Building sustainable values
Annual Report and Accounts
2016
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Inside this report
2
46
105
164
Strategic Report
Governance
Financial Statements
Other Information
2 A snapshot of our business
4 Our performance and financial highlights
6 How we create and preserve value
8 Chairman’s statement
10 Key aspects of our market
12 Chief Executive’s statement
19 Strategic Priorities
Our principles
36 Keeping people safe
37 Being a trusted partner
38 Building strong
community relationships
39 Safeguarding the environment
40 Ensuring the financial health
of our business
41 Risk management
46 The Board
48 Chairman’s introduction
50 Corporate governance report – Overview
51 Corporate governance report – Leadership
62 Nomination Committee report
66 Audit Committee report
74 Safety, Health and Environment
Committee report
76 Remuneration report
98 Other statutory disclosures
104 Statement of Directors’
Responsibilities
106 Independent Auditors Report
110 Consolidated Income Statement
110 Statement of Comprehensive Income
111 Statement of Changes in
Shareholder’s Equity – Group
112 Statement of Changes in
Shareholder’s Equity – Company
113 Balance Sheets
114 Cash Flow Statements
115 Notes to the Financial Statements
Notice regarding limitations on Director's liability
under English law
Under the Companies Act 2006, a safe harbour limits the
liability of Directors in respect of statements in, and omissions
from, the Strategic Report contained on pages 1 to 45 and the
Directors’ Report contained on pages 46 to 104. Under English
Law the Directors would be liable to the Company (but not to
any third party) if the Strategic Report and/or the Directors’
Report contains errors as a result of recklessness or knowing
misstatement or dishonest concealment of a material fact,
but would not otherwise be liable.
Strategic Report and Directors’ Report
Pages 1 to 45 inclusive comprise the Strategic Report and
pages 46 to 104 inclusive comprise the Directors’ Report, both
of which have been drawn up and presented in accordance with,
and in reliance upon, English Company Law and liabilities of the
Directors in connection with the reports shall be subject to the
limitations and restrictions provided by such law.
Cautionary statement regarding forward-looking statements
The Group’s reports including this document and written
information released, or oral statements made, to the public in
future by or on behalf of the Group, may contain forward-looking
statements. Although the Group believes that its expectations are
based on reasonable assumptions, any statements about future
outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
Strategic Priorities
20
Customer first
24
28
32
Great places
Leading construction
Investing in our people
Barratt Developments PLC – Annual Report and Accounts 2016
Welcome to Barratt Developments
Our vision is to lead the future of
housebuilding by putting customers first
and at the heart of everything we do.
By investing in our people, we are
leading construction to create great places
where people aspire to live,
and generating sustainable returns
for our shareholders.
Barratt Developments PLC – Annual Report and Accounts 2016
1
Strategic ReportGovernanceFinancial StatementsOther Information A snapshot of our business
We are the nation’s leading housebuilder
operating across Britain with 27 housebuilding divisions
delivering 17,319 homes this year.
Our year in numbers1
Our homes
Our customers
Homes legally completed2
Average active sites
Housebuilding divisions
We are a HBF4 5 Star housebuilder
and create great places to live. We aspire
to meet Building for Life 12 standards5
on all of our developments.
We put our customers first.
We build great homes and aim to provide
customer service
that exceeds expectations.
2016 completions by unit type
2016 completions by deal type
17,319
2015: 16,447
365
2015: 380
27
2015: 27
Owned and controlled
land bank plot
Employees3
71,351
6,209
2016
2015
1 and 2 bedroom houses
11% 12%
Help to Buy
3 bedroom houses
34% 33%
Part Exchange
2015: 70,523
2015: 5,971
4 bedroom houses
31% 28%
Other Private
1 Unless otherwise stated, all numbers quoted exclude joint ventures (‘JV’) and are as at 30 June 2016 throughout this Annual Report and Accounts.
2 Total completions, including joint ventures, were 17,319 (2015: 16,447) for the year. Private completions for the year were 13,198 (2015: 12,746).
Affordable completions for the year were 2,707 (2015: 2,853) and JV completions in which the Group had an interest were 1,414 (2015: 848).
3 Employee numbers, excluding sub-contractors, taken as at 30 June.
4 Home Builders Federation ('HBF').
5 Building for Life 12 is the industry standard, endorsed by the Government, for well-designed homes and neighbourhoods that local communities,
local authorities and developers are invited to use to stimulate conversations about creating good places to live.
5 and 6 bedroom houses
Flats London
Flats non-London
5%
7%
4%
9%
12% 14%
Investor
Affordable
2016
2015
32% 31%
8%
8%
35% 32%
8% 11%
17% 18%
2
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Our geographic spread (including JV's)
We are the nation’s leading housebuilder committed
to operating throughout Britain1.
4
West
2,392
homes
2015: 2,336
5
London
2,054
homes
2015: 1,965
6
Southern
3,124
homes
2015: 2,882
1
3
4
2
6
5
1
Northern
3,611
homes
2015: 3,289
2
East
2,897
homes
2015: 2,945
3
Central
3,241
homes
2015: 3,030
Our brands
We have three main brands –
Barratt Homes, David Wilson Homes
and Barratt London.
Commercial developments are delivered
by Wilson Bowden Developments.
Total completions
(including joint ventures)
+5.3%
on 2015
1 Housebuilding contributes 98.1% (2015: 98.5%) of revenues. We also have a commercial developments business which contributes 1.9% (2015: 1.5%) of revenues.
Barratt Developments PLC – Annual Report and Accounts 2016
3
Strategic ReportGovernanceFinancial StatementsOther Information
Our performance
and financial highlights
It has been a record year. We delivered our highest ever profit before
tax and a strong performance against a number of our key metrics.
Revenue £m
£4,235.2
+12.7%
Gross margin %
18.9%
-0.1ppts
4,235.2
3,759.5
19.0
18.9
16.8
3,157.0
2,606.2
2,323.4
13.8
12.7
KPI
KPI
Profit before tax2 £m
Earnings per share pence
£682.3
+20.7%
682.3
565.5
55.1p
+21.1%
55.1
45.5
390.6
31.2
192.0
110.7
7.0
7.7
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Target
Disciplined growth
in completion volumes
Status
On target
1 FY refers to the financial year ended 30 June.
2 Profit before tax in 2012 and 2013 is calculated before exceptional items.
Target
At least 20%
by FY17¹
Status
On target
Target
Target
£645m profit before tax broadly in line with
consensus at the start of the financial year
52.3p broadly in line with consensus at the
start of the financial year
Status
Achieved
Status
Achieved
4
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
KPI
88.7%
Total shareholder return for the
three years ended 30 June 2016
30.7 pence
Total capital return per share1
Land bank years
Land approvals plots
Return on capital employed2 %
Year end net cash/(debt)3 £m
KPI
KPI
KPI
4.5 years
no change
4.3
4.4
4.7
4.5
4.5
24,387
+43.8%
21,478
18,536
16,956
24,387
27.1%
+3.2 ppts
27.1
23.9
19.5
£592.0
+£405.5m
592.0
12,085
11.5
8.3
186.5
73.1
(167.7)
(25.9)
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Target
Target
Target
c. 4.5 years supply
16,000–18,000 plots approved for purchase
At least 25% by FY17
Target
Year end net cash
Status
Achieved
Status
Achieved greater than target
Status
On target
Status
Achieved
1 The Board proposes a final dividend of 12.3 pence per share and a further special dividend of 12.4 pence per share under the special cash payment programme. An interim dividend of 6.0 pence per share was paid to shareholders on 20 May 2016.
2 Return on capital employed (‘ROCE’) is calculated as earnings before interest, tax, operating charges relating to the defined benefit pension scheme and operating exceptional items, divided by average net assets adjusted for goodwill and intangibles, tax, cash, loans and borrowings,
retirement benefit assets/obligations and derivative financial instruments.
3 Net cash is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings and foreign exchange swaps.
Barratt Developments PLC – Annual Report and Accounts 2016
5
Strategic ReportGovernanceFinancial StatementsOther Information
How we create
and preserve value
Our business model focuses on delivering value across
the housebuilding value chain, creating sustainable
returns for shareholders and making a positive
difference in the communities in which we operate.
What we do
Long term sustainable value
1
2
3
4
5
Targeted
land buying
and effective
planning
Outstanding
design
Construction
excellence
and
efficiency
Innovative
sales and
marketing
Industry
leading
customer
experience
Financial capital
Our people
See page 40
See page 32
6
Critical inputs
Local
government
engagement
Land owner
engagement
Availability
of building
materials
Affordable
mortgages
Shareholders
Total shareholder returns including dividends
– Three times dividend cover
– Special cash payment programme
from November 2015 to November 2017
– In total £963m1 Capital Return Plan
to November 2017
Customers and society
Quality homes
Local investment and regeneration
Job creation
Taxation revenues
1 See page 9 for further details.
Contractors
Community
relations
See page 37
See page 38
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information 1
2
3
4
5
Targeted land buying
and effective planning
Outstanding
design
Construction excellence
and efficiency
Innovative sales
and marketing
Industry leading
customer experience
What we do
What we do
What we do
What we do
What we do
We purchase land in targeted locations
which at least meets our hurdle
rates of 20% gross margin and 25%
ROCE. We then work closely with local
communities and authorities to deliver
effective planning permissions.
Our capability to deliver developments
of all levels of complexity from standard
housing to large and highly complex
London schemes, and our wide
geographical portfolio means we can
manage risk through our diversity.
We also have a proven track record in
delivering successful JV partnerships.
We design outstanding homes and
places for our customers, using
standard house designs, developed
using customer research.
This means our quality products are well
designed to fit our customers’ lifestyles
with developments that enhance the
local community, with our aim that all
new developments meet Building for
Life 12 standards.
We build quality homes efficiently,
with centralised procurement and
sharing of best practice, while
ensuring high standards of health
and safety. Our experienced teams
help ensure efficient delivery of
complex developments.
We have long standing relationships with
material suppliers which are centrally
contracted, managing our cost base and
ensuring continuity of supply and strong,
long standing relationships with local
sub-contractors.
We constantly innovate our sales and
marketing methods to customers and
invest in IT to deliver strong sales rates.
We have strong, well-recognised brands
– Barratt Homes, David Wilson Homes
and Barratt London that have carefully
defined market positions.
We focus on maintaining the very highest
levels of quality seeking to understand
customer needs and provide a first class
customer experience.
We are the only national housebuilder to
achieve 5 Star HBF rating for customer
satisfaction for seven consecutive years.
The value this creates
The value this creates
The value this creates
The value this creates
The value this creates
Increasing margins and return on capital
employed with FY17 targets being at
least 25% return on capital employed
and 20% gross margin
Delivery of quality housing to help
address Britain’s housing shortage
Investment in local facilities and
infrastructure resulting from
development
Regeneration of brownfield sites
Ability to achieve the best possible prices
for the homes we sell, driving returns
Successful development enhances local
relationships and reputation, helping
source future sites, obtain effective
planning permissions, community
support and customers
Positive legacy for local communities
by building great places to live
Efficient house design reduces energy
consumption and helps to provide a
more sustainable future
Improving return on capital employed
through capital efficiency
Security of materials and sub-
contractor supply
High standards of health and safety on
our sites
Job creation through over 12,700
supplier and sub-contractor companies
that we help support
Helping address the construction
industry skills shortage through
employing and training apprentices
and graduates and improving the
industry's reputation
Good sales rates and revenues
delivering improved returns
Efficient sales process enhances the
customer journey from reservation
through to completion
Improved revenues and improved
efficiency through reduced
remedial costs
Customers who are satisfied with their
new homes and would recommend us
to their friends and families, generating
further sales
The associated risks¹
The associated risks
The associated risks
The associated risks
> Government regulation and
planning policy
> Construction and new technologies
> Safety, health and environmental
> Attracting and retaining high-
calibre employees
> Economic environment,
including housing demand and
mortgage availability
> Land purchasing
> Liquidity
> Government regulation and
planning policy
> Joint ventures and consortia
> Attracting and retaining
high-calibre employees
> IT
> Economic environment,
including housing demand and
mortgage availability
> Attracting and retaining
high-calibre employees
> IT
> Economic environment,
including housing demand and
mortgage availability
> Land purchasing
> Construction and new technologies
> Availability of raw materials,
sub-contractors and suppliers
> Safety, health and environmental
> Joint ventures and consortia
> Attracting and retaining
high-calibre employees
> IT
Barratt Developments PLC – Annual Report and Accounts 2016
The associated risks
> Attracting and retaining
high-calibre employees
> Availability of raw materials,
sub-contractors and suppliers
> IT
1 The associated risks are discussed in greater detail
in the Risk Management section on pages 41 to 45.
7
Strategic ReportGovernanceFinancial StatementsOther Information Chairman’s statement
This performance is particularly
impressive, given it accompanies
our industry-leading quality and
customer service standards.
John Allan
Chairman
18.3p
Ordinary dividend per share
(2015: 15.1p)
£963m
A year of strong performance
This has been another year of excellent progress for the Group, with a strong financial
and operational performance. We have grown completion volumes in a disciplined way,
significantly grown profit and continued our delivery of industry leading build quality
and customer service.
Whilst the outcome of the EU referendum has increased levels of economic and
political uncertainty, the Group is in a strong position, with a substantial year end net
cash balance, healthy forward sales position and an experienced management team.
The Board will continue to monitor the market and economy and take appropriate
action where necessary. The wider market for new homes remains healthy across
Britain, with a long term undersupply of new homes, strong government support
to the sector and a liquid mortgage market.
Consequently, we remain confident in the strong fundamentals of the housing sector
and our business.
Capital Return Plan
over three years ending November
2017 based on consensus earnings
Operationally, we have delivered our highest
completion volumes for eight years, increasing
completions by 5.3% to 17,319 homes,
a performance that highlights the reliability
and delivery capability of our housebuilding
operations. This performance is particularly
impressive, given it accompanies our
industry-leading quality and customer
service standards.
As a result of this excellent operating
performance, we were able to increase profit
before tax by 20.7% and we ended the year
with a net cash balance of £592.0m.
The Group’s fast asset turn model, supported
by a relatively short consented land bank, the
use of deferred payment terms, high levels
of standard products and the ability to sell
through both Barratt and David Wilson Homes
on larger sites, ensures a focus on driving
return on capital employed. We made further
progress in the year, driving return on capital
employed up to 27.1%, an increase of 3.2
percentage points.
Investing in land
The land market remained attractive
throughout FY16 in terms of land availability
at acceptable prices and we have secured
excellent development opportunities that meet
or exceed our minimum hurdle rates of 20%
gross margin and 25% site ROCE. In the year
we approved £1,095.6m of operational land
for purchase, which we expect to equate to
24,387 plots. Our long term targets for land
are to hold 3.5 years of owned and consented
land and a further 1.0 year of controlled land.
This strong performance helped us to end the
year with 3.4 years of owned and consented
land and a further 1.1 year of controlled land:
4.5 years in total (2015: 4.5 years).
During the year we have also made good
progress in securing a longer term pipeline
of land through strategic options.
8
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Housing policy
The UK Government continues to recognise
the need to see more homes built across
the country as evidenced by its policies to
improve land availability, planning and support
for buyers.
By increasing the number of homes that we
are building, in a disciplined way, we are not
only playing our part in reducing the housing
shortage but are also generating significant
economic activity, creating jobs and enhancing
communities. During the year we estimate that
we supported over 55,000 jobs either directly,
indirectly or induced.
Delivering returns for our shareholders
Our dividend plan was announced in
September 2014 and aimed to deliver
attractive future cash returns through an
ordinary dividend of one-third of earnings and
a special dividend, over three years, of £400m
in aggregate.
As a result, the Board is pleased to propose
a final dividend of 12.3 pence per share
(2015: 10.3 pence per share). Under our Capital
Return Plan, special dividends are proposed in
addition to ordinary dividends with the second
special dividend of £125.0m to be paid in
November 2016, which equates to 12.4 pence
per share.
The total proposed capital return for the year
is therefore 30.7 pence per share (2015: 25.1
pence per share).
Our employees
The outstanding progress made during the
year would not have been possible without the
capability and dedication of our employees
whom I would like to thank on behalf of the
Board for their contribution.
Capital Return PlanA
Paid to dateB
Proposed payment
November 2016
Year to November 2017
Total proposed payment
Total Capital Return Plan
Ordinary
dividend
£m
281
123D
159C,D
282C,D
563
Special dividend
£m
Total Capital
Return
£m
100
125
175
300
400
381
248
334
582
963
Total pence
per share
38.2p
24.7pD
33.2pD
57.9pD
96.1pD
A All ordinary and special dividends are subject to shareholder approval. The second special dividend will be subject to shareholder approval at the
Annual General Meeting in November 2016 and subsequent special dividends will be subject to shareholder approval.
B Comprises FY14 final dividend of 7.1 pence per share (£70m), FY15 interim dividend of 4.8 pence per share (£48m), FY15 final dividend of 10.3
pence per share (£103m), FY15 special dividend of 10.0 pence per share (£100m) and FY16 interim dividend of 6.0 pence per share (£60m).
C Based on Reuters consensus estimates of earnings per share of 47.5 pence for FY17 as at 2 September 2016 and applying a three times dividend
cover in line with previously announced policy.
D Based upon 30 June 2016 share capital of 1,003,607,066 shares for proposed payments.
We are delighted that our site managers were
awarded 79 NHBC Pride in the Job Awards.
This is the 12th year in succession that we have
secured more Pride in the Job Awards than
any other housebuilder.
We are also very pleased that we have
maintained the Home Builders Federation
maximum five star rating for the seventh
consecutive year, indicating that 90% of our
homeowners would recommend us to a friend.
This is a fantastic achievement and reflects
the strength of our sales and customer
service teams.
The Board appointed Jock Lennox as a Non-
Executive Director of the Company with effect
from 1 July 2016. Jock also joined the Audit,
Nomination and Remuneration Committees
with effect from the same date and will
succeed Mark Rolfe as Chairman of the
Audit Committee from the conclusion of the
2016 AGM.
The Board is confident that the Executive
Directors – David Thomas, Steven Boyes and
Neil Cooper – supported by an experienced
and talented Senior Management team, will
continue to lead the Group effectively.
John Allan
Chairman
6 September 2016
The Board
During the year there have been a number of
significant changes to the Board.
David Thomas, who joined us as Group
Finance Director in 2009, succeeded Mark
Clare as Chief Executive on 1 July 2015.
Neil Cooper joined the Board on 23 November
2015 as Chief Financial Officer. Neil was
previously Group Finance Director of William
Hill PLC and was Group Finance Director of
Bovis Homes Group PLC from 2007 until 2010.
After eight years’ distinguished service to the
Board, Mark Rolfe will step down from his
position as a Non-Executive Director of the
Company with effect from the conclusion of
the forthcoming AGM to be held in November
2016. Mark will also stand down as the Senior
Independent Director and Chairman of the
Audit Committee on the same date.
Richard Akers will replace Mark Rolfe
as the Senior Independent Director with
effect from the conclusion of the Group’s
AGM in November 2016. Richard has been
a Non-Executive Director of the Group
since 2012 and is also Chairman of the
Remuneration Committee.
Barratt Developments PLC – Annual Report and Accounts 2016
9
Strategic ReportGovernanceFinancial StatementsOther Information
Key aspects of our market
The market for new homes
was generally strong in FY16,
with the housing market as
a whole being characterised
by continued demand
and undersupply.
144,290
English housing starts 20161
(2015: 140,940)
Source: DCLG
£216,823
Just outside the Peak
District National Park,
Octavia Gardens offers
you rural living in an
established community.
UK average house prices 20162
(2015: £199,447)
Source: Halifax
The UK economy and housing market
The UK economy continued to grow in
the 12 months to 30 June 2016, with most
economic indicators showing improvements
on the prior year.
The UK housing market has continued to
show strength with UK residential housing
transactions for the year to 30 June 2016
increasing by 8% on the prior year to
1.3 million transactions (source: HM Revenue
& Customs (‘HMRC’)3).
The London market saw growth in transaction
volumes based on an extrapolation of data
from the Land Registry, although transactions
at the higher end have seen a number of
negative sentiment impacts, including stamp-
duty hikes.
The market for new homes remains strong
across Britain with the housing market as
a whole being characterised by continued
demand and undersupply.
Housing supply
The supply of new housing has increased
slightly, with 144,290 new housing starts in the
year to 30 June 2016 in England, an increase of
2% on the prior year (source: Department for
Communities and Local Government (‘DCLG’)),
although housing completions were up 6% on
the previous year to 139,030 (2015: 131,510)1.
Whilst this represents a positive move, new
housing starts remain over 35,000 lower
than the pre-downturn peak and significantly
lower than that required to meet demand.
DCLG projects that 210,000 homes need to be
built in England, per year, through the period
2014 – 2039.
10
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Obtaining planning permission continues to
be a constraint for new build developments.
A number of amendments have been made
to the planning system in recent years, with
an increase of 9% in planning approvals to
292,089 in the year to March 2016 across
Great Britain (source: HBF4).
Help to Buy and mortgage availability
Help to Buy (Equity Loan) continues to be an
important enabler for new housebuilding,
supporting 81,014 purchases in England from
the scheme’s inception in April 2013 until
March 2016, with 81% of purchasers using
the scheme being first time buyers (source:
DCLG). However, the scheme has had a limited
impact on the wider housing market in the
UK as it represented only 2.6%5 of HMRC
residential housing transactions in England
for the same period.
Average quoted household interest rates
remain at affordable levels and mortgage
transaction volumes increased over the last
year. The number of mortgage approvals
for house purchases rose by 11% to 836,082
approvals in the year to 30 June 2016 and
the value of mortgage approvals for house
purchases rose by 17% to £146,126m (source:
Bank of England6).
House prices
The shortfall in the supply of housing stock and
a continued availability of mortgage finance
at low interest rates meant that house prices
rose in the year. The ONS7 house price index
rose by an average of 8.7% per annum across
the UK in the year to June 2016. The increase
was particularly marked in the East, London
and the South East of England, where the ONS
house price index rose by 14.3%, 12.6% and
12.3% respectively in the year to June 2016.
The lowest annual growth was in the North
East, where prices increased by 1.5% over the
year. According to the Halifax, the UK average
house price in June 2016 was £216,823, which
was £17,376 higher than at June 2015.
Housing outlook
The underlying demand for new housing is
expected to remain strong as supply is unlikely
to meet demand in the medium term. We are
committed to do our part to help address the
existing undersupply in the market.
The Government is committed to increasing
the supply of new homes, we have greater
clarity on housing policy, and in particular
believe the extension of the Help to Buy (Equity
Loan) scheme through to 2021 in England will
support an increase in new housing supply.
Following the EU referendum, we are mindful
that the immediate outlook for the UK
economy is less clear. Risks lie around the
short term impact on buyer sentiment and
any longer term negative impact on the wider
economy. Offsetting this we have seen positive
changes in mortgage interest rates following
the vote. In the round, it is too early to say
what the impact of the uncertainty facing our
industry will be.
Duddingston Gardens, a
development of a two, three
and four bedroom homes and
stylish apartments, just a few
miles south east of Edinburgh
city centre.
1 DCLG House Building Release June Quarter 2016, England, non-seasonally adjusted.
The DCLG published revised figures for the year ending 30 June 2015 and therefore the prior
year comparative has been restated.
2 Halifax House Price Index June 2016. Halifax’s standardised average price is calculated using
its HPI mix adjusted methodology and therefore the prior year comparative has been adjusted.
3 HMRC UK Property Transaction Statistics June 2016.
4 HBF New Housing Pipeline Q1 2016 Report.
5 DCLG Help to Buy (Equity Loan) purchases divided by HMRC residential transactions
in England for the 36 months ending 31 March 2016.
6 Bank of England Approvals for lending secured on dwellings (Table A5.4, not
seasonally adjusted).
7 Office of National Statistics ('ONS') House Price Index June 2016.
Barratt Developments PLC – Annual Report and Accounts 2016
11
Strategic ReportGovernanceFinancial StatementsOther Information Chief Executive’s statement
Improving the efficiency of our
operations and controlling costs
continues to be a high priority
for the Group.
David Thomas
Chief Executive
£682.3m
Profit before tax
(2015: £565.5m)
Our results
The Group traded successfully throughout the financial year, delivering a strong
performance. We made a record profit before tax of £682.3m, up 20.7% on the
prior year (2015: £565.5m), and our highest ROCE in ten years at 27.1% (2015: 23.9%).
We have also significantly strengthened our Balance Sheet, ending the year with
net cash of £592.0m (2015: £186.5m) and with net tangible assets¹ of £3,118m
(2015: £2,819m).
£m unless otherwise stated
Housebuilding
Commercial
Total completions including JV’s (plots)
27.1%
Revenue
Gross margin (%)
Profit from operations
Operating margin (%)
Return on capital employed
(2015: 23.9%)
Share of post-tax profit/(loss) from joint ventures and associates
1 Group net assets less other intangible assets and goodwill.
17,319
4,153.3
19.1%
662.4
15.9%
72.4
–
81.9
10.3%
6.0
7.3%
(0.3)
Total
17,319
4,235.2
18.9%
668.4
15.8%
72.1
Our businesses
Our improved financial results have been
driven by a strong and disciplined operational
performance in both our housebuilding
and commercial developments businesses.
Housebuilding
Housebuilding results
We saw good consumer demand across
our regions throughout our financial year,
with some slowdown in the higher value
London market. Throughout the year, the
mortgage market remained positive, with
increased competition amongst lenders
and new market entrants resulting in good
availability of attractive mortgage finance for
our customers.
The sales rate in the year was 0.69 (2015: 0.64)
net private reservations per active outlet per
week, with a sales rate in the second half of
0.72 (2015: 0.70) net private reservations per
active outlet per week. During the year, we
operated from an average of 365 active outlets
(2015: 380).
In London, we have seen strong demand at
price points up to £600,000, reflecting the
benefit of the increase in the Help to Buy
(Equity Loan) qualifying value limit to 40% in
London. Above this price point, sales rates
have slowed.
We delivered our highest completion volumes
for eight years, being 17,319 units including
JV’s (2015: 16,447). Private completions
increased by 3.5% to 13,198 (2015: 12,746),
affordable completions were 2,707
(2015: 2,853), and JV completions in which the
Group had an interest were 1,414 (2015: 848).
We continue to increase the proportion of
completions that are on more recently acquired
higher margin land and these accounted for
86% (2015: 76%) of the total in the year.
12
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Our total average selling price (‘ASP’)
increased by 10.5% to £259,700
(2015: £235,000) in the financial year with
our private average selling price increasing
by 10.4% to £289,800 (2015: £262,500).
The year on year increase predominately
reflects mix changes, with the average size
of total completions rising by 4.6% from
1,013 to 1,060 sq ft and with the selling price
per square foot benefiting from locational
improvement and underlying house price
inflation. Affordable average selling price
increased by 0.8% to £113,200 (2015: £112,300)
reflecting changes in mix, with affordable
completions representing 17% (2015: 18%)
of total completions.
Our JV’s have performed well and our
share of profits from JV’s in the year for the
housebuilding business increased to £72.2m
(2015: £45.6m). As at 30 June 2016 we were
selling from 11 (2015: 16) JV outlets. We expect
our share of profits from JV's to be around
£45m in FY17.
Housing policy
The UK Government recognises the need for
more new homes to be built, given ongoing
levels of household formation and historical
undersupply, as evidenced by its policies to
improve land availability, planning and support
for buyers. In this regard, we noted in July this
year the publication of the most recent DCLG
publication updating household formation
rate projections for England: now estimated at
210,000 per year through the period 2014-2039.
We were also pleased to see the extension
of the Help to Buy (Equity Loan) programme
in England through to 2021, as well as the
increase in February 2016 of the Government’s
equity loan to 40% in London. Help to Buy
(Equity Loan) provides support on house
purchases up to £600,000 in England with
equivalent support at lower house values in
Scotland and Wales. Our customers, especially
first time buyers, have found this a very
attractive proposition with 32% (2015: 31%)
of our total completions using the scheme
during the year. In FY16, 95% of the private
homes (including JV’s) that we completed
had a selling price below £600,000. In FY17
we expect this to be around 93%, reflecting
our forecast London mix.
Increasing our housing supply
With housing demand remaining strong, we
have continued to invest, in a disciplined way,
to increase housing production, with over
£4.8bn approved for the purchase of over
93,400 plots of land over the last five years.
There remains a long term housing shortage
of all tenures that can only be addressed
through additional supply; we are committed
to playing a leading role in addressing this
issue without compromising our operational
or financial strength.
Over the last five years we have built more
than 75,000 homes (including JV’s) of which
over 13,600 were affordable homes (including
JV’s) sold to registered providers and we have
invested in our employees, including in FY16
268 new apprentices, trainees, graduates and
undergraduates to further expand our skilled
workforce, enabling further delivery of supply.
The key dimensions underpinning
delivery of our strategy
In addition to the generally favourable market
conditions during the year, the increase in our
housebuilding profitability has benefited from
our successful land investment strategy and
from improvements in operating margin.
The showhomes at Silkwood
Gate, Wakefield which is a
development of three, four
and five bedroom homes.
Barratt Developments PLC – Annual Report and Accounts 2016
13
Strategic ReportGovernanceFinancial StatementsOther Information Chief Executive’s statement continued
Executive Committee
Regional Managing Directors
In addition to David Thomas and Neil Cooper,
the Executive Committee consists of:
The Group operates through six geographic housebuilding regions and a commercial
division, each of which has a Managing Director as follows:
1 Steven Boyes
3 Jeremy Hipkiss
5 John Reed
7 Richard Brooke
8 Chris Burton
10 Alastair Baird
Chief Operating Officer
and Deputy Chief Executive
See page 46.
2 Rob Tansey
Group HR Director
Rob has responsibility for the
Group’s human resources
strategy, including recruitment,
remuneration and benefits, talent
and performance management.
Career and Experience
Rob joined the Group on 1 August
2012 from Dairy Crest Plc where he
was Group HR Director for six years.
Before joining Dairy Crest, Rob was
HR Director at Travis Perkins Plc
and previously held senior HR roles
at Celesio AG and Wickes.
Group Sales
and Marketing Director
Jeremy is responsible for the
Group’s overall Sales, Marketing
& Customer Experience strategy
and delivery.
Career and Experience
Jeremy joined the Group in 2008 and
has wide experience in Marketing
and Retail Operations. Jeremy held
a similar role at the Spirit Group.
Prior to that, Jeremy worked for
Allied Domecq and Marstons
having graduated in Economics
at Leeds University.
4 Tina Bains
Company Secretary
See page 47.
Regional Managing Director,
Northern
John is responsible for the Group's
operations in the Northern Region
which consists of six divisions.
Career and Experience
John joined the Group in 1989.
Formerly Managing Director of
Barratt York he was appointed to his
current role in January 2006.
6 Bernard Rooney
Regional Managing Director,
Central
Bernard is responsible for the
Group’s operations in the Central
Region which consists of five
divisions. In addition he heads
up Barratt Partnerships which
is responsible for identifying
and securing public land and
partnering opportunities.
Career and Experience
Bernard joined the Group in 1981.
Formerly Managing Director of
Barratt Newcastle, he was appointed
to his current position in July 2010.
Regional Managing Director, East
Richard is responsible for the
Group’s operations in the East
Region which consists of four
divisions. He is also responsible
for the Group's procurement and
commercial functions.
Career and Experience
Richard joined the Group in
2007 following the acquisition of
Wilson Bowden plc, where he was
Operations Director and previously
Finance Director for David Wilson
Homes. He was appointed to his
current position in July 2008.
Regional Managing Director, West
Chris is responsible for the Group's
operations in the West region which
consists of four divisions.
Career and Experience
Chris joined the Group in 1985.
Formerly Managing Director for the
Barratt Yorkshire West Division, he
was appointed to his current role in
July 2012.
9 Gary Ennis
Regional Managing Director,
Southern
Gary is responsible for the Group's
operations in the Southern region
which consists of five divisions.
Career and Experience
Gary joined the Group in 1995.
Formerly Managing Director of
Barratt North London he was
appointed to his current role in
January 2006.
Regional Managing Director,
London
Alastair is responsible for high-
value complex residential and
mixed-use developments across
the capital including three divisions.
Career and Experience
Alastair joined the Group in 1987
as an Engineer. Formerly Managing
Director for Barratt East & West
London divisions he was appointed
to his current role in 2010.
11 Nick Richardson
Managing Director,
Wilson Bowden Developments
Nick is responsible for the
commercial business, Wilson
Bowden Developments.
Career and Experience
Nick joined Wilson Bowden in 1991
and was appointed to his current
role in 1999. Nick joined the Group
in 2007 following the acquisition
of Wilson Bowden plc. Nick is
a Chartered Surveyor.
3
11
10
4
1
6
8
2
5
7
9
14
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information £289,800
Private ASP
(2015: £262,500)
£1,096m
Approved land purchases
(2015: £957m)
Commercial developments
Greater occupier confidence in the second
half of calendar 2015, particularly from within
the logistics sector, encouraged institutional
funding back into the market enabling us
to enter into agreements to commit to over
1 million sq. ft. of speculative forward funded
logistics buildings.
During the year we successfully secured
a planning permission for a Regional
Distribution Centre on a parcel of strategic
land that we subsequently sold to a
supermarket group. We also completed the
final phase of our retail and leisure scheme
at Hinckley. This final phase is 80% let and
further transactions are in legals.
As we move forward we will continue to
carefully manage our risk profile by seeking
to secure forward commitments; accordingly
our activity levels are very much determined
by securing occupiers up front, which in turn
is governed to a large extent by sentiment and
occupier confidence.
Commercial development revenue was £81.9m
(2015: £57.2m) with an operating profit of
£6.0m (2015: £6.1m).
Land and planning
A key enabler of the growth of our
housebuilding business in recent years has
been our land investment strategy, which has
boosted absolute profit and led to increased
completion volumes.
The land market remained attractive
throughout the financial year and we
secured excellent opportunities that meet
or exceed our minimum hurdle rates of
20% gross margin and 25% site ROCE¹.
In the period, we approved the purchase of
£1,095.6m (2015: £957.0m) of land, equating
to 130 sites (2015: 114 sites) and 24,387 plots
(2015: 16,956 plots).
We continue, under normal market conditions,
to target a regionally balanced land portfolio
with a supply of owned land of c. 3.5 years
and a further c. 1.0 year of controlled land.
Our target for a shorter than sector average
land bank reflects our focus on ROCE and a
rapid asset turn. At 30 June 2016 we achieved
this target with a 4.5 years land supply
(excluding JV’s) comprising 3.4 years owned
land and 1.1 years controlled land, with the
owned land bank including land with both
outline and detailed planning consents.
Following our success with planning over the
past 12 months we are very well positioned,
with 99.7% of expected FY17 completions
(2015: 100% of FY16 completions) having
outline or full planning consent.
Improving efficiency and reducing costs
Improving the efficiency of our operations
and controlling costs continues to be
a high priority for the Group, as it will
further enhance margin. Efficiency can be
improved through increasing throughput,
as we have done in the year, but we are also
focused on improving efficiency through
business simplification including further
standardisation of our layouts and product
range and through driving process efficiency
across key aspects of our business, with wide-
ranging reviews underway, for example in the
areas of commercial, construction and sales
and marketing.
We have a robust and carefully managed
supply chain with 90% of the house build
materials sourced by our centralised
procurement function denominated in Sterling.
We have effectively sourced the raw materials
required to underpin our controlled volume
growth and the cost of c. 75% of our centrally
procured materials is now fixed until the end
of FY17.
Whilst we have seen an increase in the supply
of skilled sub-contractors over the past year,
there remains an industry shortage in the UK,
with increases in labour costs remaining the
largest driver of overall build cost inflation.
We are currently well placed with the
necessary labour to meet our operational and
quality requirements. We are also seeking
to increase efficiency through the use of
timber frame on over 1,300 plots during FY17
and through the use of alternative offsite
manufacturing options.
We expect that overall build cost inflation
for FY17 will be c. 2-3%.
1 Site 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, work in
progress and equity share.
Barratt Developments PLC – Annual Report and Accounts 2016
15
Strategic ReportGovernanceFinancial StatementsOther Information Aspect is a new development
in Anlaby, East Yorkshire, with
a fabulous selection of luxury
3, 4 and 5 bedroom homes in
a highly desirable village.
Chief Executive’s statement continued
Going forward our commercial division
will continue to work closely with our
housebuilding business to develop mixed-
use schemes, and will seek to develop
independent commercial schemes where
they can be forward funded by third parties
prior to commencement.
Our strategic objectives
Our strategic objectives remain clear –
maintain disciplined growth, improve our
key financial metrics and continue to deliver
attractive cash returns.
Our key financial metrics
Our gross margin was broadly flat at 18.9%
(2015: 19.0%) with an improvement in margin
arising from the reduction in the mix of legacy
assets, offset by adverse business mix and
other net impacts. Operating margin grew
by 0.5 ppts, from 15.3% to 15.8%, reflecting
improved overhead leverage levels and an
absolute fall in net administrative expenses.
We have made further good progress against
our ROCE objective in the year with ROCE
increasing by 3.2 ppts to 27.1% (2015: 23.9%).
This is benefiting from the absolute reduction
in legacy assets: the disposal of £85.4m of
loans arising from equity share programmes
early in our second half for £82.9m of cash has
contributed. We have also been successful
in driving business growth levels ahead of
growth in working capital levels, reflecting our
effective balance sheet discipline. It remains
a core part of our strategy to drive ROCE
performance further, in line with our fast asset
turn model.
We remain committed to delivering our FY17
targets of at least 20% gross margin and at
least 25% ROCE.
Maintaining an appropriate
capital structure
As at 30 June 2016 the Group had a net cash
balance of £592.0m (2015: £186.5m), reflecting
a strong financial year. This was ahead of
expectations, partly driven by our completion
volumes and the timing of land payments.
We also benefited from timings of other
working capital payments.
We seek to defer payment for new land where
possible to drive a higher ROCE, and land
creditors as at 30 June 2016 were 38% of the
owned land bank (30 June 2015: 35%).
The Group continues to maintain a balanced
capital structure with land and long term
work in progress funded by shareholders’
funds and land creditors. Net tangible assets
were £3,118m (£3.11 per share) of which land
net of land creditors and work in progress
totalled £3,180m (£3.17 per share).
We continue to secure attractive deferred
payment terms on land and expect land
creditors as a proportion of the owned land
bank to be around one-third at 30 June 2017,
in line with our operating framework.
Dividend
Our strong financial performance supports
the Group’s Capital Return Plan and dividend
policy. We are delighted to propose a final
dividend of 12.3 pence per share (2015: 10.3
pence per share) resulting in a total ordinary
dividend for the year up 21% to 18.3 pence
per share (2015: 15.1 pence per share) and
the second of our special dividends totalling
£125m, equivalent to 12.4 pence per share,
payable in November 2016. This reflects
our ordinary dividend policy of the dividend
being covered three times by earnings,
supplemented by the special dividends to
November 2017 totalling £400m.
Health and safety
We were deeply saddened that two employees
of our sub-contractors lost their lives in
separate incidents on two of our sites during
the year. Both of these incidents have been
thoroughly investigated by our internal health
and safety (SHE) team. We are fully co-operating
with the Health and Safety Executive during
their ongoing investigations into each of
the incidents.
Increased activity levels across the industry in
terms of site openings and production volumes
combined with shortages of skilled staff has
contributed to an increased risk of accidents
on sites. We remain fully committed to the
highest standards of health and safety upon
our sites. In the year, our reportable incident
rate has increased slightly with 385 (2015: 381)
reportable incidents per 100,000 employees.
16
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information We believe that a strongly performing business benefits from a focus on its wider priorities which for us are: Customer First, Great Places, Leading Construction and Investing in our People.
Each of these priorities has a work plan to drive improvements across the business and they are supported by a set of principles and financial discipline which underpins all of our operations.
Our priorities
Customer first
Great places
Leading construction
Investing in our people
A key focus of our business continues to be
building relationships with landowners to
ensure that we can acquire the right land
and then create outstanding places to live.
Our objective is to be the partner of choice for
landowners by demonstrating our ability to
achieve planning permission and create value.
We continue to be focused on a ‘right
first time’ approach as the most efficient
way of operating across all aspects of
our building processes with a continuous
focus on improving build quality which
will reduce remedial costs and improve
customer satisfaction.
During the period we made significant
progress in terms of securing the right
operational land and increased investment
in longer term strategic sites.
We are implementing a number of key
initiatives in terms of increasing construction
efficiency, for example we have built 988
timber frame homes in FY16.
We continue to focus upon design and all of our
developments are reviewed against our ‘Great
Places’ design standard at the pre-application
stage. ‘Great Places’ enables us to meet
Building For Life 12, the industry standard for
the design of new housing developments.
Our site managers continue to lead the
industry and in 2016 we won 79 NHBC
Pride in the Job Awards. This was the 12th
year in succession that our site managers
have won more of these awards than any
other housebuilder.
The building and construction industry
continues to face a shortage of skilled workers
and attracting and retaining the best people is
an important priority for the business. We aim
to have a diverse workforce that reflects the
communities in which we operate, delivering
excellence for our customers and business
by drawing on a broad range of talents, skills
and experience.
We have continued with our graduate and
apprentice programmes, with 268 employees
joining us on these programmes in this period.
We also continue to support the wider industry
focus on addressing the skills shortage.
We place customers at the heart of our
business by building outstanding homes
and anticipating the changing needs of
home buyers.
We are the only major national housebuilder
to achieve the HBF 5 Star Customer
Satisfaction rating for seven consecutive
years, with over 90% of customers being
prepared to recommend us to a friend.
We continue to improve the quality and
efficiency of the way in which we deal with
customers through the sales process.
During the period we invested in our customer
service systems to speed up and improve the
efficiency of our service.
We worked with suppliers, customers and
industry experts to produce the ‘Future Home
Report’ to inform design direction in terms
of customer trends and preferences. As well
as carefully defining customer segments and
their design preferences, our project with
The Architects’ Journal to select new house
design features to meet these requirements
concluded in the year.
Barratt Developments PLC – Annual Report and Accounts 2016
17
Strategic ReportGovernanceFinancial StatementsOther Information The sales performance of the
group has been positive, with
0.75 net private reservations
per active outlet per average
week, as compared to 0.71 in the
comparable period.
Chief Executive’s statement continued
Current trading
The sales performance of the Group has been positive, with average weekly net private reservations
since 1 July 2016 of 267 (FY16: 265), resulting in net private reservations per active outlet per average
week of 0.75 (FY16: 0.71). Regionally, trading conditions in the North and Midlands have been stronger
than those seen in the South.
Our total forward sales (including JV’s) as at 4 September 2016 were up 4.1% on the strong prior
year figures at a value of £2,416.5m (6 September 2015: £2,321.9m), equating to 11,364 plots
(6 September 2015: 10,755 plots).
Forward sales
4 September 2016
6 September 2015
Variance
Private
Affordable
Sub total
JV
Total
£m
1,545.9
707.4
2,253.3
163.2
2,416.5
Plots
4,723
5,957
10,680
684
11,364
£m
1,332.3
512.2
1,844.5
477.4
2,321.9
Plots
4,788
4,487
9,275
1,480
10,755
%
16.0
38.1
22.2
(65.8)
4.1
We expect FY17 wholly owned completions to grow modestly versus the comparable period, with
around 700 completions delivered through our JV portfolio.
Outlook
We have started the new financial year in a good position, with £592.0m year end net cash, a healthy
forward order position and an experienced management team in place. We have industry leading
quality and customer service, and talented employees. There remains an undersupply of new
homes, strong government support including Help to Buy (Equity Loan), and a mortgage market
willing to lend. As a result, we remain confident in the underlying fundamentals of both the
housing sector and our business.
Our sales trends since the start of the new financial year have been encouraging, and underpin
an increasingly ‘business-as-usual’ stance whilst we continue to monitor consumer, economic
and other lead indicators closely following the EU referendum vote.
I am proud to lead our first class team and we are all determined to build on this year’s
outstanding operational and financial performance in the future, as well as delivering on our
targets for key financial metrics and our capital return plans in FY17.
David Thomas
Chief Executive
6 September 2016
18
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Strategic Priorities
Customer
first
Great
places
Leading
construction
Investing in
our people
See page 20
See page 24
See page 28
See page 32
Keeping
people safe
Being a trusted
partner
Our principles
Building strong
community
relationships
Safeguarding the
environment
Ensuring the
financial health
of our business
See page 36
See page 37
See page 38
See page 39
See page 40
Delivering sustainable
shareholder value
Barratt Developments PLC – Annual Report and Accounts 2016
19
Strategic ReportGovernanceFinancial StatementsOther Information Strategic Report
Governance
Financial Statements
Other Information
Building excellence by putting
Customers first
Jill Timmins
2015 Barratt Sales Adviser of the Year
20
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic Report
Governance
Financial Statements
Other Information
Strategic priority
Our priority is building great homes and providing an
outstanding customer experience. We seek to anticipate
our customers’ evolving needs by continuously improving
the homes and places we build.
Key highlights
The challenge
Only national housebuilder
to be awarded HBF 5 Star status
for seven consecutive years
Continued investment
in customer service
Mortgage market remains good
KPI
HBF 5 Star Homebuilder
Britain needs more homes to address its
housing shortage, with continued demand
in the market and continued undersupply
of new homes. Home buyers are supported
by a good mortgage market in terms of
both availability and rates, as well as the
Government’s Help to Buy (Equity Loan)
scheme in England, Scotland and Wales.
