expectation while Barratt’s pay-out is expectedly to be twice to
30 p per share and this will provide the yield of nearly 5%. Bellway group has been selling 6,
851 homes and this were in the year 2014 showing the potential growth from its competitive
rivals Barratt. (Gardiner, 2014)

Bellway Company has shown increase in the selling price which was £213,182 and increased
to £224,000 and there has been expectation of increasing the operating margin to 20%. There
have been a lot of expectations for the coming years as there is consistent demand for new
homes in England. (Gibson, 2015)

Barratt Homes have been reportedly increasing to be 45% and has been earning the profit
level to £565.5m which is attributed to the improvement of the mortgage availability along
with the support of the government. There has been currently increase in the private housing
policies by Barratt Company to 8.5%. There has been profit level to be increasingly and the
amount is huge making it to be 45% and this enhances the level of profit making the business
to be effectively executed. (BBC News, 2016)

There has been a share soaring up for Bellway Company over its past financial crises that has
affected its performance level. This has impacted a lot the financial position of Bellway
Company and dividend has also been predicting to rise due to the soaring up of the shares.
(Shapland, 2015).

There has been soaring up of shares to be 35 in Bellway and there will dividend raised too
which is the current status of the trading update and the reservations have also been increased
currently to 12% from 2015 having 165 homes per week and there has been expectation of

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increase in the reservation rates. The current financial year is associated to be having increase
in the expected outcome to be 10% more than the previous year. (Evans, 2015)

Barratt Company has been viewed favourable by the financial markets and the reason has
been attributed to the rising selling price along with the strong sales volume. The government
tends to be supportive for Barratt Development which has strong performance and also has
been showing the completion of projects to be 9.4% making increase in the selling prices and
also the land market has been actively been referred with positive opportunities for
reinvestment providing Barratt Company to full confidence in the year ahead.

Bellway is also being supported by the financial markets as it has upbeat the trading
statement which shows that there is increase in the number of homes that has been showing
increase of 13.2% in July making 7,752 homes and there is 5% rise in the sale price which
makes it have strong acceptance in the financial markets. (Fletcher, 2015)

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References

 Anon, (2014). [online] Available at:

http://www.bellwaycorporate.com/pdf/preliminary-announcement-14-10-14.pdf
[Accessed 20 Jan. 2016].
 Anon, (2016). [online] Available at:
http://www.barrattdevelopments.co.uk/~/media/Files/B/Barratt-Developments/repots-
presentation/2015/barratt-annual-report-2015.pdf [Accessed 20 Jan. 2016].
 BBC News, (2016). Barratt Homes reports a 45% jump in profits - BBC News.
[online] Available at: http://www.bbc.com/news/uk-scotland-scotland-business-
34195318 [Accessed 20 Jan. 2016].
 Evans, J. (2015). Bellway increases dividend on higher home sales - FT.com. [online]
Financial Times. Available at: http://www.ft.com/intl/cms/s/0/d58baaec-a016-11e5-
beba-5e33e2b79e46.html#axzz3xnbpCwds [Accessed 20 Jan. 2016].
 Financials.morningstar.com, (2016). Growth, Profitability, and Financial Ratios for
Barratt Developments PLC (BDEV) from Morningstar.com. [online] Available at:
http://financials.morningstar.com/ratios/r.html?t=BDEV [Accessed 20 Jan. 2016].
 Financials.morningstar.com, (2016). Growth, Profitability, and Financial Ratios for
Bellway PLC (BWY) from Morningstar.com. [online] Available at:
http://financials.morningstar.com/ratios/r.html?t=BWY [Accessed 20 Jan. 2016].
 Fletcher, N. (2015). Bellway upbeat on housing market. [online] the Guardian.
Available at:
http://www.theguardian.com/business/marketforceslive/2015/aug/07/bellway-upbeat-
on-housing-market [Accessed 20 Jan. 2016].
 Gardiner, J. (2014). Bellway hints at growth plans after 21% rise in homes built.
[online] Building. Available at: http://www.building.co.uk/bellway-hints-at-growth-
plans-after-21-rise-in-homes-built/5071504.article [Accessed 20 Jan. 2016].
 Gibson, R. (2015). Bellway reports record housing completions on the back of strong
demand and favourable market conditions. [online] nechronicle. Available at:
http://www.chroniclelive.co.uk/business/business-news/bellway-reports-record-
housing-completions-9807777 [Accessed 20 Jan. 2016].
 Guibourg, C. (2015). Bellway profit soars on record house sales. [online]
Cityam.com. Available at: http://www.cityam.com/226417/bellway-profit-soars-to-
beat-expectations-on-record-house-sales- [Accessed 20 Jan. 2016].

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 Hailmaryam, S. (2013). PERFORMANCE ASSESSMENT AND MANAGEMENT
IN THE UK HOUSE BUILDING INDUSTRY : A CASE STUDY OF BARRATT
DEVELOPMENTS. ACCA, 6(2), pp.7-9.
 Head, R. (2015). Should You Sell Bellway plc And Barratt Developments plc And Buy
Tesco PLC For 2016? | The Motley Fool UK. [online] Fool.co.uk. Available at:
http://www.fool.co.uk/investing/2015/12/24/should-you-sell-bellway-plc-and-barratt-
developments-plc-and-buy-tesco-plc-for-2016/ [Accessed 20 Jan. 2016].
 Londonstockexchange.com, (2016). Interim Results - RNS - London Stock Exchange.
[online] Available at: http://www.londonstockexchange.com/exchange/news/market-
news/market-news-detail/BWY/12293041.html [Accessed 20 Jan. 2016].
 Shapland, M. (2015). Bellway shares soar as it returns to pre-financial crisis levels.
[online] This is Money. Available at:
http://www.thisismoney.co.uk/money/markets/article-3270632/Bellway-shares-soar-
returns-pre-financial-crisis-performance-levels.html [Accessed 20 Jan. 2016].
 Shares.telegraph.co.uk, (2016). Bellway - Fundamentals | Shares & Markets -
Telegraph. [online] Available at:
http://shares.telegraph.co.uk/fundamentals/?epic=BWY [Accessed 20 Jan. 2016].
 Ycharts.com, (2016). Bellway Return on Equity (TTM) (BLWYY). [online] Available
at: https://ycharts.com/companies/BLWYY/return_on_equity [Accessed 20 Jan.
2016].

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