The industry is seeking to increase
volumes, maintain customer satisfaction
and build quality and at the same time
address the constraint created
by a shortage of skilled people.
Barratt Developments PLC – Annual Report and Accounts 2016
21
Priorities and principles in action
Customer first
Affordability of homes and accessibility
to home ownership
We build a wide range of product, from homes
for first time buyers to larger family homes.
Our private average selling price for the year
was £289,800 (2015: £262,500); £275,000
(2015: £246,800) outside of London.
During the year, the mortgage market
remained positive. Our customers have
access to mortgage finance that allows them
to buy with a 5% deposit through the Help
to Buy (Equity Loan) scheme and there is
also a range of higher loan to value products
which do not use the Help to Buy scheme
available. We continue to work with a broad
set of lenders through our approved brokers
to ensure that our customers have access
to independent advice and a wide range of
mortgage products.
We delivered 2,707 (2015: 2,853) affordable
homes built for registered providers, equating
to 17% (2015: 18%) of our total completions
(excluding JV’s) in the year. We have a team
which engages with housing association
partners at local, regional and national levels.
We place customers at the
heart of everything we do, with
their satisfaction being a key
performance indicator at all
levels of management.
2,707
We delivered 2,707 (2015: 2,853)
affordable homes built
for registered providers
Mr and Mrs Atkinson
purchased a three
bedroom home at Garnett
Wharfe, Otley.
22
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Customer satisfaction
We place customers at the heart of everything
we do, with their satisfaction being a key
performance indicator at all levels of
management. All of our team are responsible
for delivering customer satisfaction and
we operate a Customer Service Academy
comprising both classroom and online training
to ensure that our employees understand how
to deliver right first time, every time.
We are pleased that we have increased our
completions delivery, including JV’s, by 5.3%
during the year whilst retaining our HBF 5 Star
status for the seventh successive year, the only
national housebuilder to do so. We regularly
review the results from the NHBC customer
survey with the insights gained being used to
aid our decision making.
We continue to drive customer service,
investing in technology from developments to
our customer service systems and our onsite
systems to aid our quality control inspections.
Each home we build is repeatedly inspected
at key stages and, as a minimum, is approved
by the site manager, contracts manager and
sales staff before handover to our customers.
Management throughout the business are
responsible for customer service and monitor
customer satisfaction survey performance on
a weekly basis.
Increasing customer insight
To ensure that we continuously reflect our
customers’ needs we have worked with
suppliers, customers and industry experts
to produce the ‘Future Home Report’ to
inform design direction in terms of customer
trends and preferences. As well as carefully
defining customer segments and their design
preferences, our project with The Architects’
Journal to select new house design features
to meet these requirements concluded during
this financial year.
We are pleased that we have
increased our completions
delivery, including JV’s, by 5.3%
during the year whilst retaining
our HBF 5 Star status for the
seventh successive year, the only
national housebuilder to do so.
Mr and Mrs Patel purchased
a beautiful five bedroom
home at our prestigious David
Wilson Homes, Cane Hill Park
development using the
part-exchange scheme.
Barratt Developments PLC – Annual Report and Accounts 2016
23
Strategic ReportGovernanceFinancial StatementsOther Information Strategic Report
Governance
Financial Statements
Other Information
Building excellence by developing
Great places
Megan Brooks
Technical Manager
2015 Barratt Individual
Excellence Award Winner
24
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic Report
Governance
Financial Statements
Other Information
Strategic priority
Our priority is building long term relationships to secure
good value land where people aspire to live. We design
developments which look great, are a pleasure to live on,
and will enhance local communities for years to come.
Key highlights
Land market remained attractive
throughout FY16
Transformation of our land bank
to more recently acquired higher margin
land is well progressed
Detailed or outline planning permission on
99.7% of FY17 expected completions and
94.2% of FY18 expected completions
KPI
Owned and controlled land bank
4.5 years
(2015: 4.5 years)
Land approved for purchase (plots)
2012: 12,085
2013: 18,536
2014: 21,478
2015: 16,956
2016: 24,387
The challenge
The future of our business depends upon
securing the right land in the right place
that achieves our investment hurdle rates.
Barratt Developments PLC – Annual Report and Accounts 2016
25
Priorities and principles in action continued
Great places
Securing the best land
We continue to see high quality land
opportunities that at least meet our required
hurdle rates of a gross margin of 20% and
a site ROCE of 25%1.
Our success in buying land is based on the
extensive local knowledge of our divisional
land teams and strong local relationships
with land owners, combined with detailed
assessments of local market conditions.
We target locations based on the availability
of land, housing market conditions and the
likelihood of obtaining planning consent.
We continue, under normal market conditions,
to target a regionally balanced land portfolio
with a supply of owned land of c. 3.5 years
and a further c. 1.0 year of controlled land.
Our target is for a shorter than sector average
land bank reflecting our focus on ROCE
and a rapid asset turn. At 30 June 2016 we
achieved this target with a 4.5 year land
supply (excluding JV’s) comprising 3.4 years
owned land and 1.1 years controlled land,
with the owned land bank including land with
both outline and detailed planning consents.
Land approved for purchase
Total
Total (plots)
Year ended
30 June 2016
Year ended
30 June 2015
£1,095.6m
£957.0m
24,387
16,956
1 Site ROCE on land acquisition is calculated as site operating profit
(site trading profit less overheads less allocated administrative
overheads) divided by average investment in site land, work in
progress and equity share.
Designing great places is
fundamental to our business:
our customers want to live
in great places.
37.0%
ROCE on completed new sites
acquired since 2009
c. 11,700
Acres of strategic land
(2015: c. 11,100)
Mount Oswald, Durham
offers a premium collection
of 60 bespoke homes with
spectacular views of the
surrounding woodland and
open areas.
26
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Our land bank
The transformation of our land bank from
older, lower margin land to more recently
acquired higher margin land is well
progressed. As at 30 June 2016, 93% (30 June
2015: 90%) of our owned and controlled land
is higher margin, newer land. On the 232 sites
that we have acquired and completed since
2009 we have achieved an average site gross
margin of 20.9%, and an average site ROCE
of 37.0%, demonstrating sustained delivery
above our hurdle rates on this more recently
acquired land.
Whilst maintaining a first class operational
land bank, we remain focused on securing
a longer term land pipeline through the
acquisition of strategic land options. In the year
4,558 plots (2015: 5,239 plots) were transferred
from strategic land to our owned land bank
and 22% of our completions (2015: 17%) during
the year were on strategically sourced land.
We remain on track to deliver our target of
c. 25% of completions to be delivered from
strategic land.
We use land creditors to defer payments for
land acquisition where possible to drive a
higher ROCE and as at 30 June 2016, the land
creditor position totalled £1,086.8m (30 June
2015: £999.0m) representing 38% (30 June
2015: 35%) of the owned land bank. We are
targeting land creditors at around one-third
of the owned land bank for FY17.
Effective planning permission
Bringing land through the planning system
quickly and into production is important to
support our business objectives. We support
the work the Government is currently doing to
speed up the planning process, in particular
in relation to quicker resolution of planning
conditions which can hold up prompt progress.
A faster planning process will enable housing
supply to increase faster.
We have maintained good momentum in
achieving planning consents, and during the
year we secured planning on 20,249 plots
(2015: 17,092 plots). We now have full or outline
planning permission in place for 99.7% of our
expected completions in FY17 and 94.2% of
expected production in FY18.
Designing great places
Designing great places is fundamental to
our business: our customers want to live
in great places; the vendors of the land we
purchase want to work with developers who
leave behind a legacy of design quality; and
local people want developments that enhance
their communities.
We are focused upon ‘placemaking’
throughout our business and use our internal
‘Great Places’ design standards, assessing
every development against these at the pre-
application stage. Our ‘Great Places’ design
standards are aligned to the requirements of
Building for Life, and we run annual awards
to recognise our best developments. We also
review our development layouts to ensure they
achieve both design quality and efficient land
use, and have an internal urban design team
to provide specialist expertise.
Our land bank
Owned and unconditional land bank (plots)
Conditionally contracted land bank (plots)
Owned and controlled land bank (plots)
Number of years’ supply based upon completions in the financial year
JV’s owned and controlled land bank (plots)
Strategic land (acres)
Land bank carrying value
30 June 2016
30 June 2015
53,849
17,502
71,351
51,640
18,883
70,523
4.5 years
4.5 years
5,309
6,325
c. 11,700
c. 11,100
£2,880.2m
£2,826.1m
Located in the picturesque
village of Tettenhall is
Woodthorne, a beautiful
new development sitting
amongst mature trees
and wonderful green
open space.
Barratt Developments PLC – Annual Report and Accounts 2016
27
Strategic ReportGovernanceFinancial StatementsOther Information Strategic Report
Governance
Financial Statements
Other Information
Building excellence by
Leading construction
Mark Summersgill
2015 Barratt Site Manager of the Year
28
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic Report
Governance
Financial Statements
Other Information
Strategic priority
We deliver the highest quality homes by focusing on excellence across
all aspects of construction. We are embracing the best new methods
of on and offsite construction to increase build efficiency.
Key highlights
KPI
Focused on a ‘right first time’ approach
to drive operating efficiency
Long term relationships with
suppliers and sub-contractors
Considering and implementing
new construction methods
where appropriate
Total completions including
joint ventures (units)
+5.3%
Total completions including joint ventures (units)
2012: 12,857
2013: 13,663
2014: 14,838
2015: 16,447
2016: 17,319
The challenge
The housing shortage has increased
demand for the building of new homes,
which has resulted in pressures upon the
availability of materials and skilled labour
and sub-contractors.
Barratt Developments PLC – Annual Report and Accounts 2016
29
Priorities and principles in action continued
Leading construction
We put customer satisfaction
at the heart of our construction
processes with a focus upon
getting it right first time.
79
NHBC Pride in the Job Award
winners for 2016
David Wilson Homes East
Midlands’ 10 Pride in the Job
Award Winning Site Managers.
Delivering high quality homes
We put customer satisfaction at the heart of
our construction processes with a focus upon
getting it right first time, which also drives
operating efficiencies in the build process.
Our site managers continue to lead the
industry, winning 79 NHBC Pride in the Job
Awards. This is the 12th consecutive year that
we have won more of these awards than any
other housebuilder.
Partnering with our supply chain
We have a centralised procurement team
which has built long term relationships with
our suppliers. This ensures the consistency
of specification and technical performance of
the materials used in our homes. Long term
relationships have enabled us to ensure the
continuous availability of materials as demand
increased. We also use many local sub-
contractors in the construction of our homes,
who our divisions partner with at a local level
to ensure the availability of the skilled trades
that we require.
We engage in continuous communication with
our suppliers and hold regular performance
and business reviews, training days and an
annual supplier conference. We are a signatory
of the Prompt Payment Code.
We purchase substantial amounts of timber
and have implemented a sustainable
procurement and timber sourcing policy.
Since December 2013, all timber and
timber products that we purchase via group
agreements are FSC/PEFC certified and
originate from well managed forestry sources.
Further information is available in the
Sustainability Report for 2016.
30
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Kirk Raine, Webbs Meadow
Site Manager – Winner of
the NHBC Supreme Large
Housebuilder Pride in the
Job Award for 2015.
Innovating to improve efficiency
The majority of our homes are built with
traditional brick and block construction,
although we are increasing the use of timber
frame on some of our sites and have built
988 homes using this method during FY16.
We have also completed a successful small
scale trial of Light Gauge Steel Frames which
are lighter, safer and quicker to put together
than traditional construction methods.
In addition, as the parts are manufactured
offsite, the level of waste generation is
reduced. We will be undertaking a larger scale
trial of this technology in FY17.
Another offsite technology that we have
successfully trialled, in FY16, is the use of
prefabricated utility cupboards, with pre-
installed features such as boilers, storage
tanks and heating controls. These take 1-2
hours to install rather than a whole day,
enabling us to make better use of skilled
tradespeople and increase build speed.
We have engaged with our suppliers to
find, understand and consider innovative
products and services including foundation
systems, roofing and mechanical and
electrical solutions.
We are also researching smart technologies
and their use in future homes to improve
the ability of customers to save energy and
have undertaken divisional pilots of smart
thermostats, which give customers the ability
to remotely control their heating systems.
We will be extending their availability to
customers in FY17.
We are also researching smart
technologies and their use
in future homes to improve
the ability of customers to
save energy.
988
Timber frame homes built in FY16
Barratt Developments PLC – Annual Report and Accounts 2016
31
With over 200 metres of Thames
river frontage, Enderby Wharf
offers studios and one, two, three
and four-bedroom apartments
and penthouses, each with floor-
to-ceiling windows and private
outdoor space.
Strategic ReportGovernanceFinancial StatementsOther Information Strategic Report
Governance
Financial Statements
Other Information
Building excellence by
Investing in our people
Suzanne Flynn
Graduate and Future Talent Manager
2015 Barratt Individual Excellence
Award Winner
32
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic Report
Governance
Financial Statements
Other Information
Strategic priority
We aim to attract and retain the best people by
investing in their development and success. We seek to
create a great place to work, founded on an open and
honest culture that embraces diversity and inclusion.
Key highlights
KPI
Focus upon employee retention
Upper quartile employee engagement
Highly engaged workforce
Committed to providing an inclusive
working environment
77%
(2015: 78%)1
The challenge
The building and construction
industry continues to face a shortage
of skilled workers and attracting and
retaining the best people is a key priority
for our business.
1 Assessed against the UK all sectors comparator group by IBM Kenexa.
Barratt Developments PLC – Annual Report and Accounts 2016
33
Priorities and principles in action continued
Investing in our people
Attracting people to our industry
Together with other housebuilders we are
working with the HBF, the Construction
Industry Training Board and schools,
universities and the West Midlands University
Technical College ('UTC') upon targeted
projects to help address the industry-wide
skills shortage.
Employee retention
During the year employee turnover reduced by
2% to 17% (2015: 19%) reflecting our focus in
this area. However, there is significant demand
and many opportunities for skilled employees
elsewhere in the industry. We therefore
continue to focus upon developing talent within
our business, including succession planning,
to ensure that we have the necessary skills
within our business for continued operational
delivery as well as focusing on remuneration
and benefits to ensure retention measures are
in place and effective.
Developing talent
We are committed to the development of
our people in order to drive our success.
We offer both vocational and leadership
training programmes, as well as in-house
schemes promoting employee development,
engagement and recognition.
We continue to invest in and develop our
‘Future Talent’ strategy, recruiting graduates,
apprentices and paid interns into our business.
We have local Apprentice Champions who
oversee the apprenticeship experience from
attracting new trainees, to working with our
sub-contractors and aiding our apprentices’
development.
We continue to invest in and
develop our ‘Future Talent’
strategy, recruiting graduates,
apprentices and paid interns into
our business.
17%
Employee Turnover
(2015: 19%)
268
Number of graduate and apprentice
programme employees
Our South Wales Division
took on the Welsh 3 Peaks
challenge, raising £7,942
for their charity of the year.
34
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information The table opposite shows the number of
men and women employed, as at 30 June
2016, across our business split between PLC
Directors, Senior Managers and employees.
The diversity policy relating to the appointment
of PLC Directors is set out on page 65 of the
Annual Report and Accounts.
After a successful pilot last year, we have
started diversity and inclusion training across
our business, which we will continue to rollout
during FY17. Our 2015 graduate cohort have
also been promoting a campaign called ‘Built
by Both’ to encourage women into the industry
and have held a number of work experience
days for women studying at universities.
Human rights
We support the United Nations’ Universal
Declaration of Human Rights and have policies
and processes in place to ensure that we act
in accordance with our principles in relation
to areas such as anti-corruption, diversity,
whistleblowing and the requirements of the
Modern Slavery Act 2015.
The Barratt Academy continues to provide
structured, bespoke training to support
individual development across three
separate disciplines; apprentices, site
managers and technical/commercial roles.
Courses combine professional training
(onsite and in the classroom) with industry
recognised qualifications.
Engaging our people
As a business we believe that an engaged
workforce is critical to our success.
We conduct an annual employee engagement
survey in order to gain valuable insight into
how our people feel about working for us.
We are delighted that in our annual employee
engagement survey we achieved our upper
quartile target with an index of 77%, which is
5% above the UK employers’ norm of 72%.
We develop and implement action plans
following each survey to strengthen our
business and to continue our position of being
an employer of choice.
We recognise the outstanding contributions
of our people through quarterly awards for
sales staff, apprentices and site managers
as well as through individual and team
excellence awards.
Diversity and inclusion
We are committed to providing an inclusive
working environment where everyone
feels valued and respected. We aim to
have a diverse workforce that reflects the
communities in which we operate, delivering
excellence for our customers and business
by drawing on a diverse range of talents,
skills and experience.
Men and women employed
30 June 2016
30 June 2015
Men
Women
Total
Men
Women
Total
Number
% Number
% Number
Number
%
Number
%
Number
PLC Directors
Senior Managers
Employees
Total workforce
7
251
4,103
4,361
78
87
69
70
2
36
1,810
1,848
22
13
31
30
9
287
5,913
6,209
6
250
3,875
4,131
75
87
68
69
2
37
1,801
1,840
25
13
32
31
8
287
5,676
5,971
Jordan Brown
2015 Barratt Apprentice
of the Year.
Barratt Developments PLC – Annual Report and Accounts 2016
35
Strategic ReportGovernanceFinancial StatementsOther Information Sury Patel
Project Manager at
Barratt London and
SHE award winner.
Our principle
We are committed to achieving
the highest industry health and
safety standards. Health and
safety is a key principle for which
all of our people are responsible.
KPI
> Health and safety compliance rate 96%
(2015: 96%)1
> Reportable injury incidence rate
per 100,000 employees including
sub-contractors 385 (2015: 381)
Health and safety compliance rate (%)
2012: 96
2013: 97
2014: 96
2015: 96
2016: 96
Reportable injury rate per 100,000 employees
(including sub-contractors)
2012: 511
2013: 329
2014: 379
2015: 381
2016: 385
Key highlights
> Achieved target health and safety
compliance rate
> Positive external recognition for our
performance from NHBC and British
Safety Council
1 Key performance indicator used to assess performance
for annual incentive scheme.
36
Our principles
Keeping
people safe
The challenge and our response
Increased activity levels across the industry in
terms of site openings and production volumes
combined with shortages of skilled staff has
contributed to an increased risk of accidents
on sites. We seek to maintain stringent safety
standards and have a continuous focus on
health and safety. Getting the basics right,
good leadership, and commitment to health
and safety from all levels of management
is what delivers good health and safety
performance in our business.
Our Safety, Health and Environmental
management system (‘SHE’) is subject to
continuous review and improvement. All of our
trading divisions are certified to OHSAS 18001
(Occupational Health and Safety Management
Systems) and adhere to our SHE guidelines
with their ongoing compliance being verified
by a programme of internal and external
audits. During the year, we carried out 6,184
(2015: 6,269) monitoring visits and achieved an
average compliance rate of 96% (2015: 96%).
We also maintained our 5 Star rating from
the British Safety Council for the second year
in succession.
Our overall aim is to have an injury free
working environment, and whilst we believe
that all injuries are avoidable, our objective
for the year was to have an improvement in
our reportable Injury Incidence Rate (‘IIR’).
During the year, our IIR increased slightly to
385 (2015: 381) per 100,000 persons employed
(including sub-contractors). We have
continued to operate our 5 Steps to Safety
Campaign and during the year have reviewed
and restructured our health and safety training
strategy for employees at all levels within
our business, in order to continue to seek to
improve our performance.
Our site managers have again been successful
at the NHBC Health and Safety Awards,
achieving more awards than any other
housebuilder, with nine commendations
and five going on to receive the highly
commended status.
We were deeply saddened that two employees
of our sub-contractors lost their lives in
separate incidents on two of our sites during
the year. Both of these incidents have been
thoroughly investigated by our internal
health and safety (SHE) team. We are fully
co-operating with the Health and Safety
Executive during their ongoing investigations
into each of the incidents.
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Being a trusted
partner
Our principle
We build meaningful, long term
relationships that make us
the developer of choice for our
partners. We are innovating with
our supply chain to drive efficiency
and meet our customers’ needs.
Key highlights
> Continue to work with a variety of partners
to bring forward land for development
> Continue to invest in the relationship with
our suppliers and sub-contractors
The challenge and our response
Housebuilding is a long term business and
the development of sustained business
partnerships with landowners, suppliers and
sub-contractors, is critical to our success.
We continue to work with private landowners,
operators and agents to identify and bring
forward land for development. Divisional land
teams continue to work hard to try and
ensure we are regarded as the housebuilder
of choice by the local landowners and
agency community.
Our suppliers and sub-contractors are
critical to the delivery of our strategic
objectives and we invest in our relationships
with them. We hold a national supply chain
conference and regular review meetings
with our suppliers and seek to develop long
term business relationships. We also work
with our suppliers to help them to introduce
the new technologies that we need to meet
increasingly challenging building standards.
We also work with our sub-contractors to
help them to improve their environmental
and safety performance.
Georgina McLean
Group Procurement Manager – who
has taken the lead on the partnership
relationship building with the
Supply Chain Sustainability School,
supporting a diverse, capable supply
chain who can help us achieve our
sustainability goals.
Barratt Developments PLC – Annual Report and Accounts 2016
37
Strategic ReportGovernanceFinancial StatementsOther Information Our principles continued
Building strong
community relationships
Our principle
We engage fully with local
communities and customers
when creating new developments.
We seek to ensure that our work
creates a positive legacy that
helps local communities to thrive.
Key highlights
> Estimated that our activities support
over 55,000 jobs directly, indirectly
or induced in the economy
> Work closely with local authorities
The challenge and our response
Housebuilding has a direct impact upon local
communities. It is therefore important that
they are engaged in the creation process and
that our development creates a positive legacy.
As a Group we contribute social and economic
benefits to the communities in which we are
working, which are far-reaching and long-
lasting. By building more homes we are
generating substantial amounts of economic
activity and we estimate that during the
year we supported over 55,000 jobs either
directly, indirectly or induced. The homes we
build for new communities are high quality:
for example, the average size of new private
homes sold in the year by Barratt was 1,114 sq
ft, 12% larger than the average UK home¹.
We work closely with local planning
authorities to negotiate and deliver or fund
social infrastructure such as highways and
public transport improvements, new schools
and school places, sports facilities and
medical centres.
Engagement with local communities to seek
to address any impact that our developments
may have on the environment is also
important. By holding public consultations,
we invite stakeholders to talk to our specialist
planners and architects about their concerns
and aspirations for our developments.
We believe that a genuinely collaborative
approach will deliver more land and housing
and in this regard 62% (2015: 54%) of our active
developments have held a public consultation.
We continue to support and promote a wide
range of charitable giving and community
volunteering initiatives with each division
focusing on the charitable activities that best
reflect the needs of their local community
and the issues that impact upon their
employees. We have launched a Charity of
the Year Scheme, where we match every
pound raised for each division’s charity of the
year up to a set maximum. Our employees
have raised £603,776 for charity this year,
including £46,402 donated by Barratt through
the Charity of the Year Scheme. In addition we
have launched a volunteering policy whereby
every employee can take one day’s paid leave
to volunteer for a charity of their choice.
> Actively engage with local communities
1 Based on 2012/13 English Housing Survey.
St James C of E Primary School
pupils were given a tour of
Ribble Meadow, Clitheroe by
our mascot Barry Barratt.
Children from Allington Primary
School visit The Orchards
development to find out just what it
takes to design and plan a community
of new homes.
38
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
Safeguarding the
environment
The challenge and our response
As the demand for new housing increases,
we recognise the need for our business to
become more resource and energy efficient
and to produce less waste and generate
fewer carbon emissions. All of our divisions
are certified to ISO 14001, the environmental
management standard.
Designing out construction waste
During the year, we have been focusing upon
waste elimination and seeking to significantly
reduce both waste tonnage and costs, rather
than increasing recycling rates.
A key to waste reduction is designing waste out
and one area where we have been successful
is plasterboard. We engaged with other
members of our industry and worked with our
supplier to re-size plasterboard to meet the
requirements of modern builds. This means
that 100mm no longer needs to be cut off
every plasterboard section, which reduces
our costs, and is expected to cut our waste
by 1,300 tonnes each year.
We segregate waste for recycling as standard
across our sites and have achieved a recycling
rate of 95% (2015: 95%) for the year.
Our principle
We strive to minimise the
environmental impact of our
operations and supply chain,
which increases the energy
and resource efficiency of our
homes. We seek to enhance
habitats, biodiversity and local
environments across all
of our developments.
KPI
> 95% of construction waste segregated
onsite for recycling (2015: 95%)
> Carbon intensity reduced by 5.5%
to 2.23 tonnes CO2 per 1,000 sq. ft.
(2015: 2.36 tonnes)
Construction waste segregated onsite for recycling
2012: 96
2013: 95
2014: 94
2015: 95
2016: 95
Key highlights
> Focused on waste reduction through
reducing waste generation
Being energy efficient and reducing
emissions
Our direct and indirect operational greenhouse
gas emissions are shown in the table below.
This is based on the energy used in our
offices, on our live developments and for
business travel.
Greenhouse gas
emissions (Tonnes CO2e)
Year ended
30 June
2016
Year ended
30 June
2015
Year ended
30 June
2014
Scope 1 emissions
Scope 2 emissions
Scope 3 emissions
20,211
10,804
9,303
18,224
11,843
9,150
17,315
14,053
8,981
Total
40,318
39,217
40,349
Tonnes of emissions
per 1,000 sq. ft.
2.23
2.36
2.78
Our operational greenhouse gas emissions
have reduced to 2.23 (2015: 2.36) tonnes
of emissions per 1,000 sq. ft. this year.
We continue to drive awareness and seek
to improve energy and greenhouse gas
performance across our business.
Enhancing habitats, biodiversity and local
environments across our developments
During the year we built 48% (2015: 57%)
of our homes on brownfield sites. We have
continued our national partnership with the
RSPB, the UK’s largest nature conservation
charity. Our ‘Great Places’ guide includes
ecology and biodiversity to help ensure that
they are considered from project inception
through to completion. During the year within
our developments, 521 (2015: 634) hectares
of open space were created and 638,136
(2015: 554,819) trees or shrubs were planted
or retained.
DeVessey Village, a beautiful
development of three, four and
five bedroom homes, surrounded
by woodland and next door to
Sleaford Golf Course.
Barratt Developments PLC – Annual Report and Accounts 2016
39
Strategic ReportGovernanceFinancial StatementsOther Information Our principles continued
Ensuring the financial
health of our business
Our principle
Our people take individual
responsibility appropriate to
their level of seniority for driving
the financial management and
performance of the business. We
maintain financial discipline across
all aspects of our operations.
KPI
> Profit before tax £682.3m (2015: £565.5m)1
> Earnings per share 55.1 pence
(2015: 45.5 pence)2
> Return on capital employed 27.1%
(2015: 23.9%)2
> Total shareholder return2 for the three
years ended 30 June 2016 88.7% (three
years ended 30 June 2015: 362.9%)
> Year end net cash £592.0m
(2015: £186.5m)
> Land creditors as a percentage of owned
land bank 38% (2015: 35%)
Key highlights
> Continued to build profitability, increasing
operating margin by 0.5 ppts to 15.8%
> Achieved a 3.2 ppt increase in ROCE
to 27.1%
> On track for our targets of at least 20%
gross margin and at least 25% ROCE
> Maintained an appropriate
capital structure
1 Key performance indicator used to assess performance for
annual incentive scheme.
2 Key performance indicator used to assess performance for long
term incentive schemes.
Our performance
Our strategic objectives remain to maintain
disciplined growth, deliver on our targets for
key financial metrics and continue to deliver
attractive cash returns.
We have made significant progress on these
objectives during the year, achieving a 5.3%
growth in completion volumes, a 20.7% increase
in profit before tax, a 3.2 ppt improvement
in ROCE to 27.1% and are proposing a 22.3%
increase in total dividend per share, including
special dividend, to 30.7 pence per share for
the financial year.
Profit for the year
The improved performance in our
housebuilding business resulted in an
operating profit of £668.4m (2015: £576.8m)
at an operating margin of 15.8% (2015: 15.3%).
The finance charge for the year was £58.2m
(2015: £57.0m), consisting of a cash finance
charge of £24.1m (2015: £27.4m) and £34.1m
(2015: £29.6m) of non-cash charges: the main
component of the non-cash charge relates
to the unwind of the discount factor from
deferred term land creditors.
Profit before tax for the year was £682.3m
(2015: £565.5m), the highest profit the Group
has ever achieved. The increase of £116.8m
was driven by increased completion volumes,
growth in average selling prices, an increased
contribution from joint ventures and from an
increase in sundry income.
The tax charge for the year was £132.0m
(2015: £115.2m) at an effective tax rate of 19.3%
(2015: 20.4%). The rate of tax assessed for the
year is slightly below the standard effective
rate of corporation tax of 20.0% (2015: 20.75%)
mainly due to land remediation relief and the
tax rate reduction on deferred tax.
Profit after tax for the year was £550.3m
(2015: £450.3m), resulting in a basic earnings
per share of 55.1p (2015: 45.5p).
Return on capital employed
The Group’s fast asset turn model, supported by
a relatively short consented land bank, deferred
payment terms, high levels of standard product,
and the ability to sell through our David Wilson
Homes and Barratt brands on larger sites, is
focused on driving ROCE.
For FY16 ROCE increased by 3.2 ppts to 27.1%
(2015: 23.9%). This growth benefited from
reductions in legacy assets following the
disposal of £85.4m of our available for sale
assets in the second half of 2016 together
with rates of profit growth running ahead of
working capital growth rates.
Net cash and capital structure
We maintain an appropriate capital structure,
with land and long term work in progress
funded by shareholders’ funds and land
creditors, and with net cash at our year
end. During the year we generated £652.9m
(2015: £184.0m) of cash inflow from operating
activities and £12.7m of cash inflow from
investing activities. This was in part applied
to £268.0m of financing activities: of which
£263.2m related to dividends paid during the
year. Together with opening cash of £360.4m,
the Group’s net cash increase in the year
of £397.6m led to closing cash of £758.0m
and net cash at 30 June 2016 of £592.0m
(2015: £186.5m). At 30 June 2016 land creditors
were 38% (2015: 35%) of the owned land bank.
The factors behind the strong growth in
cash inflow from operating activities include
increased profit from operations, £82.9m of
cash inflow from the disposal of the bulk of
our available for sale assets and favourable
movements in trade and other payables.
As we make scheduled payments on agreed
new land and build work in progress to deliver
spring 2017 completions, we expect net cash
at 31 December 2016 to be in line with normal
seasonal trends (31 December 2015: £24.2m).
It remains our objective for FY17 to maintain an
appropriate capital structure with year end net
cash and land creditors at around one-third
of the owned land bank.
Capital Return Plan
The Board proposes to pay a final ordinary
dividend of 12.3 pence (2015: 10.3 pence)
per share for the financial year ended
30 June 2016, which subject to shareholder
approval, will be paid on 21 November 2016
to shareholders on the register at the close
of business on 28 October 2016. Together with
the interim ordinary dividend of 6.0 pence per
share, which was paid in the year, this gives
a total ordinary dividend for the year of 18.3
pence per share (2015: 15.1 pence per share).
The ordinary dividend was covered around
three times by basic earnings per share.
Under the special cash payment programme
the Board is proposing a payment of £125.0m
(12.4 pence per share), which subject to
shareholder approval, will be paid by way
of a special dividend on 21 November 2016
to shareholders on the register at the close
of business on 28 October 2016. The Board
anticipates a further payment of £175.0m to
be proposed with our FY17 results payable in
November 2017.
In total, the Capital Return Plan is expected to
return around £963m of cash through ordinary
dividends (based on consensus earnings)
and special dividends to the Company’s
shareholders over the three years ending
November 2017.
40
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Risk
management
Effective risk management is fundamental to
the achievement of our strategic objectives.
Risk management controls are integrated
into all levels of our business and across all
of our operations. We continually assess our
exposure to risk and seek to ensure that risks
are appropriately mitigated.
Roles and responsibilities
The Board is responsible for the overall stewardship of our
system of risk management and internal control. It has
undertaken a robust assessment of the principal risks in our
business and has established the appropriate level of risk that
is acceptable in the pursuit of our strategic objectives and has
set appropriate policies to govern this. It has also set delegated
authority levels to provide the executive framework for assessing
risks and ensuring that they are escalated to the appropriate
levels of management, including up to the Board where
appropriate, for consideration and approval.
The roles and responsibilities of the Board, its committees and
all levels of management from a risk management perspective
are summarised on this page:
Board
Overall responsibility for corporate strategy,
governance, performance, internal controls and
risk management
Defines the Group’s appetite for risk and monitors
risks to ensure they are effectively managed,
including agreeing actions where necessary
Audit
Committee
Nomination
Committee
Remuneration
Committee
Safety, Health and
Environmental Committee
Reviewing the effectiveness
of internal controls, including
systems to identify, assess
and monitor risks
Ensuring an appropriate
balance of skills, knowledge
and experience on the Board
Assessing the appropriate
incentivisation of the
Executive Directors and
Senior Management
Responsibility for the
stewardship of safety,
health and environmental
performance
Executive Committee
Monitoring business and operational performance and changes in key risks
facing the business and providing regular reports to the Board
Responsible for ensuring that the risk management policy is implemented and
embedded within the business and appropriate actions are taken to manage risks
Operations
Committee
Risk
Committee
Treasury Operating
Committee
Land
Committee
Health and Safety
Operating Committee
Reviewing regional
operating performance
Consideration of
identified risks and
their mitigation
Identification of new
and emerging risks
Management of liquidity
and counterparty risk
and ensuring that
treasury policies are
implemented and
embedded within
the business
Reviewing and
authorising all proposed
land acquisitions to
manage land acquisition
risk
Reviewing the
effectiveness of health
and safety policies and
establishing controls
and procedures to
manage these risks
Responsible for risk identification, management and control within their region or division
Regional and Divisional Management
Maintaining an effective system of risk management and internal control at their site including
construction risks, sub-contractor risks and health and safety
Site Management
Barratt Developments PLC – Annual Report and Accounts 2016
41
Strategic ReportGovernanceFinancial StatementsOther Information Why and how our principal risks change
Principal risks probability
Whilst the Principal Risks for the Group
related to the execution of its business
strategy have not changed since 2015,
the likelihood of the risk factors occurring
may have changed. The diagram on
this page shows the estimated residual
likelihood of each risk following our risk
mitigation strategies in both 2016 and
2015. The diagram does not consider the
relative size of the associated financial
or reputational impacts for each Principal
Risk item.
A
Economic environment,
including housing demand
and mortgage availability
B
Land Purchasing
C
Liquidity
D
Attracting and retaining
high-calibre employees
E
F
G
H
Availability of raw
materials, sub-contractors
and suppliers
Government regulation
and planning policy
Construction and
new technologies
Joint ventures
and consortia
I
Safety, health
and environmental
J
IT
Risk management continued
2015
2016
Medium
High
Medium
High
Managing risk – health and safety
Maintaining high standards of health and safety
is an integral element of the Group’s principles
and is the number one priority for all our business
activities. We have implemented a detailed
strategy for continuous improvement in this area
which is supported by our well established policy
and procedures.
The Group Board Safety, Health and
Environmental (SHE) Committee which is chaired
by one of our Non-Executive Directors and
attended by our Deputy Chief Executive, provides
oversight and stewardship of our operational
performance. (Refer to the SHE Committee report
on page 74 for further information.)
The SHE Operations Committee reports directly
to the SHE Board Committee and is responsible
for implementing the overall SHE improvement
strategy for the Group.
The Group employs an internal team of 23 SHE
Managers who assist with operational compliance
and monitor our sites at least once per month.
They work independently of our operational
Divisions and carry out over 6000 monitoring visits
to our sites every year. They report on levels of
compliance to operational management and an
overview of the performance of each operational
Division including reportable injuries and near
misses, is provided on a monthly basis to our
Group Board.
All our operational units are accredited to the
international standard OHSAS 18001 and as
part of the compliance process are audited
internally each year by our in-house team and
externally audited by our accreditation body
Ocean Certification.
The Group has for the second year arranged
for the British Safety Council to carry out a
comprehensive review of our management
systems and associated arrangements. The audit
model evaluates leadership at all levels of the
business and continuous improvement which
are continually assessed throughout the audit
process. The Group achieved a compliance score
of 96% and was again awarded the highest five
star status. This is an excellent achievement and
reflects on our approach to health and safety
management throughout the business.
42
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information New risks
No new principal risks have emerged during the financial year
Increased risk profile
Why?
A
D
E
Economic environment, including
housing demand and mortgage
availability
Following the vote to leave the European Union (‘EU’) in the recent referendum
there is increased uncertainty within the UK economy and it is too early to say
what the impact of this will be.
Attracting and retaining
high-calibre employees
There is high competition for skilled employees within the housebuilding industry
which has been driven by both the growth in industry volumes and the skills
shortage within the industry.
Availability of raw materials,
sub-contractors and suppliers
A significant proportion of the skilled sub-contractors upon our sites are
nationals of other EU countries. Following the vote to leave the EU in the recent
referendum, it is too early to say what impact this will have upon the availability
of sub-contractors.
Whilst the majority of our raw materials are sourced from UK suppliers, some
such as timber, are sourced from outside the UK. In addition, some components
contain materials sourced from outside the UK. The decrease in the value of
the pound following the EU referendum may, subject to other factors such as
demand, lead to an increase in the cost of these materials and components.
IT
J
There has been an increased level of attempted cyber-attacks against the Group’s
IT systems during the year.
Decreased risk profile
Why?
Liquidity
C
The Group’s average debt decreased to £60.0m (2015: £271.3m) for the year,
resulting in more headroom against the Group’s committed facilities.
Viability Statement
In accordance with provision C.2.2 of the UK
Corporate Governance Code 2014, the Directors
have assessed the prospects and financial viability
of the Group, taking into account both its current
position and circumstances, and the potential
impact of its principal risks. The Directors
consider that a three-year period is appropriate for
this assessment.
The Group’s objective is for a shorter than sector
average land bank reflecting its focus on return
on capital and a rapid asset turn. Our target is a
regionally balanced land portfolio with a supply
of owned land of c. 3.5 years and a further 1.0
years of controlled land. Accordingly, we consider
it appropriate that our viability review period is
broadly aligned with the expected longevity of our
owned land supply.
By using a three-year timeframe, the Viability
Statement review period is also aligned with
the Group’s bottom up three-year planning and
forecasting cycle, during which a wide range
of information relating to present and future
business conditions is considered, including those
impacting on expected profitability, cash flows, and
funding requirements.
The Group is subject to a number of Principal Risks
(as set out in more detail in pages 44 to 45), and its
Viability Statement review considers the impact
that these risks (particularly those related to the
economy and to mortgage availability) might have
on its ability to meet its targets. This is undertaken
through the performance of sensitivity testing,
using appropriately challenging scenarios which
reflect severe but plausible impacts based on
current market conditions and applying estimates
for the impact of these risks to ensure that the
quantified mitigation actions available to it are
sufficient. This process involves consideration of
the impact of our chosen scenarios on key business
drivers, including the volume of legal completions
achieved, average selling prices and build costs.
Several scenarios are modelled to ensure that the
Board can carefully evaluate the range of plausible
outcomes being assessed and mitigation factors
are based on those identified and successfully
deployed during the previous downturn in 2007-
2008 following the ‘credit crisis’.
Based on this review, the Directors confirm that
they have a reasonable expectation that the Group
will be able to continue in operation and meet its
liabilities over this three-year period.
Managing risk – Addressing the skills shortage
We continue to invest in our people to ensure that
they can maximise their potential, but we are
equally focused on the need to attract new talent
into our business to address the skills shortages
in our industry.
For the medium to long term, we have our Future
Talent strategy. Our annual intake of apprentices
(trade and professions) and graduates continues.
We have made good progress against our 2020
aspiration and have recruited over 900 graduates,
trainees and apprentices including those that will
join us in 2017. Numbers on our foundation degree
in residential development and construction
introduced three years ago continue to grow and
last year we became patrons of the West Midlands
Construction UTC. Providing mentors from
our West Midlands division and Group Support
Centre. This is the first UTC to offer a construction
curriculum and provide students with a work
based mentor.
We have launched a schools career toolkit which
includes six housebuilding activities linked to the
school curriculum, a teachers’ and parents’ guide
and a student guide to promote our professions.
Many of our regionally based employees, including
our Apprentice Champions, have visited schools
and use the toolkit as a way of demonstrating the
many careers within housebuilding. The toolkit
educates young people on roles and careers advice
and provides teachers with material to embed
and reference the industry within the curriculum.
This is a completely new initiative for the industry
and is intended as a resource for influencers
(teachers, careers advisers, governors and
parents) and students. The toolkit is intended to:
challenge industry perceptions, misconceptions
and stereotyping, promote the industry as a diverse
organisation, challenge the underrepresentation
of females in the industry, address the lack of
diversity in the workforce, challenge teacher /
parent attitudes towards careers in construction.
This supports our diversity and inclusion
programme which aims to attract talent from more
diverse backgrounds.
In the short term we are actively seeking to
recruit talent from other industry backgrounds,
and providing transitional training for a career in
housebuilding. We have signed up to the Armed
Forces Covenant and have launched a site
manager transitional training programme for
armed forces personnel which allows them to
undertake a year’s transition programme whilst
working as an Assistant Site Manager. We currently
employ 28 armed forces personnel and plan to
significantly grow this over the period ahead.
We advertise our vacancies on diversityjobs.co.uk
and launched a profile page on thebigidea.co.uk
which promotes us as an organisation from a
diversity perspective. We have launched numerous
programmes to help appeal to a wider audience
of potential recruits. For example, teaming up
with RICS, CBRE and others on our ‘Built by Both’
campaign to attract young women professionals
into careers in housebuilding; developing a
housebuilding app game; and relaunching an
enhanced recruitment website.
We are working closely with Construction Industry
Training Board (CITB) through the Go Construct
project, providing many case studies for them and
the HBF which helps to improve the image of our
sector as a career choice. This work also includes
support to the House Building Skills Partnership
which aims to provide new training and
qualifications to more than 45,000 new entrants
to our sector.
Barratt Developments PLC – Annual Report and Accounts 2016
43
Strategic ReportGovernanceFinancial StatementsOther Information
Risk management continued
Principal risks
B
Land Purchasing
C
Liquidity
D
E
Attracting and retaining
high-calibre employees
Availability of raw materials,
sub-contractors and suppliers
The ability to secure sufficient consented
land and strategic land options at
appropriate cost and quality to provide
profitable growth.
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 from management of
working capital such as conditional
contracts, build costs, joint ventures and
the cash flows related to them.
Inability to recruit and/or retain
employees with appropriate skill sets or
sufficient numbers of such employees.
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.
Risk
Potential
impact
A
Economic environment,
including housing demand and
mortgage availability
Changes in the UK and European
macroeconomic environments, including
but not limited to unemployment, flat
or negative economic growth, buyer
confidence, availability of mortgage
finance particularly for higher loan to
values including government backed
schemes, interest rates, competitor
pricing, falls in house prices or land
values, may lead to a fall in the demand
or price achieved for houses, which
in turn could result in impairments of
the Group’s inventories, goodwill and
intangible assets.
Mitigation
> Board, Executive Committee, regional
and divisional management review
> Quarterly site valuations
> Comprehensive sales policies and
procedures including transparency
towards mortgage lenders
> Committed bank facilities and private
> Comprehensive Human Resources
> All potential land acquisitions are
subject to formal appraisal and
approval by the Land Committee
placement notes of around £850m with
maturities ranging from 2016 to 2021
> Divisional, regional and Group review of
land currently owned, committed and
identified against requirements
> Regular forecasts of working capital
and cash requirements and compliance
with banking covenants
> Policy requiring minimum headroom
of £150m of drawings against
committed facilities
programme including apprenticeship
schemes, a graduate development
programme, succession planning
and training academies tailored to
each discipline
> Monthly monitoring of employee
statistics including turnover
and absence
> Exit interviews
> Annual employee engagement survey
> Remuneration benchmarked against
industry competitors
> Centralised team procures the majority
of the Group’s materials from within the
UK including sub-contractor materials,
ensuring consistent quality and costs
and security of supply
> Seek to establish and maintain long
term supplier and sub-contractor
partnerships with all of our significant
supply agreements fixed in advance,
usually for 12 months
> Group policies include tendering, the
requirement for multiple suppliers for
both labour contracts and material
supplies and establish contingency
plans should any key supplier fail
Sufficient material and skilled sub-
contractor availability will enable
disciplined volume growth.
The
opportunity
The majority of our customers
require mortgages to purchase their
new home. Buyer confidence, the
availability of mortgages and mortgage
interest rates are affected by the
economic environment.
Securing more sites that at least meet
our hurdle rates of 20% gross margin
and 25% ROCE will enable disciplined
volume growth.
Availability of sufficient committed and
surety facilities ensures that the Group
can manage changes in the economic
environment and take advantage of
appropriate land buying and operational
opportunities and deliver sustainable
shareholder value.
Skilled employees are critical to deliver
the Group’s strategy of disciplined
growth, improving key financial metrics
through a focus on efficiency and
the continued delivery of attractive
cash returns.
Business
model link
1
3
4
1 Targeted land buying and effective planning.
2 Outstanding design.
3 Construction excellence and efficiency.
4 Innovative sales and marketing.
5 Industry leading customer experience.
1
3
1
1
2
3
4
5
3
5
44
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information F
G
H
I
Risk
Government regulation and planning policy
Construction and new technologies
Joint ventures and consortia
Safety, health and environmental
J
IT
Principal risks
Potential
impact
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.
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. There are
also risks associated with climate change
and the use of new technology in the
build process e.g. materials related to
carbon reduction.
Large development projects, some of
which involve joint ventures or consortia
arrangements and/or commercial
developments, are complex and capital
intensive and changes may negatively
impact upon cash flows or returns.
Health and safety or environmental
breaches can result in injuries to
employees, sub-contractors and site
visitors, delays in construction or
increased costs, reputational damage,
criminal prosecution and civil litigation.
Failure of the Group’s IT systems
(whether due to cyber-attacks or other
causes) in particular those relating to
surveying and valuation, could adversely
impact the performance of the Group.
Mitigation
> Considerable in-house technical
and planning expertise devoted
to complying with regulations
and achieving implementable
planning consents
> Rigorous design standards for the
homes and places we develop
> Policies and technical guidance
manuals for employees on regulatory
compliance and the standards of
business conduct expected
The
opportunity
Securing sufficient, appropriate planning
permissions upon new sites will
enable the Group to deliver disciplined
volume growth.
> Executive Committee, regional and
> All potential joint ventures are subject
> Health and safety team
> Centrally maintained IT systems
divisional reviews
> Any alternative forms of construction
and building technologies and the
quality of materials are subject to
evaluation by external and internal
technical experts, including the NHBC,
to ensure compliance with all building
and other regulations
> Quarterly site valuations
> Monitoring of environmental
impact indicators
> Maintenance of appropriate
insurance cover
Modern construction methods are
being assessed and implemented
where appropriate to reduce the risks
inherent in the construction process and
to help address the shortage of skilled
trades people.
to formal appraisal and approval by the
Group’s Land Committee and the Board
> Once operational, the performance of
joint ventures and consortia are subject
to regular review
> Regular health and safety audits and
development monitoring visits
> Fully-tested disaster
recovery programme
> Group health and safety and
> Regular reviews to seek to reduce
environmental policies and procedures
the risk of successful cyber-attacks
> Board health and safety visits reinforce
the importance of Health, Safety and
Environmental compliance
Securing more joint venture sites that
at least meet our hurdle rates of 20%
gross margin and 25% ROCE will enable
disciplined volume growth.
Continued focus upon health and
safety to seek to reduce injury rates
and manage the risks inherent in the
construction process.
Integrated IT systems enhance business
control and drive efficiency.
Business
model link
1
2
2
3
1
2
3
1
3
4
5
The Strategic Report on pages 2 to 45 was approved by the Board and is signed on its behalf by:
David Thomas
Chief Executive
6 September 2016
1 Targeted land buying and effective planning.
2 Outstanding design.
3 Construction excellence and efficiency.
4 Innovative sales and marketing.
5 Industry leading customer experience.
Barratt Developments PLC – Annual Report and Accounts 2016
45
Strategic ReportGovernanceFinancial StatementsOther Information
The Board
The Board
John Allan
Non-Executive Chairman
David Thomas
Chief Executive
Appointment to the Board:
David joined as an Executive Director and
Group Finance Director on 21 July 2009
and was appointed Chief Executive on
1 July 2015.
Committee membership:
Member of the Nomination Committee.
Career and experience:
David brings a wealth of financial and
leadership experience acquired over a
number of years in senior positions. He is
an Associate of the Institute of Chartered
Accountants in England and Wales. He was
formerly Group Finance Director and
Deputy Chief Executive of The GAME Group
plc (2004-2009). Before that he was the
Group Finance Director at Millennium and
Copthorne Hotels plc (1998-2004) and held
senior financial roles with House of Fraser
plc and Forte plc.
Appointment to the Board:
John joined the Board as a Non-Executive
Director on 1 August 2014 and became
Chairman on 12 November 2014.
Committee membership:
Chairman of the Nomination Committee and
a member of the Remuneration Committee.
Career and experience:
John brings a broad range of business and
retail experience to the Board. He became
Chairman of Tesco PLC on 1 March 2015
and also of London First on 1 January 2015.
He is a Non-Executive Director of Worldpay
plc and a regent of the University of
Edinburgh. Previously John was Chairman
of Dixons Retail plc until its merger with
Carphone Warehouse Group plc. He then
became Deputy Chairman of the combined
business, Dixons Carphone plc, until 2015.
He was also a Non-Executive Director of
Royal Mail PLC (2013-2015), National Grid
plc (2005-2011), 3i plc (2009-2011) and of
various other public companies in the UK,
Germany and Denmark. His other previous
appointments also include CFO of Deutsche
Post until 2009 and Chief Executive of Exel
plc until 2005.
Steven Boyes
Neil Cooper
Mark Rolfe
Chief Operating Officer
and Deputy Chief Executive
Appointment to the Board:
Steven joined the Board as an Executive
Director on 1 July 2001 and subsequently
Chief Operating Officer on 5 July 2012.
He became Deputy Chief Executive
on 24 February 2016 and continues
to be responsible for the Group’s
housebuilding operations.
Committee membership:
Member of the Safety, Health and
Environmental Committee.
Career and experience:
Steven became a trustee of the UK Green
Building Council in September 2015.
He has over 38 years’ experience in the
housebuilding industry having joined
Barratt in 1978 as a junior quantity surveyor
and progressing through the business to
assume the roles of Technical Director and
Managing Director of Barratt York before
being appointed Regional Director for
Barratt Northern in 1999.
Chief Financial Officer
Senior Independent Director
Appointment to the Board:
Neil joined the Board as an Executive
Director and Chief Financial Officer
on 23 November 2015.
Career and experience:
Neil is an experienced finance professional
bringing to the Board significant
international experience from a variety of
sectors. Neil is currently a Non-Executive
Director of Pennon Group Plc. He was
previously Group Finance Director of
William Hill PLC (2010-2015) and Finance
Director of Bovis Homes for three years
(2007-2010). Before that he spent eight
years in a variety of finance roles with
Whitbread PLC and has held financial
and consultancy roles with Reckitt &
Colman PLC (now Reckitt Benckiser)
and PricewaterhouseCoopers.
Appointment to the Board:
Mark was appointed as a Non-Executive
Director on 1 May 2008 and became Senior
Independent Director on 14 November
2012. Mark will step down from each of his
positions with the Group at the conclusion of
the Company’s 2016 AGM.
Committee membership:
Chairman of the Audit Committee
and a member of the Nomination and
Remuneration Committees.
Career and experience:
Mark is an experienced Non-Executive
Director with a strong financial and retail
background. He is currently a Non-
Executive Director of Debenhams plc
and a Fellow of the Institute of Chartered
Accountants in England and Wales.
Mark was formerly a Non-Executive
Director of The Sage Group plc (2007-2013)
and Hornby plc (2008-2014), Chairman
of Lane Clark & Peacock LLP (2008-
2014), and Finance Director of Gallaher
Group Plc (2000-2007). His career with
Gallaher spanned 20 years during which
time he served in various finance and
executive roles.
46
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Richard Akers
Tessa Bamford
Nina Bibby
Jock Lennox
Tina Bains
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
Appointment to the Board:
Tessa was appointed as a Non-Executive
Director on 1 July 2009.
Committee membership:
Member of the Audit, Nomination and
Remuneration Committees.
Career and experience:
Tessa brings broad business experience to
the Board. She is currently a Non-Executive
Director of Wolseley plc and a consultant
at Spencer Stuart. Tessa was formerly a
Director of Cantos Communications (2001-
2011) and a Director of J Henry Schroder
& Co with whom her career spanned over
12 years in various roles (1986-1998).
Appointment to the Board:
Nina joined the Board as a Non-Executive
Director on 3 December 2012.
Committee membership:
Member of the Audit, Nomination and
Remuneration Committees.
Career and experience:
Nina brings a wealth of marketing
experience to the Board and is currently the
Marketing and Consumer Director at O2
UK, Telefonica. She was formerly the Global
Chief Marketing Officer at Barclaycard,
the payments subsidiary of Barclays plc
until 2013. Prior to Barclaycard, Nina
was SVP Global Brand Management at
InterContinental Hotels Group plc (2006-
2009) and worked at Diageo (1997-2006),
latterly as Commercial Strategy Director.
Appointment to the Board:
Richard joined the Board as a Non-Executive
Director on 2 April 2012. Richard will
become the Senior Independent Director
from the conclusion of the 2016 AGM.
Committee membership:
Chairman of the Remuneration and
the Safety, Health and Environmental
Committees and a member of the Audit and
Nomination Committees.
Career and experience:
Richard has a broad range of property
knowledge and experience. He is a
Non-Executive Director of Emaar Malls
PJSC, a member of the Advisory Board
for Battersea Power Station Development
Company and a Fellow of the Royal
Institution of Chartered Surveyors.
Richard was a senior executive of Land
Securities Group plc (1995-2014), joining
the main Board in May 2005 following his
appointment as Managing Director of the
Retail Portfolio. He was also a Director and
President of the British Council of Shopping
Centres (2009-2012), the main industry body
for retail property owners.
Appointment to the Board:
Tina was appointed to the role of Company
Secretary on 1 January 2016.
Career and experience:
Tina joined the Group in 2008 as Assistant
Company Secretary and was promoted
to the role of Deputy Company Secretary
in 2011. Prior to this, Tina held various
Company Secretarial positions within the
private and professional services sectors
including TMF Corporate Secretarial
Services Limited and Ernst & Young LLP.
Tina is a Fellow of the Institute of Chartered
Secretaries and Administrators.
Appointment to the Board:
Jock joined the Board as a Non-Executive
Director on 1 July 2016.
Committee membership:
Jock is a member of the Audit Committee
and will become its chair from the
conclusion of the Company’s 2016 AGM.
Jock is also a member of the Remuneration
and Nomination Committees.
Career and experience:
Jock, a Chartered Accountant, is an
experienced Non-Executive Director
bringing to the Board a wealth of business
and finance experience. He is currently
Non-Executive Director and Chairman of
the Audit Committee of Dixons Carphone
plc, A&J Mucklow Group plc, Enquest plc
and Hill and Smith Holdings plc. He is also
the Senior Independent Director of Oxford
Instruments plc. Jock will be stepping down
from his positions at Oxford Instruments plc
and A&J Mucklow Group plc in September
2016 and November 2016 respectively.
Previously, Jock spent 30 years with Ernst &
Young LLP (including 20 years as a partner)
during which time he led a number of
relationships with international clients and
held a number of leadership positions both
UK and globally.
Barratt Developments PLC – Annual Report and Accounts 2016
47
Strategic ReportGovernanceFinancial StatementsOther Information Chairman’s introduction
I am pleased to present my second corporate
governance report to you and to explain
how your Board has used the authority and
trust you place in it to drive your Company
forward as it strives to deliver sustainable
shareholder value.
Now more than ever good corporate
governance will play a key part in the long
term success of any business. The UK’s
decision to leave the EU has created great
uncertainty, not only in the UK but more widely.
Whilst I cannot predict what may happen in the
future, I can assure you that we have a strong
business led by an equally strong and talented
Board. The Board is continually monitoring
events and will make decisions based on firm
facts to ensure that it exploits opportunities as
they arise.
Good corporate governance is more than
simply adhering to the principles of the UK
Corporate Governance Code: it is the basis
of good management practice. We are
focused on ensuring that good governance is
embedded in our culture across disciplines
and all areas of the business, in order to create
a stable foundation upon which our business
and long term success is built. The Board
takes time to receive regular updates on
changes in corporate governance and best
practice and strives to adopt the spirit, in
addition to the letter of the regulations or best
practice provisions.
Together with overseeing a strong financial
performance, the following key changes have
been addressed by the Board during the year:
Board Changes
David Thomas took over as Chief Executive
from Mark Clare on 1 July 2015 and retained
the position of Group Finance Director
until Neil Cooper joined as Chief Financial
Officer on 23 November 2015. David received
support from the Board and from Mark Clare
throughout his transition to Chief Executive.
Information on the induction process for David
and Neil can be found on page 58.
Mark Rolfe, after eight years of service, has
decided to stand down after the 2016 AGM.
Mark is a highly valued member of the Board
and during his tenure has contributed greatly
to the Company’s success.
We undertook a full and formal process to
find a new Non-Executive Director (more
information is available on page 64) and we
are pleased to have secured the services
of Jock Lennox. Jock joined the Board on
1 July 2016 and will take over as Chair of the
Audit Committee following the 2016 AGM.
His biography can be found on page 47 and
details of his induction can be found on
page 59.
Good corporate governance is the
foundation of effective management.
We place governance at the heart of
everything we do. It is embedded in our
procedures and processes throughout
our business from Board level to our
divisional operations.
John Allan
Chairman
48
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Changes to Regulation
Numerous changes have taken place to
the regulatory framework within which we
operate. The Board took time to discuss
and consider each of these in detail.
Particular areas of focus were:
Long term viability statement
The Audit Committee robustly assessed
the internal control and principal risks of
the business on behalf of the Board. It also
considered the period over which the viability
of the Company should be assessed and
analysed the outcome of the assessment
of long term viability over that timescale.
The results of this assessment can be seen on
page 43 of the Strategic Report.
Modern Slavery Act
During the year, the Company assessed the
effect of the Modern Slavery Act (‘MSA 2015’)
on its processes, procedures and contracts
in addition to our relationships with suppliers
and contractors. The Modern Slavery Act
Statement as required by MSA 2015 is
currently being prepared and will be published
on our website, following approval by the
Board, no later than 31 December 2016.
Market Abuse Regulation
The Board reviewed the impact of the Market
Abuse Regulation including its treatment
of inside information; the relationship with
our brokers and analysts; the obligations
of Persons Discharging Managerial
Responsibilities; and the Company’s Share
Dealing Code. Following its review and in
accordance with best practice, the Board
approved the establishment of a Disclosure
Committee, adopted a revised Share
Dealing Code and updated its procedures
and processes to ensure the Company's
compliance with the new regulations.
Auditor independence and non-audit
fees policy
During the year the Audit Committee reviewed
the policy on auditor independence and non-
audit fees to take into account the prescribed
prohibited non-audit services with effect
from June 2016. A cap on fees for permissible
non-audit services of 70% (based on the
average of the previous three years of audit
fees) has been imposed and will be effective
from the year commencing 1 July 2019.
Further information is contained on page 72.
FY17
Our areas of focus during FY17, amongst other
matters, will be:
> to continually assess the impact on the
business of the decision to leave the EU and
flex our strategy accordingly;
> to assess and fully comply with the principles
and provisions of the UK Corporate
Governance Code issued in 2016;
> to implement the recommendations arising
from the 2016 externally facilitated Board
effectiveness review (see page 56); and
> to conduct a formal process to tender our
external audit and taxation services.
You have a strong and experienced Board
managing your Company through these
uncertain times. The actions that they take
over the coming months will be in line with
good governance and, in the opinion of the
Board, in your best interests.
The following pages set out our governance
structures, processes and the work
undertaken by the Board and its Committees
during FY16.
John Allan
Chairman
6 September 2016
Barratt Developments PLC – Annual Report and Accounts 2016
49
Strategic ReportGovernanceFinancial StatementsOther Information Corporate governance report – Overview
Leadership
Effectiveness
Accountability
Relations with shareholders
Your Board is collectively responsible for the
long term success of your Company. The roles
are clearly defined with Executive Directors
managing the business on a day to day basis
and the Non-Executive Directors providing
an appropriate level of scrutiny, challenge
and support. In this way proposals relating
to strategy, performance, responsibility and
accountability are constructively challenged
and the Board ensures that all decisions are
well considered, justified and of the highest
quality. In addition, Board processes are
set up to ensure adequate oversight of the
implementation of those decisions.
This section details the structure and
composition of the Board and its Committees,
how responsibilities are divided amongst
the Board, its Committees and individual
Directors, the main activities of the Board
in FY16 and its main focus areas for FY17.
Your Board continuously reviews its balance
of skills, experience, independence and
knowledge to ensure that they remain
appropriate to enable it to discharge its duties
and responsibilities effectively. The Board
undertakes an annual evaluation of its own
effectiveness and that of its Committees and
of individual Directors.
This section outlines the independent Board
evaluation process undertaken in FY16 and
the outcomes. It also sets out the progress
made with the actions arising from the FY15
evaluation as well as the induction process
for new Directors.
Your Board is mindful of the risk environment
in which it operates when making
any decisions. It maintains sound risk
management and internal control systems
and regularly reviews the principal risks
and assesses the appropriate appetite for
risk in striving to achieve the Company’s
strategic objectives.
This section details the Board’s approach to
risk management, its internal controls and
risk management systems and its processes
for evaluating that the Annual Report and
Accounts of the Company are fair, balanced
and understandable.
Your Board recognises the importance
of maintaining open dialogue with its
shareholders, both private and institutional.
A number of events and communications
take place on an annual basis to regularly
communicate with shareholders and to
encourage their participation.
This section summarises how the Board
and individual Directors engaged with
shareholders throughout FY16 and how
shareholders can communicate with
the Company.
See pages 51–55
See pages 56–59
See page 59
See pages 60–61
Remuneration
The Board, through its Remuneration Committee, has established a
formal and transparent procedure for developing its policy on executive
remuneration. The Group’s Remuneration Policy was presented to, and
approved by, shareholders at the 2014 AGM and is designed to promote
the long term success of the Group. No changes are proposed to the
policy for FY17.
This section summarises the Group’s Remuneration Policy, how the
policy operated during FY16 and how it will be applied in FY17.
See pages 76–97
50
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Corporate governance report – Leadership
Board composition, diversity and experience as at 30 June 2016
Board composition
Non-Executive Director tenure
(including the Chairman)
Gender split
20%
40%
0-3 years
3+ years
40%
6+ years
Experience
Chairman
Executive Directors
Independent Non-Executive Directors
1
3
4
Male
Female
75%
25%
Business
Finance
Retail
development
Housebuilding/
Construction
Marketing
Commercial
development
Barratt Developments PLC – Annual Report and Accounts 2016
51
See page 65 for details on Board diversity
See page 35 for details on diversity in the workforce
Strategic ReportGovernanceFinancial StatementsOther Information
Corporate governance report – Leadership continued
Corporate Governance Statement
The Board confirms that during the year ended 30 June 2016, and as at the date of this report, the
Company has fully complied with the main and supporting principles of the UK Corporate Governance
Code (the ‘Code’) issued in September 2014 (a copy of which is available from www.frc.org.uk).
This report, together with the Other Statutory Disclosures, reports from the Audit, Nomination, Safety,
Health and Environment and Remuneration Committees, provide details of how the Company has
applied the principles and complied with the provisions of the Code during the year under review.
We describe how we have applied the main principles throughout pages 50 to 97.
We are aiming to be fully compliant with the UK Corporate Governance Code issued by the FRC in 2016
which is applicable to the Company for FY17. The Company has also complied with the requirements
under the Disclosure and Transparency Rules, the Listing Rules and the BIS Directors’ Remuneration
Reporting regulations and narrative reporting requirements.
Board balance
The names, responsibilities and other details of each of the Directors of the Board are set out on pages 46
and 47 with the composition of the Board on page 51. The Board believes it has an appropriate balance of
Executive and independent Non-Executive Directors having regard to the size and nature of the business.
In addition, the combination of the experience and calibre of the Non-Executive Directors collectively,
having regard to their diverse backgrounds, experience and their varying lengths of service, further
enhances this balance and mitigates the risk of ‘group think’.
Board independence
The Company recognises the importance of its Non-Executive Directors remaining independent
throughout their appointment, it enables them to provide objective advice and guidance to the
Executive Directors (and Senior Management) through the application of their wide business and
commercial experience and diverse backgrounds. This independence allows the Non-Executive
Directors to constructively challenge and scrutinise the performance of the Executive Directors
and provide an independent perspective on business strategy, performance and the integrity of
the financial information considered by the Board and disclosed to the Company’s shareholders.
In addition, their independence is of the utmost importance when considering the appointment or
removal of Executive Directors and in the determination of succession planning for Board positions
and other Senior Management roles within the Group. All Non-Executive Directors remained
independent in character and judgement during the financial year. It was confirmed as part of the
annual conflict of interests review that none of the Non-Executive Directors have business or other
relationships with the Group (or other outside interests) that might influence their independence
or judgement (see page 65). Details of their interests in shares of the Company are contained
in Table 15 on page 89 of the Remuneration report.
John Allan was considered to be independent on appointment to the Board and on taking up the role
of Chairman. As part of the FY16 annual review of the Chairman’s effectiveness, the Non-Executive
Directors led by Mark Rolfe, as Senior Independent Director, considered John’s significant commitments
(page 46) and confirmed that they do not impinge upon his availability to fulfil his duties to the Company.
John Allan has demonstrated this throughout the year by ensuring full attendance at each of the
Board and majority of the committee meetings, being available to Board members whenever required,
spending time out in the business and within the Group’s corporate offices in London. John Allan
continues to show dedication to his role and commits the time necessary to discharge his duties.
Key responsibilities of the Board
The Board has overall responsibility for providing clear, entrepreneurial, responsible and
executive leadership to the Group and for:
> promoting the long term success of the Group;
> conducting the business of the Group;
> ensuring that the obligations to shareholders and other stakeholders are understood and met;
> setting the strategic direction of the Group; and
> ensuring the Company has adequate resources and the appropriate controls, values and
standards to deliver its strategy within a framework that enables risk to be identified and
managed appropriately.
Operational decisions are delegated to Board and Management Committees as illustrated
on page 55.
The Board has an annual standing agenda which has been set in accordance with its
terms of reference and matters reserved specifically to it, see the Company’s website at
www.barrattdevelopments.co.uk/investors/corporate-governance/governance-policies
Membership and attendance at Board meetings
Members of the Board throughout the financial year and attendance at each of its scheduled
meetings are set out in Table 1.
Table 1
Member
John Allan
David Thomas¹
Steven Boyes
Neil Cooper2
Richard Akers
Tessa Bamford
Nina Bibby
Mark Rolfe
Former Director
Mark Clare3
Role
Chairman
Chief Executive
Chief Operating Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Senior Independent Director
Executive Director
Number of meetings attended
9/9
8/9
9/9
6/6
9/9
9/9
9/9
9/9
1/1
1 David Thomas was unable to attend one meeting due to personal reasons. He reviewed the papers and provided comments to the Chairman
prior to the meeting.
2 Neil Cooper joined the Board as Chief Financial Officer on 23 November 2015.
3 Mark Clare stepped down from his position as Group Chief Executive on 30 June 2015 and from the Board on 31 July 2015.
Note:
9/ Number of meetings attended whilst a Director;
/9 Number of meetings held whilst a Director.
52
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Main activities undertaken during the financial year (including Matters Reserved)
The Board had nine scheduled meetings during the financial year to review and approve various key business proposals including those matters specifically reserved to it.
The key responsibilities of the Board and its multi-dimensional work programme throughout the year are set out below:
Board activity FY16
Other
> Undertook collective visits to the West and Central
regions and attended site visits in the locality.
> Reviewed and demonstrated commitment to the
culture, values and ethics of the Group.
> Conducted health and safety site visits.
> Reviewed and updated management succession plans.
Board composition and effectiveness
> Implemented the induction process for the new Chief
Executive and Chief Financial Officer.
> Appointed a new Non-Executive Director / Chairman
of the Audit Committee and a new Company Secretary.
> Undertook an external evaluation of its own
performance and that of its Committees and
individual Directors.
> Considered and approved the re-appointment of
Nina Bibby as a Non-Executive Director.
> Considered potential conflict of interests.
Governance
> Received updates on changes in regulations such as
the Market Abuse Regulation and the Modern Slavery
Act and assessed their impact.
> Reviewed share dealing control processes.
> Received updates from each of its Committees.
> Reviewed and approved the Group’s
sustainability framework.
> Reviewed and approved the Board’s principal policies.
> Reviewed and approved matters reserved to it, its own
terms of reference and those for the Chairman, Chief
Executive and Senior Independent Director.
> Reviewed the Group’s operating structure to ensure
it remains fit for purpose.
Strategy and management
> Full day offsite strategic review in January focusing
on performance against strategy, objectives, business
plan and budget.
> Received presentations from business functions
on strategic opportunities and further developed
future strategy.
> Reviewed and approved various material land
investments/transactions.
> Hold a number of detailed strategy sessions
throughout the year rather than holding a one
day offsite.
> Discussed the implications of the result of the EU
Referendum and agreed to continually monitor the
situation and to adjust strategy if necessary.
Shareholder engagement
> Reviewed shareholder feedback on half and full year
results and outcomes from investor roadshows.
> Received presentations from the Group’s
corporate brokers.
> Met with shareholders at the 2015 AGM.
> Reviewed the 2015 AGM proxy voting figures.
> Reviewed and approved the 2015 AGM Notice.
Financial reporting and controls
> Reviewed monthly reports on performance against
budget and forecast.
> Reviewed the proposed three-year business plan.
> Reviewed and approved half and full year results
and announcements.
> Assessed if the Annual Report and Accounts were
‘fair, balanced and understandable’.
> Approved the 2015 Annual Report and Accounts.
> Approved payment of an interim dividend and agreed
to recommend payment of a final dividend and
special dividend under the Group’s Special Cash
Payment Programme.
> Reviewed the Group’s financing agreements.
> Reviewed and approved process for satisfaction of
awards under share performance schemes and block
listing requirements.
> Reviewed the long term viability of the Company over
a period of three years and approved the long term
viability statement to be included in the Annual Report
and Accounts following the recommendation of the
Audit Committee.
Risk management and internal controls
> Robustly reviewed and approved the effectiveness
of internal control and risk management systems.
> Reviewed the Company’s appetite for risk and
approved the principal risks and uncertainties
affecting the business.
> Received regular updates from the Audit Committee
in respect of internal and external audit reviews.
> Undertook six-monthly in-depth health and
safety reviews.
Barratt Developments PLC – Annual Report and Accounts 2016
53
Strategic ReportGovernanceFinancial StatementsOther Information Corporate governance report – Leadership continued
Board roles and their responsibilities
The Chairman
> Leads and manages the Board in the achievement of its objectives, sets its agenda and chairs its meetings;
> facilitates the effective contribution of Non-Executive Directors and constructive relations between Executive and Non-Executive Directors;
> makes certain that the continued development needs of each Director are identified and addressed; and
> ensures effective communication with shareholders and participates in corporate relations activities including meetings with shareholders
and other stakeholders as appropriate.
Chief Executive
> Responsible for the development of the Group’s strategy for the enhancement of long term shareholder return and its recommendation
to the Board for approval;
> ensures the delivery of Group Strategy approved by the Board;
> responsible for the day to day leadership and management of the operational activities of the Group in accordance with overall strategy
Chief Operating Officer
Chief Financial Officer
The Senior Independent Director
and policy as determined by the Board;
> chairs the Executive Committee through which he carries out his duties;
> responsible for corporate relations with shareholders and other stakeholders; and
> responsible for the sustainability policies and practices of the Group.
> Responsible for the Group’s housebuilding operations; and
> chairs the operations committee meetings, the other members of which include the Regional Managing Directors.
> Responsible for devising and implementing the Group’s financial strategy and policies;
> responsible for managing the Group Legal, Internal Audit and Investor Relations departments;
> supports the Chief Executive with his corporate relations responsibilities with shareholders and other stakeholders; and
> manages the Company's relationship with the external auditor.
> Responsible for evaluating the performance of the Chairman, at least annually;
> responsible for ensuring that, where required, he is available to shareholders to:
(i) address any material issues or concerns which the Chairman and/or Chief Executive have failed to resolve; and
(ii) listen to their views in order for the Company to gain a balanced understanding of their issues and concerns; and
> act as a sounding board for the Chairman and, if necessary, an intermediary for the other Directors.
Independent Non-Executive Directors
> Constructively challenge the Executive Directors;
> develop proposals on strategy; and
> monitor the implementation of the Group’s strategy within its risk and control framework.
Company Secretary
> Supports the Chairman and Chief Executive in fulfilling their duties;
> available to all Directors for advice and support;
> keeps the Board regularly updated on governance matters;
> ensures Group policies and procedures are maintained and updated on a regular basis; and
> attends, and maintains a record of the matters discussed and approved at Board and Committee meetings.
54
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Board committees and delegation
Board Committees
Audit Committee
Responsible for monitoring the integrity of the Group’s financial statements
and its systems for internal control and risk management. It also
monitors the independence, objectivity and tenure of the external auditor,
considers whether the Annual Report and Accounts are fair, balanced and
understandable; and assesses the long term viability of the Company.
See page 66 for full report
Nomination Committee
Responsible for monitoring the composition and balance of the Board
to ensure that it has the appropriate skills, experience and diversity to
successfully deliver the strategy of the Group and ensuring progressive
refreshing of the Board and its Committees. See page 62 for full report
Remuneration Committee
Responsible for designing and implementing the Group’s overall remuneration
strategy and policy and for setting the remuneration of the Executive Directors
and members of Senior Management directly below the Board.
See page 76 for full report
Safety, Health and Environmental Committee
Responsible for the stewardship of the safety, health and environmental
issues impacting the business including, but not limited to, the Group’s
compliance with the safety, health and environmental management system.
It also monitors any significant safety, health and environmental risks and
exposure to the business and the steps taken to mitigate against these.
See page 74 for full report
The Disclosure Committee
Responsible for ensuring that the Company remains compliant with the
requirements of the Market Abuse Regulation.
Board
The
Board
Chief Executive
Executive Committee
Supports the Chief Executive in carrying out the day-to-
day management of the activities of the Group.
Group Management Committees
The Risk Committee
Reviews the effectiveness of the Group’s internal control policies and
procedures for the identification, assessment and reporting of risks and
assessing individual key risks on a rolling basis.
The Land Committee
Reviews and approves all land acquisition proposals across the Group.
Depending on the value of the land acquisition or its complex nature
e.g. high rise apartments or joint venture arrangements, Board approval
may also be required.
The Treasury Operating Committee
Reviews the Group’s funding requirements and approval of new debt facilities.
Additional approval from the Board may be required for certain types of
funding and where the level of funding is over and above the levels delegated
to the Treasury Operating Committee.
The Allotment Committee
Responsible for approving the allotment of shares within dilution limits and
the authority obtained from shareholders.
The Health and Safety Operations Committee
Develops the health and safety strategy for the Group; ensures that health
and safety policies and procedures are adequately implemented and adhered
to throughout the Group; monitors the effectiveness of the Group’s health
and safety systems and keeps abreast of changes in legislation surrounding
safety, health and the environment.
Chief Operating Officer
Responsible for managing operational performance.
The Operations Committee
Barratt Developments PLC – Annual Report and Accounts 2016
55
Strategic ReportGovernanceFinancial StatementsOther Information Corporate governance report continued
Effectiveness
Board and Committee Evaluation
In accordance with the Code, the Board is responsible for undertaking a formal and rigorous annual evaluation of its own performance and that of its committees and individual Directors.
In 2015 this process was conducted internally and in FY16 we appointed an external company to facilitate the evaluation. Details of progress made on the outcomes of the 2015 review and
the results of the 2016 review are set out below.
Update on 2015 Board performance evaluation outcomes
Table 2
2015 outcomes
Progress in FY16
Board composition
Ensure satisfactory skills, experience and knowledge are
maintained to help deliver the Company’s long term strategy
and objectives.
Reviewed the skills required to achieve the Group’s strategy and
completed the appointment of Jock Lennox as Non-Executive
Director and Audit Committee Chair designate. Completed the
appointment of Neil Cooper as Chief Financial Officer.
Succession planning
Increased focus on succession planning for the Board as a
whole but more specifically for Non-Executive Directors and
Senior Management.
David Thomas appointed as Chief Executive, he previously
held the role of Group Finance Director.
Identified that Mark Rolfe was coming up to nine years’ service
and appointed Jock Lennox as a new Non-Executive Director.
Diversity review of the business undertaken and steps
identified and implemented to increase diversity levels
throughout the Group.
Board meetings
Maintain the disciplines enshrined in Board processes such as
streamlined papers and pre-allocation of sufficient time to consider
and discuss matters fully.
Refocus agenda to give greater prominence to items for discussion
and requiring a decision as well as items of strategic significance to
make the Board decision making process as effective as possible.
Progress towards strategic actions now being considered in more
detail at each meeting.
Reduction of the size of Board and Committee packs to allow for
important information with supporting documentation to be included
in the exhibit book.
Board performance evaluation 2016
We last conducted an externally facilitated Board evaluation in respect of FY13. In accordance
with the Code, we therefore engaged the services of Independent Board Evaluation ('IBE') to
undertake the evaluation review for FY16. IBE also undertook the external evaluation for FY13
giving them a greater insight into how the Board and its procedures have developed over the
years. IBE has no other connection with the Company.
Board evaluation process
IBE attended meetings of the Board and its committees and interviewed all Board members
and key members of Senior Management. Their review covered the following:
> The performance of the Board and its principal committees generally and individually;
> board contribution to strategy and shareholder accountability;
> risk management;
> financial and operating reporting;
> succession planning (including diversity);
> inter-relationships between the Board and its Committees and between the Executive
and Non-Executive Directors;
> board Committees and decision making; and
> effectiveness of each Director.
56
Evaluation of the Chairman and Non-Executive Directors
As part of the 2016 Board Evaluation, IBE evaluated the effectiveness of the Chairman.
Interviews were held with each member of the Board and the result was unanimous support.
Of particular note was the Chairman's ability to steer the Board in a way that encourages
openness and transparency. In addition, his knowledge of the important issues requiring Board
debate and his focus on them during Board meetings was seen as a key strength. These findings
were presented to the Senior Independent Director who shared them with the Board (without the
Chairman being present) before providing feedback to the Chairman.
IBE also assessed the effectiveness of each Board Director, including the Non-Executive
Directors and provided feedback to the Chairman. The Chairman subsequently held one to one
meetings with each Director to discuss the findings and agree any areas of improvement or
training / development identified. There were no issues of any substance arising from this review.
In addition, in accordance with the requirements of the Code, the Chairman met at least once
with the Non-Executive Directors independently of the Executive Directors. The Non-Executive
Directors meet without the Executive Directors being present usually prior to or immediately
following Committee meetings.
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information 2016 External Board Effectiveness Evaluation Outcomes
IBE delivered their report to the June Board meeting. The results were generally positive and identified governance processes, shareholder accountability and relations,
selection of new Board members and Board culture as areas of particular strength. The areas of improvement identified were:
Table 3
2016 outcomes
Actions for 2017
2016 outcomes
Actions for 2017
Succession planning
Further work required to identify talent within the business
and to ensure that potential successors to Board roles are
developed.
Increased focus required on diversity (ethnic and gender)
throughout the business.
Executive Directors together with HR to focus on identifying
employees below Board level as potential future successors.
A programme on diversity led by the Chief Executive, has
commenced in FY16 and will be developed further in FY17.
Training and Development
To assess the requirements for Board training and development
for individual Directors.
Strategy
To have a longer term view on strategy for the Group.
Each Director to provide suggestions and an annual timetable
for training and development to be maintained.
Specific sessions to be held throughout the year to focus on
strategic issues identified by the Board.
Nomination Committee
All Committees are operating effectively with members understanding what is expected of them to undertake and discharge their responsibilities as well as their regulatory requirements.
To support the Board in identifying successors for Board and
committee members as well as Senior Management.
Continue the focus on simplifying remuneration structures over
the coming year.
Remuneration Committee
Audit Committee
The Committee is well versed in the detail of audit issues and
focus over the next year will be to include a more strategic view
of financial and audit issues.
Focus on diversity throughout the business especially with
regards to gender and ethnic diversity.
Information and support
The Chairman, with the assistance of the Company Secretary, ensures that the Board receives
accurate, timely and clear information. Each Director is issued with an agenda, briefing papers
and comprehensive operating and financial management reports for the period under review,
generally five working days before any Board meeting. The Company Secretary attends all
Board and Committee meetings and all Directors have access to her advice and, if necessary,
to independent professional advice at the Company’s expense to assist with the discharge
of their responsibilities as Directors.
All Directors are provided with a rolling three-year schedule of proposed meeting dates.
Any Director who is unable to attend a meeting is invited to provide their views to the Chairman
ahead of that meeting, having reviewed the agenda, briefing papers and management
information. Reasons for non-attendance are recorded by the Company Secretary and either
she or the Chairman will meet with any absent Director to go through any action points which
are of relevance. Formal minutes of each Board meeting are prepared, circulated and submitted
for approval at the next meeting.
Training
The Chairman regularly reviews training requirements of, and annually agrees development
needs with, individual Directors. A number of internal presentations and updates are provided to
Directors as part of the Board and strategy agenda. This forms part of the training the Directors
receive for their role. Subjects are chosen based on their impact on the business and include
(but are not limited to) general economic and market updates, government and regulatory
environment, our customers, financial updates and planning, sales and product development.
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Corporate governance report – Effectiveness continued
Induction
On joining the Company, each new Director participates in a full and formal induction process.
The aim of the induction is to assist the Director to familiarise himself with the business and
its culture in addition to the roles and responsibilities of the Board and each member of Senior
Management. Site and divisional / functional visits are arranged so the Group’s business is
seen in operation. Each new Director is provided with an induction pack containing general
and specific information relating to their role such as a schedule of meetings, copies of Board
minutes, various policies and procedures, details of their duties as a Director of a listed plc and
other obligations under the various regulations governing the Company.
Neil Cooper's induction
Neil Cooper was provided with a tailored induction process which included, amongst other
matters, health and safety training, site visits, meetings with all Board members and the
Company Secretary, key external advisers and senior and operational management teams
across the business. This enabled him to gain a greater understanding of our products,
processes and policies. Neil met with the Group's brokers and analysts to gain an external
perspective of items of importance to the Group. He also met major shareholders of the
Company during investor meetings.
David Thomas' induction
David Thomas' induction was focused on his new role as Chief Executive given that he was
already familiar with the Group's operations having previously held the position of Group
Finance Director. He worked closely with Mark Clare to gain a more in-depth view of the role
and the associated responsibilities to ensure a smooth transition. During this period David met
with external analysts and stakeholders and internal management allowing him to gauge for
himself the priorities of the business.
Neil Cooper visiting the Group Urban Design team at the Group Support Centre in Leicestershire.
Pictured with Phillip Livesley, Senior Urban Designer.
David Thomas on a health and safety visit to our Saxon Rise site at Mercia. Pictured with Group SHE Director,
Vince Coyle and Projects Manager, Ian Green.
58
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Jock Lennox's induction
Jock Lennox’s induction began as soon as he accepted his appointment. He was sent various
documents for him to begin to understand the Company and its culture. As an experienced
Non-Executive Director, Jock was already familiar with his obligations as a plc Director of a
listed company. Meetings were arranged with all Board members and members of Senior
Management. Jock also visited various regional offices and sites across the country including
the Group Support Centre in Leicestershire.
Jock Lennox visiting a sales office at our Malbank Waters site in the Central region.
Pictured with Angela O’Neill-Walker, Sales Adviser.
Accountability
Internal controls and risk management
In accordance with provision C.2.3. of the Code, the Board monitors and regularly reviews the
effectiveness of the Group’s system of internal controls, including those related to material
financial, operational and compliance performance and the risk management systems (see
the Audit Committee report on pages 66 to 73). A risk framework has been developed for
all business processes by the Internal Audit function and approved by the Audit Committee.
This framework forms the basis of the internal control audit plan for the year ahead, which tests
if key controls are being applied effectively in each operating division. Material issues identified
during internal audits and follow-up action plans are reviewed by the Executive Directors and
by the Board on a quarterly basis. Any necessary actions are immediately taken to remedy any
significant failings in the internal control system.
The Group’s system of internal controls is designed to manage risks that may impede the
achievement of the Group’s business objectives rather than to eliminate those risks entirely.
The system of internal controls therefore provides only reasonable, not absolute, assurance
against material misstatement or loss. The system of internal controls does, however, provide
reasonable assurance that potential issues can be identified promptly and appropriate remedial
action taken. Further details can be found in the risk management section of the Strategic Report
(pages 41 to 45).
The Group operates internal controls to ensure that the Group’s Financial Statements are
reconciled to the underlying financial ledgers. A review of the consolidated accounts and
Financial Statements is completed by management to ensure that the financial position and
results of the Group are appropriately reflected.
The Board has not identified nor been advised of any failings or weaknesses which it has
determined to be significant. Therefore, a confirmation of necessary actions has not been
considered appropriate.
Fair, balanced and understandable
As part of its considerations, the Board reflected upon the feedback shareholders provided in
respect of our 2014/15 Annual Report and Accounts. It also set aside adequate time to review
and discuss significant areas of the 2015/16 Annual Report and Accounts.
The Board assessed the tone, balance and language of the document being mindful of the
requirements of the Code and the need for consistency between the narrative section of the
Report and the Financial Statements in arriving at its conclusion. The Board's formal statement
on the Annual Report and Accounts being fair, balanced and understandable is contained
within the Director's Responsibility Statement on page 104. The process undertaken by the
Audit Committee to assist the Board in assessing if the Annual Report and Accounts were fair,
balanced and understandable can be found on page 69.
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Corporate governance report continued
Relations with shareholders
2015
Activity
July
August
September
October
November
December
> Post year end trading update.
> Analyst hospitality event.
> Full year results preparation.
> Annual update on
remuneration to major
investors and principal
investor advisory groups.
> Full year results
announcement and
analyst presentation.
> UK and US roadshows
following the full year
results announcement.
> Institutional broker sales
desk briefings.
> Private client
brokers roadshow.
> Annual Corporate
Governance meetings with
major shareholders.
> Trading update and Annual
> Private client brokers
General Meeting.
> Institutional broker sales
desk briefings.
> Top shareholders and key
investor roundtable chaired
by Chief Executive and Senior
Management team.
group meeting.
> Chief Financial
Officer introductory
analyst meetings.
Ad hoc meetings with existing and potential investors and sell-side analysts
The Board recognises the importance of having an effective relationship with its shareholders
and other stakeholders. The Group has arrangements in place which enable it to communicate
effectively with shareholders in respect of business strategy, governance, remuneration and any
Senior Management or Board changes. It also conducts regular institutional investor meetings
after the release of the annual and half year results and following the publication of each of our
trading updates.
Trading Updates
We are fully aware that the Disclosure and Transparency Rules have removed the requirement
for companies to publish interim management statements to the market in between the full and
half year results. We therefore undertook a review of our reporting frequency and, given the
cyclical nature of our business, we believe that it is imperative that we keep our shareholders
fully informed of the performance of the business on a regular basis. In addition, given that we
only publish short trading updates four times a year, two of which are in preparation for the half
and full year results, the burden on management time is not deemed to be excessive. We will
therefore continue to publish trading updates in FY17 four times a year and will keep the position
under review.
Any announcement published via the Regulatory Information Service including the half year
and annual results, trading updates and other Company announcements can be found on the
Company’s website at www.barrattdevelopments.co.uk/investors.
investor relations activities, including updates from the Company’s brokers. Additionally, the
Company’s brokers presented an analysis of investor feedback during the year under review.
Investor Meetings
The Chief Executive and the Chief Financial Officer meet regularly with investors and analysts
in order to convey an understanding of the market and the Group’s operations and objectives.
These meetings take place throughout the year but particularly after the annual and half year
results announcements. In FY16, the Directors attended a total of 161 investor meetings (133 one
to one meetings and 28 group meetings). In addition, they attended a number of conferences and
investor roadshows in the UK and the US. The Chairman and other Non-Executive Directors also
have the opportunity to attend meetings with major shareholders at the request of either party.
The Senior Independent Director is available to meet with major shareholders, as and when
required, to gain an understanding of any issues and concerns.
Remuneration Committee
During the year, the Chairman of the Remuneration Committee consulted with major investors
and the principal investor advisory groups on the proposed remuneration outcomes for FY15
and the Group’s approach to remuneration for FY16, in accordance with the Remuneration Policy
approved at the 2014 AGM. This process was also repeated in August 2016 in respect of the FY16
outcomes and proposals for FY17.
Board Updates
Annual General Meeting
In order to ensure that all Directors are aware of, and have a clear understanding of, the views of
major shareholders, the Chief Financial Officer reports regularly to the Board on the Company’s
All Directors, including the Chairmen of the Committees, attend the AGM and are available to
answer shareholder questions. The notice of each AGM and related papers are circulated to all
shareholders at least 20 working days before the meeting.
60
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Strategic ReportGovernanceFinancial StatementsOther Information 2016
Activity
2016
Activity
January
January
> Post half year end
> Post half year end
trading update.
trading update.
> Institutional broker sales
> Institutional broker sales
desk briefings.
desk briefings.
February
> Half year results
> Half year results
February
announcement and
announcement and
analyst presentation.
analyst presentation.
> UK roadshow
> UK roadshow
following the half year
following the half year
results announcement.
results announcement.
> Institutional broker sales
> Institutional broker sales
desk briefings.
desk briefings.
March
March
> US roadshow following the
> US roadshow following the
half year results.
half year results.
> Private client brokers group
> Private client brokers group
meeting. (Edinburgh).
meeting (Edinburgh).
April
> Private client
> Private client
April
brokers roadshow.
brokers roadshow.
> Institutional broker sales
> Institutional broker sales
desk briefings.
desk briefings.
> Paris roadshow following the
> Paris roadshow following the
half year results.
half year results.
May
May
> Q3 trading update.
> Trading update.
> Institutional broker sales
> Institutional broker sales
desk briefings.
desk briefings.
> Goldman Sachs Small & Mid
> Goldman Sachs Small & Mid
cap Symposium.
Cap Symposium.
> Deutsche Bank
> Deutsche Bank
Housebuilding conference.
Housebuilding Conference.
June
> Institutional broker sales
> Institutional broker sales
June
desk briefings.
desk briefings.
> UBS UK Housing Seminar.
> UBS UK Housing Seminar.
> Peel Hunt Builders,
> Peel Hunt Builders,
Industrials and Support
Industrials and Support
Services Conference.
Services Conference.
Ad hoc meetings with existing and potential investors and sell-side analysts
Ad hoc meetings with existing and potential investors and sell-side analysts.
Major shareholders
In accordance with the UKLA’s Disclosure and Transparency Rules (the ‘DTRs’),
all notifications received by the Company are published on the Company’s website
www.barrattdevelopments.co.uk and via a Regulatory Information Service.
As at 30 June 2016, the persons set out in Table 4 have notified the Company, pursuant
to DTR 5.1, of their interests in the voting rights in the Company’s issued share capital.
Between 1 July 2016 and 6 September 2016 the following changes in respect of interests in the
voting rights in the Company’s issued share capital have been notified to the Company:
Name
BlackRock, Inc.
Number of
voting rights1
50,693,351
% of total
issued share
capital1
5.05
Nature of
holding
Indirect
Table 4 – Notifiable Interests
Name
BlackRock, Inc.
Capital Research and Management Company
FMR LLC
Standard Life Investments Ltd
Number of
voting rights1
50,694,370
89,384,141
34,579,199
47,711,714
% of total issued
share capital
when notified
1 Based on the Total Voting Rights as at the relevant notification dates.
The Total Voting Rights of the Company as announced on 1 September 2016, are 1,003,771,524.
Nature of
holding
On behalf of the Board
5.05
8.97
8.24
4.94
Indirect
Indirect
Indirect
Direct & Indirect
John Allan
Chairman
6 September 2016
1 Represents the number of voting rights last notified to the Company by the respective shareholder in accordance with DTR 5.1.
Barratt Developments PLC – Annual Report and Accounts 2016
61
Strategic ReportGovernanceFinancial StatementsOther Information Nomination Committee report
Statement from the Chairman of the Nomination Committee
The Nomination Committee plays a vital role within the business. It ensures that the Company
is headed by an effective Board which is collectively responsible for the long term success of
the Company. Through the strategic focus of the Nomination Committee, we can ensure that
the Board has the optimum skills and experience for achieving its long term strategy and goals.
We aim to build a responsive, open and transparent culture, where contributions are valued,
so it is imperative to get the appointment process right.
A key focus of the Nomination Committee during the year under review was the appointment
and re-appointment of Non-Executive Directors and the external Board evaluation.
One of our key areas of focus for the next financial year will be to oversee the implementation
of the recommendations of the performance evaluation of the Nomination Committee.
John Allan
Chairman of the Nomination Committee
6 September 2016
This has been a year of
consolidation for the Nomination
Committee following the changes
to the Executive Directors in FY16.
John Allan
Nomination Committee
Chairman
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Strategic ReportGovernanceFinancial StatementsOther Information Nomination Committee activity FY16
Main activities undertaken during the financial year
The Nomination Committee met formally on three occasions during the year to fulfil the responsibilities delegated to it by the Board.
The main areas of focus for the Nomination Committee during the year were as follows:
Board composition and balance
> Reviewed skills, experience and knowledge of each
Board member and of the Board as a whole, against
the needs of the Board.
> Considered and recommended to the Board the
re-appointment of Nina Bibby as Non-Executive
Director (pages 64 and 65).
Succession planning
> Conducted external recruitment process for a new
Non-Executive Director (page 64).
> Considered and recommended Richard
Akers as a successor to Mark Rolfe as Senior
Independent Director.
> Assessed the tenure of Board members and held
discussions with Directors on expected length
of service in order to inform the succession plan
(page 65).
Governance
> Considered and confirmed the independence
of, and commitment to the role of, each Non-
Executive Director.
> Considered and recommended to the Board the
authorisation of the potential conflict of interest arising
from Neil Cooper’s role as Non-Executive Director
of Pennon Group PLC.
> Undertook an annual review and recommended to
the Board the renewal of the authorisation of existing
Directors’ potential conflict of interests.
> Approved a new procedure for conflicts and potential
conflicts to be reviewed by Directors at each Board
meeting and not just annually (page 65).
> Reviewed and approved its annual agenda and terms
of reference.
Committee effectiveness
> Reviewed and made progress against matters arising
from the 2015 annual evaluation.
> Undertook an external evaluation of its own
performance and reviewed and devised an action
plan to address issues arising (page 57).
Nomination Committee Terms of Reference: www.barrattdevelopments.co.uk/investors/corporate-governance/governance-policies
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Nomination Committee report continued
Role
The role of the Nomination Committee includes:
> monitoring the structure, size and composition of the Board;
> evaluating the balance of skills, experience, independence and knowledge of each
of the members;
> making recommendations to the Board in respect of any changes required;
> leading the process for Board appointments;
Appointment and re-appointment of Directors
The Nomination Committee leads the process for appointments to the Board and makes
recommendations to the Board when suitable candidates have been identified. When a vacancy
arises the Nomination Committee evaluates the balance of skills, experience, independence
and knowledge on the Board and considers this against current and future needs to deliver
its strategy. It then prepares a description of the roles and capabilities required for that
appointment. The search for Board candidates is carried out, and appointments made, on merit
with due regard for Board diversity and the need to maintain an appropriate balance of skills and
experience. External recruitment consultants are used where appropriate.
> giving full consideration to succession planning for Directors and Senior Management
in the course of its duties;
Appointment of Jock Lennox
> regularly reviewing the time commitment required from the Chairman and the
Non-Executive Directors to satisfactorily fulfil their roles; and
> considering and, if deemed appropriate, authorising potential conflict of interests.
Membership and attendance at meetings
The membership of the Nomination Committee and the attendance at each of its scheduled
meetings is set out in Table 5. In accordance with Code provision B.2.1. the majority of Committee
members are considered independent by the Company and their biographies and qualifications
are shown on pages 46 and 47.
Table 5
Member
John Allan
Richard Akers
Tessa Bamford
Nina Bibby
Mark Rolfe
David Thomas¹
Role
Chairman
Member
Member
Member
Member
Member
Number of meetings attended
3/3
3/3
3/3
3/3
3/3
2/3
1 David Thomas was unable to attend one meeting due to personal reasons. He reviewed the papers and provided comments
to the Chairman prior to the meeting.
Note:
3/ Number of meetings attended whilst a Director.
/3 Number of meetings held whilst a Director.
During the year, the Nomination Committee began a formal process to identify a suitable
candidate to replace Mark Rolfe who indicated his intention to step down from his position
through an orderly transition following eight years of service. Consideration was given to the
skills and experience required of the new Director and a job description was produced. The Zygos
Partnership, an independent recruitment agency, with no other connection to the Company, were
then briefed in order that they could assist with the search. A list of candidates of both genders
was prepared and reviewed by the Nomination Committee. Four candidates were shortlisted and
met with the Chairman and Senior Independent Director. The two preferred candidates then met
the remaining members of the Board. Jock Lennox, who is the Chair of a number of other Audit
Committees and who demonstrated that he had the relevant financial experience, was selected
to take on the role of Chairman of the Audit Committee. The Committee felt that his considerable
and wide ranging experience would be an asset to the Group and recommended his appointment
to the Board for approval. John Allan absented himself from the final decision to appoint Jock
Lennox due to his previous working relationship with Jock at Dixons Carphone plc.
Re-appointment of Non-Executive Directors
Non-Executive Directors are appointed by the Board for an initial three-year term and normally
serve a second three-year term, subject to re-election by shareholders and statutory provisions
relating to the removal of Directors. Beyond this a third term of up to three years may be
served subject to particularly rigorous review and taking into account the need for progressive
refreshment of the Board. The Articles, in accordance with the Code, require any Non-Executive
Director who has served nine years or more on the Board continuously to be subject to annual
re-appointment.
The letters of appointment of all Non-Executive Directors (alongside the service contracts for the
Executive Directors) are available for inspection by any person at the Company’s registered office
during normal office hours or via the Company’s website (www.barrattdevelopments.co.uk).
Copies will also be available at the 2016 AGM for 15 minutes before and throughout the
meeting. The letters of appointment clearly set out the time commitment expected from each
Non-Executive Director to ensure they satisfactorily perform their duties. The required time
commitment is reviewed annually by the Board. Each Non-Executive Director confirms that
they are able to allocate the time commitment required at the time of their appointment and
thereafter as part of their individual annual effectiveness review undertaken by the Chairman.
64
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information During the year, the Nomination Committee considered the re-appointment of Nina Bibby.
The Nomination Committee was satisfied that Nina remains independent in character and
judgement and has no other relationship or circumstance that would affect this. Nina confirmed
that she would be able to continue to dedicate sufficient time to fulfil her role as a Non-Executive
Director of the Company. Accordingly, the re-appointment of Nina for a second three-year term
was recommended to the Board, which it fully endorsed.
Retirement and re-election of Directors
The Articles currently require Directors to submit themselves for re-election by shareholders
at the first AGM following their initial appointment to the Board and thereafter at intervals of no
more than three years. All Board members will, however, in accordance with the Code, stand for
re-election by shareholders at the 2016 AGM irrespective of their date of appointment and length
of service on the Board.
Biographical details of each of the Directors and supporting statements for their re-election
are set out on pages 46 and 47 of this report and in the Notice of the 2016 AGM. Details of the
Executive Directors’ service contracts can be found in the Remuneration report on page 83.
Each of the Directors has been subject to a formal performance evaluation process and the
Nomination Committee, and the Board, are satisfied that they each continue to be effective in,
and demonstrate commitment to, their respective roles. The Board, therefore, recommends
that shareholders approve the resolutions to be put forward at the 2016 AGM relating to the
re-election of all Directors.
Succession Planning – Executive Directors
During the year, the Board undertook its annual review of the Group's succession plans.
This involves a review of succession plans for Executive Directors and other Senior Management
roles below Board level. The aim of this review is to identify suitable individuals who are capable
of filling senior managerial positions and ensure that their development needs are identified
and addressed. It also seeks to ensure that the Board's future needs are met. As part of their
development, senior managers who are not of Board level will be invited to attend part of a Board
meeting to present on their specialist area. This also enables the Board to assess the quality of
internal talent and for the individual to get a greater understanding of the workings of the Board.
In order to assist with the development of senior managers, they are able to take on non-
executive roles with other organisations in order that they can widen their experience.
The Nomination Committee plays an active part in this process. It intends to place a greater
focus on succession planning during the next year in response to the outcomes of the recent
external effectiveness review.
Succession Planning – Non-Executive Directors
The Nomination Committee reviews annually the length of service of the Non-Executive
Directors and holds conversations with the longer serving members to create a plan for the
progressive refreshment of the Board.
Directors’ conflict of interests
The Board has, in accordance with the Articles and best practice guidelines, authorised the
Nomination Committee to oversee the process for reviewing and making recommendations to the
Board concerning any actual or potential conflict of interests which may arise for any Board member,
including details of any terms and conditions which it deems necessary to impose on any authorisation
given. This process was carried out satisfactorily during the year in respect of all Directors.
The Company Secretary maintains a register of Directors’ conflict of interests which is reviewed
annually with recommendations made to the Board in respect of any changes to the authorisations
that may be required. Following the annual review for 2015, it was agreed that the register of
conflicts would be reviewed at each Board meeting. This enables each Director to review their
entries and notify the Chairman and/or the Board of any new conflict or possible conflict and of any
change in circumstances relating to authorisations already given. The Board, when authorising
any conflict or possible conflict of interests, does not count in the quorum the Director whose
conflict or possible conflict is being discussed and reserves the right to exclude a Director from
a meeting whilst a conflict or possible conflict is being considered. The Board may revoke or vary
any authorisation at any time.
Board diversity policy
During the year, the Nomination Committee reviewed the Group’s policy on diversity, including
professional, international and gender diversity. This policy was in turn also considered by the
Board. The Nomination Committee’s primary goal remains to identify the most suitable candidate to
join the Board and for other senior positions within the Group. However, it also seeks to ensure that,
in managing an appointment and in succession planning, it has regard to the benefits of diversity,
including but not restricted to gender diversity and its impact on effective decision making.
In terms of gender diversity the Board will continue to work only with recruitment search consultants
who have adopted a voluntary code of conduct addressing gender diversity. The Board has agreed
not to impose a quota regarding gender balance preferring instead to appoint strictly on merit.
The Nomination Committee and the Board do recognise the need to ensure that the business reflects
a diverse workforce, at all levels of seniority, whilst always seeking to ensure that each post is offered
to the best available candidate. Promoting diversity at a Senior Management level and more generally
within the workforce is an objective for the Chief Executive and HR Director. Progress has been made
with promoting diversity within the business (see page 35, Diversity and inclusion).
Barratt Developments PLC – Diversity Policy
www.barrattdevelopments.co.uk/sustainability/our-policies
This report forms part of the Corporate governance report and is signed on behalf of the
Nomination Committee by:
John Allan
Chairman of the Nomination Committee
6 September 2016
Barratt Developments PLC – Annual Report and Accounts 2016
65
Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee report
Statement from the Chairman of the Audit Committee
I am very pleased to present the Audit Committee report for the financial year ended 30 June
2016. During the year, as required by the Code, we have addressed the requirements of the new
long term viability statement and the Board has accepted our recommendations on the form
of that statement and the related review period (see page 43 of the Strategic Report).
In this year's Committee meetings, we have had frequent discussions on key accounting
judgements and the impact of the pipeline of new accounting standards. We have also held
in-depth sessions with Senior Management on a variety of topics important to the business
including: revenue recognition, tender processes, IT resilience, cyber security and pension
provision and funding. This enables the Committee to truly understand the practical aspects
of the important issues facing the Group and their related accounting judgements and policies.
In performing our role we work closely with both internal and external audit teams in order
to ensure our internal control processes remain robust, our financial reporting remains clear
and concise and our accounting judgements are appropriate.
Areas of focus for FY17
FY17 is shaping up to be another busy year. After eight years as Chairman of this Committee,
I will be stepping down at the 2016 AGM and I am delighted to be handing over to Jock Lennox,
a very experienced Audit Committee Chairman. Jock joined the Board on 1 July 2016 and we
have been working together since then to ensure a smooth transition of ongoing matters relating
to the Audit Committee.
We will be tendering the Group's external audit during FY17. The Group's tax compliance and
advisory services will also be put out to tender. Further information is available on page 71.
The Audit Committee has been given its authority by the Board and acts in accordance with its
written terms of reference which are available on the Company’s website. In undertaking its role,
the Committee has complied with its duties under the Code and will take all necessary steps to
ensure compliance with the 2016 Code during FY17. Set out in the following pages is more detail
of how we have discharged those duties in respect of the financial year under review.
It has been a pleasure to serve you and the Company during my period in office.
Mark Rolfe
Chairman of the Audit Committee
6 September 2016
The Audit Committee has continued to implement
the changes to Corporate Governance best practice
and monitor developments in accounting standards.
We have reviewed the risk landscape of the business
and considered in detail our principal risk areas.
We are comfortable that the risk management and
internal control framework in operation throughout
the year was appropriate and effective.
Mark Rolfe
Audit Committee
Chairman
66
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Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee activity FY16
Main activities undertaken during the financial year
The Audit Committee follows an annual work programme; this covers the principal responsibilities as set under its terms of reference, which was fully completed during the year.
The main areas of focus for the Audit Committee during the year were as follows:
Going concern and viability statement
> Assessed the Group’s available facilities, headroom
and banking covenants.
> Reviewed and challenged management’s
detailed analysis, which included forecasts and
scenarios considering potential downturns in the
housing market.
> Satisfied itself, and recommended to the Board, that
the going concern basis of preparation continues
to be appropriate (page 68).
> Assessed the long term prospects of the Company in
order to agree a viability statement for disclosure in
the FY16 Report and Accounts (page 43).
Committee effectiveness
> Considered and made progress against matters
arising from the 2015 annual evaluation.
> Undertook an external evaluation of its performance.
> Reviewed and devised an action plan to address
the issues arising from the 2016 annual evaluation
(page 57).
Governance
> Agreed to the appointment of Jock Lennox as Audit
Committee Chairman designate prior to Mark Rolfe's
retirement from the position after the AGM (page 64).
> Considered and recommended for approval the
proposed corporate governance disclosures for the
2016 Annual Report and Accounts including fair,
balanced and understandable (page 69).
> Received updates on general corporate
governance requirements, including proposals and
recommendations for the viability statement in line
with the Code.
> Reviewed and updated its terms of reference.
External audit
> Agreed external audit plans for the half and full year ends.
> Considered the external auditor's reports on half and full year
financial statements.
> Met with the external audit partner without management being present.
> Assessed the effectiveness and performance of the external audit (page 71).
> Assessed and confirmed the independence of the external auditor (page 72).
> Considered the process and timing for retendering the Group’s external
audit (page 71).
> Regularly reviewed the ratio between audit and non-audit fees (page 72).
> Reviewed and updated the policy on auditor independence and
non-audit fees (page 72).
Internal Audit
> Received regular updates from the Chief Internal
Auditor on matters arising from audits undertaken
throughout the business.
> Met with the Chief Internal Auditor without
management being present.
> Reviewed and agreed the Internal Audit plan for FY17
with due regard to the principal risks of the Company.
> Assessed the effectiveness of the Internal Audit
function during FY16.
Integrity of financial statements
and announcements
> Analysed drafts of half and full year results
announcements.
> Reviewed and addressed key accounting judgements
and significant issues (see pages 68 and 69).
> Assessed proforma financial statements for FY16.
> Reviewed process established to confirm if Annual
Report and Accounts are fair, balanced and
understandable (page 69).
> Considered and approved material accounting policies,
estimates and judgements.
> Assessed and approved pension assumptions.
> Received updates on the implications of new
accounting standards and key regulatory changes.
Internal control and risk management systems
> Monitored and regularly reviewed the effectiveness of
internal controls and risk management systems in the
context of the Company’s ‘appetite for risk’ (page 70).
> Considered regular updates from the Risk Committee.
> Considered regular updates from the Chief Internal
Auditor upon whistleblowing and suspected frauds
and related investigations (page 73).
> Reviewed and updated the policy framework and the
policies specifically allocated to it.
> Kept under review the updating of the Group’s
Delegation of Authority Matrix.
> Received updates on the Group’s disaster recovery
policies and processes.
> Reviewed and recommended to the Board for approval
the principal risk disclosures for inclusion in the FY16
Annual Report and Accounts (page 42).
Barratt Developments PLC – Annual Report and Accounts 2016
67
Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee report continued
Role of the Audit Committee
The role of the Audit Committee is to:
> monitor the integrity of the Group’s financial statements and any proposed formal
announcements relating to the Group’s financial performance, including any significant
financial reporting judgements and whether the Annual Report and Accounts are ‘fair,
balanced and understandable’ and review and assess whether it provides sufficient
information to assess the Company's position, performance, business model and strategy;
Table 6
Member
Mark Rolfe
Richard Akers
Tessa Bamford
Nina Bibby
Role
Chairman
Member
Member
Member
> assess the prospects of the Company over a period of time agreed by the Board and consider
and confirm whether there is a reasonable expectation that the Company will be able to
continue in operation;
Note:
4/ Number of meetings attended whilst a Director.
/4 Number of meetings whilst a Director.
Number of meetings attended
4/4
4/4
4/4
4/4
> monitor and review the effectiveness of the Internal Audit function;
> review the Company’s principal risks, systems of internal control and risk management; and
> keep under review the relationship between the Group and the external auditor, including
their re-appointment, independence and objectivity and the effectiveness of the external audit
process, whilst continually monitoring and, where required, challenging the ratio between
audit and non-audit fees.
Audit Committee terms of reference – www.barrattdevelopments.co.uk/investors/
corporate-governance/governance-policies
In addition to the Company Secretary, the Chief Internal Auditor and representatives from
Deloitte LLP attended each of the Audit Committee meetings. The Audit Committee met
(independently of management and the Chairman of the Board) the Chief Financial Officer,
the Chief Internal Auditor and Deloitte LLP. The Chief Executive and other members of Senior
Management also attended meetings (or parts thereof), by invitation. After each meeting,
the Chairman reports to the Board upon the business undertaken by the Audit Committee.
Significant issues considered during the financial year
The significant issues considered by the Audit Committee during the financial year and how
each of them was addressed were as follows:
Membership and attendance at Audit Committee meetings
In compliance with the Code, the Committee comprises exclusively of Non-Executive Directors
and each of the members is considered to be independent by the Company. John Allan is not a
member of the Audit Committee. The Board is satisfied that, Mark Rolfe has recent and relevant
financial experience to Chair the Audit Committee. Jock Lennox, who joined the Board on 1 July
2016, will succeed Mark Rolfe as Chair of the Audit Committee in November 2016. Jock is a
chartered accountant and Chairman of a number of other Audit Committees and is therefore
well qualified to undertake this role effectively. There were four scheduled meetings during the
year. Details of the members and attendance at each of the meetings is shown in Table 6 and
the biographies and qualifications of the members are shown on pages 46-47.
Going concern
The Audit Committee:
> assessed the Group’s available facilities, headroom and banking covenants;
> reviewed management’s detailed analysis, which included forecasts and scenarios considering
potential downturns in the housing market;
> satisfied itself, and subsequently the Board, that the going concern basis of preparation
continues to be appropriate in the context of the Group’s funding and liquidity position;
> considered the revised disclosure requirements on going concern under the Code; and
> performed a detailed sensitivity analysis following the UK's decision to leave the EU.
Further details on the Group’s going concern assessment can be found on page 115.
Financial reporting
The Audit Committee reviewed the integrity of the Financial Statements of the Group and the
Company and all formal announcements relating to the Group’s and Company’s financial
performance. This process included the assessment of the following primary areas of judgement
and took into account the views of Deloitte LLP.
68
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Strategic ReportGovernanceFinancial StatementsOther Information
Significant financial judgements for 2016
Carrying value of land and work in progress
Goodwill and intangible assets impairment review
Land and work in progress (‘WIP’) are the most significant assets of the Group and as at 30 June 2016 were
carried at £4,226.5m (see note 3.1 to the Financial Statements). We undertake housebuilding and commercial
development and the majority of activity we carry out is not forward sold before we commence development.
Accordingly, there is a risk that land and WIP may be held at a value in excess of the lower of cost and net
realisable (sale) value. The Group conducts half yearly reviews of land and WIP carrying value and if the
estimated net realisable value is lower than the carrying value, it impairs the land and WIP value.
The Group has £792.2m of goodwill and £100.0m of intangible assets which arose upon the acquisition of
Wilson Bowden (see note 4.2 to the Financial Statements). The Group reviews the carrying value of these assets
on an annual basis to ensure that the present value of the future cash flows that the housebuilding business
is expected to generate is greater than the carrying value of these assets. This review includes a number of
judgements around the estimation of future cash flows and the determination of an appropriate rate with which
to discount these cash flows.
How the Audit Committee addressed those judgements
Carrying value of land and work in progress valuation
The Audit Committee considered land and WIP accounting judgements review papers at its February, June
and August meetings. These outlined the review process undertaken and the judgements made with regards
to the estimation of further sales proceeds and further build costs. Deloitte LLP reported upon land and WIP
carrying value at the February and August meetings in the context of the half year review and year end audit.
Following detailed consideration of the accounting judgements papers and the findings of Deloitte LLP, the Audit
Committee agreed with the judgements made by management and concluded that the carrying value of our
land and WIP remains appropriate.
Goodwill and intangible assets impairment review
The Audit Committee considered a goodwill and intangible assets accounting judgements paper at its August
meeting. This outlined the assumptions made, the sources for these assumptions, and the resulting valuation.
Deloitte LLP reported upon goodwill and intangible assets valuation at the August meeting in the context of the
year end audit. Following detailed consideration of the accounting judgements paper and the findings of Deloitte
LLP, the Audit Committee agreed with the judgements made by management and concluded that the valuation
of goodwill and intangible assets remains appropriate.
Available for sale financial assets was included as a significant financial judgement for 2015 but due to the sale of the majority of the assets, as described in note 3.5 of the financial statements,
this is no longer considered a material item.
Fair, balanced and understandable
Long Term Viability Statement
The Audit Committee also undertook a detailed process to consider whether the 2016 Annual
Report and Accounts were fair, balanced and understandable. It considered the feedback
provided by shareholders in respect of the 2015 Annual Report and Accounts, the Group’s
trading updates and the information that the Board had received throughout the year. The Audit
Committee received an early draft of the 2016 Annual Report and Accounts (including the risk
management statement and principal risks disclosure) to allow itself sufficient time to review
the disclosures therein. It also received a report from the Company Secretary which confirmed
that: (i) the Annual Report and Accounts had been reviewed by the Executive Directors; and
(ii) the Company had received confirmation from its external advisers, that the Annual Report
and Accounts adhered to the requirements of the Code and relevant rules and regulations.
The Audit Committee then assessed, at its August 2016 meeting, whether the Annual Report and
Accounts were fair, balanced and understandable. It reviewed the processes underpinning the
compilation and assurance of the Annual Report and Accounts, in relation to the financial and
non-financial management information. It also reviewed the internal processes underpinning the
Group’s reporting governance framework and the reviews and findings of the Group’s external
legal advisers and the auditor. The Audit Committee concluded that the 2016 Annual Report
and Accounts were fair, balanced and understandable and contained sufficient information for
shareholders to assess the Company’s position, performance, business model and strategy and
recommended as such to the Board.
In accordance with section C.2.2. of the Code and the FRC guidance on Risk Management,
Internal Control and Related Financial and Business Reporting, the Audit Committee considered
the timescale over which it could sensibly assess the Company’s ability to continue to trade,
taking into account the Company’s business model and prospects. It concluded that this analysis
should be performed over a three-year timespan as explained on page 43 of the Strategic
Report. Presentations were received from management and it was concluded that there was
a reasonable expectation that the Group would be able to continue in operation and meet its
liabilities over this three-year period. This was then communicated and recommended to the
Board for approval.
The long term viability statement with a full explanation is shown on page 43 of the
Strategic Report.
Barratt Developments PLC – Annual Report and Accounts 2016
69
Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee report continued
The effectiveness of internal controls and the risk management process
The Audit Committee plays a vital role in managing the effectiveness of internal controls and
the risk management process on behalf of the Board. The key aspects of the Group’s system
of internal control and risk management framework are as follows:
i)
a clear organisational structure with defined levels of authority and responsibility for each
operating division;
ii) financial and management reporting systems under which financial and operating
performance is consistently reviewed against budget and forecasts at divisional, regional
and Group levels on a monthly basis;
iii) identification and review of principal operational risk areas to ensure they are embedded
in the Group’s monthly management reporting system. This embeds the identification and
control of risk as routine aspects of managerial responsibility. Details of the management
of risk system utilised and the principal risks and uncertainties and their relevance to the
operations and financial performance of the Group are set out in the Risk management
section on pages 41 to 45 of the Strategic Report; and
iv) assessment of compliance with the internal control and risk management systems.
This assessment is supported by the Group’s Internal Audit team which is responsible for
undertaking an annual audit plan, ad hoc audits and reporting to the Audit Committee, and if
necessary, the Board, on the operation and effectiveness of those systems and any material
failings. The planned programme of audit appraisals across Group operations is approved
by the Audit Committee. It includes full divisional audits and targeted audits of key risk areas
such as land acquisition and sale, cost controls and monitoring WIP, Treasury, payroll and HR.
Where the Internal Audit team does not have the expertise or resources required to conduct
complex audits they use external expertise.
The Group’s operations and financing arrangements expose it to a variety of financial risks
that include the effects of changes in borrowing and debt profiles, Government policy, market
prices, credit risks, liquidity risks and interest rates. The most significant of these to the Group
is liquidity risk. Accordingly, there is a regular, detailed system for the reporting and forecasting
of cash flows from the operations to Group management to ensure that risks are promptly
identified and appropriate mitigating actions taken. These forecasts are further stress tested at
a Group level on a regular basis to ensure that adequate headroom within facilities and banking
covenants is maintained. In addition, the Group has in place a risk management programme that
seeks to limit the adverse effects of the other risks on its financial performance, in particular by
using financial instruments, including debt and derivatives, to hedge interest and currency rates.
The Group does not use derivative financial instruments for speculative purposes. Activities are
delegated, by the Board, to a centralised Treasury Operating Committee, which in turn reports
to the Board. The Treasury department implements guidelines in accordance with approved
treasury policies that are established by the Board and the Treasury Operating Committee.
During the year the Audit Committee:
> monitored and reviewed the effectiveness of risk management and internal controls in relation
to material financial risks;
> reviewed a number of process improvements and confirmed that the risk management and
internal control systems had been in place and had operated effectively throughout the year
ended 30 June 2016;
> provided regular reports to the Board in respect of the findings of its monitoring of the
effectiveness of the internal controls and risk management process, in order to assist the
Board with its assessment that sound risk management and internal control systems had been
maintained throughout the year to safeguard shareholders’ investments as well as the Group’s
assets (in accordance with principle C.2 of the Code);
> assisted the Board to determine the nature and extent of the principal risks that are
appropriate for the Group to take in order to achieve its strategic objectives and to be assured
that Executive Directors and Senior Management continue to implement and maintain the
Group’s internal control and risk management systems within the governance and policy
framework approved by the Board;
> carried out a robust assessment of the principal risks including those that would threaten the
business model, future performance, solvency and liquidity and confirmed that they are being
appropriately managed;
> received presentations from management below Board level to understand risks and controls
in a number of areas of the business including; revenue recognition, tender processes,
IT resilience, cyber security, pension provision and funding;
> reviewed in detail the output of the six monthly control self-certification process from each
of the divisions;
> considered all whistleblowing and suspected fraud reports and actions;
> reviewed all internal audit results and action plans and the effectiveness of the Group Internal
Audit function;
> received regular reports from the Risk Committee in respect of the work it had undertaken
to review the effectiveness of the Group’s internal control policies and procedures for the
identification, assessment and reporting of risks and for assessing individual key risks on
a rolling basis;
> reviewed the concurrency of the principal risks and the risk management framework to
determine if the descriptions of their operation were up to date, the system of internal control
remains effective and reported their findings to the Board when considering the draft half year
and full year Financial Statements; assisted the Executive Committee to prioritise the risk
framework by identifying the risks considered most significant to the Group and assessed their
potential impact on the business of any risks identified; and
> robustly assessed the structure deployed by the Group when assessing risks. This is set out
in the Risk management section on pages 41 to 45 of the Strategic Report.
The Audit Committee is pleased with the progress with its short and medium term work
programmes to date, and recognises that work will need to be continued in these areas during
the next financial year. It will also review whether the internal control and risk management
framework needs adjustment following the EU referendum vote.
70
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Review of accounting policies
The Audit Committee considered the impact of the accounting standards adopted in the year
and reviewed the Group’s progress on projects to consider the impact of IFRS 9 ‘Financial
Instruments’, IFRS 15 ‘Revenue from contracts with customers’ and IFRS 16 'Leases' upon
the Group’s accounting policies and financial statements. Further information on the impact
of accounting standards is on page 116.
External Auditor
i) External audit tender
The Audit Committee considered the re-appointment of Deloitte LLP as auditor to the Company
and whether to tender the external audit in respect of the 2017 financial year. In arriving at its
conclusion, the Audit Committee took into account:
> feedback on the effectiveness of the external audit from divisional, regional and Group
management who were closely involved in both the half year and year end reporting process;
> Deloitte LLP was appointed as the auditor of the Company through an external tender process
in 2007;
> the appointment of Mark Goodey as the lead audit partner during FY13 and FRC guidance
which suggests that the tendering could align with the five-yearly cycle of partner rotation;
> Deloitte LLP’s objectivity and independence;
> Deloitte LLP’s performance against the audit plan for FY16; and
> the quality of advice and assistance brought to bear and received throughout the year.
Deloitte LLP’s performance as auditor to the Company continues to be satisfactory. It was
therefore, not considered absolutely necessary to perform a tender process for the FY17 audit.
Mark Goodey will continue to act as lead audit partner for Deloitte LLP until the conclusion of the
FY17 audit subject to satisfactory performance. Accordingly, the Audit Committee recommended
to the Board that a resolution re-appointing Deloitte LLP as the auditor to the Company be
proposed at the 2016 AGM. That recommendation was subsequently endorsed by the Board.
The Audit Committee did however recognise that it was the appropriate time for the Group
external audit to be tendered by following a formal process during the first half of the year ended
30 June 2017. Should the tender exercise lead to a change in auditor, the Audit Committee will
look to execute the change for the audit of the financial year ended 30 June 2018. This exercise
is in line with the Code provision to consider tendering external audit every ten years and the
FRC guidance that it be linked with the five-yearly lead audit partner rotation. The results of the
tender exercise will be announced at the appropriate time. The Committee confirms compliance
with the provisions of the Statutory Audit Services for Large Company Market Investigations
(Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014.
There are no contractual obligations that restrict the Audit Committee’s choice of
external auditor.
ii) Audit effectiveness
The Audit Committee assessed the effectiveness of the external audit and concluded that the
audit process as a whole had been conducted robustly and that the team selected to undertake
the audit had done so thoroughly and professionally. In coming to this conclusion the Audit
Committee reviewed amongst other matters:
> Deloitte LLP’s fulfilment of the agreed audit plan and the absence of any variations from it;
> reports highlighting the material issues and accounting judgements that arose during the
conduct of the audit;
> feedback from Group and regional management finance functions and the Chief Internal
Auditor on the performance of the audit; and
> the report from the FRC’s Audit Quality Review Team.
iii) Non-audit services
The Committee has approved a policy on the use of the external auditor for non-audit purposes
and continually monitors the ratio of audit to non-audit fees to ensure that it does not exceed
the 1:1 ratio prescribed by that policy. For the purpose of calculating this ratio, non-audit fees
relating to the interim review are classified as incurred for audit purposes. At the end of FY16,
non-audit fees represented 91% of audit fees. Further details of the audit (including audit-related)
and non-audit fees incurred by the Group can be found on page 119.
The majority of the non-audit fees related to audit-related assurance services comprising:
the review of the Group’s half year report, taxation compliance (for which Deloitte LLP were
appointed on 1 December 2010 following a competitive tender process in which four of the
leading audit firms took part); and also taxation advice on various land acquisitions and disposals
during the year. Accordingly, the Audit Committee was satisfied that the work performed
by Deloitte LLP was appropriate in the context of ensuring their independence as auditor,
particularly given that the audit-related assurance services, relating to the review of the Group’s
half year report, is usually conducted by the Group’s auditor and that the tax compliance and
advisory services had been managed by a partner who has no involvement with the audit of
the Group. Consequently, the Audit Committee concluded that the level of non-audit fees was
justified and did not raise any concerns in terms of Deloitte LLP’s independence as auditor to
the Group.
The Audit Committee has agreed with Senior Management's recommendation to tender its
taxation services during the first half of FY17, having last been tendered in FY11. The provider
of external audit following the audit tender will not be appointed as tax adviser.
Barratt Developments PLC – Annual Report and Accounts 2016
71
Strategic ReportGovernanceFinancial StatementsOther Information Audit Committee report continued
iv) Auditor independence and non-audit fees policy
Exceptions
The Audit Committee formally reviewed the policy which the Company has implemented on
Auditor independence and non-audit fees (the ‘Policy’) during the year. For FY16, the Policy sets
out the duties of the Audit Committee in this respect and the limited range of services which
the auditor may provide without requiring prior approval of the Audit Committee. This helps
to maintain auditor independence and to monitor non-audit fees incurred by the Group.
The review of the Policy this year had particular regard to the legislation arising from the
European Commission reforms of the EU audit market which became effective from 17 June
2016 and is in accordance with the Ethical Standard. The Policy has been updated as follows:
> the services that the external auditor is prohibited from providing have been amended in line
with the legislation; and
> the inclusion of a 70% cap on non-audit fees (based on the average of audit fees over the
previous three years) in preparation for when the EU regulations become applicable to the
Company in FY20.
Prohibited Services
Under the new policy, the services which the external auditor is excluded from providing
to the Group are:
> tax services and compliance (see exceptions opposite);
> services that involve playing any part in the management or decision making process
of the Company;
> bookkeeping and preparing accounting records and financial statements/payroll services;
> designing and implementing internal controls related to financial information or designing
and implementing financial information technology systems;
> valuation services (see exceptions opposite);
> legal services/internal audit/human resource services;
> services linked to financing, capital structure and allocation, and investment strategy
of the Company;
> promoting, dealing in or underwriting shares in the Company; and
> any other service that the Audit Committee determines is not permissible.
Certain tax and valuation services, including tax advice will be allowed provided:
> they have no direct or clearly inconsequential effect on the audited financial statements;
> the auditor has documented and explained the estimated effect on the financial statements
in their report to the Audit Committee;
> the ethical principles of the ethical standards are upheld; and
> significant reliance is not placed on the results of the non-audit service for the purpose
of the Audit.
As per the previous year, the Policy continues to include restrictions on the recruitment of
employees from Deloitte LLP, so that no employee (at whatever level of seniority) involved in the
Company's audit for a two-year preceding period can be hired without the pre-approval of each
the Chairman of the Company; the Chair of the Audit Committee and the Chief Financial Officer.
With effect from 1 July 2016, Deloitte LLP no longer provide services to the Group that are
prohibited under the new Policy. Tax compliance services provided by Deloitte LLP concluded
during FY16.
Under the Policy the Company is required to obtain written confirmation from Deloitte LLP that
they remain independent. This is requested on an annual basis. For FY16 Deloitte LLP provided
a comprehensive report to the Audit Committee verifying that they have performed their audit
and audit-related services in line with independence requirements and explaining why they
believe that they remain independent within the requirements of the applicable regulations and
their own professional standards. The report also explains why the ratio of audit to non-audit
fees and the extent and type of non-audit services provided by them is appropriate.
Following receipt of such confirmations and the completion of their own review, the Audit
Committee endorsed Deloitte's conclusions that the Policy had been appropriately complied
with throughout the year under review; there were no items that may affect the independence
of the auditor; and non-audit fees were of an appropriate level.
72
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Internal Audit function
Whistleblowing
During the year, the Audit Committee received reports from the Chief Internal Auditor on the
findings of internal audits conducted throughout the business, together with details of the
proposed actions to rectify any issues identified. The Internal Audit function is fully independent
of business operations and has a Group-wide mandate. The Chief Internal Auditor attends all
Audit Committee meetings. In addition, the Audit Committee monitors and reviews the systems
and processes adopted by the Internal Audit function to ensure that they remain fit for purpose.
During the year the Committee reviewed the effectiveness of the Internal Audit function and
confirmed that, in its opinion, the Internal Audit function had operated effectively and provided
a level of independent scrutiny of the operations of the Group.
The Chief Internal Auditor updated the Audit Committee at each meeting on new whistleblowing
incidents, ongoing investigations and the outcome of any completed investigations. On the back
of these updates, the Audit Committee assessed the adequacy of the Group’s whistleblowing
policy in accordance with the requirements of the Code. It reviewed the whistleblowing
procedure adopted by the Group, including steps that can be taken to enhance awareness of
the process, to ensure it remains appropriate and available to those who need to raise concerns.
The procedure allows individuals who become aware of possible improper, unethical or even
illegal behaviour to raise the matter with their manager or alternatively refer the matter to a
confidential and independent telephone number (the ‘Whistleblowing Number’).
Audit Committee effectiveness
The Audit Committee successfully implemented the recommendations arising from its 2015
performance evaluation. This year the Audit Committee's evaluation was performed by an
external facilitator along with the Board effectiveness review. The outcome of the review
was positive, particularly in respect of each member having a clear understanding of what
is expected of them to undertake and discharge their responsibilities. The outcomes are
described on page 57.
The Whistleblowing Number is available to all employees (together with sub-contractors
and suppliers) 24 hours a day, seven days a week. Any issues reported to the Whistleblowing
Number are immediately brought to the attention of the Chief Internal Auditor. The Chief
Internal Auditor reviews and investigates the issues and, at his sole discretion, can seek
guidance from appropriate individuals within the Group, such as the Company Secretary,
as and when necessary.
This report forms part of the Corporate Governance report and is signed on behalf of the
Audit Committee by:
Mark Rolfe
Chairman of the Audit Committee
6 September 2016
Barratt Developments PLC – Annual Report and Accounts 2016
73
Strategic ReportGovernanceFinancial StatementsOther Information Safety, Health and Environment Committee report
Statement from the Chairman of the Safety, Health and Environment Committee
Safety, health and the environment (‘SHE’) remains a key principle of the Group which is
embedded within the day-to-day operations of the business. In 2014, the Group Board
established this Committee primarily to oversee and provide stewardship of the Group’s
SHE operational performance.
The key aspects of this Committee’s role are to:
> oversee the Group’s compliance with the SHE management system;
> identify and monitor SHE risks or exposures for the business and determine how best
to mitigate against them;
> establish and maintain policies in respect of all areas relating to safety, health and
the environment;
> assess the outcome of annual SHE internal and external audits and agree necessary actions
with the Group SHE Director;
> receive assessments from the Group SHE Director on specific incidents to gain an
understanding of what caused it, details of the internal and external (if any) investigations that
are being/have been undertaken and details of what steps have been taken or controls put in
place to mitigate against the incident recurring; and
> agree and recommend to the Remuneration Committee targets for any SHE performance
measure which is to be applied to the annual bonus scheme and monitor performance against
such measures.
The Committee continues to work closely with the SHE Operating Committee. To further
enhance this relationship, the SHE Committee now holds at least one joint meeting with the SHE
Operating Committee. This allows this Committee to gain a more in-depth understanding of the
issues from an operational perspective and for the Committee to discuss such issues directly
with those responsible for day-to-day management.
These terms of reference are available on
www.barrattdevelopments.co.uk/investors/corporate-governance/governance-policies
Key achievements in FY16
We continue to strive to ensure that our people, whether employees, sub-contractors or
members of the public, remain safe throughout the whole construction and sales process
of our developments and in the wider business.
Consequently, we continually monitor, review and amend (as necessary) our SHE policies,
processes and procedures to ensure that they remain up to date and relevant to the business.
All employees are encouraged to familiarise themselves with these policies, processes and
procedures during their induction and are invited to attend various health and safety courses
throughout their time with the Group.
Health and safety is of paramount
importance to the Group. We strive to
continually improve our processes and
are pleased to announce that this was
recognised by the British Safety Council
who have again granted our health and
safety management 5 star status.
Richard Akers
Safety, Health and Environment
Committee Chairman
74
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Membership and attendance at SHE Committee meetings
The Directors who are members of the SHE Committee and their attendance at the one
scheduled meeting during the year are shown in Table 7. The Group’s SHE Director is also
a member and the Company Secretary acts as Secretary to the Committee.
Only members of the SHE Committee have the right to attend meetings, however other
individuals may be invited to attend all or part of any meeting where it is deemed appropriate.
Table 7
Member¹
Richard Akers
Steven Boyes
Role
Chairman
Member
1 The Group’s SHE Director also attended 1/1 meetings during the year.
Note:
1/ Number of meetings attended whilst a Director.
/1 Number of meetings whilst a Director.
Number of meetings attended
1/1
1/1
The SHE Operations Committee reports directly to the SHE Committee with the Group SHE
Director presenting direct reports to these Committees and to the Board. The Group SHE
Operations Committee continues to operate and is responsible for implementing and oversight
of the overall SHE improvement strategy for the Group.
In addition, we have undertaken various campaigns during the year including a ‘Five Steps to
Safety’ initiative which encourage positive behaviours and a culture of assessing risks prior to
undertaking work activities. This initiative was commended by the NHBC as the leading health
and safety initiative in the industry.
Such initiatives have helped us to once again achieve 5-star status with the British Safety Council
following their recent health and safety audit. The audit evaluates leadership at all levels of
the business and dedication to continuous improvement, in addition to other factors such as
occupational health, employee well-being, safety culture and the appropriate dedication of
sufficient resources to health and safety. This achievement is truly important for our business
and independently illustrates that our health and safety approach, policies and procedures are
of the highest quality.
In addition to preparing and undertaking this audit we have been closely monitoring our overall
injury incidence rates and the underlying causes of any recurring accidents.
We have continued to monitor our SHE performance targets and our key performance indicators,
which are available in the Strategic Report and our Sustainability Report.
Despite our best efforts, it is with deep regret that I have to inform you that two employees of
our sub-contractors tragically lost their lives on site during the year. I can assure you that both
incidents have been thoroughly investigated by our internal health and safety team and we are
fully co-operating with the Health and Safety Executive during their ongoing investigations into
each of the incidents. At this stage there are no defined management failures which could be
directly attributed to the cause of either of the incidents and no enforcement or improvement
notices have been issued by the Health and Safety Executive. Our thoughts are with the families
of each of the individuals concerned during this distressing time.
Areas of focus for FY17
During FY17, we will:
> continue to review and monitor our SHE systems and processes throughout the business
to ensure that they remain fit for purpose;
> ensure that our SHE performance targets and objectives remain challenging and do not
encourage inappropriate behaviours or unnecessary risk taking;
> continue to try and identify better and safer ways to work; and
> continue to monitor incident rates and perform causal analysis on incidents to ensure
appropriate action is taken to reduce these through targeted campaigns.
Without our people, we do not have a business and therefore their safety and well-being will,
as always, remain a top priority for this Committee and the Group Board.
Richard Akers
Chairman of the SHE Committee
6 September 2016
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report
Annual statement from the Chairman of the Remuneration Committee
I am pleased to present the Remuneration Report for the year ended 30 June 2016 which
summarises our Remuneration Policy, how it was implemented throughout FY16 and how it will
be implemented for FY17.
Remuneration Policy
Our Remuneration Policy was last approved by shareholders at the 2014 AGM and in accordance
with the regulations on Directors’ remuneration, it will remain valid for a period of three years
(subject to there being no changes required). We reviewed the Remuneration Policy during
FY16, taking into account the current strategy of the Company, and agreed that it remains fit for
purpose. A further review will be undertaken in FY17. Any proposed changes will be discussed
with shareholders prior to the revised policy being presented for approval at the 2017 AGM.
As part of the review, we will take into account the report of the Investment Association's
Working Group on simplification of remuneration structures and assess which, if any, of the
structures would be feasible for us. We are also conscious of the Government’s new intentions to
make changes to executive remuneration. We will monitor these closely and will seek guidance
on the implementation of any changes from our remuneration consultants as well as consult
with you as necessary when the details are published.
Management changes
In FY16 we saw major changes to the Executive Director team. David Thomas became Chief
Executive replacing Mark Clare, Neil Cooper joined as Chief Financial Officer and Steven Boyes
assumed more responsibilities. Details of the remuneration received by Mark until 31 July
2015, when he stepped down from the Board, are set out on pages 86 and 92. The remuneration
package awarded to Neil Cooper comprised salary, pension, bonus and share awards which
were all in line with our Remuneration Policy. Full details of the remuneration for the Executive
Directors can be found on page 86 to 97.
In addition, Jock Lennox joined the Board as a Non-Executive Director on 1 July 2016 on the
same basic fee as the existing Non-Executive Directors (page 97).
This has been another good year for the Group.
Through the effective implementation of the
Group’s strategy we believe we are delivering
long term sustainable shareholder value. The
remuneration received by the Executive Directors
during FY16 reflects the achievements made
against stretching targets for both short and
long term incentive schemes.
Richard Akers
Remuneration Committee
Chairman
76
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information FY16 Performance and outcomes
Once again, your Company met or exceeded performance against all financial metrics which
were established at the beginning of the year (see Table 12 on page 87). This is a result of the
strong and focused leadership from the Executive Directors and the Senior Management team
as well as the hard work and commitment of all employees across the Group. The Committee
agreed that the financial performance of the Company fully supports an annual bonus payment
of 146.1% of salary for Executive Directors.
In addition, the performance of the LTPP award granted in October 2013 was tested after the
year end and 100% of the award vested. The net shares (after the payment of any tax and NI due
on release) will be transferred to participants in October 2016. Full details of the achievements
against each of the bonus and LTPP targets can be found on pages 87 and 88 respectively.
FY17 Executive Director Remuneration
As you are aware, on 23 June 2016, the UK voted to leave the EU, creating great uncertainty
within the UK and global economies. Consequently, whilst it is envisaged that the metrics for
the FY17 annual bonus and any LTPP award will be similar to those of FY16 (and will remain in
line with our Remuneration Policy), the Committee has, following advice from its remuneration
consultants, decided to defer setting the actual targets until October 2016 when it is hoped that
there will be more clarity over the impact of the EU Referendum. The Committee will, as always,
ensure that these targets, are stretching and challenging, promote the long term success of the
Company and seek to attract, retain and motivate Executive Directors and Senior Management
required to continue to drive the business strategy.
Conclusion
We believe that our remuneration policies and practices remain sufficiently challenging and
drive appropriate behaviours by management that are in the long term interest of the Company
and its shareholders. FY17 will be an interesting and challenging year for the Company as we
see the impact of the EU Referendum unfold. Your support to date has been invaluable and I,
together with the Committee, hope that we will continue to receive your support through these
uncertain times.
Richard Akers
Chairman of the Remuneration Committee
6 September 2016
Our remuneration strategy
Our most important asset is our people. Our remuneration strategy seeks to ensure that
Executive Directors’ remuneration (and that of Senior Management) is clearly linked to
the delivery of sustainable shareholder value and that they are appropriately rewarded
for performance against the Group’s key objectives.
Aims of our Remuneration Policy:
> promote the long term success of the Company and be fully aligned with the performance
and strategic objectives of the Group in order to enhance shareholder value;
> reward the delivery of profit, the maintenance of an appropriate capital structure and the
continued improvement of return on capital employed by the business whilst ensuring that
Executive Directors and Senior Management adopt a level of risk which is in line with the
risk profile of the business as approved by the Board;
> reflect the interests and expectations of shareholders and other stakeholders;
> attract, retain, motivate and competitively reward Executive Directors and Senior
Management with the requisite experience, skills and ability to support the achievement
of the Group’s key strategic objectives in any financial year;
> take account of pay and employment conditions of employees across the Group; and
> ensure that there is no reward for failure; termination payments (if any) are limited to
those that the Executive Director (or member of Senior Management) is legally entitled to;
and in exercising its discretion, the Committee robustly applies the ‘good’ and ‘bad’ leaver
provisions as defined in the rules of each of the share schemes operated by the Group.
In developing its policy the Committee has regard to:
> the Company’s business strategy, ensuring that targets support the achievement
of business strategy and key KPIs;
> the performance, roles and responsibilities of each Executive Director or member
of Senior Management;
> arrangements which apply below Senior Management level, including average base
salary increases;
> information and surveys from internal and independent sources; and
> the economic environment and financial performance of the Group.
For full details of our Remuneration Policy see pages 64 to 74 of our 2014 Annual Report
and Accounts.
Barratt Developments PLC – Annual Report and Accounts 2016
77
Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Overview
Below is a summary of the remuneration package for Executive Directors throughout FY16, together with the targets set for variable remuneration, our performance against such targets
and the resulting remuneration outcomes. Full details can be found in the Annual report on remuneration on pages 86 to 97.
FY16 Executive Directors’ remuneration package
Fixed element (c. 27% of total reward assuming maximum performance)
Salary + Pension + Benefits
Performance-related element (c. 73% of total reward assuming maximum performance)
Annual incentive
Annual Bonus
(max 150% of salary)
Bonus in excess of 100% of
salary deferred into shares
FY16 Performance metrics and link to strategy:
Financial – 105% of salary
Profit before tax – 60%
(support profitability)
Land – 22.5%
(drive the ownership of optimum amount of land to support
business activities)
Capital employed – 22.5%
(support strategic financial performance and Balance
Sheet stability)
Non-Financial / strategic / personal – 45% of salary
Health and safety – 15%
(drive health and safety performance throughout the business)
Customer Care – 15%
(drive the customer experience throughout the business)
Personal Objectives – 15%
(incentivise the achievement of role specific targets)
Long term performance
Performance Share Plan
(max 200% of salary)
FY16 Performance metrics and link to strategy:
Earnings per Share (‘EPS’)– 1/3
(to support the increase of earnings)
Return on capital employed (‘ROCE’)– 1/3
(optimises the efficiency and profitability of investments)
Total Shareholder Return (‘TSR’) – 1/3
(to align interests of Directors with those of shareholders)
Two-year continued holding period commencing
at the end of performance period
Profit before tax £m
EPS pence
ROCE %
Land bank owned years
Net cash/(debt) £m
Total capital return1 pence
682.3
55.1
27.1
3.4
3.3
3.4
592.0
30.7
Our performance in FY16
565.5
45.5
390.6
31.2
23.9
19.5
25.1
186.5
10.3
73.1
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
1 Includes interim dividend of 6 pence per share paid in May 2016 and the proposed final dividend of 12.3 pence per share and special dividend of 12.4 pence per share for FY16, both of which are subject to shareholder approval.
78
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Dear Reader
Barratt Developments PLC – 2016 Annual Report and Accounts
Errata Statement
Following the publication of our 2016 Annual Report and Accounts on 5 October 2016, the following typographical errors have been identified in the Remuneration Report:
1.
Table 12 page 87: The capital employed threshold figure reads £2,691.9m but should read £2,961.9m.
2.
3.
4.
Table 13 page 87: The bonus deferred for FY16 has been included to the pound despite the column heading indicating that the number should be in thousands. The
figures in that column should therefore read 312 and not 311,711 for David Thomas, 247 and not 246,694 for Steven Boyes and 122 and not 122,118 for Neil Cooper.
Footnote 3 page 88: the number of shares that lapsed in respect of Mark Clare’s award reads 91,200 but should be 91,283. The number of shares that vested for Mark
Clare is shown correctly.
Table 16 page 91: 2,013 shares are shown as granted to Steven Boyes under the 3 year Sharesave scheme during FY16. These shares were actually granted in FY15. The
2,013 shares should therefore have been shown in the ‘unvested shares as at 1 July 2015’ column.
We apologise for these typographical errors. Further, we have reviewed and amended our proofing procedures to mitigate against such errors occurring again.
Should you have any queries on the above please do not hesitate to contact me on 01530 278278 in the first instance.
For and on behalf of Barratt Developments PLC
Tina Bains
Company Secretary
Barratt Developments PLC, Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire LE67 1UF
Telephone 01530 278278 • Fax 01530 278279 • Web www.barrattdevelopments.co.uk
Barratt Developments PLC, Registered in England and Wales, Registered Number 00604574, Registered Office: Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire LE67 1UF.
Remuneration Committee activity FY16
Main activities undertaken during FY16
The Remuneration Committee follows an annual work programme: this covers the principal responsibilities as set out in its terms of reference, which was fully completed during the year.
The main areas of focus for the Remuneration Committee during the year were as follows.
Executive Directors’ and Senior Management remuneration
> Reviewed annual performance of the Executive Directors.
> Reviewed fixed and variable remuneration for Executive Directors and
Senior Management.
> Considered and approved FY16 salary increases for Executive Directors
and Senior Management (page 95).
Committee effectiveness
> Reviewed and made progress against all matters arising from the 2015
annual evaluation.
> Undertook an external evaluation of its own performance (page 57).
> Reviewed and devised an action plan to address the issues arising from
the 2016 annual evaluation (page 57).
> Assessed the effectiveness of the Committee’s remuneration consultants
during FY16 and approved their re-appointment for FY17 (page 95).
Annual bonus
> Formally confirmed bonus outcomes for FY16 (page 87).
> Considered bonus targets for FY17 (page 96).
> Reviewed and approved proposals to further simplify the annual
bonus scheme.
> Assessed potential bonus outcomes for FY16 and targets for FY17.
> Considered potential impact of BREXIT on the targets for FY17.
Governance
> Considered and approved the Remuneration report for FY15.
> Considered remuneration disclosure requirements for the Annual Report
and Accounts for FY16.
> Reviewed and approved the proposed approach for the Remuneration
report for FY16.
> Identified future training requirements for Committee members.
> Reviewed and approved its annual agenda and terms of reference.
Long term incentives
> Received updates on the potential levels of vesting of outstanding
LTPP awards.
> Considered and finalised performance targets, participants and level
of awards for FY16 LTPP.
> Reviewed the potential structure for the FY17 LTPP.
> Discussed and approved proposed membership of the Senior Management
long term incentive schemes.
Shareholder consultation
> Updated and consulted with shareholders on the remuneration outcomes
for FY15 and the proposed policy for FY16.
> Considered feedback received from the consultation process in finalising
the targets proposed for flexible remuneration in FY16.
> Reviewed the effectiveness of the shareholder consultation process.
Remuneration Committee terms of reference – www.barrattdevelopments.co.uk/investors/corporate-governance/governance-policies
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report
Directors’ Remuneration Policy – summary
The Policy is summarised in the tables below and on pages 83 to 85. The Policy was approved by shareholders at the 2014 Annual General Meeting held on 12 November 2014.
No changes are proposed to the Policy for FY17. It is our intention to put the Remuneration Policy to a binding vote at the AGM in 2017 in line with the Regulations.
The full version of the Policy can be found on pages 64 to 74 of the 2014 Annual Report and Accounts which is available on our website at www.barrattdevelopments.co.uk/investors/results-
reports-and-presentations/rp-2014.
A description of how the Company implemented the Policy in FY16 can be found on pages 86 to 95 and details of how the Policy is intended to be applied in FY17 are set out on pages 95 to 97.
Element of pay
How operated in practice
Additional information
Base salary
To help promote the long term success of the Company,
attract and retain high-calibre Executive Directors
and reflect the roles and responsibilities of each of the
Executive Directors.
Benefits (taxable)
To support the health and well-being of Executive
Directors whilst they undertake their roles.
Pension
To assist Executive Directors plan for retirement.
Annual bonus
To motivate and reward Executive Directors and Senior
Management for the achievement of demanding
financial objectives and key strategic measures over
the financial year.
Salaries are paid monthly in arrears. The aim is to provide a competitive salary
relative to comparable companies in terms of size and complexity.
Normally reviewed annually and fixed for 12 months with effect from 1 July.
See page 95 for Executive Directors’ salaries with effect from 1 July 2016.
Benefits include:
> company car;
> annual medical screening;
> private medical insurance;
> some telephone costs; and
> contributions towards obtaining independent tax advice.
The Committee does have the discretion to offer other benefits, if it deems
appropriate, to secure the appointment of a new Executive Director and to ensure
that the benefits package for existing Executive Directors remains competitive
in the market.
In accordance with legislation, Executive Directors are enrolled into a workplace
pension. If Executive Directors choose to opt-out of the workplace pension they
can elect to either:
> participate in the Company’s money purchase pension plan; or
> receive a salary supplement.
Executive Directors are also eligible for an insured lump sum of up to five times
pensionable salary on death in service.
The defined benefit section of the Group’s pension scheme closed to new entrants
in 2001 and future accrual of defined benefits for current members ceased to
be offered on 30 June 2009. Steven Boyes remains a member of this part of the
scheme.
Details of the pension salary supplements for each of the Executive Directors
are set out on page 93.
Executive Directors are eligible to earn a discretionary annual bonus.
The bonus is not pensionable.
The level of bonus awarded to each Executive Director is dependent on the
achievement of a number of Group and individual performance targets.
Bonuses up to 100% of base salary are paid in cash. Any bonus earned in excess
of this (up to a maximum of 50% of base salary) is compulsorily deferred into
shares under the Deferred Bonus Plan (‘DBP’), see below.
When setting bonus targets, the Committee considers the effect of corporate
performance on environmental, social and governance risks and sustainability
issues generally to ensure that remuneration structures do not inadvertently
motivate irresponsible behaviour.
The performance targets set are stretching whilst having regard to the nature and
risk profile of the Company and the interests of its shareholders. Performance
conditions are based on a mixture of financial and non-financial targets.
Performance against FY16 targets can be found on page 87.
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Strategic ReportGovernanceFinancial StatementsOther Information Element of pay
How operated in practice
Additional information
Long Term Performance Plan (‘LTPP’)
To motivate and reward Executive Directors and
Senior Management for the delivery of the long term
performance of the Group.
To facilitate share ownership by Executive Directors
and Senior Management.
Executive Directors are eligible to participate in the Company’s LTPP.
Annual LTPP awards can be equal to a maximum of 200% of base salary and
are for a period of three years with a two-year continued holding period attached
to the end of the performance period.
Deferred Bonus Plan (‘DBP’)
To encourage long term focus and to further align
interests of the Executive Directors and Senior
Management with those of shareholders and
discourage excessive risk taking.
Any annual bonus which is deferred into shares is held in this plan for a period
of three years and is subject to a continued employment condition.
Deferred shares may be forfeitable if an individual leaves prior to the release date.
Deferred shares do not accrue dividends.
LTPP awards are usually granted following the final results announcement
in September of each year.
The Committee sets performance targets for each award and ensures that targets,
whilst stretching, are: realistic and attainable; for the long term benefit of the Group;
and do not encourage inappropriate business risks.
Performance so far against the targets for the awards made in FY15 and FY16
can be found on page 89.
Details of the awards due to be granted in FY17 are set out on page 96.
For any bonus deferred prior to November 2015, the Committee utilises the rules
of the Group’s Co-Investment Plan (the ‘CIP’) for the purposes of the DBP. From
FY16, deferred shares will be held in accordance with the DBP as approved by
shareholders at the 2015 AGM. Under these rules the Committee has discretion
to award matching shares (the ‘Matching Award’) should it deem appropriate.
The Committee has not and does not intend to award such shares for FY16 or FY17.
Details of any bonus deferred into shares for FY16 can be found on page 87.
Executive Share Option Scheme (‘ESOS’)
To encourage or facilitate the holding of shares in the
Company by or for the benefit of bona fide employees
and former employees of the Company and its
subsidiaries.
Savings Related Share Option Scheme (‘Sharesave’)
To promote long term share ownership amongst all
employees of the Group in a tax-efficient way, linking
employee benefits to the performance of the Group and
to aid retention of staff.
No awards can be granted under the ESOS in the same financial year as an award
is granted under the LTPP.
The Committee retains the discretion to make future awards under the ESOS
should market conditions dictate that it is more appropriate to grant under the
ESOS than the LTPP.
The last award, made under the ESOS in December 2009, vested in December
2012. Executive Directors have until 9 December 2019 to exercise their vested
option, after which time it will lapse. No Executive Directors exercised their ESOS
options during the year.
Details of the Executive Directors’ remaining option holdings can be found on
pages 90 to 92.
Under the standard terms of the Sharesave, all employees who have completed
the minimum level of employment as at the invitation date as agreed by the Board,
are eligible to participate in the Sharesave.
The three-year Sharesave granted in March 2013 matured on 1 June 2016.
David Thomas exercised his options following the vesting of the 2013 three-year
Sharesave Scheme in accordance with the rules and elected to retain his shares.
Employees can elect to save between a minimum of £5 and the maximum monthly
savings limit as approved by the Committee and the Board, for a period of three
or five years. At the end of the savings period, employees have six months in which
to exercise their option.
Options granted to Executive Directors under the Sharesave Scheme can be found
in table 15 (page 89).
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Directors’ Remuneration Policy – summary continued
Element of pay
How operated in practice
Additional information
Shareholding requirement
To further align the interests of Executive Directors
and Senior Management to those of shareholders.
Executive Directors and Senior Management are required to build up and retain
a shareholding in the Company’s shares within five years of being appointed
to the Group.
The Chief Executive and other Executive Directors are required to build up and
retain a total shareholding in the Company’s shares equivalent to 200% and 150%
of base salary respectively (the ‘Total Shareholding’²).
The share price used for the purposes of determining the value of the shares is
that prevailing on 30th June¹.
There is no mandatory requirement for the Non-Executive Directors, including the
Chairman, to hold shares however there is an expectation that they will acquire
some shares following their appointment.
Clawback and malus provisions apply to all short and long term variable remuneration (except the ESOS Scheme) in the event of material misconduct and/or material misstatement or error
of financial results. For full details see page 85.
1 Vested schemes that have not yet been released will be valued by reference to the higher of the share price paid on acquisition or vesting on 30 June.
2 ‘Total shareholding’ (included net of income tax except for Owned shareholdings) include all ‘Owned shareholdings’, shares held under a vested but unexercised option, shares held under the Deferred Bonus Plan, and vested shares under the LTPP subject to ongoing restrictions.
The Chief Executive and other Executive Directors must ensure that their Total Shareholding is made up of at least 67% and 50% respectively of "Owned Shareholding"³.
3 ‘Owned shareholding’ include shares held directly, by a spouse, partner or children under 18, in an ISA or PEP and in a pension or trust arrangement.
Guidelines of Responsible Investment Disclosure
In line with the ABI Guidelines on Responsible Investment Disclosure the Committee is satisfied that the incentive structure and targets for Executive Directors do not raise any environmental,
social, or governance risks by inadvertently motivating irresponsible or reckless behaviour. The Committee considers that no element of the remuneration package will encourage inappropriate
risk taking within the Company.
Summary of the Remuneration Policy for the Chairman and Non-Executive Directors
Element of pay
How operated in practice
Additional information
Non-Executive Directors’ fees (including the Chairman)
To reflect the time commitment and the skills
and experience required for the role.
The remuneration of the Chairman and the Non-Executive Directors is
reviewed annually taking into account the fees paid by other companies
in the housebuilding sector.
The remuneration of the Non-Executive Directors is set by the Board on the
recommendation of a Committee of Executive Directors and the remuneration
of the Chairman is set by the Board on the recommendation of the Committee.
Non-Executive Directors' fees are paid monthly in arrears.
Non-Executive Directors' fees are set out on page 97.
No additional fees are payable for membership of Board Committees however,
additional fees are paid to the Chairmen of the Audit, the Remuneration and the
Safety, Health and Environmental Committees and to the Senior Independent
Director. See page 97 for full details.
The Non-Executive Directors do not participate in any performance related
schemes (e.g. annual bonus or incentive schemes) nor do they receive any pension
or private medical insurance or taxable benefits other than the potential to receive
gifts at the end of a long-standing term of appointment and travel/hospitality
benefits related to their role as Directors.
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Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Executive Directors’ service contracts
Details of the Executive Directors’ service contracts are included in Table 8 below and their
emoluments are shown in Table 10 (page 86). The Company’s policy is for all Executive Directors’
(including new appointments) service contracts to be for a rolling 12 month period which can be
terminated by 12 months’ notice given by either the Company or by the Executive Director at any
time. The service contracts entitle Executive Directors to the provision of a company car, annual
medical screening, private medical insurance, some telephone costs and contributions to the
cost of obtaining independent tax advice. The Committee regularly reviews the contractual terms
for Executive Directors to ensure that they continue to reflect best practice.
All Executive Directors’ appointments and subsequent re-appointments are subject to election
and annual re-election by shareholders at the Company’s Annual General Meeting.
Table 8 – Executive Directors’ service contracts
Executive Director
Service contract date
Date of appointment
David Thomas
Steven Boyes
Neil Cooper
16 January 2013
21 February 2013
17 June 2015
21 July 2009
1 July 2001
23 November 2015
Notice period
12 months
12 months
12 months
Executive Directors’ service contracts are available for inspection by any person at the
Company’s registered office during normal office hours and on the Company’s website at:
www.barrattdevelopments.co.uk.
Chairman and Non-Executive Directors’ letters of appointment
The Chairman and each of the Non-Executive Directors are appointed under terms set out
in a letter of appointment. They do not have service contracts and their appointments can be
terminated (by the Board) without compensation for loss of office and by giving the appropriate
length of notice as prescribed in their respective letters of appointment. The notice period
applicable, from either party, for the Chairman is three months and for each of the other
Non-Executive Directors is one month.
Under governance policies approved by the Board, Non-Executive Directors are appointed for
a three-year term and usually serve a second three-year term subject to performance review
and re-election by shareholders. Beyond this a further term of up to three years may be served
subject to rigorous review by the Chairman and the Nomination Committee and re-election
by shareholders. Details of Non-Executive Directors’ letters of appointment can be found in
Table 9.
Table 9 – Non-Executive Directors’ letters of appointment
Date first appointed
Date elected/
to the Board
re-elected at AGM
Non-Executive Director
John Allan
Tessa Bamford
Mark Rolfe
Richard Akers
Nina Bibby
Jock Lennox
11 November 2015
11 November 2015
11 November 2015
11 November 2015
11 November 2015
N/A
1 August 2014
1 July 2009
1 May 2008
2 April 2012
3 December 2012
1 July 2016
Date last re-appointed
to the Board
N/A
1 July 2015
1 May 2014
2 April 2015
3 December 2015
N/A
The letters of appointment for Non-Executive Directors are available for inspection by any person
at the Company’s registered office during normal office hours and on the Company’s website at:
www.barrattdevelopments.co.uk.
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Directors’ Remuneration Policy – summary continued
In accordance with Code provision D.2.1, each of the members of the Committee (including John
Allan at the date of his Board appointment) is considered to be independent with no financial
interest in the Committee’s decisions, other than as shareholders and the fees paid to them.
Details of their shareholdings and fees can be found on pages 89 and 97 respectively.
Recruitment of Executive Directors
The Committee will determine the remuneration for any new Executive Director in accordance
with the Policy as set out in the Future Policy Table on pages 64 to 69 of the 2014 Annual Report
and Accounts and will take into consideration each of the following elements:
Salary and benefits – the Committee will take into account: market data for the scope of the
job; remuneration for the relevant role; salaries of and benefits provided to existing Executive
Directors; and the new Executive Director’s experience, location and current base salary
and benefits package. In the event an Executive Director is recruited at below market levels,
their base salary may be re-aligned over a period of time (e.g. two to three years) subject
to their performance in the role. The Committee may also agree to cover relocation costs,
if it is deemed appropriate.
Pension – Executive Directors will be auto-enrolled from the date of recruitment unless they opt-
out. If an Executive Director chooses to opt-out they may elect to receive a pension supplement in
cash. The Committee has discretion to determine the level of pension supplement to be awarded
to each Executive Director, up to a maximum of 30% of base salary, having regard to the pension
supplement given to existing Executive Directors. Alternatively, the Executive Director may
choose to join the defined contribution money purchase pension plan provided they meet all of
the eligibility criteria. The Executive Director also has the option to receive some of their pension
entitlement in cash and have the remainder contributed to the defined contribution money
purchase pension plan, provided this does not, in aggregate, exceed 30% of base salary.
LTPP – new Executive Directors may be able to participate in the LTPP on terms to be considered
by the Committee on a case by case basis. Any award made to the new Executive Director will
usually be on the same terms as set out in the Policy. The level of the award will be no greater
than that made to existing Executive Directors and will be pro-rated based on the remaining time
span of the relevant performance period.
The Committee may also consider buying out incentive awards which an individual would forfeit
upon leaving their current employer, again this would be reviewed on a case by case basis.
The Committee would however in all cases seek validation of the value of any potential incentive
the individual is likely to forfeit and take into account the proportion of the performance period
remaining of the award, the type of award (i.e. cash/shares) and the performance achieved (or
likely to be achieved). Replacement share awards, if any, will be capped at the amount which
the individual will forfeit and will be subject to the performance conditions applicable under the
terms of the Executive Director share scheme in operation at the time.
Where an individual is recruited internally to the position of Executive Director, the Company
will honour any pre-existing contractual commitments.
Executive Directors’ policy on payment on loss of office
Historically, there have been no specific provisions for compensation on early termination (except
for payment in lieu of holidays accrued but untaken) or loss of office due to a change of ownership
of the Company. The Committee also reserves the right to make additional payments where
such payments are made in good faith: (a) in discharge of an existing legal obligation (or by way
of damages for breach of such an obligation); or (b) by way of settlement or compromise of any
claim arising in connection with the termination of an Executive Director’s office or employment.
The Committee will apply mitigation against any contractual obligations as it deems fair and
reasonable and will seek legal advice on the Company’s liability to pay compensation. It also
seeks to reduce the level of any compensation payable and takes into account, amongst other
factors, the individual’s and the Group’s performance; the Director’s obligation to mitigate
their own loss; and the Director’s length of service when calculating termination payments.
The Committee reserves the right to phase any such payments if it deems that it is appropriate
to do so. Any amount that the Committee decides to pay an Executive Director will be based on
the main elements of Executive Remuneration namely, base salary, annual bonus (subject to the
Committee’s discretion), benefits and pension. For new appointments to the Board, the Company
can, at its discretion, terminate a Director’s appointment and pay them only a monthly salary
for the 12 month notice period or until such time as the Director secures another job, whichever
is the earlier.
The Committee also takes into account the rules of the annual bonus and long term incentive
schemes when determining any payments for loss of office as follows:
Annual bonus – in terms of the annual bonus, in accordance with the provisions contained
within the service contracts, Executive Directors are not usually entitled to any bonus payment
(other than in circumstances where they are deemed by the Committee as a ‘good leaver’,
which includes but is not limited to redundancy, retirement, ill-health or disability or any other
circumstance which the Committee may decide), unless they remain employed and are not
under notice as at the payment date. Any bonus payment for a ‘good leaver’ will be based on
the individual performance of the Executive Director concerned, as well as the Company’s
performance during the relevant period. Such payment will be pro-rated depending on the
proportion of the bonus period worked by the relevant individual.
Deferred bonus – for any bonus deferred into shares, if the Executive Director is deemed to be a
‘good leaver’ (as defined above), he will be entitled to retain the shares subject to settling any tax
and national insurance liability that may become due on release of the shares. In all other cases,
the shares will lapse immediately on the date that the Executive Director’s employment with the
Company ends and there is no entitlement to any compensation for the loss of the shares.
In the event any matching awards have been granted to the Executive Director, these will lapse
immediately unless the individual is leaving for a ‘permitted reason’ (this includes, but is not
limited to, redundancy, retirement, ill-health or disability). If the Executive Director is leaving
for a permitted reason, the unvested award will vest after the deferral period in line with the
other awards. However, the number of matching shares to be released to a good leaver will
be pro-rated based on the proportion of the performance period that has been completed and
the level of the performance conditions that have been met up to that date.
84
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information LTPP – under the rules of the LTPP, unless the Executive Director is deemed by the Committee
to be a ‘good leaver’ (as previously defined) any LTPP awards held by him will lapse on cessation
of his employment. If he is a ‘good leaver’, the number of shares subject to the award will be
pro-rated based on the proportion of the performance period that has been completed by him.
No shares will, however, be released to the Executive Director, until the normal vesting date,
being three years from the date of grant. During this time the shares will continue to be subject
to the relevant performance conditions until the end of the performance period, at which point
the Committee will test the performance conditions and determine how much, if any, of the
remaining shares will vest.
Change of control – the rules of each share scheme operated by the Company contain provisions
relating to a change of control. In the event that a change of control does occur any unvested
options/awards will become vested on the date of the relevant event. However, the number of
options/awards that vest will be pro-rated depending on the remaining time span of the relevant
performance period and the level of performance conditions achieved during that period.
Options/awards which have already vested as at the date of the relevant event may still be
exercised within the prescribed timescales set out in the rules.
Non-Executive directorships
Subject to Board approval, Executive Directors are permitted to accept one Non-Executive
directorship outside the Company and retain any fees received from such a position.
Executive Directors are not allowed to take on the Chairmanship of any FTSE 100 company.
Board approval will not be given for any Non-Executive position where such appointment would
lead to a material conflict of interest or would have an adverse effect on the Director’s ability
to perform their duties to the Company.
Gifts to Directors on leaving employment
The Committee reserves the discretion to approve gifts to long serving Directors who are retiring
or who are considered by the Board to be leaving in good faith e.g. those leaving office for any
reason other than dismissal or misconduct. The value of the gift for any one Director shall be
limited to a maximum of £5,000 and where a tax liability is incurred on such a gift the Committee
has the discretion to approve the payment of such liability on behalf of the Director in addition
to this maximum limit.
Legacy arrangements
In approving the Policy, authority is given to the Company to honour any previously disclosed
commitments entered into with current or former Directors including, but not limited to, payment
of pensions or the vesting/exercise of past share awards.
Clawback and Malus
Both the annual bonus (including any deferred bonus and any matching element) and the LTPP
are subject to the Company’s power of clawback and malus (‘Clawback’) for a period of two years
following vesting. 'Clawback' is applicable in respect of any annual bonus paid/deferred and to
any share awards granted under the LTPP or the ESOS from 30 June 2010 onwards, subject in
the case of HMRC approved options, to such approval. In addition, 'Clawback' will also apply to
any awards granted under any Senior Management share schemes.
Clawback can be invoked if:
a) it is necessary to restate the Group’s accounts used to calculate a participant’s entitlement
to bonus or share awards in circumstances where the original over-statement has led to a
bonus being paid/deferred or share awards being granted which would not otherwise have
been paid or granted; or
b) the participant is found guilty of any criminal activity in connection with his or her employment
and this related to an act which led to a bonus being paid/deferred or share awards being
granted to him or her.
In such circumstances, the Committee may determine that the bonus and/or share award will
be retrospectively recalculated. If bonus monies have been paid, the participant will be required
to reimburse the Company for an amount up to the total amount of the net bonus paid, less
any bonus that the Committee determines would have been paid regardless of the event in
question. If share awards have been granted, the number of awards or options granted will
be reduced accordingly. If the award has vested and shares have been issued to the participant,
the participant will be required to repay the value of the relevant number of shares based
on the Company’s closing share price as at the date the shares were issued.
Barratt Developments PLC – Annual Report and Accounts 2016
85
Strategic ReportGovernanceFinancial StatementsOther Information Annual report on remuneration
In this section, we describe how the Policy has been implemented throughout FY16 together with the resulting payments to Directors and how the Policy will be applied in FY17.
The Annual report on remuneration will be subject to an advisory vote at the 2016 AGM.
Directors’ remuneration outcomes for FY16
Single figure of remuneration
The total remuneration for each of the Directors for the financial year ended 30 June 2016 is as set out in Tables 10 and 11 below:
Table 10 – Executive Directors’ single figure of remuneration (Audited)
David Thomas
Steven Boyes
Neil Cooper8
Former Directors
Mark Clare7
Total
Salary
£000
Benefits1 (taxable)
£000
Annual Bonus2
£000
LTPP
£000
Pension Benefits
£000
Sharesave Scheme
£000
2016 Total
£000
2015 Total
£000
2015/16
2014/15
2015/16
2014/15
2015/16
2014/15
2015/163
2014/154
2015/16
2014/15
2015/165
2014/156
676
535
275
58
1,544
454
454
–
701
1,609
15
38
9
3
65
15
30
–
44
89
988
782
387
-
2,157
635
635
–
980
2,250
1,456
1,456
245
1,758
4,915
3,493
3,493
–
5,394
12,380
169
134
66
18
387
136
136
–
210
482
16
–
–
–
16
–
34
–
34
68
3,320
2,945
982
1,837
9,084
4,733
4,782
–
7,363
16,878
1 Benefits (taxable) include the provision of a company car or car allowance, annual medical screening, private medical insurance, some telephone costs and contributions towards obtaining independent tax advice.
2 Includes amount deferred for David Thomas, Neil Cooper and Steven Boyes (see Table 13 on page 87). Mark Clare received his entire 2014/15 bonus in cash in accordance with the retirement arrangements agreed.
3 Performance conditions tested after 30 June 2016 and 100% of the award is due to vest in October 2016. The market price of shares has been calculated based on an average market value over the three months to 30 June 2016 (£5.37 per share).
4 In accordance with regulatory requirements, the values in this column have been re-calculated using share price of £6.54 per share being the market value of the shares on the vesting date, 24 October 2015, as opposed to the market price of £5.70 per share calculated based on an average
market value over the three months to 30 June 2015 as disclosed in last year’s Remuneration report.
5 The Sharesave Scheme, granted in March 2013, was subject to a continued employment condition and matured on 1 June 2016. The value is calculated using a share price of £5.74 per share being the mid market close price of a share on the date of maturity.
6 The Sharesave Scheme, granted in March 2012, was subject to a continued employment condition and matured on 1 June 2015. The value is calculated using a share price of £5.96 per share being the mid market close price of a share on the date of maturity.
7 Mark Clare retired from his position as a Director of the Board on 31 July 2015 and from the Company on 31 October 2015. The payment above shows the remuneration received by Mark Clare during his period serving as a Director. Mark Clare received a full bonus payment for FY15 but was not
entitled to any bonus for the year ended 30 June 2016.
8 Neil Cooper was appointed to the Board on 23 November 2015 and his salary and bonus reflects the period served on the Board.
Table 11 – Non-Executive Directors’ single figure of remuneration (Audited)
John Allan
Richard Akers
Tessa Bamford
Nina Bibby
Mark Rolfe
Former Directors
Bob Lawson2
Total
2015/16
300
71
56
56
71
–
554
Fees
£000
2014/15
203¹
63
48
48
63
98
523
Benefits (taxable)
£000
2016 Total
£000
2015 Total
£000
2015/16³
2014/15
0
0
–
–
1
–
1
–
–
–
–
–
11
11
300
71
56
56
72
–
555
203
63
48
48
63
109
534
1 Reflects a fee of £48,000 p.a. for the period 1 August 2014 to 11 November 2014 and £300,000 p.a. from 12 November 2014 onwards.
2 Bob Lawson stepped down from his position as Chairman of the Company at the conclusion of 2014 AGM on 12 November 2014. Benefits (taxable) relates to the value of the gift (£5,000) and the tax payable thereon (£6,000 including VAT), presented to Bob by the Board to reflect the significant
contribution he made during his period of service.
3 Benefits (taxable) include expenses incurred in attending the Company's main corporate office and are £348 for John Allan, £470 for Richard Akers and £1,325 for Mark Rolfe.
86
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Annual bonus
For the year under review, Executive Directors had the potential to earn an annual bonus of up to 150% of base salary, 135% of which is based on the attainment of Group performance targets and
15% on personal objectives, both of which are linked directly to the Group’s strategy. Any bonus earned in excess of 100% of base salary is deferred into shares for a period of three years. All targets,
Group and personal, were agreed towards the beginning of the financial year. The Group performance targets which applied to the bonus for FY16 and the level of bonus achieved were as follows:
Table 12 – Annual bonus (Audited)
Bonus target
Strategic objective
Profit before tax
Increase profitability
Capital employed
Increase focus on the capital employed position
Targets
Threshold: £600m
Target: £645m
Maximum: £680m
Threshold: £2,691.9m
Target: £2,936.9m
Maximum: £2,911.9m
Land bank owned and
controlled
Health and safety1
Customer service
Personal objectives³
To ensure appropriate future land supply
Land bank owned: 4.3 – 4.6 years
To create a safe environment for employees and other
stakeholders
SHE audit compliance: 94% or above
85% or less: No more than 0.45% of sites
To increase focus on providing a high quality service to
our customers and maintain 5 Star status
To focus individuals to achieving the Group’s strategic
objectives
HBF/NHBC Star rating: 5 Star²
Threshold: 1.5%
Target: 7.5%
Maximum: 15%
Potential bonus weighting
Actual performance
Bonus achieved
Payable in cash
Payable in shares
% of salary
12%
30%
60%
4.5%
11.25%
22.5%
22.5%
15%
15%
15%
Achievement
£682.3m
% of salary
60.0%
% of salary
13.9%
% of salary
46.1%
£2,605.5
4.5 years
96.0%
0.2%
5 Star
David Thomas 15.0%
Steven Boyes 15.0%
Neil Cooper 15.0%
22.5%
22.5%
15.0%
11.1%
15.0%
22.5%
22.5%
15.0%
11.1%
15.0%
–
–
–
–
–
1 In the case of a material breach of SHE policy or procedures, the SHE Committee retains discretion to withhold all or part of the bonus depending on the nature of the breach.
2 Customer service metric will be pro-rated based on the number of divisions achieving the required standard. For FY16, 20/27 divisions achieved the required standard.
3 The Committee assessed the performance of each Director individually and in the context of the Company's performance against meeting the above strategic objectives and concluded that they had fully met the range of specific personal objectives set for them for the year.
Table 13 – Executive Directors’ deferred bonus
David Thomas
Steven Boyes
Neil Cooper
2015/16 Deferred Bonus
2014/15 Deferred Bonus
% of salary
deferred1
Amount deferred
£000
Number of
shares2
% of salary
deferred1
Amount deferred
£000
46.1%
46.1%
46.1%
311,711
246,694
122,118
TBC3
TBC3
TBC3
39.8
39.8
–
181
181
–
Number of
shares2
27,531
27,531
–
1 The Executive Directors earned a total bonus of 139.8% and 146.1% of base salary for FY15 and FY16 respectively. The bonus earned in excess of 100% of base salary will be deferred into shares. Mark Clare did not receive any annual bonus for the period between 30 June 2015 and his retirement
from the Company on 31 October 2015. Neil Cooper's deferred bonus has been pro-rated based on the period he has been employed during the performance period.
2 Shares are held in the CIP (pre-FY16) and DBP (post-FY16) for a period of three years commencing from the date of the award and subject to a continued employment condition.
3 The number of shares will be determined based on the share price calculated by averaging the closing middle-market quotations, as derived from the Daily Official List of the London Stock Exchange, for the first five dealing days following the date on which the Group announces its FY16 annual
results. The actual number of shares awarded in respect of the FY16 deferred bonus was not therefore available as at the date of this report and will be disclosed in next year’s report.
Barratt Developments PLC – Annual Report and Accounts 2016
87
Strategic ReportGovernanceFinancial StatementsOther Information
Remuneration report – Annual report on remuneration continued
Long Term Performance Plans
Vesting of 2013/14 LTPP (included in 2015/16 Single Figure) (Audited)
The 2013/14 LTPP award granted on 23 October 2013 was based on performance to the year
ended 30 June 2016 and will vest on 23 October 2016. The performance conditions for this
award and the resulting vesting level is as follows:
Metric
EPS
TSR
Performance condition
Absolute EPS growth for the financial year
ended 30 June 2016.
TSR against the constituents of the FTSE
250 index (excluding investment trusts).
25% of this element vests for median
performance and 100% of this element
vests for upper quartile performance or
above. TSR measured over three financial
years with a three month average at the
start and end of the performance period.
Total level of award vesting
Threshold
target
30p
Median
ranking of
91.5 (TSR of
32.5%)
Stretch
target
Actual
% of award
vesting
40p Basic EPS
55.1p1
Rank of
28 (TSR of
88.7%)
Upper
quartile of
46.0 (TSR of
68.4%)
501
50
100
1 The actual earnings per share of 55.1 pence has been rebased using the corporation tax rate applicable at the date on which the 2013/14 LTPP
targets were set, as the subsequent reduction to the rate of corporation tax was not performance related. The actual earnings per share has
also been rebased using the same number of shares in issue as used in the 2013/14 LTPP targets. The rebased earnings per share used for the
purpose of determining vesting, which is directly comparable to the 2013/14 LTPP targets, was 55.8 pence.
The Committee considered the underlying financial performance of the Group and was satisfied
that given the continued improvement in the Group’s financial results, the above level of vesting
of the 2013/14 LTPP was justified. Accordingly, the gross number of shares to be released to
each of the Executive Directors are as follows:
Executive Director
David Thomas
Steven Boyes
Neil Cooper
Former Directors
Mark Clare3
Number of
shares at grant
Number of
shares to
vest1
Number of
shares to
lapse
Dividends on
shares to
vest
271,230
271,230
45,705
271,230
271,230
45,705
418,830
327,547
–
–
–
–
Total
271,230
271,230
45,705
Estimated
value2
(£000)
1,456
1,456
245
N/A
N/A
N/A
N/A
327,547
1,758
1 The relevant number of shares will be released to each participant as soon as is practicable in October 2016, following the vesting date.
2 The estimated value of the vested shares is based on the average share price during the three months to 30 June 2016 (£5.37 per share).
3 Mark Clare left the Company’s employment on 31 October 2015 therefore the shares vesting to him under the 2013/14 LTPP reflect the period
of service from 1 July 2013 until 31 October 2015. 91,200 shares lapsed on 31 October 2015. His shares will be released on the usual vesting date
along with other participants.
LTPP granted during the year (the ‘2015/16 LTPP’) (Audited)
On 19 October 2015, the following 2015/16 LTPP awards were granted to Executive Directors:
Executive Director
Type of award
Basis of
award
granted
Share price at
date of grant
(pence)
Number of
shares over
which award
was granted
Face value
of award
(£000)
% of face value
that would vest
at threshold
performance
Vesting
determined by
performance
over
David Thomas
Steven Boyes
Neil Cooper1
Conditional
award
Conditional
award
Conditional
award
200% of salary
£676,000
200% of salary
£535,000
200% of salary
£454,000
632
212,244
1,341
632
167,974
1,062
605
122,440
741
25
25
25
Three
financial
years to
30 June
2018
1 Neil Cooper’s award was made on 21 December 2015 after joining the Company and was pro-rated to take account of the portion of the
performance period employed.
The 2015/16 LTPP is subject to three performance conditions, one-third TSR, one-third EPS
and one-third ROCE. The levels of vesting against TSR are measured over a three-year period
commencing 1 July 2015, and against EPS and ROCE for the financial year ending 30 June 2018.
Once the performance test has been completed, assuming shares vest, they will be subject
to a further two-year holding period. The performance against targets for these awards
in addition to previous awards are set out on page 89.
CFO Scheme
In December 2015, the Company granted the following awards to Neil Cooper. These awards
were designed in quantum to compensate for awards which were forfeited by Neil on leaving
his previous employment. They were structured to mirror the vesting timescales and
performance conditions of the Company’s awards made in 2013 and 2014, so his incentives
are aligned with those of the other Executive Directors. Shares that vest on 20 October 2017
are subject to a two-year holding period commencing 1 July 2017. These performance based
share awards were structured as share options with a nominal exercise price of the par value
of the Company’s shares of 10 pence per share.
Date of Grant
21 Dec 2015
21 Dec 2015
Share price at
date of grant
(pence)
605
605
Number of
shares over
which award
was granted
45,705
76,175
Option price
(pence)
Face value
of award
(£000)
% of face value
that would vest
at threshold
performance
10
10
277
461
25%
25%
Exercisable
from
Exercisable
to
23 Oct
2016
20 Oct
2017
6 Nov
2016
6 Nov
2017
88
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
Table 14 – Performance of current LTPP plans against targets
Given the commercial sensitivity of the EPS and ROCE targets set for the 2014/15 and 2015/16
LTPPs to the Group’s future strategy, the Committee agreed that it would not publish these
targets prospectively but would set out performance against the targets on an annual basis.
The metrics and performance to date against the targets set at the outset of the awards are
shown below:
2014/15 Award
Last year we disclosed performance and potential level of vesting of this award against targets
over a single year. The table below shows the potential level of vesting if performance was
measured over a two year period to the 30 June 2016:
Performance target
TSR
EPS
ROCE
Total
2015/16
Performance as at
30 June 2016
55.4%
55.1 pence
27.1%
Level of vesting had the
award vested as at
30 June 2016
33.3%
26.9%
33.3%
93.5%
Outlined below is the potential level of vesting for the 2015/16 LTPP, had the performance period
been for one year to 30 June 2016:
Performance target
TSR
EPS
ROCE
Total
Performance as at
30 June 2016
-1.8%
55.1 pence
27.1%
Level of vesting had the
award vested as at
30 June 2016
14.2%
0%
25.8%
40.0%
Statement of Directors’ shareholding and share interests (Audited)
For the financial year ended 30 June 2016 Executive Directors were required to hold shares in the
Company equivalent in value to 200% of salary for the Chief Executive and 150% of salary for the
other Directors. In addition the Executive Directors were also required to have a minimum owned
shareholding in the Group (see page 82 for definition) of 67% salary for the Chief Executive and 50%
for other Executive Directors. The Chief Executive and other Executive Directors are expected to
meet this requirement no later than the fifth anniversary of joining the Board, with progress being
made throughout the period. Participants who have not built up the required level of ‘Owned and
Total Shareholdings’ by the end of the defined period, will not be eligible for inclusion in future
share-based incentive schemes nor will they be allowed to sell shares until they reach the levels
specified, unless exceptional circumstances exist in the opinion of the Committee.
Barratt Developments PLC – Annual Report and Accounts 2016
At 30 June 2016, both David Thomas and Steven Boyes have met the shareholding requirement.
In accordance with the Policy, Neil Cooper has until 23 November 2020 to meet the
relevant requirement.
The interests of the Directors serving during the financial year and their connected persons
in the ordinary share capital of the Company at the beginning and end of the year are shown in
Table 15 below. No notification has been received of any change in the interests shown during
the period 30 June 2016 to 7 September 2016 inclusive, with the exception of the shares to be
deferred in respect of the bonus earned in excess of 100% of base salary by Executive Directors
for the financial year ended 30 June 2016 the details of which can be found on page 87.
To be classified as a ‘good leaver’ from the Company, the Chief Executive and the other Executive
Directors, will be required to commit to continue retaining a Total Shareholding of 100% and 75%
respectively of the value of their final salary in the Company’s shares for two years post their
leaving date.
Table 15 – Directors’ interests in shares (Audited)
Beneficially
owned as at
1 July 2015
Beneficially
owned as at
30 June 2016
931,577
478,275
–
3,102
40,000
32,542
8,500
71,821
1,280,726
827,498
–
3,102
40,000
34,010
8,500
75,062
Outstanding
share awards
under all
employee
share plans
as at 30 June
2016
1,101,766
838,272
248,054
–
–
–
–
–
Owned
Shareholding
as a % of
salary as at
30 June
20161
Owned
Shareholding
requirement
met
(Y/N)
Total
Shareholding
as a % of
salary as at
30 June
20161
Total
Shareholding
requirement
met
(Y/N)
767%
626%
0%
N/A
N/A
N/A
N/A
N/A
Y
Y
N
N/A
N/A
N/A
N/A
N/A
N/A
886%
687%
0%
N/A
N/A
N/A
N/A
N/A
–
David Thomas
Steven Boyes
Neil Cooper³
John Allan
Richard Akers
Tessa Bamford
Nina Bibby
Mark Rolfe
Former Directors
Mark Clare²
311,103
–
584,825
–
1 Calculated in accordance with the Group’s Remuneration Policy.
2 Mark Clare retired from his position as a Director of the Board on 31 July 2015 and from the Company on 31 October 2015.
3 Neil Cooper has until 23 November 2020 to build up his shareholding.
Y
Y
N
N/A
N/A
N/A
N/A
N/A
N/A
89
Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Annual report on remuneration continued
Table 16 – Executive Directors’ conditional awards and share options (Audited)
Details of the conditional awards and share options over shares held by the Executive Directors who served during the year are as follows:
David Thomas
Conditional share options
ESOS2
ESOS2
Sharesave (3 year)
Sharesave (5 year)
Sharesave (5 year)
Conditional awards
DBP³
LTPP4
DBP
LTPP5
DBP
LTPP6
DBP
LTPP7
Total
Date of grant
10.12.2009
10.12.2009
27.03.2013
30.04.2014
27.04.2016
12.10.2012
24.10.2012
02.10.2013
23.10.2013
09.10.2014
20.10.2014
19.10.2015
19.10.2015
Unvested
shares at
1 July 2015
(number)
Vested
shares at
1 July 2015
(number)
Granted
(number)
Exercised
(number)
Lapsed
(number)
Outstanding
shares as at
30 June 16
(number)
Market price
on award
(pence)
Exercise
price
(pence)
Market price
at exercise/
vesting
(pence)
Gain
receivable
(£000)
Date from which
exercisable/
capable of
vesting1
Expiry
Date
–
–
4,398
4,297
-
116,903
534,493
65,769
271,230
57,091
244,086
–
–
1,298,267
8,350
208,056
–
–
–
–
–
–
–
–
–
–
–
216,406
–
–
–
–
3,112
–
–
–
–
–
–
27,531
212,244
242,887
–
–
(4,398)
–
–
(116,903)
(534,493)
–
–
–
–
–
–
(655,794)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,350
208,056
–
4,297
3,112
–
–
65,769
271,230
57,091
244,086
27,531
212,244
1,101,766
–
–
–
–
–
170.14
160.90
326.90
325.00
386.00
372.00
656.00
637.00
–
117.84
121.39
204.60
349.00
482.00
–
–
–
–
–
–
–
–
–
–
–
354.010
–
–
613.5
613.5
–
–
–
–
–
–
–
–
–
6
–
–
717
3,279
–
–
–
–
–
–
4,002
10.12.2012
10.12.2012
01.06.2016
01.07.2019
01.07.2021
12.10.2015
24.10.2015
02.10.2016
23.10.2016
09.10.2017
20.10.2017
19.10.2018
19.10.2018
–
09.12.2019
09.12.2019
30.11.2016
31.12.2019
31.12.2021
–
–
–
–
–
–
–
–
–
90
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Steven Boyes
Conditional share options
Sharesave (3 year)
Sharesave (3 year)
Sharesave (3 year)
Conditional awards
DBP³
LTPP4
DBP
LTPP5
DBP
LTPP6
DBP
LTPP7
Total
Neil Cooper
Conditional share options
CFO Scheme8
CFO Scheme8
Sharesave (3 year)
Conditional Awards
LTPP7
Total
Date of grant
28.03.2012
30.04.2014
29.04.2015
12.10.2012
24.10.2012
02.10.2013
23.10.2013
09.10.2014
20.10.2014
19.10.2015
19.10.2015
Date of grant
21.12.2015
21.12.2015
27.04.2016
21.12.2015
Unvested
shares at
1 July 2015
(number)
Vested
shares at
1 July 2015
(number)
Granted
(number)
Exercised
(number)
Lapsed
(number)
Outstanding
shares as at
30 June 16
(number)
Market price
on award
(pence)
Exercise
price
(pence)
Market price
at exercise/
vesting
(pence)
Gain
receivable
(£000)
Date from which
exercisable/
capable of
vesting1
Expiry
date
–
2,578
–
111,746
534,493
65,769
271,230
57,091
244,086
–
–
1,286,993
7,200
–
–
–
–
–
–
–
–
–
–
7,200
–
–
2,013
–
–
–
–
–
–
27,531
167,974
197,518
(7,200)
–
–
(111,746)
(534,493)
–
–
–
–
–
–
(653,439)
–
–
–
–
–
–
–
–
–
–
–
–
–
2,578
2,013
–
–
65,769
271,230
57,091
244,086
27,531
167,974
838,272
–
–
–
170.14
160.90
326.90
325.00
386.00
372.00
656.00
637.00
–
125.00
349.00
447.00
–
–
–
–
–
–
–
–
–
632.0
–
–
613.5
613.5
–
–
–
–
–
–
–
36
–
–
01.06.2015
01.07.2017
01.07.2018
30.11.2015
31.12.2017
31.12.2018
686
3,279
–
–
–
–
–
–
4,001
12.10.2015
24.10.2015
02.10.2016
23.10.2016
09.10.2017
20.10.2017
19.10.2018
19.10.2018
–
–
–
–
–
–
–
–
–
–
Unvested
shares at
1 July 2015
(number)
Vested
shares at
1 July 2015
(number)
Granted
(number)
Exercised
(number)
Lapsed
(number)
Outstanding
shares as at
30 June 16
(number)
Market price
on award
(pence)
Exercise
price
(pence)
Market price
at exercise/
vesting
(pence)
Gain
receivable
(£000)
Date from which
exercisable/
capable of
vesting1
Expiry
date
–
–
–
–
–
–
–
–
–
–
45,705
76,175
3,734
122,440
248,054
–
–
–
–
–
–
–
–
–
–
45,705
76,175
3,734
–
–
–
122,440
248,054
637.00
–
10.00
10.00
482.00
–
–
–
–
–
–
–
–
–
–
–
–
23.10.2016
20.10.2017
01.07.2019
06.11.2016
03.11.2017
31.12.2019
19.10.2018
–
–
–
Barratt Developments PLC – Annual Report and Accounts 2016
91
Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Annual report on remuneration continued
Former Directors
Mark Clare9
Conditional awards
DBP³
LTPP4
DBP
LTPP5
DBP
LTPP6
Total
Date of grant
12.10.2012
24.10.2012
02.10.2013
23.10.2013
09.10.2014
20.10.2014
Unvested
shares at
1 July 2015
(number)
Vested
shares at
1 July 2015
(number)
Granted
(number)
Exercised
(number)
Lapsed
(number)
Outstanding
shares as at
30 June 16
(number)
Market price
on award
(pence)
Exercise
price
(pence)
Market price
at exercise/
vesting
(pence)
Gain
receivable
(£000)
Date from which
exercisable/
capable of
vesting1
Expiry
date
184,123
825,357
101,560
418,830
88,160
376,891
1,994,921
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(184,123)
(825,357)
(101,560)
–
(88,160)
–
(1,199,200)
–
–
–
(91,283)
–
(207,773)
(299,056)
–
–
–
327,547
–
169,118
496,665
170.14
160.90
326.90
325.00
386.00
372.00
–
–
–
–
–
–
–
–
613.5
613.5
–
–
–
–
–
1,130
5,064
–
–
–
–
6,194
12.10.2015
24.10.2015
02.10.2016
23.10.2016
09.10.2017
20.10.2017
–
–
–
–
–
–
–
–
1 The earliest date on which an award may vest, in normal circumstances, having fulfilled all qualifying conditions, after which ordinary shares under conditional awards are transferred automatically to the participants as soon as possible and share options can be exercised.
2 The ESOS is divided into two sub-schemes, one of which is approved under the Income Tax (Earnings and Pensions) Act 2003 and the other of which is not. The exercise price is calculated differently for each sub-scheme in accordance with the rules of the ESOS. Executive Directors have
until 9 December 2019 to exercise their options under the ESOS.
3 100% of this award vested on 12 October 2015. The relevant number of shares were released to each participant thereafter following the settlement of any tax and national insurance liabilities due on the shares.
4 100% of this award vested on 24 October 2015. The relevant number of shares were released to each participant thereafter following the settlement of any tax and national insurance liabilities due on the shares.
5 This award was tested after 30 June 2016 and 100% of the award will vest in October 2016 (see page 86 for further details).
6 Award based on an allocation of ordinary shares equivalent in value to a maximum of 200% of base salary. One third of the award is subject to a three-year TSR performance condition, one third is based on the achievement of an EPS target for the financial year ending 30 June 2017
and the remaining third is based on the achievement of a ROCE target for the financial year ending 30 June 2017. There is no re-testing of performance conditions. See page 89 for an update on performance to date against the targets.
7 See page 88 for details.
8 Granted on joining as replacement awards for those forfeited by leaving his previous employment as described on page 88.
9 Mark Clare left the Board on 31 July 2015 and the employment of the Company on 31 October 2015. His deferred bonus awards were released to him shortly after leaving as per the rules of the scheme. His LTPP awards have been time pro-rated and will be issued at the normal vesting
date for the award subject to the original performance conditions being met.
10 This reflects the share price as at 27 June 2016, being the date on which David Thomas exercised his option.
All conditional awards and share options are subject to an overriding Committee discretion, in that the Committee must be satisfied that the underlying financial performance of the Group
over the performance period warrants the level of vesting as determined by applying the relevant targets. If the Committee is not of this view, it has the authority to reduce the level
of vesting as it deems appropriate.
92
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Dilution
On maturity or vesting of any of its share incentive schemes the Company satisfies the awards
through: a new issue of shares; market purchases; or the Employee Benefit Trust (the ‘EBT’).
During the financial year ended 30 June 2016, the Company continued to satisfy all outstanding
Executive options and awards under the LTPP, 2009/10 ESOS, the DBP and the Sharesave
through a new issue of shares, subject to the dilution limits described below. Awards made to
individuals below Senior Management level continued to be satisfied through shares currently
held, or to be purchased in the market, by the EBT.
The Company regularly monitors the number of shares issued under its schemes and the
impact on dilution limits. The Company is satisfied that as at 30 June 2016 its usage of shares
is compliant with the relevant dilution limits set by the Investment Association in respect of
all share plans (10% of the Company’s issued share capital in any rolling ten-year period) and
discretionary share plans (5% of the Company’s issued share capital in any rolling ten-year
period). In the event that the outstanding options under each of the schemes to be satisfied
through a new issue of shares were to vest and had been exercised on 30 June 2016, the
resulting issue of new shares would represent 1.9% of the Company’s issued share capital
as at that date.
Executive Directors’ pension arrangements
The Company’s pension policy for Executive Directors is that on joining the Group they will be
auto-enrolled unless they choose to opt-out. Upon opting-out, the Executive Director may choose
to receive a cash supplement (which does not count for incentive purposes) and/or participate
in the Company’s defined contribution money purchase pension plan. Each of the Executive
Directors has opted to receive a cash supplement in lieu of pension, which for FY16 was equal to
25% of base salary and is in line with market practice. The Remuneration Committee felt it was
appropriate to reduce the Executive Directors' pension entitlements to 25% base salary in order
to better align with market practice. Only the base salary element of a Director’s remuneration
is pensionable.
Defined benefit section
Steven Boyes was a deferred member of the defined benefit section of the Barratt Group Pension
and Life Assurance Scheme (the ‘Scheme’) during the year ended 30 June 2016.
The Scheme was closed to new entrants in 2001 and on 30 June 2009, the Company exercised
its consent under the rules of the Scheme and agreed to cease offering future accrual of defined
benefits for current members. Members of the Scheme became eligible to join the defined
contribution money purchase section of the Scheme with effect from 1 July 2009.
Until 30 June 2009, Steven Boyes was an active member of the defined benefit section of the
Scheme. This entitlement was based on a 1/60 accrual rate and a normal retirement age of 65.
Since 1 July 2009, Steven Boyes has been entitled to receive a cash supplement equal to 25%
(30% prior to 1 July 2015) of his base salary per annum.
The last full actuarial valuation of the Scheme as at 30 November 2013 showed a deficit of
£34.8m calculated on the basis of the Scheme’s technical provisions. The Company and the
Trustees of the Scheme have agreed a plan to address the shortfall which requires the Company
to continue to make deficit reduction payments of £13.3m per annum until 30 November 2015,
followed by payments of £9.5m per annum from 1 December 2015 until 31 December 2016.
It is expected that the Company will continue to make deficit reduction payments at this level
until 28 February 2018 (or until the Scheme reaches full funding on its long term funding
basis, if earlier). The Company will discuss the funding requirements of the Scheme with the
Trustees alongside the next actuarial valuation of the Scheme which is due on 30 November
2016. The valuation for the Financial Statements was updated to 30 June 2016 by a qualified
independent actuary and a surplus of £8.1m (2015: surplus of £5.3m) is included in the Group
Balance Sheet as shown in note 6.2.2 of the Financial Statements.
Members of the Scheme are also eligible for an insured lump sum of up to five times pensionable
salary on death in service. Current employees who were members of the defined benefit section
of the Scheme at closure also retain their dependants’ pension entitlements.
No excess retirement benefits have been paid to or are receivable by current and/or past
Directors in respect of their qualifying services during the financial year and there are no
arrangements in place that guarantee pensions with limited or no abatement on severance
or early retirement.
Payments to former Directors and those leaving the Group (Audited)
No payments were made in respect of loss of office during the year ended 30 June 2016 (30 June
2015: £nil) except otherwise disclosed in this Remuneration Report. Also, no payments were
made to any former Directors during the year ended 30 June 2016 (30 June 2015: £nil) except
otherwise disclosed in this Remuneration report.
Upon his retirement, Mark Clare received leaving gifts totalling £4,990, with any tax due on this
payment being settled by the Company.
Chief Executive’s Relative pay
Table 17 sets out: (i) the total pay, calculated in line with the single figure methodology; (ii) the
annual bonus pay out as a percentage of maximum; and (iii) the long term incentive (‘LTI’) vesting
level for the Chief Executive over a seven-year period (David Thomas for FY16 and Mark Clare for
FY10-15):
Table 17 – Chief Executive’s pay (Audited)
Chief Executive’s total pay (£000)
Bonus outturn (as percentage of
maximum opportunity)
LTI vesting percentage
2010
1,417
90.2
2011
1,220
36.6
2012
2,099
99.2
2013
4,310
100.0
2014
6,430
100.0
2015
7,363
93.2
2016
3,320
97.4
Seven years to 30 June 2016
0.0
0.0
32.8
73.9
95.8
100.0
100.0
Barratt Developments PLC – Annual Report and Accounts 2016
93
Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Annual report on remuneration continued
Total Shareholder Return performance graph
Chart 1, prepared in accordance with the BIS Regulations, shows the TSR performance over the
last seven years against the FTSE 350 (excluding investment trusts) and against an unweighted
index of listed housebuilders. The Board has chosen these comparative indices as the Group
and its major competitors are constituents of one or both of these indices. The TSR has been
calculated using a fair method in accordance with the BIS Regulations.
Percentage change in remuneration of Chief Executive compared to employees
Table 18 shows the percentage change in salary, benefits and annual bonus earned by the
director undertaking the role of Chief Executive on 30 June 2015 and 30 June 2016, compared
to that of the average pay of all employees of the Group.
Table 18 – Percentage change in remuneration
Chart 1 – Total Shareholder Return
700
600
500
400
300
200
100
0
30 June
2009
30 June
2010
30 June
2011
30 June
2012
30 June
2013
30 June
2014
30 June
2015
30 June
2016
Barratt Developments
FTSE 350 Index (excluding Investment Trusts)
Index of listed house builders
This graph shows the value by 30 June 2016 of £100 invested in Barratt Developments PLC on 30 June 2009 compared with the value of £100
invested in the FTSE 350 (excluding investment trusts). As a supplementary source of information, we also show performance against an index
of currently listed housebuilders (excluding Barratt Developments PLC). The other points plotted are the values at intervening financial year ends.
Source: Datastream
Chief Executive¹
Average pay of all employees²
Salary
% change
-3.6
4.3
Benefits
% change
-65.9
6.4
Annual bonus
% change
0.8
11.8
1 David Thomas took over the as Chief Executive on 1 July 2015.
2 The basis of calculation has changed compared to the previous year to more accurately reflect the average pay of all employees.
Relative importance of spend on pay
The following table shows the Company’s actual spend on pay (for all employees) relative
to dividends and profit from operations:
Table 19 – Relative importance of spend on pay
Staff costs (including Executive Directors) (£m)
Profit from operations (£m)1
Total capital return (£m)2
2016
369.8
668.4
308.0
2015
353.0
576.8
249.8
% change
4.8
15.9
23.3
1 Profit from operations has been chosen as a metric to compare against as it shows how spend on pay is linked to the Group’s
operating performance.
2 Includes interim dividend of 6.0 pence per share paid on 20 May 2016 to those shareholders on the register as at the close of business on 29 April
2016 and a final dividend of 12.3 pence per share and a special dividend of 12.4 pence per share, value of which has been calculated on the number
of shares in issue (excluding those held by the EBT) as at 30 June 2016. The final dividend and special dividend, if approved by shareholders at the
2016 AGM, will be paid on 21 November 2016 to those shareholders on the register at the close of business on 28 October 2016.
94
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Non-Executive directorships
Since joining the Board, Neil Cooper received a total fee of £39,016 in respect of his position as
a Non-Executive Director of Pennon Group PLC. He has retained this fee in full. Neither David
Thomas nor Steven Boyes held any Non-Executive directorships with other companies during
the year.
Advice/advisers
In carrying out its principal responsibilities, the Committee has the authority to obtain the
advice of external independent remuneration consultants and is solely responsible for their
appointment, retention and termination. During the year, the Committee has taken advice from
independent advisers, New Bridge Street (‘NBS’), a part of Aon plc. NBS was initially appointed
by the Committee as its remuneration consultant in 2008 and is a founder signatory to the
Remuneration Consultants Group’s Code of Conduct. In addition to advising the Committee,
NBS also provided the Company with advice on implementing decisions made by the Committee
and remuneration benchmarking. NBS’s fees for providing such advice amounted to £40,489
(2015: £54,344) for the year ended 30 June 2016. In line with best practice, the Committee
assesses, from time to time, whether the appointment remains appropriate or if it should be
put out to tender as part of its effectiveness review. NBS’s appointment was reconfirmed by the
Committee in June 2016 after an annual review of the quality of the advice received and fees
charged. The Committee is comfortable that the NBS engagement partner and team, which
provide remuneration advice to the Committee, do not have any connections with the Company
that may impair their independence or objectivity. The Committee reviewed the potential for
conflict of interests and judged that there were appropriate safeguards against such conflicts.
Aon plc also provided broking services to the Company in respect of private medical insurance,
Death in Service benefits and Group Income Protection.
The Committee also receives input into its decision making from the Chief Executive, the
Company Secretary and the Group Human Resources Director, none of whom were present
at any time when their own remuneration was being considered.
Membership and attendance at Committee meetings
The Committee operates within terms of reference (the ‘Terms of Reference’) and governance
policies approved annually by the Board and in accordance with the Code.
Membership of the Committee and attendance at each of its scheduled meetings during the year
is set out in Table 20.
Table 20
Member
Richard Akers
John Allan¹
Tessa Bamford
Nina Bibby
Mark Rolfe
Role
Chairman
Member
Member
Member
Member
Number of meetings attended
5/5
4/5
5/5
5/5
5/5
1 John Allan was unable to attend a meeting due to an unavoidable personal circumstance. John Allan reviewed the papers and provided his
comments prior to the meeting.
Note:
5/ Number of meetings attended whilst a Director.
/5 Number of meetings whilst a Director.
The Company Secretary acts as Secretary to the Committee.
Statement of implementation of the Policy for FY17
Executive Directors’ remuneration for FY17 will be based on the Group’s remuneration strategy
as summarised on pages 80 to 85 and will be implemented in accordance with the Policy
as follows:
Base salary
The Committee reviewed the Executive Directors’ salaries in June 2016. In reviewing these
salaries the Committee had regard to: the performance of the Executive Directors during the
year; the pay and employment conditions elsewhere in the business, the increases awarded to
other members of staff and the multiplier effect of an increase in base salary on the package
as a whole. The salaries of the Executive Directors at the beginning of the financial year were
as follows:
Table 21 – Executive Directors’ salary increases
Executive Director
David Thomas (3% increase)
Steven Boyes (3% increase)
Neil Cooper1
Salary with effect
from 1 July 2015
£000
Salary with effect
from 1 July 2016
£000
676
535
454
696
551
454
1 Neil Cooper joined the Board on 23 November 2015.
Following these increases Executive Directors’ salaries remain within the range for the
housebuilding sector and the wider population of similar sized companies.
Barratt Developments PLC – Annual Report and Accounts 2016
95
Strategic ReportGovernanceFinancial StatementsOther Information Remuneration report – Annual report on remuneration continued
Pension
Each of the Executive Directors has opted to receive a cash salary supplement in lieu of a
pension of 25% annual salary.
Annual bonus
Executive Directors and Senior Management will participate in the Group’s annual bonus scheme
in accordance with the Policy. The performance measures, the reasons for selecting these
measures and the maximum bonus payment against each of them expressed as a percentage
of salary for FY17 will be:
Performance measure
Reason for selecting
Weighting
(% of salary maximum)
The Committee will continue to have an overriding discretion in respect of any bonus payment in
accordance with its Remuneration Policy. In addition, any bonus awarded for FY17 will be subject
to Malus and Clawback (see page 85).
LTPP
The level of the LTPP award to be granted to Executive Directors and Senior Management
during FY17 will be in line with that set out in the Policy. The Committee is cognisant that such
an award should be subject to performance targets which are stretching and challenging whilst
aligned with the short and long term performance of the Group and total shareholder return.
Accordingly, the Committee has agreed that the extent to which the LTPP award to be granted
in FY17 (the ‘2016/17 LTPP’) will vest, will be dependent on three independent performance
conditions as follows:
Financial:
Profit before tax
Balance Sheet Items:
Land bank owned and
controlled
Capital employed
Non-financial:
Quality and service
with a health and
safety underpin
Personal objectives
Rewards outperformance against stretching targets and
is a key measure of our performance
Ensures sufficient land available for the future business
plan.
Ensures efficient and effective management of our
Balance Sheet.
Ensures a focus on quality and service to our customers
without compromising the safety of our people.
Focus individuals on specific factors required to meet
the long and short term strategy of the business whilst
aligning their interests with those of shareholders.
Total bonus achievable as a % salary
65
22.5
22.5
20
20
150*
Performance condition
Reason selected
TSR against a 50+/50-
comparator group as
at the beginning of the
performance period.
Absolute EPS for the
financial year ending
30 June 2019.
ROCE for the financial
year ending 30 June
2019.
To ensure that the
comparator group remains
current whilst factoring in
the continued movement
in the Company’s market
capitalisation.
To ensure efficient and
effective management of our
business and align interests
with those of shareholders.
To ensure efficient and
effective management of our
business and align interests
with those of shareholders.
Weighting
(of total award)
One-
third
Below
Threshold
(0% vesting)
Below
median
Threshold
(25% vesting)
Maximum
(100% vesting)
Median
Upper
quartile
One-
third
One-
third
See
below
See
below
* Any bonus earned in aggregate in excess of 100% will continue to be deferred into shares and held in the DBP. The Committee has agreed that
no matching shares will be awarded against any deferred shares in respect of FY17.
Annual Bonus, EPS and ROCE performance targets
The Group’s profitability remains a key measure, however, in order to drive sustainable value this
must be achieved through an appropriate capital structure and in line with the risk profile of the
business. The annual bonus performance measures have been reviewed against last year’s and
the following changes have been made to align them with the Company’s strategy:
> moved the health and safety measure to an underpin of the customer service metric to create
a single quality service metric to encourage the maintenance of a high quality product whilst
preserving the safety of all employees and individuals on site.
> personal objectives have been given an increased weighting to enhance focus on the
achievement of outcomes that support the strategy of the Group. Consequently, the other
metrics have been reweighted to maintain an appropriate balance between each of them.
The Company is of the view that the individual annual bonus performance metrics together
with the EPS and ROCE targets for the 2016/17 LTPP are commercially sensitive in terms of the
Group’s future strategy and therefore these targets will not be disclosed in this report. We will,
as always disclose the annual bonus metrics and performance against them in next year's
report. We will also provide an update on EPS and ROCE performance against targets on an
annual basis in line with feedback that we receive from shareholders on the disclosure in respect
of the 2014/15 LTPP and 2015/16 LTPP. The annual bonus metrics and the specific target range
for the 2016/17 LTPP will remain designed to incentivise significant performance improvement
across the business, deliver a strong return to shareholders and represent a stretching target
for Executive Directors and Senior Management. When setting the annual bonus metrics and the
target range for the 2016/17 LTPP, the Committee will take into account the Board’s assessment
of the optimal scale of business, the Group’s ROCE target and current market consensus.
96
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
Both the annual bonus and 2016/17 LTPP performance conditions will remain subject to an
overriding Committee discretion and to Clawback as set out in the Policy. A two-year continued
holding period on any shares (net of any shares sold to satisfy tax and national insurance
liabilities) vesting, will also apply to the 2016/17 LTPP.
Statement of shareholding vote at AGM
At the 2015 AGM, a resolution was proposed to shareholders to approve the Annual Report
on Remuneration (advisory vote) for the year ended 30 June 2015 for which the following votes
were received:
Non-Executive Directors’ fees
The Board reviewed the fees for the Non-Executive Directors (including the Chairman) and
concluded that in order to ensure that the base fee level remains competitive in the market,
they should be increased to £305,000 per annum for the Chairman and £58,000 per annum for
Non-Executive Directors with effect from 1 July 2016. The additional fees for the Chairmen of the
Committees and to the Senior Independent Director remain the same. Accordingly, the annual
fees payable to the Non-Executive Chairman and Non-Executive Directors with effect from
1 July 2016 are as follows:
Table 23
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Remuneration report
Number of votes
% votes cast
620,551,709
33,096,748
653,648,457
24,878,965
94.94
5.06
100.00
–
Table 22 – Non-Executive Directors’ fees
Role
Chairman (1.7% increase)
Non-Executive Director base fee (3.6% increase)
Chairman of Audit Committee
Chairman of Remuneration Committee
Chairman of Safety, Health and Environmental Committee
Senior Independent Director
Fee as at 1 July 2015
Fee as at 1 July 2016
This Remuneration report was approved by the Board on 6 September 2016 and signed on its
behalf by:
£300,000
£56,000
£10,000
£10,000
£5,000
£5,000
£305,000
£58,000
£10,000
£10,000
£5,000
£5,000
Richard Akers
Non-Executive Director
6 September 2016.
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Other statutory disclosures
Directors’ Report
The Directors’ Report for the financial year ended 30 June 2016 comprises pages 46 to 104
inclusive, together with the sections incorporated by reference. Any matters on which the
Directors are required to report on annually, but which do not appear in any other section
of this report are detailed below.
Activities of the Group
The Company is the holding company of the Group. The Group’s principal activities comprise
acquiring and developing land, planning, designing and constructing residential property
developments and selling the homes it builds throughout Britain. These core activities are
supported by the Group’s commercial development, urban regeneration, procurement,
design and strategic land capabilities.
Results and dividends
The profit from continuing activities for the year ended 30 June 2016 was £550.3m
(2015: £449.4m).
An interim dividend of 6.0 pence per share was paid on 20 May 2016 to those shareholders on
the register as at close of business on 29 April 2016 (2015: 4.8 pence per share). The Directors
recommend the payment of a final dividend of 12.3 pence per share (2015: 10.3 pence per share)
in respect of the financial year ended 30 June 2016.
The Directors also recommend the payment of a special dividend of 12.4 pence per share under
the Company’s Special Cash Payment Programme (see page 9 for further details).
Both the final dividend and the special dividend will, subject to shareholder approval at the 2016
AGM, be paid on 21 November 2016 to those shareholders on the register at the close of business
on 28 October 2016. If approved, the total dividend (including the special dividend) for FY16 is 30.7
pence per share (2015: 25.1 pence per share).
Strategic Report
The Group’s Strategic Report is set out on pages 2 to 45 of this Annual Report and Accounts
and contains certain disclosures required to be contained in the Directors' Report as follows:
details of the Group’s greenhouse gas emissions (page 39); our approach to diversity and details
of diversity within the Group (page 35); our employee engagement programme (page 35); an
indication of likely future developments in the Group including in the field of research and
development (page 31) and the Group’s principal risks (pages 42 to 45).
In addition, details of the Company’s approach to dealing with environmental issues in its
operations and the impact of and management of risks associated with environmental, social
and governance matters are contained in the Strategic Report on pages 42 to 45 and in the
Sustainability Report available at www.barrattdevelopments.co.uk. They can also be found in
the sustainability section of the Company’s website at www.barrattdevelopments.co.uk.
The Group’s financial assets, financial liabilities and derivative financial instruments are detailed
in sections 3 and 5 within the notes to the Financial Statements. Details of the Group’s liquidity,
market price, credit and cash flow risks are set out in note 5.5 to the Financial Statements.
Annual General Meeting
The 2016 AGM will be held at The Royal College of Physicians, 11 St Andrews Place, Regent’s
Park, London NW1 4LE on Wednesday, 16 November 2016 at 2.30 p.m. The notice convening
the 2016 AGM is set out in a separate letter to shareholders.
Directors and their interests
Details of the Directors who held office during the financial year ending 30 June 2016 and as
at the date of this report can be found on pages 46 and 47.
The beneficial interests of the Directors and connected persons in the ordinary share capital of
the Company together with the interests of the Executive Directors in share options and awards
of shares as at 30 June 2016 and as at the date of this report are disclosed in the Remuneration
report on pages 89 to 92.
At no time during or at the end of the year did any Director have a material interest in a contract
of significance in relation to the business of the Group.
98
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Strategic ReportGovernanceFinancial StatementsOther Information Appointment and replacement of Directors
In accordance with the Articles there shall be no less than two and no more than 15 Directors
appointed to the Board at any one time. Directors may be appointed by the Company by ordinary
resolution or by the Board. The Board may from time to time appoint one or more Directors
to hold employment or executive office for such period (subject to the Act) and on such terms
as they may determine and may revoke or terminate any such appointment. Directors are not
subject to a maximum age limit.
In addition to the power under the Act for shareholders to remove any Director by ordinary
resolution upon the giving of special notice, under the Articles the Company may, by special
resolution, remove any Director before the expiration of their term of office. The office of Director
shall be vacated if: (i) they resign or offer to resign and the Board resolves to accept such offer;
(ii) their resignation is requested by all of the other Directors and all of the other Directors are
not less than three in number; (iii) they are or have been suffering from mental or physical ill
health; (iv) they are absent without permission of the Board from meetings of the Board for six
consecutive months and the Board resolves that their office is vacated; (v) they become bankrupt
or compound with their creditors generally; (vi) they are prohibited by law from being a Director;
(vii) they cease to be a Director by virtue of the Act; or (viii) they are removed from office pursuant
to the Articles.
Details relating to the retirement, election and re-election of Directors at each AGM can be found
in the Nomination Committee report on pages 64 and 65.
Powers of the Directors
Subject to the Articles, the Act and any directions given by special resolution, the business of the
Company is ultimately managed by the Board who may exercise all the powers of the Company,
whether relating to the management of the business of the Company or otherwise. In particular,
the Board may exercise all the powers of the Company to borrow money and to mortgage or
charge any of its undertakings, property, assets and uncalled capital and to issue debentures
and other securities and to give security for any debt, liability or obligation of the Company to any
third party.
Qualifying third party indemnity provisions
At the date of this Annual Report and Accounts, there are qualifying third party indemnity
provisions governed by the Act in place under which the Company has agreed to indemnify the
Directors, former Directors and the Company Secretary, together with those who have held or
hold these positions as officers of other Group companies or of associate or affiliated companies
and members of the Executive Committee, to the extent permitted by law and the Articles,
against all liability arising in respect of any act or omission in the course of performing their
duties. In addition, the Company maintains directors’ and officers’ liability insurance for each
Director of the Group and its associated companies.
No Director of the Company or of any associated company shall be accountable to the Company
or the members for any benefit provided pursuant to the Articles and receipt of any such benefit
shall not disqualify any person from being or becoming a Director of the Company.
Related party transactions
The Board and certain members of Senior Management are related parties within the definition
of IAS 24 (Revised) ‘Related Party Disclosures’ (‘IAS 24’) and the Board are related parties
within the definition of Chapter 11 of the UK Listing Rules (‘Chapter 11’). There is no difference
between transactions with key personnel of the Company and transactions with key personnel
of the Group.
During the year, the Company entered into the following transaction(s) which, for the purposes
of IAS 24, is considered to be a ‘related party transaction’:
Transaction 1
As outlined in the Annual Report and Accounts for FY15, in August 2014, Mark Clare (at the time,
Group Chief Executive) reserved a flat (including a car parking space) from Fulham Wharf LLP, a
joint venture partnership between BDW Trading Limited (the Company’s main trading subsidiary)
and London and Quadrant Housing Trust (L&Q), at a purchase price of £1,692,350. This purchase
was conducted at a fair and reasonable market price based on four independent market
valuations and similar comparable transactions at that time. An amount of £2,500 was paid on
reservation and a deposit of £166,735 was paid on 13 October 2014. The remaining balance was
paid on completion on 17 June 2016 in accordance with the Group’s normal terms of trading.
Fulham Wharf LLP is not controlled by and is not a ‘subsidiary undertaking’ of the Company.
Transaction 2
In June 2016, David Thomas notified the Board that he and one of his connected persons intended
to buy one property each at the BDW Trading Limited site at Cane Hill, Coulsdon, Surrey (the
‘Transactions’).
Property 1
David Thomas intends to purchase a Barratt showhome on a sale and licence back basis.
Sale and licence back transactions are carried out on showhomes in the ordinary course of
business and are normally for a period of two years. The purchase price of the property is
£579,995 (which includes an upgraded kitchen, flooring, lighting, built-in wardrobe and soft
furnishings). The sale and licence back is for a minimum of two years with an annual rental of 6%.
David Thomas will also be purchasing all of the furniture and fittings displayed in the showhome
for an agreed price of £4,000. The anticipated completion date is end of November 2016.
Property 2
David Thomas’ connected person is proposing to purchase, in the ordinary course of business,
a David Wilson home from BDW Trading Limited at a purchase price of £545,000 together with a
number of customer extras with a value not exceeding £18,000. The anticipated completion date
is the end of January 2017.
Both of the Transactions are being conducted at a fair and reasonable market price based on an
independent market valuation and similar comparable transactions at the time. Neither of the
properties have been exchanged. A 10% deposit will be payable on exchange, with the remaining
balance being payable on legal completion in November 2016 and January 2017 respectively,
in accordance with the Group’s normal terms of trading.
Barratt Developments PLC – Annual Report and Accounts 2016
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Strategic ReportGovernanceFinancial StatementsOther Information Other statutory disclosures continued
On notification by David Thomas of the Transactions, the Board sought advice from its legal
advisers and Corporate brokers/sponsors in respect of the application of Chapter 11 and section
190 of the Act (Substantial Property Transaction) (‘Section 190’) to the Transactions. The advice
received concluded that the Transactions, both individually and combined, were exempt from the
provisions of Chapter 11, due to being classified as a ‘Small Transaction’. However, the Transactions
are above the threshold prescribed by Section 190. As David Thomas is a Director of the Company,
which is not a wholly owned subsidiary, shareholder approval is required before the Transactions
can be completed. Accordingly, in June 2016, the Board approved the Transactions subject to
shareholder approval being obtained. The relevant resolution will be included in the Notice of AGM
for consideration and, if deemed fit, approval by shareholders in November 2016. David Thomas will
enter into the contracts subject to such approval being obtained.
No other related party transactions that require disclosure, have been entered into during the
year under review.
Disclosure of information to auditor
So far as each of the Directors is aware, there is no relevant audit information (that is,
information needed by the Company’s auditor in connection with preparing its report) of which
the Company’s auditor is not aware.
Each Director has taken all reasonable steps that they ought to have taken in accordance with
their duty as a Director to make themselves aware of any relevant audit information and to
ensure that the Company’s auditor is aware of that information. This confirmation is given and
should be interpreted in accordance with the provisions of section 418(2) of the Act.
Political donations and expenditure
No political donations or expenditure were made or incurred during the year (2015: £nil).
Offices
The Group had 29 offices (excluding those offices undertaking an administrative function only)
located throughout Britain at the end of the financial year. The Group also has a representative
office in Beijing and Shanghai, China. A full list of the Group’s offices and their locations can be
obtained from the Company Secretary at the Company's registered office or from its website
www.barrattdevelopments.co.uk.
Capital structure
The Company has a single class of share capital which is divided into ordinary shares of 10 pence
each. All issued shares are in registered form and are fully paid. Details of the Company’s issued
share capital and of the movements in the share capital during the year can be found in note 5.6
to the Financial Statements on page 145. Subject to the Articles, the Act and other shareholders’
rights, shares are at the disposal of the Board. At each AGM the Board seeks authorisation
from its shareholders to allot shares. At the AGM held on 11 November 2015, the Directors were
given authority to allot shares up to a nominal value of £33,199,348 (representing one-third of the
nominal value of the Company’s issued share capital as at 30 September 2015), such authority to
remain valid until the end of the 2016 AGM or, if earlier, until the close of business on 10 February
2017. A resolution to renew this authority will be proposed at the 2016 AGM.
Rights and obligations attaching to shares
Subject to any rights attached to existing shares, shares may be issued with such rights and
restrictions as the Company may by ordinary resolution decide, or (if there is no such resolution
or so far as it does not make specific provision) as the Board may decide.
Subject to the Act, the Articles specify that rights attached to any existing class of shares may
be varied either with the written consent of the holders of not less than three-fourths in nominal
value of the issued shares of that class (excluding any shares of that class held as treasury
shares), or with the sanction of a special resolution passed at a separate general meeting of the
holders of those shares. The rights conferred upon the holders of any shares shall not, unless
otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by
the creation or issue of further shares ranking pari passu with them.
Voting
Subject to any special terms as to voting upon any shares which may be issued or may at the
relevant time be held, every member present in person or by proxy at a general meeting or
class meeting has one vote upon a show of hands or, upon a poll vote, one vote for every share
of which such member is a holder. In the case of joint holders of a share, the vote of the senior
who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of votes
of the other joint holders and seniority shall be determined by the order in which the names
stand in the register in respect of the joint holding.
In accordance with the Act, each member is entitled to appoint one or more proxies, and in the
case of corporations, more than one corporate representative to exercise all or any of their rights
to attend, speak and vote on their behalf at a general meeting or class meeting. The timescales
for appointing proxies are set out in the Notice of the 2016 AGM.
No member shall be entitled to vote at any general meeting or class meeting in respect of
any shares held by them if any call or other sum then payable by them in respect of that share
remains unpaid or if they have been served with a restriction notice (as defined in the Articles)
after failure to provide the Company with information concerning interests in those shares
required to be provided under the Act.
Transfer of shares
Shares in the Company may be in uncertificated or certificated form. Title to uncertificated
shares may be transferred by means of a relevant system and certificated shares may be
transferred by an instrument of transfer as approved by the Board. The transferor of a share
is deemed to remain the holder until the transferee’s name is entered into the Company’s
register of members.
There are no restrictions on the transfer of shares except as follows. The Board may, in its
absolute discretion and without giving any reason, decline to register any transfer of any share
which is not a fully paid share. Registration of a transfer of an uncertificated share may be
refused in the circumstances set out in the uncertificated securities rules (as defined in the
Articles) and where, in the case of a transfer to joint holders, the number of joint holders to
whom the uncertificated share is to be transferred exceeds four.
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Strategic ReportGovernanceFinancial StatementsOther Information The Board may decline to register a transfer of a certificated share unless the instrument of
transfer: (i) is duly stamped or certified or otherwise shown to the satisfaction of the Board to
be exempt from stamp duty and is accompanied by the relevant share certificate and such other
evidence of the right to transfer as the Board may reasonably require; (ii) is in respect of only
one class of share; (iii) if joint transferees, is in favour of not more than four such transferees; or
(iv) where the transfer is requested by a person with a 0.25% interest (as defined in the Articles)
if such a person has been served with a restriction notice after failure to provide the Company
with information concerning interests in those shares required to be provided under the Act,
unless the transfer is shown to the Board to be pursuant to an arm’s length sale (as defined in
the Articles).
There are no special control rights in relation to the Company’s shares and the Company is not
aware of any agreements between holders of securities that may result in restrictions on the
transfer of securities.
Shareholder authority for purchase of own shares
At the Company’s AGM held on 11 November 2015, shareholders gave authority to the Company
to buy back up to an aggregate of 99,598,040 ordinary shares (representing 10% of the Company’s
issued share capital). This authority is valid until the end of the 2016 AGM or, if earlier, until the
close of business on 10 February 2017. Under the authority there is a minimum and maximum
price to be paid for such shares. Any shares which are bought back may be held as treasury
shares or, if not so held, will be cancelled immediately upon completion of the purchase, thereby
reducing the Company’s issued share capital.
No purchases had been made under this authority as at the date of this Annual Report and
Accounts. A resolution renewing the authority will be proposed at the 2016 AGM.
Dividends and distributions
Subject to the provisions of the Act, the Company may by ordinary resolution from time to
time declare dividends for payment to the holders of the ordinary shares of 10 pence each,
of an amount which does not exceed the amount recommended by the Board. The Board may
pay interim dividends, and also any fixed rate dividends, whenever the financial position of the
Company justify their payment in the opinion of the Board. If the Board acts in good faith, it is
not liable to holders of shares with preferred or pari passu rights for losses arising from the
payment of interim or fixed dividends on other shares. The Board may withhold payment of all
or any part of any dividends or other monies payable in respect of the Company’s shares from
a person with a 0.25% interest if such person has been served with a restriction notice after
failure to provide the Company with information concerning interests in those shares required
to be provided under the Act.
Shareholder arrangements to waive dividends
The Barratt Developments Employee Benefit Trust (the ‘EBT’) holds ordinary shares in the
Company for the purpose of satisfying options and awards that have been granted under the
various employee share schemes operated by the Company. Details of the shares so held
are set out in note 5.6 to the Financial Statements.
The EBT has agreed to waive all or any future right to dividend payments on shares held within
the EBT and these shares do not count in the calculation of the weighted average number of
shares used to calculate EPS until such time as they are vested to the relevant employee.
The Trustees of the EBT may vote or abstain from voting on shares held in the EBT in any way
they think fit and in doing so may take into account both financial and non-financial interests
of the beneficiaries of the EBT or their dependants.
Employee share schemes
Details of employee share schemes are set out in note 6.3 to the Financial Statements. Details
of long term incentive schemes for the Directors are shown in the Remuneration report
on pages 76 to 97.
Employment policy and involvement
(i) Employment and diversity
The Group is committed to seeking to develop the talents of its employees so that they can
maximise their career potential and providing rewarding careers in an atmosphere that
engenders equal opportunities for all. Selection for employment and promotion is based on
merit, following an objective assessment of ability and experience of candidates, after giving full
and fair consideration to all applications (including individuals with disabilities). The Group is
also committed to ensuring that its workplaces are free from discrimination. The Group strives
to ensure that its policies and practices provide equal opportunities in respect of issues such
as training, career development and promotion for all existing or potential staff irrespective of
gender, race, ethnic origin, colour, religion, physical disability, marital status, sexual orientation
or age. Every effort is made to retain and support employees who become disabled whilst
working within the Group. Further details on Group's diversity initiatives are available in the
Sustainability Report which is available from www.barrattdevelopments.co.uk/sustainability/
our-reports.
(ii) Employee engagement
The Board recognises that appropriate employee engagement is a key factor in the long term
success of the Group. It utilises a comprehensive employee engagement programme with the
aim of creating a strong, shared culture. All employees are invited to take part in an online
engagement survey each year. The results of this survey are fed back to each operating division
who use the results to formulate plans for maintaining or improving engagement in the following
year. We continue to report high levels of engagement, with scores remaining within the top
quartile of IBM’s database this year at 77%.
Barratt Developments PLC – Annual Report and Accounts 2016
101
Strategic ReportGovernanceFinancial StatementsOther Information Other statutory disclosures continued
(iii) Employee communications
A key part of effective employee engagement is communication. The Company seeks to ensure
that all significant events, economic factors and financial updates and the impact of these on
the performance of the Group are communicated to employees. This is mainly channelled
through the Group’s intranet and the use of email alerts, core briefings and regular newsletters.
Additionally, the Chief Executive regularly briefs senior and middle management via conference
calls and bulletins which gives them the opportunity to ask questions and enter into dialogue.
Individually and collectively, the Board and the Executive Committee members visit operating
divisions and sites frequently in order to assess operational performance, engage with
employees on a one-to-one basis and gain first-hand experience of employees’ aspirations
and concerns.
(iv) Future talent
The Group runs a number of programmes for new entrants through our ‘Future Talent strategy’.
The Group currently has 73 graduates across our two-year and one-year schemes, 46 of which
commenced their training in September 2015. In addition, 74 delegates are currently on our
bespoke Foundation Degree in Residential Development and Construction in partnership
with Sheffield Hallam University. We are currently training 451 Trade, Technical, Commercial
and other apprentices/trainees and 13 undergraduate students on a paid 12-month industrial
placement programme.
(v) Employee training and development
The Group has a suite of leadership and management development programmes aimed at all
levels within the organisation. The programmes are designed and delivered internally and are
tailored to the needs of the business.
The Group also offers the Barratt Academy, a staged programme to enable employee
development from apprentice to site manager as well as within the areas of customer service
(new in FY16), our technical and commercial academies have been enhanced and we are making
a significant investment into our IT training provision. Succession planning is in place across the
Group and the leadership programmes assist with the development of individuals as part of this
process. In addition, we have continued to provide development centres for those employees with
high potential.
(vi) Employee Sharesave Scheme
In April 2016, the Company invited all eligible employees of the Group to participate in the
seventh grant under the Savings Related Share Option Scheme (the ‘2016 Sharesave’) which was
approved by shareholders at the Company’s Annual General Meeting held in November 2008.
The invitations for the 2016 Sharesave allowed eligible employees to contribute a maximum of
£500 per month in one or a combination of Sharesave schemes. This enabled those individuals
who had participated in previous grants under the Sharesave the opportunity to increase their
savings and gave other employees (new and existing) the chance to participate and further
align their interests with the performance of the Group. At 30 June 2016, approximately 60%
of employees participate in one or more of the active Sharesave schemes.
Articles of Association
The Company’s Articles of Association (the ‘Articles’) contain regulations which deal with matters
such as the appointment and removal of Directors, Directors’ interests and proceedings at
general and Board meetings. Any amendments to the Articles may be made in accordance with
the provisions of the Companies Act 2006 by way of a special resolution at a general meeting.
Approach to tax and tax governance
For all taxes, it is the Group’s aim to ensure it accurately calculates and pays the tax that is due
at the correct time. Whilst the Group does seek to minimise its tax liabilities through the use
of legitimate routine tax planning, it does not participate in aggressive tax planning schemes.
The Group also seeks to be transparent in its dealings with HM Revenue & Customs and has
regular dialogue with its representatives to discuss both developments in the business and the
ongoing tax position.
The Chief Financial Officer retains overall responsibility for oversight of the tax affairs of the
Group. David Thomas, in his capacity of Chief Executive and Interim Finance Director, was the
named Senior Accounting Officer until 31 December 2015 at which time, Neil Cooper assumed
the responsibility. The Senior Accounting Officer receives regular updates on the tax position.
In addition, taxation is discussed by the Audit Committee at least annually.
Significant agreements
The following significant agreements contain provisions entitling the counterparties to exercise
termination or other rights in the event of a change of control of the Company:
> The revolving credit facility agreement dated 14 May 2013 (as amended on 17 December
2014 and 30 June 2016) made between, amongst others, the Company, Lloyds Bank Plc (as
the facility agent) and the banks and financial institutions named therein as lenders (the
‘Revolving Credit Facility Agreement’) contains a prepayment provision at the election of
each lender on change of control. The Company must notify the facility agent promptly upon
becoming aware of the change of control. After the occurrence of a change of control, the
facility agent shall (if a lender so requests within 20 days of being notified of the change of
control) by notice to the Company, on the date falling 30 days after the change of control,
cancel the commitment of such lender under the Revolving Credit Facility Agreement and
declare all amounts outstanding in respect of such lender under the Revolving Credit Facility
Agreement immediately due and payable. The Revolving Credit Facility Agreement also
contains a provision such that, following a change of control, a lender is not obliged to fund
any further drawdown of the facility (other than rollover loans). For these purposes, a ‘change
of control’ occurs if any person or group of persons ‘acting in concert’ (as defined in the City
Code on Takeovers and Mergers) gains control (as defined in the Corporation Tax Act 2010)
of the Company.
102
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Going concern
In determining the appropriate basis of preparation of the Financial Statements, the Directors
are required to consider whether the Group can continue in operational existence for the
foreseeable future. Accordingly, after making enquiries and having considered forecasts and
appropriate sensitivities, the Directors have formed a judgement, at the time of approving
the Financial Statements, that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future, being at least
12 months from the date of these Financial Statements (more information on the Going Concern
judgement can be found on page 115). For this reason, they continue to adopt the going concern
basis in the preparation of these Financial Statements.
On behalf of the Board
Tina Bains
Company Secretary
6 September 2016
> Each of the note purchase agreements entered into in respect of the Group’s privately placed
notes (being the US$80m of notes issued pursuant to the following note purchase agreements:
(i) a note purchase agreement in respect of the issue of US$15m notes dated 10 May 2011
(as amended and restated on 14 May 2013 and as amended on 17 December 2014); and
(ii) a note purchase agreement in respect of the issue of US$65m notes also dated 10 May 2011
(as amended and restated on 14 May 2013 and as amended on 17 December 2014)) contains a
change of control prepayment provision. Each such control provision provides that promptly
after the Company becomes aware that a change of control has occurred, the Company shall
notify all the holders of the notes of the same and give the noteholders the option to require
the Company to prepay at par all outstanding amounts (principal and interest) under the notes.
If a noteholder accepts such offer of prepayment, such prepayment shall take place on a
business day that is not more than 90 days after the Company notified the noteholders of the
change of control. For these purposes a ‘change of control’ means the acquisition by a person
or a group of persons ‘acting in concert’ (as defined in the City Code on Takeovers and Mergers)
such that they gain beneficial ownership of more than 50% of the issued share capital of the
Company carrying voting rights.
> The £100m term facility agreement between, amongst others, the Company and Prudential/
M&G UK Companies Financing Fund LP dated 10 May 2011 (as amended and restated on
14 May 2013 and as amended on 17 December 2014) also contains a prepayment provision on
a change of control at the election of each lender; such prepayment provision is the same as
that described for the Revolving Credit Facility Agreement (save for the fact that the term loan
is fully drawn and so the restrictions on drawing described for the Revolving Credit Facility
Agreement do not apply).
> Each of the debt facility agreements (based on a proforma agreement agreed in October 2012)
between the Company (as guarantor), BDW (as borrower and developer) and the Homes and
Communities Agency (‘HCA’) (as lender), whereby the HCA has made up to £33m (in aggregate)
of project financing available to fund up to 20 development sites, contains a provision requiring
BDW to obtain the consent of the HCA on a change in control of the Company, BDW or any
of their holding companies (if relevant). The HCA is entitled to withhold its consent to such a
change in control if the new controller does not have sufficient reputation, financial standing
or organisational standing and capacity. A failure to: (i) obtain the HCA’s consent to a change
in control; and (ii) provide the HCA with notice of the change in control within a specified time
period, is an event of default under each of these agreements. On such an event of default the
HCA may, by notice in writing to BDW, terminate each debt facility agreement and require BDW
to prepay the project financing. For these purposes a ‘change in control’ means the acquisition
by a person or a group of persons acting together such that they gain beneficial ownership of
more than 50% of the issued share capital or voting rights of the relevant company, have the
right to appoint the majority of the Directors of the relevant company or otherwise control the
votes at Board meetings of the relevant company.
The note purchase agreements also impose upon the holders customary restrictions on resale
or transfer of the notes, such as the transfer being subject to a de minimis amount.
Barratt Developments PLC – Annual Report and Accounts 2016
103
Strategic ReportGovernanceFinancial StatementsOther Information Statement of Directors’ Responsibilities
Financial Statements and accounting records
The Directors are responsible for preparing the Annual Report and Accounts including the
Directors’ remuneration report and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
The Directors are required by the International Accounting Standards Regulation (the ‘IAS
Regulation’) to prepare the Group Financial Statements under International Financial Reporting
Standards as adopted by the European Union (‘IFRS’) and have also elected to prepare the Parent
Company Financial Statements in accordance with IFRS. The Financial Statements are also
required by law to be properly prepared in accordance with the Companies Act 2006 and Article
4 of the IAS Regulation. Under the Disclosure and Transparency Rules, the Directors must not
approve the Accounts unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that period.
International Accounting Standard 1 requires that Financial Statements present fairly for
each financial year the Company’s financial position, financial performance and cash flows.
This requires the faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting Standards Board’s ‘Framework
for the preparation and presentation of financial statements’. In virtually all circumstances,
a fair presentation will be achieved by compliance with all applicable IFRS. Directors are also
required to:
> properly select and apply accounting policies;
> present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
> provide additional disclosures when compliance with the specific requirements in IFRS are
insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial performance; and
Fair, balanced and understandable
The Board considers, on the advice of the Audit Committee, that the Annual Report and
Accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position, performance, business model
and strategy.
Directors’ responsibility statement
The Directors confirm that, to the best of each person’s knowledge:
a) the Group and Parent Company Financial Statements in this Annual Report and Accounts,
which have been prepared in accordance with IFRS, Standing Interpretation Committee
interpretations as adopted and endorsed by the European Union, International Financial
Reporting Interpretations Committee interpretations and those parts of the Companies Act
2006 applicable to companies reporting under IFRS, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and of the Group taken as a
whole; and
b) the Annual Report and Accounts includes a fair review of the development and performance
of the business and the position of the Company and the Group taken as a whole, together
with a description of the principal risks and uncertainties they face.
The Directors of the Company and their functions are listed on pages 46 and 47.
By order of the Board
David Thomas
Chief Executive
Neil Cooper
Chief Financial Officer
> make an assessment of the Company’s ability to continue as a going concern.
6 September 2016
6 September 2016
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure that the Financial Statements
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
The Directors’ Report from pages 46 to 104 inclusive was approved by the Board on 6 September
2016 and is signed on its behalf by:
Tina Bains
Company Secretary
104
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
Strategic Report
Governance
Financial Statements
Other Information
Financial Statements
Independent Auditors Report
106
Notes to the Financial Statements
Primary statements
Consolidated Income Statement
Statement of Comprehensive Income
Statement of Changes in Shareholders’
Equity – Group
Statement of Changes in Shareholders’
Equity – Company
Balance Sheets
Cash Flow Statements
1
Section 1
Basis of preparation
1.1 Introduction
1.2 Basis of consolidation
1.3 Going concern
1.4 Adoption of new and revised standards
1.5 Impact of standards and interpretations in issue
but not yet effective
2
Section 2
Results for the year and utilisation of profits
110
110
111
112
113
114
2.1 Revenue
2.2 Segmental analysis
2.3 Profit from operations
2.4 Earnings per share
2.5 Dividends
2.6 Tax
3
Section 3
Working capital
3.1 Inventories
3.2 Trade and other receivables
3.3 Trade and other payables
3.4 Contract accounting
3.5 Available for sale financial assets
Key to financial icons
Throughout the Financial Statements you will see these
icons used, they represent the following:
Group accounting policies
Critical accounting judgements and key sources
of estimation uncertainty
Barratt Developments PLC – Annual Report and Accounts 2016
4
Section 4
Business combinations and other investing activities
115
115
115
116
116
117
118
118
120
120
120
123
124
125
125
126
4.1 Business combinations
4.2 Goodwill and other intangible assets
4.3 Investments in jointly controlled entities
and associated entities
4.4 Jointly controlled operations
4.5 Property, plant and equipment
5
Section 5
Capital structure and financing
5.1 Net cash
5.2 Net finance costs
5.3 Financial instruments
5.4 Derivative financial instruments – swaps
5.5 Financial risk management
5.6 Share capital
6
Section 6
Directors and employees
6.1 Key management and employees
6.2 Retirement benefit obligations
6.3 Share-based payments
7
Section 7
Commitments, contingencies and related parties
7.1 Operating lease obligations
7.2 Contingent liabilities
7.3 Related party transactions
7.4 Group subsidiary undertakings
127
129
131
134
135
136
137
138
140
142
145
146
147
150
154
155
156
157
105
Independent Auditors Report
Opinion on financial statements of Barratt Developments PLC
In our opinion:
> the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 30 June 2016 and of the Group’s profit for the year then ended;
> the Group financial statements have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union;
> the Parent Company financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union and as applied in accordance with the provisions
of the Companies Act 2006; and
> the financial statements have been prepared in accordance with the requirements of
the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
The financial statements comprise the Consolidated Income Statement, the Group and Parent
Company Statements of Comprehensive Income, the Group and Parent Company Statements
of Changes in Shareholders’ Equity, the Group and Parent Company Balance Sheets, the Group
and Parent Company Cash Flow Statements, the Accounting Policies, the Impact of Standards
and Interpretations in issue but not yet Effective, the Critical Accounting Judgements and
Key Sources of Estimation Uncertainty and the related notes 1 to 7.4. The financial reporting
framework that has been applied in their preparation is applicable law and IFRSs as adopted
by the European Union and, as regards the Parent Company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.
Going concern
As required by the Listing Rules we have reviewed the Directors’ statement regarding the
appropriateness of the going concern basis contained within note 1.3 on page 115 and the
directors’ statement on the longer-term viability of the Group contained on page 43. We have
nothing material to add or draw attention to in relation to:
> the directors’ confirmation on page 43 that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity;
> the disclosures on pages 42–45 that describe those risks and explain how they are being
managed or mitigated;
> the directors’ statement on page 103 to the financial statements about whether they considered
it appropriate to adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the group’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements;
> the directors’ explanation on page 43 as to how they have assessed the prospects of the
group, over what period they have done so and why they consider that period to be appropriate,
and their statement as to whether they have a reasonable expectation that the group will
be able to continue in operation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
We agreed with the directors’ adoption of the going concern basis of accounting and we did not
identify any such material uncertainties. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the group’s ability to continue as
a going concern.
Independence
We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors
and we confirm that we are independent of the group and we have fulfilled our other ethical
responsibilities in accordance with those standards. We also confirm we have not provided
any of the prohibited non-audit services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest
effect on our audit strategy, the allocation of resources in the audit and directing the efforts of
the engagement team.
At 30 June 2016, the balance of directly held available for sale financial assets is no longer
material to the Group. We have therefore removed this as a focus area of our audit.
106
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Strategic ReportGovernanceFinancial StatementsOther Information Risk
How the scope of our audit responded to the risk
Carrying value of land and work in progress – land £2,880.2m (2015: £2,826.1m), work in progress £1,386.3m (2015: £1,287.4m)
Refer to page 69 (Audit Committee Statement) , page 123 (Critical accounting judgements and key sources of estimation uncertainty) and note 3.1 (financial statement disclosures)
The Group’s assessment of the carrying value of land and
work in progress, being the lower of cost and net realisable
value, is a judgemental process. This requires the estimation
of selling prices, sales rates and costs to complete,
determined on a site by site basis. These factors drive the
gross margin for each site and hence the profit recognised
at the point of sale.
The outcome of the EU referendum has resulted in greater
political and economic uncertainty which may impact selling
prices, sales rates and build costs, especially in the longer
term. Such assumptions impact the Group’s assessments
on the carrying value of land and work in progress.
The net impairment charge for the year was £8.6m (2015:
£11.7m).
In addition, revenue recognition on social housing
developments accounted for under IAS 11 ‘Construction
Contracts’ requires additional judgement in calculating the
revenue and profit to be recognised, estimating the total
expected costs to complete each site and the percentage of
completion at the balance sheet date.
Our work involved the following:
> We have tested the design, implementation and operating effectiveness of the Group’s controls relating to the determination of costs to complete as this is the most significant judgement applied to
each site valuation. We attended a number of valuation meetings across all regions that review the carrying value of land and work in progress of individual sites. A sample of sites were also visited
to enable us to verify how surveyors measure the degree of build completion of the developments against the costs incurred to date and to measure the subcontractor accruals at the year end.
> For multi-phased sites we have performed procedures to validate the appropriateness of actual and forecast margin maintained across the individual phases of the entire site.
> We have reviewed the land acquisition appraisal process and viability assessment at acquisition and tested the design, implementation and operating effectiveness of the key controls.
> We have sample tested and agreed certain costs incurred to date included within land and work in progress as well as reviewing the proportion of that expenditure recognised as a cost of sale
in the year in respect of units sold.
> We have used IT interrogation tools to test the model prepared by Management to calculate the net realisable value of sites to ascertain the mechanical accuracy of the formulae being applied
to the inputs to specific sites.
> We have tested each of the key assumptions within Management’s model on forecast sales values, sales rates and costs to complete which support the basis of the carrying value of land
and work in progress. We have compared the Group’s assumptions to external market forecasts for sales price inflation and build cost inflation and have tested a sample of sites to current
market data on sales rates, sales prices and cost assumptions. We have also tested the accuracy of costs to complete assumptions on a sample basis.
> We have performed independent sensitivity analysis, informed by external forecasts, to measure the impact on the carrying value of land and work in progress through possible deviations
around the assumptions applied by management. This included consideration of the outcome of the EU referendum.
> A sample of construction contracts for social housing developments have been tested by verifying the costs incurred to date and recalculating the percentage of completion at the balance sheet
date. A selection of these schemes have been reviewed with a sample of costs agreed to third party surveyors’ certificates, total sales values agreed to contracts, and the recognition formula
verified to support revenue recognised.
> We have reviewed the appropriateness of the Group’s disclosures within the Annual Report and Financial Statements relating to the estimation uncertainty.
Impairment of goodwill and intangible assets – goodwill £792.2m (2015: £792.2m), intangible assets £100m (2015: £100m)
Refer to page 69 (Audit Committee Statement) , page 129 (Critical accounting judgements and key sources of estimation uncertainty) and note 4.2 (financial statement disclosures)
The goodwill and David Wilson Homes brand intangible asset
arose upon the acquisition of Wilson Bowden (see note 4.2).
Our work involved the following:
> We have assessed the design and implementation of the Group’s controls relating to Management’s impairment review of goodwill and intangible assets.
The Group’s assessment of impairment of goodwill and
intangible assets is a judgemental process which requires
estimates concerning the forecast future cash flows
associated with the goodwill and brand assets held, the
discount rates and the growth rate of revenue and costs
to be applied in determining the value in use.
As described in the previous significant risk, the outcome
of the EU referendum has resulted in greater political and
economic uncertainty which may impact selling prices,
sales rates and build costs, especially in the longer term.
There were no impairments in the current year (2015: £nil).
> We have tested the accuracy of the underlying model to assess whether the processes are applied to the correct input data and the outputs are mapped accurately.
> We challenged each of the key assumptions employed in the annual goodwill impairment test. This included reference to our internal valuation specialists’ benchmarking of the
weighted average cost of capital rate (‘WACC’) employed as the discount rate employed, including its methodology and constituent inputs, comparison to independent market
forecasts of revenue and cost growth in the housebuilding sector and an assessment of the Group’s historic forecasting accuracy.
> We have tested Management’s sensitivity analysis in relation to the key inputs to the goodwill impairment test model, as well as performing our own sensitivity analysis which
included changes to volume, margin, incentives and the discount rate applied. This included consideration of the outcome of the EU referendum.
> We have reviewed the appropriateness of the disclosures provided in accordance with IAS 36 ‘Impairment of Assets’.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Barratt Developments PLC – Annual Report and Accounts 2016
107
Strategic ReportGovernanceFinancial StatementsOther Information Independent Auditors Report continued
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our audit work and in evaluating
the results of our work.
We determined materiality for the Group to be £33.5 million (2015: £27.6 million), which is
determined based on 5.0% (2015: 5.0%) of statutory pre-tax profit. Profit before tax was used as
the benchmark because this it is a key performance indicator for the group’s stakeholders and
is consistent with the benchmark used for comparable companies.
We agreed with the Audit Committee that we would report to the Committee all audit differences
in excess of £1.7 million (2015: £0.55 million), as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including Group-wide controls, and assessing the risks of material misstatement at the
Group level. The entire Group is audited by one audit team, led by the Senior Statutory Auditor.
The audit is performed centrally and comprises all of the divisions which comprise the Group’s
housebuilding segment, the Group’s commercial developments segment and the head
office consolidation. Consistent with prior years, we choose to visit the Group’s three London
housebuilding divisions each year, as well as five further non-London housebuilding divisions
across each of the Group’s regions, selected on a rotational basis and with reference to size
and complexity among other factors. We also visit Wilson Bowden Developments Limited on
an annual basis, which constitutes the Group’s commercial developments segment.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
> the part of the Directors’ Remuneration Report to be audited has been properly prepared
in accordance with the Companies Act 2006; and
> the information given in the Strategic Report and the Directors’ Report for the financial year
for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
> we have not received all the information and explanations we require for our audit; or
> adequate accounting records have not been kept by the Parent Company, or returns adequate
for our audit have not been received from branches not visited by us; or
> the Parent Company financial statements are not in agreement with the accounting records
and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of directors’ remuneration have not been made or the part of the Directors’
Remuneration Report to be audited is not in agreement with the accounting records and returns.
We have nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review part of the Corporate Governance
Statement relating to the company’s compliance with certain provisions of the UK Corporate
Governance Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you if,
in our opinion, information in the annual report is:
> materially inconsistent with the information in the audited financial statements; or
> apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group acquired in the course of performing our audit; or
> otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between
our knowledge acquired during the audit and the directors’ statement that they consider the
annual report is fair, balanced and understandable and whether the annual report appropriately
discloses those matters that we communicated to the audit committee which we consider
should have been disclosed. We confirm that we have not identified any such inconsistencies
or misleading statements.
108
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK
and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland).
Our audit methodology and tools aim to ensure that our quality control procedures are effective,
understood and applied. Our quality controls and systems include our dedicated professional
standards review team and independent partner reviews.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an assessment
of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the overall presentation of
the financial statements. In addition, we read all the financial and non-financial information
in the annual report to identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Mark Goodey
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
6 September 2016
Barratt Developments PLC – Annual Report and Accounts 2016
109
Strategic ReportGovernanceFinancial StatementsOther Information Consolidated Income Statement Year ended 30 June 2016
Statement of Comprehensive Income Year ended 30 June 2016
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit from operations
Finance income
Finance costs
Net finance costs
Share of post-tax profit from joint ventures
Share of post-tax profit from associates
Profit before tax
Tax
Profit for the year
Profit for the year attributable to the owners of the Company
Profit for the year attributable to non-controlling interests
Earnings per share from continuing operations
Basic
Diluted
Notes
2.1, 2.2
2016
£m
2015
£m
4,235.2
3,759.5
Profit for the year
(3,434.8)
(3,045.2)
Other comprehensive income/(expense):
Notes
2016
£m
550.3
Group
2015
£m
450.3
Company
2015
£m
16.7
2016
£m
1.4
800.4
(132.0)
668.4
5.9
(64.1)
(58.2)
71.9
0.2
682.3
(132.0)
550.3
550.3
–
55.1p
54.3p
2.3
5.2
5.2
5.2
4.3
4.3
2.6.1
4.1.2
2.4
2.4
714.3
Items that will not be reclassified to profit or loss
(137.5)
576.8
7.6
(64.6)
(57.0)
45.4
0.3
565.5
(115.2)
450.3
449.4
0.9
45.5p
44.6p
Actuarial loss on defined benefit
pension scheme
Fair value adjustment on available for sale
financial assets
Tax credit relating to items not reclassified
Total items that will not be reclassified to
profit or loss
Items that may be reclassified subsequently
to profit or loss
Amounts deferred in respect of effective
cash flow hedges
Amounts reclassified to the Income Statement
in respect of hedged cash flows
Tax charge relating to items that may be reclassified
Total items that may be reclassified subsequently
to profit or loss
Total comprehensive income recognised
for the year
Total comprehensive income recognised for the
year attributable to the owners of the Company
Total comprehensive income recognised for the
year attributable to non-controlling interests
6.2.2
(9.0)
(11.5)
(9.0)
(11.5)
3.5
0.5
1.7
5.1
1.3
–
1.8
(6.8)
(5.1)
(7.2)
5.2
5.4.3
5.2
5.4.3
6.3
(1.1)
(1.2)
4.0
(0.5)
2.9
(0.5)
1.9
547.5
447.1
547.5
446.2
4.1.2
–
0.9
6.3
(1.1)
(1.2)
4.0
(1.8)
(1.8)
–
–
2.4
(9.1)
(0.5)
2.9
(0.5)
1.9
9.5
9.5
–
The notes on pages 115 to 164 form an integral part of these Financial Statements.
Parent Company Income Statement
In accordance with the provisions of section 408 of the Companies Act 2006, a separate Income
Statement for the Company has not been presented. The Company’s profit for the year was
£1.4m (2015: £16.7m).
110
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
Statement of Changes in Shareholders’ Equity – Group
At 1 July 2014
Profit for the year
Amounts deferred in respect of effective cash flow hedges
Amounts reclassified to the Income Statement in respect of hedged cash flows
Fair value adjustments on available for sale financial assets
Actuarial losses on pension scheme
Tax on items above taken directly to equity
Total comprehensive income recognised for the year ended 30 June 2015
Dividend payments
Issue of shares
Share-based payments
Disposal of own shares
Transfer of share-based payments charge for exercised/lapsed options
Tax on share-based payments
At 30 June 2015
Profit for the year
Amounts deferred in respect of effective cash flow hedges
Amounts reclassified to the Income Statement in respect of hedged cash flows
Fair value adjustments on available for sale financial assets
Actuarial losses on pension scheme
Tax on items above taken directly to equity
Total comprehensive income recognised for the year ended 30 June 2016
Dividend payments
Issue of shares
Share-based payments
Net purchase of own shares
Transfer of share-based payments charge for exercised/lapsed options
Tax on share-based payments
At 30 June 2016
Hedging
reserve
(note 5.4.3)
£m
Own shares
(note 5.6)
£m
Share-based
payments
(note 6.3.1)
£m
Retained
earnings due to
shareholders
of the Group
£m
Total retained
earnings due to
shareholders
of the Group
£m
Non- controlling
interests
(note 4.1.2)
£m
(3.2)
24.6
Share capital
(note 5.6)
£m
98.5
Share
premium
£m
214.8
Merger
reserve
(note 4.1.1)
£m
1,109.0
–
–
–
–
–
–
–
–
1.0
–
–
–
–
–
–
–
–
–
–
–
–
4.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
99.5
219.1
1,109.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9
3.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(15.6)
–
(0.5)
2.9
–
–
(0.5)
1.9
–
–
–
–
–
–
(13.7)
–
6.3
(1.1)
–
–
(1.2)
4.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
–
–
(2.7)
–
–
–
–
–
–
–
–
–
–
(0.8)
–
–
1,917.9
449.4
–
–
5.1
(11.5)
1.3
444.3
(117.7)
(0.7)
–
–
3.6
9.8
1,939.3
449.4
–
–
5.1
(11.5)
1.3
444.3
(117.7)
(0.7)
11.6
0.5
–
11.2
2,257.2
550.3
2,288.5
550.3
–
–
0.5
(9.0)
1.7
543.5
(263.2)
(0.6)
–
–
10.8
7.2
–
–
0.5
(9.0)
1.7
543.5
(263.2)
(0.6)
12.8
(0.8)
–
(1.3)
8.0
0.9
–
–
–
–
–
0.9
–
–
–
–
–
–
8.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11.6
–
(3.6)
1.4
34.0
–
–
–
–
–
–
–
–
–
12.8
–
(10.8)
(8.5)
27.5
Total
equity
£m
3,354.0
450.3
(0.5)
2.9
5.1
(11.5)
0.8
447.1
(117.7)
4.6
11.6
0.5
–
11.2
3,711.3
550.3
6.3
(1.1)
0.5
(9.0)
0.5
547.5
(263.2)
3.9
12.8
(0.8)
–
(1.3)
The notes on pages 115 to 164 form an integral part of these Financial Statements.
Barratt Developments PLC – Annual Report and Accounts 2016
111
100.4
222.7
1,109.0
(9.7)
(3.5)
2,554.9
2,578.9
8.9
4,010.2
Strategic ReportGovernanceFinancial StatementsOther Information Statement of Changes in Shareholders’ Equity – Company
At 1 July 2014
Profit for the year
Amounts deferred in respect of effective cash flow hedges
Amounts reclassified to the Income Statement in respect of hedged cash flows
Actuarial losses on pension scheme
Tax on items above taken directly to equity
Total comprehensive income recognised for the year ended 30 June 2015
Dividend payments
Issue of shares
Share-based payments
Disposal of own shares
Transfer of share-based payments charge for exercised/lapsed options
Tax on share-based payments
At 30 June 2015
Profit for the year
Amounts deferred in respect of effective cash flow hedges
Amounts reclassified to the Income Statement in respect of hedged cash flows
Actuarial losses on pension scheme
Tax on items above taken directly to equity
Total comprehensive income recognised for the year ended 30 June 2016
Dividend payments
Issue of shares
Share-based payments
Net purchase of own shares
Transfer of share-based payments charge for exercised/lapsed options
Tax on share-based payments
At 30 June 2016
The notes on pages 115 to 164 form an integral part of these Financial Statements.
Share capital
(note 5.6)
£m
98.5
Share
premium
£m
214.8
Merger
reserve
(note 4.1.1)
£m
1,109.0
Hedging
reserve
(note 5.4.3)
£m
(15.6)
Own shares
(note 5.6)
£m
Share-based
payments
(note 6.3.1)
£m
(3.2)
18.1
–
–
–
–
–
–
–
1.0
–
–
–
–
–
–
–
–
–
–
–
4.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
99.5
219.1
1,109.0
–
–
–
–
–
–
–
0.9
–
–
–
–
–
–
–
–
–
–
–
3.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.5)
2.9
–
(0.5)
1.9
–
–
–
–
–
–
(13.7)
–
6.3
(1.1)
–
(1.2)
4.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
–
–
(2.7)
–
–
–
–
–
–
–
–
–
(0.8)
–
–
100.4
222.7
1,109.0
(9.7)
(3.5)
–
–
–
–
–
–
–
–
11.6
–
(3.6)
0.1
26.2
–
–
–
–
–
–
–
–
12.8
–
(10.8)
(2.2)
26.0
Retained
earnings
£m
2,539.4
16.7
–
–
(11.5)
2.4
7.6
(117.7)
(0.7)
–
–
1.4
2.3
Total
retained
earnings
£m
2,554.3
16.7
–
–
(11.5)
2.4
7.6
Total
equity
£m
3,961.0
16.7
(0.5)
2.9
(11.5)
1.9
9.5
(117.7)
(117.7)
(0.7)
11.6
0.5
(2.2)
2.4
4.6
11.6
0.5
(2.2)
2.4
2,432.3
2,455.8
3,869.7
1.4
–
–
(9.0)
1.8
(5.8)
(263.2)
(0.6)
–
–
3.7
2.0
1.4
–
–
(9.0)
1.8
(5.8)
1.4
6.3
(1.1)
(9.0)
0.6
(1.8)
(263.2)
(263.2)
(0.6)
12.8
(0.8)
(7.1)
(0.2)
3.9
12.8
(0.8)
(7.1)
(0.2)
2,168.4
2,190.9
3,613.3
112
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information Balance Sheets At 30 June 2016
Notes
4.2.2
4.2.1
4.5
4.1.3
4.3
6.2.2
3.5
3.2
2.6.3
5.4
3.1
3.5
3.2
5.1
2016
£m
Group
2015
£m
Company
2015
£m
2016
£m
100.0
792.2
9.6
–
255.9
8.1
3.8
1.6
–
11.8
100.0
792.2
8.2
–
200.0
5.3
96.8
3.3
–
2.3
Liabilities
Non-current liabilities
Loans and borrowings
Trade and other payables
–
–
3.8
Deferred tax liabilities
–
–
4.8
3,100.1
3,097.8
Derivative financial instruments – swaps
23.1
8.1
–
–
2.5
11.8
25.6
5.3
–
–
7.1
2.3
Current liabilities
Loans and borrowings
Trade and other payables
Derivative financial instruments – swaps
Current tax liabilities
1,183.0
1,208.1
3,150.4
3,141.9
4,326.6
4,173.6
0.8
149.6
758.0
5,235.0
6,418.0
10.2
158.8
360.4
4,703.0
5,911.1
–
–
78.1
729.0
807.1
Total liabilities
–
–
Net assets
Equity
697.7
294.1
991.8
Share capital
Share premium
Merger reserve
3,957.5
4,133.7
Hedging reserve
Notes
5.1
3.3
2.6.3
5.4
5.1
3.3
5.4
5.6.1
4.1.1
5.4.3
Assets
Non-current assets
Other intangible assets
Goodwill
Property, plant and equipment
Investments in subsidiary undertakings
Investments in joint ventures and associates
Retirement benefit assets
Available for sale financial assets
Trade and other receivables
Deferred tax assets
Derivative financial instruments – swaps
Current assets
Inventories
Available for sale financial assets
Trade and other receivables
Cash and cash equivalents
Total assets
The Financial Statements of Barratt Developments PLC (registered number 604574) were
approved by the Board and authorised for issue on 6 September 2016. Signed on behalf of
the Board.
Retained earnings
Equity attributable to the owners
of the Company
2016
£m
Group
2015
£m
Company
2015
£m
2016
£m
(150.5)
(138.6)
(171.5)
(629.9)
(10.5)
(7.5)
(163.3)
(605.9)
(1.2)
(17.0)
(0.2)
–
(7.5)
(819.4)
(787.4)
(158.2)
(6.0)
(13.2)
(1,513.5)
(1,349.8)
(5.6)
(63.3)
–
(49.4)
(1,588.4)
(1,412.4)
(2,407.8)
(2,199.8)
(42.7)
(137.6)
(5.6)
(0.1)
(186.0)
(344.2)
–
–
(17.0)
(155.6)
(58.5)
(49.9)
–
–
(108.4)
(264.0)
4,010.2
3,711.3
3,613.3
3,869.7
100.4
222.7
99.5
219.1
100.4
222.7
99.5
219.1
1,109.0
1,109.0
1,109.0
1,109.0
(9.7)
(13.7)
(9.7)
(13.7)
2,578.9
2,288.5
2,190.9
2,455.8
4,001.3
3,702.4
3,613.3
3,869.7
David Thomas
Chief Executive
Neil Cooper
Chief Financial Officer
Non-controlling interests
4.1.2
8.9
8.9
–
–
Total equity
4,010.2
3,711.3
3,613.3
3,869.7
The notes on pages 115 to 164 form an integral part of these Financial Statements.
Barratt Developments PLC – Annual Report and Accounts 2016
113
Strategic ReportGovernanceFinancial StatementsOther Information
Cash Flow Statements Year ended 30 June 2016
Net cash inflow from operating activities
Investing activities:
Purchase of property, plant and equipment
(Increase)/decrease in investments accounted for
using the equity method
Dividends received from investments accounted
for using the equity method
Interest received
Dividends received from subsidiaries
Net cash inflow from investing activities
Financing activities:
Dividends paid
(Net purchase)/disposal of own shares
Proceeds from issue of share capital
Loan (repayments)/drawdown
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning
of the year
Cash and cash equivalents at the end of the year
5.1
Notes
4.5
4.3
4.3
2016
£m
652.9
(6.1)
(11.9)
28.1
2.6
–
12.7
Group
2015
£m
184.0
(5.4)
18.3
27.0
2.3
–
42.2
2016
£m
671.1
(3.2)
2.5
–
37.4
–
36.7
Company
2015
£m
68.8
(2.8)
–
–
60.0
19.9
77.1
2.5
(263.2)
(117.7)
(263.2)
(117.7)
(0.8)
3.9
(7.9)
(268.0)
397.6
360.4
758.0
0.5
4.6
(27.9)
(140.5)
85.7
274.7
360.4
(0.8)
3.9
(12.8)
(272.9)
434.9
294.1
729.0
0.5
4.6
1.8
(110.8)
35.1
259.0
294.1
Reconciliation of operating profit to cash flow
from operating activities
Notes
2016
£m
Group
2015
£m
Operating activities:
Profit/(loss) from operations
Depreciation
Loss on disposal of fixed assets
Impairment of inventories
4.5
Impairment/(reversal of impairment) of
available for sale financial assets
Impairment of investment in subsidiaries
4.1.3
Share-based payments charge
Imputed interest on deferred term payables*
Imputed interest on available for sale
financial assets and interest free loans*
Amortisation of facility fees
Finance income related to employee benefits
6.3
5.2
5.2
5.2
5.2
Total non-cash items
Increase in inventories
(Increase)/decrease in trade and
other receivables
Increase/(decrease) in trade and
other payables
Decrease in available for sale financial assets
Total movements in working capital
Interest paid
Tax paid
Net cash inflow from operating activities
Company
2015
£m
(27.1)
1.3
–
–
–
18.7
3.4
–
–
(3.0)
0.4
20.8
–
2016
£m
(9.5)
2.0
0.2
–
–
–
3.4
–
–
(2.9)
0.4
3.1
–
668.4
576.8
4.5
0.2
8.6
2.1
–
12.8
(34.5)
2.9
(2.9)
0.4
(5.9)
3.3
–
11.7
(1.4)
–
11.6
(31.6)
4.6
(3.0)
0.4
(4.4)
(161.6)
(676.7)
(0.9)
(57.5)
607.8
122.0
188.5
100.8
126.8
(26.8)
(109.6)
652.9
394.7
21.9
(317.6)
(28.1)
(42.7)
184.0
94.7
–
702.5
(25.0)
–
671.1
(16.6)
–
105.4
(30.3)
–
68.8
* The Balance Sheet movements in land, available for sale financial assets and certain interest free loans include
non-cash movements due to imputed interest. Imputed interest is therefore included within non-cash items in the
statements above.
The notes on pages 115 to 164 form an integral part of these Financial Statements.
114
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther Information
Notes to the Financial Statements Year ended 30 June 2016
Section
1
Basis of preparation
1.1 Introduction
These Financial Statements have been prepared in accordance with International Financial
Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board
(‘IASB’), International Financial Reporting Interpretations Committee (‘IFRIC’) interpretations
and Standing Interpretations Committee (‘SIC’) interpretations as adopted and endorsed by the
European Union (‘EU’) and with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS and therefore the Group Financial Statements comply with Article 4 of
the EU International Accounting Standards Regulation. The Financial Statements have been
prepared under the historical cost convention as modified by the revaluation of available for
sale financial assets, derivative financial instruments and share-based payments.
Group accounting policies
The significant Group accounting policies are included within the relevant notes to the Financial
Statements on pages 115 to 164.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting
principles requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on
the Directors’ best knowledge of the amounts, actual results may ultimately differ from those
estimates. The Directors have made no individual judgements that have a significant impact
upon the Financial Statements, apart from those involving estimations.
The most significant estimates made by the Directors in these Financial Statements are set
out within the relevant notes on pages 115 to 164.
1.2 Basis of consolidation
The Group Financial Statements include the results of Barratt Developments PLC (the
‘Company’), incorporated in the UK, and all its subsidiary undertakings made up to 30 June.
The financial statements of subsidiary undertakings are consolidated from the date when
control passes to the Group using the purchase method of accounting and up to the date control
ceases. All transactions with subsidiaries and intercompany profits or losses are eliminated
on consolidation.
1.3 Going concern
In determining the appropriate basis of preparation of the Financial Statements, the Directors
are required to consider whether the Group can continue in operational existence for the
foreseeable future.
The Group’s business activities, together with factors which the Directors consider are likely
to affect its future development, financial performance and financial position are set out in the
Strategic Report on pages 2 to 45. The material financial and operational risks and uncertainties
that may have an impact upon the Group’s performance and their mitigation are outlined on
pages 42 to 45 and financial risks including liquidity risk, market risk, credit risk and capital
risk are outlined in note 5.5 to the Financial Statements.
The financial performance of the Group is dependent upon the wider economic environment
in which the Group operates. As explained in the Risk Management section on pages 41
to 45, factors that particularly affect the performance of the Group include changes in the
macroeconomic environment including buyer confidence, availability of mortgage finance
for the Group’s customers and interest rates.
The Group has total committed bank facilities and private placement notes of £848.3m. The final
maturity dates of these facilities range from August 2017 to July 2021, with £150.0m of the
revolving credit facility maturing in December 2017 and £550.0m of the revolving credit facility
maturing in December 2019. The committed facilities and private placement notes provide
appropriate headroom above our current forecast debt requirements.
In addition to these committed borrowing facilities the Group has £22.5m of financing from
the Government’s ‘Get Britain Building’ and ‘Growing Places Fund’ schemes. The outstanding
funds are repayable between December 2016 and March 2018. Further committed loan facilities
of £4.6m are available under agreements with local government which are due to be repaid
between March 2018 and March 2020.
Accordingly, after making enquiries and having considered forecasts and appropriate
sensitivities, the Directors have formed a judgement, at the time of approving the Financial
Statements, that there is a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future, being at least 12 months from the
date of these Financial Statements. For this reason, they continue to adopt the going concern
basis in the preparation of these Financial Statements.
Barratt Developments PLC – Annual Report and Accounts 2016
115
Strategic ReportGovernanceFinancial StatementsOther Information 1.4 Adoption of new and revised standards
In the year ended 30 June 2016, the Group has adopted the following standards, amendments
and interpretations, none of which have had a material impact on the Group:
> Annual Improvements Cycle 2012 – 2014
> Amendments to IAS 16: Property, Plant and Equipment
> Amendments to IAS 38: Intangible Assets – Clarification of Acceptable Methods of Depreciation
and Amortisation
> Amendments to IFRS 11: Accounting for the Acquisitions of Interests in Joint Operations
> Disclosure Initiative (Amendments to IAS 1)
> Amendments to IAS 27: Equity Method in Separate Financial Statements
1.5 Impact of standards and interpretations in issue
but not yet effective
At the date of approval of these Financial Statements, there were a number of standards,
amendments and interpretations that have been published and are therefore mandatory for the
Group’s accounting periods beginning on or after 1 July 2016 and later periods. The Group has
not early-adopted any standard, amendment or interpretation.
The following new standards in particular are expected to have an impact upon the Group:
> IFRS 9 ‘Financial Instruments’ was issued in final form incorporating the impairment,
classification and measurement requirements in July 2014 and is scheduled to replace IAS 39
‘Financial Instruments: Recognition and Measurement’ from 1 July 2018. IFRS 9 will impact
both the measurement and disclosures of financial instruments. The Group is currently
assessing the impact of the revisions on the Group’s results and financial position, a process
we expect to be finalised during the year ending 30 June 2017. Until such assessment is
completed it is not practical to provide an estimate of the full effect of IFRS 9.
> IFRS 15 ‘Revenue from Contracts with Customers’ was issued on 28 May 2014 and amended
in September 2015. This standard sets out revenue recognition conditions for the Group and
will be applicable from 1 July 2018. The standard remains subject to industry interpretations
and consensus. The Group has continued, but not yet completed, its assessment of the impact
of the standard, on the Group. To date, we expect the standard may delay the recognition
of revenue from construction contracts and may impact upon historical five-year warranty
obligations, although these will not affect the Group’s cash flows. In addition, the standard
will require presentational changes to our Income Statement to show part-exchange income
and expenses separately, which are currently recognised on a net basis within cost of sales,
as detailed in note 2.1. It is not practical to provide an estimate of the full impact of IFRS 15
until our assessment has been completed, which we expect to be during the year ended
30 June 2017.
> IFRS 16 ‘Leases’ was issued in January 2016 with an effective date of 1 January 2019.
The standard specifies how leases are recognised, presented, measured and disclosed.
The Group has continued, but not yet completed, its assessment of the impact of the standard
on the Group’s results and financial position. To date, we expect that the majority of the Group’s
lease commitments will be brought onto the Balance Sheet together with corresponding right
of use assets. This is likely to impact on the timing of the recognition of lease costs within the
Income Statement although it will not affect the Group’s cash flows. It is not practical to provide
an estimate of the full effect of IFRS 16 until our assessment has been completed, which we
expect to be during the year ending 30 June 2017.
> Amendments to IAS 7 ‘Statement of Cash Flows’ was issued in January 2016 and will be
applicable to the Group from 1 July 2017. The Amendment requires enhanced disclosures
of changes in financing liabilities.
116
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued Section
2
Results for the year and utilisation of profits
2.1 Revenue
The Group’s revenue derives principally from the sale of the homes we build and from the sale
of commercial property.
Sale of goods – Revenue is recognised at legal completion in respect of the total proceeds of building
and development. Revenue is measured at the fair value of consideration received or receivable and
represents the amounts receivable for the property, net of discounts and VAT. The sale proceeds of
part-exchange properties are not included in revenue and are recognised on a net basis within cost
of sales on the basis that they are incidental to the main revenue-generating activities of the Group.
Recognition of profit where developments are accounted for under IAS 11 ‘Construction
Contracts’ – The Group applies its policy on contract accounting when recognising revenue and
profit on partially completed contracts. Revenue and costs are recognised by reference to the
stage of completion of contract activity at the balance sheet date. This is normally measured
by surveys of work performed to date. When it is probable that the total costs on a construction
contract will exceed total contract revenue, the expected loss is recognised as an expense in
the Income Statement immediately. The application of this policy requires judgements to be
made in respect of the total expected costs to complete for each site. The Group has in place
established internal control processes to ensure that the evaluation of costs and revenues
is based upon appropriate estimates.
An analysis of the Group’s revenue is as follows:
Sale of goods
Contract accounting revenue
Revenue as stated in the Consolidated Income Statement
Lease income
Finance income
Forfeit deposits
Other income
Total revenue
Notes
7.1.2
5.2
2016
£m
4,073.0
162.2
4,235.2
0.9
5.9
0.8
2015
£m
3,515.4
244.1
3,759.5
1.0
7.6
0.9
51.6
4,294.4
34.7
3,803.7
Contract accounting revenue – Revenue is only recognised on a construction contract where
the outcome can be estimated reliably. Contracts are only treated as construction contracts
when they have been specifically negotiated for the construction of a development or property.
Variations to, and claims arising in respect of, construction contracts, are included in revenue
to the extent that they have been agreed with the customer. Revenue is recognised by reference
to the stage of completion of contract activity at the balance sheet date. This is normally
measured by surveys of work performed to date.
Sale of goods includes £369.9m (2015: £333.6m) of revenue generated where the sale has
been achieved using part-exchange incentives.
Proceeds received on the disposal of part-exchange properties, which are not included
in revenue, were £220.1m (2015: £179.7m).
Other income principally comprises the sale of freehold reversions, ground rents, property
management income and management fees receivable from joint ventures.
Lease income – The Group enters into leasing arrangements with third parties following the
completion of constructed developments until the date of the sale of the development to third
parties. Rental income from these operating leases is recognised in the Income Statement
on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the leased asset and
recognised in the Income Statement on a straight-line basis over the lease term.
Barratt Developments PLC – Annual Report and Accounts 2016
117
Strategic ReportGovernanceFinancial StatementsOther Information
2.2 Segmental analysis
The Group consists of two separate segments for management reporting and control purposes,
being housebuilding and commercial developments. The segments are considered appropriate
for reporting under IFRS 8 ‘Operating Segments’ since these segments are regularly reviewed
internally by the Board without further significant categorisation. The Group presents its primary
segment information on the basis of these operating segments. As the Group operates in a single
geographic market, Great Britain, no secondary segmentation is provided.
House-
building
Units
Commercial
developments
Units
2016
Total
Units
House-
building
Units
Commercial
developments
Units
2015
Total
Units
Balance Sheet
Segment assets
Elimination of intercompany balances
Cash and cash equivalents
Consolidated total assets
House-
building
£m
Commercial
developments
£m
2016
Total
£m
House-
building
£m
Commercial
developments
£m
2015
Total
£m
5,648.0
42.2
5,690.2
5,511.5
50.1
5,561.6
(30.2)
5,660.0
758.0
6,418.0
(10.9)
5,550.7
360.4
5,911.1
Segment liabilities
(2,114.3)
(72.4)
(2,186.7)
(1,916.2)
(67.4)
(1,983.6)
Residential completions*
Consolidated Income Statement
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit from operations
Share of post-tax profit/(loss) from
joint ventures and associates
Profit from operations including post-
tax profit/(loss) from joint ventures
and associates
Finance income
Finance costs
Profit before tax
Tax
Profit for the year from continuing
operations
15,905
£m
4,153.3
(3,361.3)
792.0
(129.6)
662.4
72.4
–
15,905
15,599
–
15,599
Elimination of intercompany balances
£m
81.9
£m
£m
4,235.2
3,702.3
(73.5)
(3,434.8)
(2,999.2)
8.4
(2.4)
6.0
(0.3)
800.4
(132.0)
668.4
72.1
703.1
(132.4)
570.7
45.9
£m
57.2
(46.0)
11.2
(5.1)
6.1
(0.2)
£m
3,759.5
(3,045.2)
714.3
(137.5)
576.8
45.7
Loans and borrowings
Deferred tax liabilities
Current tax liabilities
Consolidated total liabilities
734.8
5.7
740.5
616.6
5.9
622.5
30.2
(2,156.5)
(177.5)
(10.5)
(63.3)
(2,407.8)
Other information
Capital additions
Depreciation
House-
building
£m
Commercial
developments
£m
6.1
4.5
–
–
2016
Total
£m
6.1
4.5
House-
building
£m
Commercial
developments
£m
5.4
3.3
–
–
5.9
(64.1)
682.3
(132.0)
550.3
7.6
(64.6)
565.5
(115.2)
450.3
2.3 Profit from operations
Profit from operations includes all of the revenue and costs derived from the Group’s operating
businesses. Profit from operations excludes finance costs, finance income, the Group’s share
of profits or losses from joint ventures and associates and tax.
10.9
(1,972.7)
(176.5)
(1.2)
(49.4)
(2,199.8)
2015
Total
£m
5.4
3.3
* Residential completions exclude joint venture completions of 1,414 (2015: 848) in which the Group has an interest.
Government grants – Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching to them and that the grants
will be received.
Grants related to income are included in the appropriate line within the Income Statement so
as to match with the related costs they are intended to compensate for. Grants related to assets
are deducted from the carrying amount of the asset.
118
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Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
2.3 Profit from operations continued
The remuneration paid to Deloitte LLP, the Group’s principal auditor, is disclosed below:
Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Parent Company
and Consolidated Financial Statements
Fees payable to the Company’s auditor for the audit of the Company’s subsidiaries
Total audit fees
Audit-related assurance services¹
Taxation compliance services
Other taxation advisory services²
Other services²
Total fees for other services
Total fees related to the Company and its subsidiaries
2016
£000
2015
£000
70
270
340
50
102
34
217
403
743
69
260
329
50
96
27
60
233
562
1 Audit-related assurance services comprise the review of the interim report.
2 Other taxation advisory services and other services comprise advice provided on land acquisitions and disposals and
other transactions in the normal course of business.
Details of the Group’s policy on the use of the Company’s principal auditor for non-audit
services, and auditor independence are set out in the Audit Committee Report on pages 66 to 73.
No services were provided pursuant to contingent fee arrangements.
In addition to the remuneration paid to the Company’s auditor, for services related to the
Company and its subsidiaries, the auditor received the following remuneration from joint
ventures in which the Group participates:
The audit of the Group’s joint ventures pursuant to legislation
Other services
Total fees related to joint ventures
2016
£000
140
8
148
2015
£000
130
20
150
Lease charges – Operating lease rentals are charged to the Income Statement in equal
instalments over the life of the lease.
Estimation of costs to complete – In order to determine the profit that the Group is able
to recognise on its developments in a specific period, the Group has to allocate site-wide
development costs between units built in the current year and in future years. It also has to
estimate costs to complete on such developments. In making these assessments there is a
degree of inherent uncertainty. The Group has developed internal controls to assess and review
carrying values and the appropriateness of estimates made.
Profit from operations is stated after charging/(crediting):
Staff costs
Government grants
Depreciation of property, plant and equipment
Lease income
Operating lease charges:
– hire of plant, machinery and vehicles
– other
Notes
6.1
4.5
7.1.2
2016
£m
369.8
–
4.5
(0.9)
28.8
18.8
2015
£m
353.0
(4.1)
3.3
(1.0)
32.6
16.8
Government grants of £nil (2015: £2.3m) were received in the year relating to Government
initiatives including the National Affordable Housing Programme and the Affordable Homes
Programme. Grant income of £nil (2015: £4.1m) was recognised in the Consolidated Income
Statement in relation to house sales completed under these initiatives.
Administrative expenses of £132.0m (2015: £137.5m) include sundry income of £52.4m
(2015: £35.6m) which is disclosed within other revenue in note 2.1.
Profit from operations is stated after charging the Directors’ emoluments disclosed in the
Remuneration Report on page 86 and in note 6.1.
The Group does not recognise income from supplier rebates until received from suppliers.
During the year £26.9m (2015: £22.2m) of supplier rebate income was included within profit
from operations.
Barratt Developments PLC – Annual Report and Accounts 2016
119
Strategic ReportGovernanceFinancial StatementsOther Information
2.4 Earnings per share
Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary
shareholders of £550.3m (2015: £449.4m) by the weighted average number of ordinary shares
in issue during the year, excluding those held by the Employee Benefit Trust which are treated
as cancelled, which was 998.7m (2015: 987.2m) shares.
Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary
shareholders of £550.3m (2015: £449.4m) by the weighted average number of ordinary shares in
issue adjusted to assume conversion of all potentially dilutive share options from the start of the
year, giving a figure of 1,013.0m (2015: 1,008.4m) shares.
The earnings per share from continuing operations were as follows:
2.6 Tax
All profits of the Group are subject to UK corporation tax.
The current year tax charge has been provided for at an effective rate of 20.0% (2015: 20.75%)
and the closing deferred tax assets and liabilities have been provided in these Financial
Statements at a rate of between 18.0% and 20.0% (2015: 20.0%) of the temporary differences
giving rise to these assets and liabilities, dependent upon when they are expected to reverse.
2.6.1 Tax recognised in the Income Statement
The tax expense represents the sum of the tax currently payable and deferred tax.
Basic earnings per share
Diluted earnings per share
2.5 Dividends
Amounts recognised as distributions to equity shareholders in the year:
Final dividend for the year ended 30 June 2015 of 10.3p (2014: 7.1p) per share
Special dividend for the year ended 30 June 2015 of 10.0p (2014: nil) per share
Interim dividend for the year ended 30 June 2016 of 6.0p (2015: 4.8p) per share
Total dividends distributed to equity shareholders in the year
Proposed final dividend for the year ended 30 June 2016 of 12.3p (2015: 10.3p) per share
Proposed special dividend for the year of 12.4p (2015: 10.0p) per share
2016
pence
55.1
54.3
2016
£m
103.1
100.0
60.1
263.2
2016
£m
123.3
125.0
2015
pence
45.5
44.6
2015
£m
70.2
–
47.5
117.7
2015
£m
102.3
100.0
Tax – The tax currently payable is based on the taxable profit for the year. Taxable profit differs
from net profit as reported in the Income Statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax – Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax is measured on a non-discounted basis using
the tax rates and laws that have then been enacted or substantively enacted by the balance
sheet date, and is charged or credited to the income statement, except when it relates to
items charged or credited directly to other comprehensive income or equity, in which case
the deferred tax is also dealt with in other comprehensive income or equity.
The proposed final dividend and the special dividend are subject to approval by shareholders
at the Annual General Meeting. The cost has been calculated based on the issued share capital
at 30 June 2016 and has not been included as a liability at 30 June 2016.
120
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 2.6 Tax continued
2.6.1 Tax recognised in the Income Statement continued
Analysis of the tax charge for the year
2.6.3 Deferred tax
All deferred tax relates to the United Kingdom and is stated on a net basis as the Group has
a legally enforceable right to set off the recognised amounts and intends to settle on a net basis.
Notes
2016
£m
2015
£m
Current tax:
UK corporation tax for the year
Adjustment in respect of previous years
Deferred tax:
Origination and reversal of temporary differences
Adjustment in respect of previous years
Impact of reduction in corporation tax rate
Tax charge for the year
Factors affecting the tax charge for the year
135.1
(2.6)
132.5
(0.4)
1.7
(1.8)
(0.5)
132.0
2.6.3
The tax rate assessed for the year is lower (2015: lower) than the standard effective rate
of corporation tax in the UK of 20.0% (2015: 20.75%). The differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax of 20.0% (2015: 20.75%)
Effects of:
Other items including non-deductible expenses
Additional tax relief for land remediation costs
Adjustment in respect of previous years
Tax in respect of joint ventures
Impact of change in tax rate on deferred tax asset
Tax charge for the year
Deferred tax – Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments
in subsidiaries and interests in joint ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets are reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset
when there is a legally enforceable right to set-off current tax assets against current tax
liabilities and when they relate to taxes levied by the same tax authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
102.9
(8.3)
94.6
13.3
7.3
–
20.6
115.2
2015
£m
565.5
117.3
1.0
(1.3)
(1.0)
(0.8)
–
2016
£m
682.3
136.5
1.2
(2.0)
(0.9)
(1.0)
(1.8)
132.0
115.2
2.6.2 Tax recognised in equity
In addition to the amount charged to the Consolidated Income Statement, a net current
and deferred tax charge of £0.8m (2015: £12.0m credit) was recognised directly in equity.
Barratt Developments PLC – Annual Report and Accounts 2016
121
Strategic ReportGovernanceFinancial StatementsOther Information
The Company recognised a net deferred tax asset with the following movements in the year:
2.6 Tax continued
2.6.3 Deferred tax continued
The Group recognised a net deferred tax liability with the following movements in the year:
Group
At 1 July 2014
Income Statement
(charge)/credit
Amounts taken directly
to equity
At 30 June 2015
Comprising:
Deferred tax assets
Deferred tax liabilities
Year ended 30 June 2016:
Income Statement
(charge)/credit
Amounts taken directly
to equity
At 30 June 2016
Comprising:
Deferred tax assets
Deferred tax liabilities
Pension
scheme
£m
(0.6)
(0.5)
–
Share
options
£m
11.7
1.4
1.4
(1.1)
14.5
–
(1.1)
14.5
–
Tax
losses
£m
19.7
(19.6)
–
0.1
0.1
–
Hedging
£m
4.1
–
(0.5)
3.6
3.6
–
(0.5)
(0.5)
(0.1)
–
–
(1.6)
–
(1.6)
(8.5)
5.5
5.5
–
–
–
–
–
(1.2)
2.4
(18.0)
2.4
–
–
(18.0)
Brands
£m
(20.0)
ACA
£m
1.2
–
–
(20.0)
–
(20.0)
2.0
–
–
–
1.2
1.2
–
–
–
1.2
1.2
–
Other
(net)
£m
3.5
(1.9)
(1.1)
0.5
2.7
(2.2)
Total
£m
19.6
(20.6)
(0.2)
(1.2)
22.1
(23.3)
Company
At 1 July 2014
Income Statement credit/(charge)
Amounts taken directly to equity
At 30 June 2015
Comprising:
Deferred tax assets
Deferred tax liabilities
Year ended 30 June 2016:
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2016
Comprising:
(0.4)
0.5
Deferred tax assets
Deferred tax liabilities
(0.1)
(9.8)
–
(10.5)
1.9
(1.9)
11.0
(21.5)
Pension
scheme
£m
Share
options
£m
(0.6)
(0.5)
–
(1.1)
–
(1.1)
(0.5)
–
(1.6)
–
(1.6)
3.3
0.4
0.1
3.8
3.8
–
(0.4)
(2.2)
1.2
1.2
–
Tax
losses
£m
19.6
(19.6)
–
–
–
–
–
–
–
–
–
Hedging
£m
4.1
–
(0.5)
3.6
3.6
–
–
(1.2)
2.4
2.4
–
ACA
£m
0.8
–
–
0.8
0.8
–
(0.3)
–
0.5
0.5
–
Other
£m
0.7
(0.7)
–
–
–
–
–
–
–
–
–
Total
£m
27.9
(20.4)
(0.4)
7.1
8.2
(1.1)
(1.2)
(3.4)
2.5
4.1
(1.6)
It is not anticipated that any of the deferred tax liability in respect of brands will reverse in the
12 months following the balance sheet date. Whilst it is anticipated that an element of the remaining
deferred tax assets and liabilities will reverse during the 12 months following the balance sheet
date, at present it is not possible to accurately quantify the value of all of these reversals.
In the March 2016 Budget the Chancellor of the Exchequer announced the intention to further
reduce the main rate of corporation tax from 18% to 17% with effect from 1 April 2020.
The change had not been substantively enacted at the balance sheet date and, therefore, the
impact of this is not included in these Financial Statements. Had the change been enacted
prior to the balance sheet date, there would be no significant impact on the deferred tax liability
disclosed within these Financial Statements.
In addition to the deferred tax liability shown above, the Group has not recognised a deferred
tax asset of £2.1m (2015: £2.3m) in respect of capital and other losses because these are not
considered recoverable in the foreseeable future.
122
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Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued Section
3
Working capital
3.1 Inventories
Inventories – Inventories are valued at the lower of cost and net realisable value. Cost of work
in progress comprises direct materials, direct labour costs and those overheads that have
been incurred in bringing the inventories to their present location and condition.
Land held for development, including land in the course of development, is initially recorded
at discounted cost. Where, through deferred purchase credit terms, the carrying value differs
from the amount that will ultimately be paid in settling the liability, this difference is charged
as a finance cost in the Income Statement over the period of settlement.
Due to the scale of the Group’s developments, the Group has to allocate site-wide development
costs between units built in the current year and in future years. It also has to estimate costs
to complete on such developments. In making these assessments, there is a degree of inherent
uncertainty. The Group has developed internal controls to assess and review carrying values
and the appropriateness of estimates made.
Carrying value of land and work in progress – The Group’s principal activities are
housebuilding and commercial development. The majority of the development activity is not
contracted prior to the development commencing. Accordingly, the Group has in its Balance
Sheet at 30 June 2016 current assets that are not covered by a forward sale. The Group’s
internal controls are designed to identify any developments where the balance sheet value
of land and work in progress is more than the projected lower of cost or net realisable value.
During the year the Group has conducted six-monthly reviews of the net realisable value of
specific sites identified as at high risk of impairment, based upon a number of criteria including
low site profit margins and sites with no forecast completions. Where the estimated net
realisable value of a site was less than its current carrying value within the Balance Sheet,
the Group has impaired the land and work in progress value.
Carrying value of land and work in progress continued – During the year, due to performance
variations, changes in assumptions and changes to viability on individual sites, there were
gross impairment charges of £11.0m (2015: £17.9m) and gross impairment reversals of £2.4m
(2015: £6.2m), resulting in a net impairment charge of £8.6m (2015: £11.7m) included within
profit from operations.
The key judgements in these reviews were estimating the realisable value of a site, which is
determined by forecast sales rates, expected sales prices and estimated costs to complete.
The estimation of future sales prices and costs to complete included zero net inflation for the
next three years and then low single digit net inflation thereafter. During the year the Group
benefited from favourable market conditions, but increased uncertainty due to Brexit. If the UK
housing market were to change beyond management expectations in the future, in particular
with regards to the assumptions around sales prices and estimated costs to complete, further
adjustments to the carrying value of land and work in progress may be required.
The land held at the balance sheet date that has already been impaired is most sensitive to the
judgements being applied and the potential for further impairment or reversal. Forecasting
risk also increases in relation to those sites that are not expected to be realised in the short
to medium term.
Land held for development
Construction work in progress
Part-exchange properties and other inventories
The Company has no inventories.
2016
£m
2,880.2
1,386.3
60.1
4,326.6
Group
2015
£m
2,826.1
1,287.4
60.1
4,173.6
3.1.1 Nature of inventories
The Directors consider all inventories to be essentially current in nature, although the Group’s
operational cycle is such that a proportion of inventories will not be realised within 12 months.
It is not possible to determine with accuracy when specific inventory will be realised as this will
be subject to a number of variables such as consumer demand and planning permission delays.
3.1.2 Expensed inventories
The value of inventories expensed in the year ended 30 June 2016 and included in cost of sales
was £3,233.7m (2015: £2,903.5m).
Barratt Developments PLC – Annual Report and Accounts 2016
123
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3.2 Trade and other receivables
Of the year end trade receivables, the following were overdue but not impaired:
Trade and other receivables – Trade and other receivables are financial assets with fixed or
determinable payments that are not quoted in an active market. They are included in current
assets, except for those with maturities greater than 12 months after the balance sheet date,
which are classified as non-current assets and are measured at amortised cost less an
allowance for any uncollectable amounts. The net of these balances are classified as ‘trade
and other receivables’ in the Balance Sheet.
Trade and other receivables are classified as ‘loans and receivables’.
Trade and other receivables are assessed for indicators of impairment at each balance sheet
date and are impaired where there is objective evidence that the recovery of the receivable is
in doubt.
Allowance for doubtful receivables
At 1 July
Charge for the year
Objective evidence of impairment could include significant financial difficulty of the customer,
default on payment terms or the customer going into liquidation.
Uncollectable amounts written off net of recoveries
At 30 June
Notes
5.3.4
2016
£m
2.4
2.4
(1.3)
3.5
Group
2015
£m
4.0
2.6
(4.2)
2.4
Ageing of overdue but not impaired receivables
Less than three months
Greater than three months
2016
£m
3.5
0.2
Group
2015
£m
2.6
1.7
The carrying values of trade and other receivables are stated after the following allowance for
doubtful receivables:
The carrying amount of trade and other receivables is reduced through the use of an allowance
account. When a trade or other receivable is considered uncollectable, it is provided against
the allowance account. Subsequent recoveries of amounts previously written off are credited
against the allowance account. Changes in the carrying amount of the allowance account are
recognised in the Income Statement.
Non-current assets
Other receivables
Current assets
Trade receivables
Amounts due from subsidiary undertakings
Other receivables
Prepayments and accrued income
2016
£m
1.6
1.6
110.6
–
23.8
15.2
149.6
Group
2015
£m
3.3
3.3
123.8
–
22.4
12.6
158.8
Company
2015
£m
–
–
0.3
695.6
0.5
1.3
697.7
2016
£m
–
–
0.1
75.9
0.7
1.4
78.1
The allowance for doubtful receivables consists of individually impaired trade receivables that
are in default. The impairment recognised in cost of sales represents the difference between the
carrying amount of these trade receivables and the present value of any expected recoveries.
The Group does not hold any collateral over these balances.
The Directors consider that the carrying amount of trade receivables approximates to their
fair value.
Further disclosures relating to financial assets are set out in note 5.3.
124
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
3.3 Trade and other payables
3.4 Contract accounting
Trade and other payables – Trade and other payables on normal terms are not interest bearing
and are stated at amortised cost.
Trade and other payables on extended terms, particularly in respect of land, are recorded
at their fair value at the date of acquisition of the asset to which they relate by discounting at
prevailing market interest rates at the date of recognition. The discount to nominal value, which
will be paid in settling the deferred purchase terms liability, is amortised over the period of the
credit term and charged to finance costs using the ‘effective interest rate’ method.
Contract accounting – Contracts are only treated as construction contracts when they
have been specifically negotiated for the construction of a development or property.
Amounts recoverable on construction contracts are included in trade receivables and stated
at cost plus attributable profit less any foreseeable losses. Payments received on account for
construction contracts are deducted from amounts recoverable on construction contracts.
Payments received in excess of amounts recoverable on construction contracts are included
in trade payables.
Non-current liabilities
Land payables
Other payables
Current liabilities
Trade payables
Land payables
Amounts due to subsidiary undertakings
Accruals and deferred income
Other tax and social security
Other payables
2016
£m
549.4
80.5
629.9
393.8
537.4
–
409.2
12.5
160.6
493.6
112.3
605.9
392.5
505.4
–
357.6
1.8
92.5
–
0.2
0.2
2.7
–
108.4
25.4
–
1.1
–
–
–
4.4
–
23.0
22.5
–
–
49.9
1,513.5
1,349.8
137.6
Group
2015
£m
Company
2015
£m
2016
£m
In relation to contracts in progress at the balance sheet date:
Amounts due from contract customers included in trade and other receivables
Amounts due to contract customers included in trade and other payables
2016
£m
7.3
(3.5)
3.8
Group
2015
£m
14.7
(14.6)
0.1
For contracts in progress at the balance sheet date, contract costs incurred plus recognised
profits less recognised losses to date amounted to £199.5m (2015: £228.4m).
At 30 June 2016, retentions held by customers for contract work on contracts in progress at
the balance sheet date amounted to £3.4m (2015: £3.3m), of which £1.7m (2015: £2.2m) are
due for settlement after 12 months. Advances received from customers for contract work on
contracts in progress at the balance sheet date amounted to £1.9m (2015: £6.5m), of which £1.9m
(2015: £nil) relates to work, which is not expected to be performed in the next 12 months.
Accruals and deferred income includes a £3.3m (2015: £7.7m) social security accrual relating
to share-based payments (note 6.3). Other payables classified as current liabilities principally
comprise payments received on account and amounts due to related parties. Other payables
classified as non-current liabilities at 30 June 2016 principally comprise deferred payments
relating to the acquisition of land in a non-wholly controlled subsidiary.
The Group has £351.3m (2015: £357.8m) of payables secured by legal charges on certain assets
and £88.8m (2015: £181.5m) supported by promissory notes. Other non-current payables are
unsecured and non-interest bearing.
Further disclosures relating to financial liabilities are set out in note 5.3.
Barratt Developments PLC – Annual Report and Accounts 2016
125
Strategic ReportGovernanceFinancial StatementsOther Information
3.5 Available for sale financial assets
Available for sale financial assets principally comprise interest free loans that are granted as
part of sales transactions and for which the cash flows receivable are based on the value of
the property at redemption. These loans are secured by way of a second legal charge on the
respective property (after the first mortgage charge).
Available for sale financial assets – Available for sale financial assets are held at fair value
calculated as the present value of expected future cash flows, taking into account the estimated
market value of the property at the estimated time of repayment. Gains and losses arising from
changes in fair value are recognised in equity within other comprehensive income. Gains and
losses arising from impairment losses, changes in future cash flows and interest calculated
using the ‘effective interest rate’ method are recognised directly in the Income Statement.
For financial assets classified as available for sale, a significant or prolonged decline in
the value of the property underpinning the value of the loan or increased risk of default are
considered to be objective evidence of impairment. Increases in the fair value of available
for sale assets previously subject to impairment, which can be objectively related to an event
occurring after recognition of the impairment loss, are recognised in the Income Statement
to the extent that they reverse the impairment loss.
Secured loans
At 1 July
Additions
Disposals (at cost)
Imputed interest
Other provision movements
Fair value adjustment taken through other comprehensive income
At 30 June
Balance at 30 June analysed as:
Current
Non-current
2016
£m
107.0
0.6
(163.6)
2.1
58.0
0.5
4.6
0.8
3.8
Group
2015
£m
122.4
1.2
(29.6)
4.6
3.3
5.1
107.0
10.2
96.8
On 5 February 2016, the Group disposed of the majority of its available for sale assets to funds
managed by PMM Advisers for cash of £82.9m. The fair value of these assets on disposal was
£85.4m generating a loss on disposal of £2.5m. The gross value of the loans disposed of is
included within the ‘Disposals (at cost)’ line and the provision against this is included in the ‘Other
provision movements’ line. The valuation of these assets was based on the price expected to be
achieved at disposal.
The fair value of the remaining portfolio has been calculated on a loan by loan basis using the
present value of expected future cash flows of each loan.
Further disclosures relating to financial assets are set out in note 5.3.
126
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Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
4.1.2 Non-controlling interests
At 30 June 2016 the following subsidiaries of the Group had non-controlling interests:
Subsidiary
SQ Holdings Limited
The Tin Hat Regeneration Partnership LLP
* Subject to UK corporation tax (see note 2.6).
Percentage
owned
90.0%
90.0%
Voting
rights
controlled
Country of
registration
Principal
place of
business
Principal
activity
90.0%
Guernsey*
UK Housebuilding
50.0% England and
Wales
UK
Commercial
development
Movement in non-controlling interest share of net assets recognised in the Consolidated Balance Sheet
At 1 July
Share of profit for the year recognised in the Consolidated Income Statement
At 30 June
2016
£m
8.9
–
8.9
Group
2015
£m
8.0
0.9
8.9
Section
4
Business combinations and other investing activities
4.1 Business combinations
Consolidation – The financial statements of subsidiary undertakings are consolidated from
the date when control passes to the Group using the purchase method of accounting and up
to the date control ceases. All of the subsidiaries’ identifiable assets and liabilities, including
contingent liabilities, existing at the date of acquisition are recorded at their fair values.
All changes to those assets and liabilities and the resulting gains and losses that arise after
the Group has gained control of the subsidiary are included in the post-acquisition income
statement. All intra-Group transactions and intercompany profits or losses are eliminated
on consolidation.
A full list of the subsidiary undertakings of the Group and Company is included in note 7.4.
4.1.1 Merger reserve
The merger reserve comprises the non-statutory premium arising on shares issued as
consideration for the acquisition of subsidiaries where merger relief under section 612 of the
Companies Act 2006 applies.
Barratt Developments PLC – Annual Report and Accounts 2016
127
Strategic ReportGovernanceFinancial StatementsOther Information 4.1 Business combinations continued
4.1.2 Non-controlling interests continued
Summarised financial information relating to these subsidiaries:
Income
Expenditure
Tax
Profit/(loss) for the year, being total comprehensive income for the year
Profit/(loss) for the year attributable to the Group
Profit for the year attributable to the non-controlling interests
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities)
Equity attributable to the Group
Non-controlling interests
Dividends paid to non-controlling interests
Net cash (outflow)/inflow from operating activities
Net cash inflow/(outflow) from financing activities
Net cash (outflow)/inflow
SQ Holdings Limited
The Tin Hat Regeneration
Partnership LLP
2016
£m
–
(2.0)
(2.0)
0.4
(1.6)
(1.4)
(0.2)
136.5
–
(5.4)
(20.3)
110.8
103.0
7.8
–
(15.6)
15.7
0.1
2015
£m
–
(0.8)
(0.8)
0.2
(0.6)
(0.6)
–
118.5
–
(9.4)
(0.3)
108.8
100.8
8.0
–
0.1
–
0.1
2016
£m
7.8
(6.9)
0.9
–
0.9
0.7
0.2
6.5
–
(1.5)
–
5.0
3.9
1.1
–
(4.6)
(7.3)
(11.9)
2015
£m
34.9
(30.0)
4.9
–
4.9
4.0
0.9
23.3
–
(18.4)
–
4.9
4.0
0.9
–
10.3
–
10.3
The 1249 Regeneration
Partnership LLP *
2016
£m
2015
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.9
2.9
–
2.9
2.9
–
–
–
–
–
–
–
–
–
–
–
–
2016
£m
7.8
(8.9)
(1.1)
0.4
(0.7)
(0.7)
–
143.0
–
(6.9)
(20.3)
115.8
106.9
8.9
–
(20.2)
8.4
(11.8)
Total
2015
£m
34.9
(27.9)
7.0
0.2
7.2
6.3
0.9
141.8
–
(27.8)
(0.3)
113.7
104.8
8.9
–
10.4
–
10.4
* The 1249 Regeneration Partnership LLP was dissolved on 19 January 2016.
There are no significant restrictions on the ability of the Group to access or use assets and settle liabilities. Detailed arrangements for each subsidiary are laid out in the relevant shareholder
and partnership agreements.
128
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
4.1 Business combinations continued
4.1.3 Company investments in subsidiary undertakings
4.2 Goodwill and other intangible assets
4.2.1 Goodwill
Company investments – The Company’s interests in subsidiary undertakings are accounted
for at cost less any provision for impairment.
Goodwill – Goodwill arising on consolidation represents the excess of the fair value of the
consideration over the fair value of the separately identifiable net assets and liabilities acquired.
Where share-based payments are granted to the employees of subsidiary undertakings by
the Company, they are treated as a capital contribution to the subsidiary and the Company’s
investment in the subsidiary is increased accordingly.
Cost
At 1 July
Increase in investment in subsidiaries
Increase in investment in subsidiaries related to share-based payments
At 30 June
Impairment
At 1 July
Impairment of investments in subsidiaries in the year
At 30 June
Net book value
At 1 July
At 30 June
Goodwill arising on the acquisition of subsidiary undertakings and businesses is capitalised
as an asset but reviewed for impairment at least annually (see note 4.2.3).
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-
generating units expected to benefit from the synergies of the combination at acquisition
being housebuilding and commercial developments. Cash-generating units to which goodwill
has been allocated are tested for impairment at least annually. If the recoverable amount of
the cash-generating unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then
to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in
the unit. Any impairment loss is recognised immediately in the Income Statement and is not
subsequently reversed.
Company
2015
£m
2016
£m
3,177.0
3,171.0
–
2.3
–
6.0
3,179.3
3,177.0
79.2
–
79.2
60.5
18.7
79.2
Cost
At 1 July 2014, 30 June 2015 and 30 June 2016
Accumulated impairment losses
At 1 July 2014, 30 June 2015 and 30 June 2016
3,097.8
3,100.1
3,110.5
3,097.8
Carrying amount
At 30 June 2015 and 30 June 2016
Group
£m
816.7
24.5
792.2
The Group’s goodwill has a carrying value of £792.2m relating to the housebuilding segment.
The goodwill relating to the commercial developments segment, with a cost of £24.5m, was fully
impaired in the year ended 30 June 2008.
Barratt Developments PLC – Annual Report and Accounts 2016
129
Strategic ReportGovernanceFinancial StatementsOther Information
4.2 Goodwill and other intangible assets continued
4.2.2 Other intangible assets – Brands
4.2.3 Impairment of goodwill and intangible assets
The Group conducts an annual impairment review of goodwill and intangibles together for the
housebuilding segment.
Brands – The Group has capitalised as intangible assets brands that have been acquired.
Acquired brand values are calculated using discounted cash flows. Where a brand is
considered to have a finite 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. The factors that
contribute to the durability of brands capitalised are that there are no material legal,
regulatory, contractual, competitive, economic or other factors that limit the useful life of these
intangible assets. Internally generated brands are not capitalised.
The Group carries out an annual impairment review of indefinite life brands as part of the
review of the carrying value of goodwill, by performing a value-in-use calculation, using a
discount factor based upon the Group’s pre-tax weighted average cost of capital (note 4.2.3).
Impairment of goodwill and brands – The impairment review for the goodwill of the
housebuilding business and the Group’s indefinite life brand, David Wilson Homes, requires
an estimation of the value-in-use of the housebuilding segment. The value-in-use calculation
requires an estimate of the future cash flows expected from the housebuilding business,
including the anticipated growth rate of revenue and costs, and requires the determination of
a suitable discount rate to calculate the present value of the cash flows. The discount rate used
is based on the average capital structure of the Group, current market assessments of the time
value of money and risks appropriate to the Group’s housebuilding business. Changes in these
may impact upon the Group’s discount rate in future periods.
Cost
At 1 July 2014, 30 June 2015 and 30 June 2016
Amortisation
At 1 July 2014, 30 June 2015 and 30 June 2016
Carrying amount
At 30 June 2015 and 30 June 2016
Group
Brands
£m
107.0
7.0
100.0
An impairment review was performed at 30 June 2016 and compared the value-in-use of
the housebuilding segment with the carrying value of its tangible and intangible assets and
allocated goodwill.
The value-in-use was determined by discounting the expected future cash flows of the
housebuilding segment. The first three years of cash flows were determined using the Group’s
approved detailed site-by-site business plan. The cash flows for the fourth and fifth years were
determined using Group level internal forecasted cash flows based upon expected volumes,
selling prices and margins, taking into account available land purchases and work in progress
levels. The cash flows for year six onwards were extrapolated in perpetuity using an estimated
growth rate of 2.5%, which was based upon the historical long term growth rate of the
UK economy.
The Group does not amortise the housebuilding brand acquired with Wilson Bowden, being
David Wilson Homes, valued at £100.0m, as the Directors consider that this brand has an
indefinite useful economic life due to the fact that the Group intends to hold and support the
brand for an indefinite period and there are no factors that would prevent it from doing so.
The brand of Wilson Bowden Developments (valued at £7.0m prior to amortisation) was being
amortised over ten years as it is a business-to-business brand operating in niche markets.
Following an impairment review at 30 June 2008, the Wilson Bowden Developments brand
was fully impaired.
130
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
4.2 Goodwill and other intangible assets continued
4.2.3 Impairment of goodwill and intangibles continued
The key assumptions for the value-in-use calculations were:
> Discount rate: this is a pre-tax rate reflecting current market assessments of the time value
of money and risks appropriate to the Group’s housebuilding business. Accordingly, the rate of
14.2% (2015: 14.0%) is considered by the Directors to be the appropriate pre-tax risk adjusted
discount rate, being the Group’s estimated long term pre-tax weighted average cost of capital.
The rate used in the 30 June 2016 impairment review is calculated using the average capital
structure of the Group during the financial year, consistent with the prior year, due to the
cyclicality of the Group’s borrowing requirements.
> Expected changes in selling prices for completed houses and the related impact upon
operating margin: these are determined on a site-by-site basis for the first three years
dependent upon local market conditions and product type.
> Expected changes in site costs to complete: these are determined on a site-by-site basis for
the first three years dependent upon the expected costs of completing all aspects of each
individual development.
The conclusion of this impairment review was that given the current position of the
housebuilding segment and the expectations as to its future performance based upon
current forecasts for sales volumes and expected changes in both selling prices and costs
to complete, the housebuilding segment’s goodwill and intangible assets were not impaired.
The recoverable value of goodwill and intangible assets exceeded its carrying value by £1,424.6m
(2015: £1,547.4m).
If the UK housing market and expectations regarding its future were to deteriorate with either
operating margins reduced each year by 4.2% versus management expectations (2015: 4.5%
per annum) or the appropriate discount rate were to increase by 4.5% (2015: 4.3%) and all other
variables were held constant, then the recoverable value of goodwill and intangible assets would
equal its carrying value.
> Sales volumes: these are determined on a site-by-site basis for the first three years dependent
Joint ventures and associates
upon local market conditions, land availability and planning permissions.
At 1 July
4.3 Investments in jointly controlled entities and associated entities
A jointly controlled entity (joint venture) is an entity, including an unincorporated entity such
as a partnership, in which the Group holds an interest with one or more other parties where
a contractual arrangement has established joint control over the entity. An associated entity
is an entity, including an unincorporated entity such as a partnership, in which the Group holds
a significant influence and that is neither a subsidiary nor an interest in a joint venture.
Jointly controlled entities – Joint ventures and associated entities are accounted for using the
equity method of accounting.
Net increase/(decrease) in investments in joint ventures
Dividends received from joint ventures
Share of post-tax profit for the year from joint ventures
Share of post-tax profit for the year from associates
At 30 June
2016
£m
200.0
11.9
(28.1)
71.9
0.2
255.9
Group
2015
£m
199.6
(18.3)
(27.0)
45.4
0.3
200.0
Company
2015
£m
25.6
–
–
–
–
2016
£m
25.6
(2.5)
–
–
–
23.1
25.6
There are no losses in any of the Group’s joint ventures or associates which have not been
recognised by the Group.
Barratt Developments PLC – Annual Report and Accounts 2016
131
Strategic ReportGovernanceFinancial StatementsOther Information 4.3 Investments in jointly controlled entities and associated entities
continued
4.3.1 Joint ventures
During the year, the Group entered into the following new joint venture arrangements: 51 College
Road LLP and Sovereign BDW (Hutton Close) LLP. At 30 June 2016 the Group has interests in the
following jointly controlled entities:
Joint venture
Barratt Wates (Horley) Limited1
Percentage
owned
78.5%
Voting rights
controlled
50.0%
Country of
registration
England and Wales
Principal place
of business
UK
Principal
activity
Housebuilding
Ravenscraig Limited1
33.3%
33.3%
Scotland
DWH/Wates (Thame) Limited
Barratt Metropolitan LLP
Alie Street LLP2
Queensland Road LLP2
Barratt Wates (East Grinstead) Limited
Barratt Wates (East Grinstead)
No.2 Limited2
Barratt Osborne Worthing LLP
Barratt Osborne Bexley LLP
The Aldgate Place Limited Partnership
Aldgate Place (GP) Limited
Fulham Wharf LLP2
Barratt Wates (Worthing) Limited
BK Scotswood LLP
Rose Shared Equity LLP
Enderby Wharf LLP
Nine Elms LLP2
Brooklands Milton Keynes LLP
Sovereign BDW (Newbury) LLP
BDWZest Developments LLP2
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Commercial
development
Housebuilding
Housebuilding
Housebuilding
Housebuilding
Holding company
Housebuilding
Housebuilding
Housebuilding
Housebuilding
General partner
Housebuilding
Housebuilding
Holding company
Investment entity
Housebuilding
Housebuilding
Housebuilding
Housebuilding
Holding company
Joint venture
BDWZest LLP
ZestBDW LLP
Barratt Wates (Lindfield) Limited
Infinity Park Derby LLP
51 College Road LLP
Sovereign BDW (Hutton Close) LLP
Old Sarum Park Properties Limited
Aldgate Land One Limited2
Aldgate Land Two Limited2
Percentage
owned
Voting rights
controlled
Country of
registration
Principal place
of business
Principal
activity
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
UK
UK
UK
UK
UK
UK
UK
UK
UK
Holding company
Holding company
Housebuilding
Commercial
development
Housebuilding
Housebuilding
Dormant
Dormant
Dormant
Classification of joint arrangements
1 The Group holds one joint venture investment (Barratt Wates (Horley) Limited) not in equal
share, and one (Ravenscraig Limited) with more than one other party. However, in both cases,
the Group has equal voting rights and control over the activities of the companies with the
other parties. In addition, the Group and the other parties to the agreements only have rights
to the net assets of these companies through the terms of the contractual arrangements.
These entities are therefore classified as joint ventures.
2 The Group’s interests in a number of the entities classified as joint ventures are held indirectly.
> Barratt Wates (East Grinstead) No. 2 Limited is a wholly owned subsidiary of the Group’s joint
venture, Barratt Wates (East Grinstead) Limited, and is therefore classified as a joint venture
of the Group.
> Aldgate Land One Limited and Aldgate Land Two Limited are wholly owned subsidiaries of
the Group’s joint venture, Aldgate Place (GP) Limited, and are therefore classified as joint
ventures of the Group.
> BDWZest Developments LLP, Alie Street LLP, Queensland Road LLP, Fulham Wharf LLP
and Nine Elms LLP form a group of limited liability partnerships jointly owned (directly or
indirectly) by BDWZest LLP and ZestBDW LLP, both of which are joint ventures of the Group.
All of these entities are therefore classified as joint ventures of the Group.
132
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 4.3 Investments in jointly controlled entities and associated entities continued
4.3.1 Joint ventures continued
Summarised financial information relating to these joint ventures is as follows:
Queensland Road LLP
Fulham Wharf LLP
Nine Elms LLP
Enderby Wharf LLP
Barratt
Metropolitan LLP
Aldgate Place LP
Brooklands Milton
Keynes LLP
Other joint ventures
Group Total
Income
Expenditure
Tax
Profit/(loss) for the year, being total
comprehensive income/(expense)
Group share of profit/(loss) for the year
recognised in the
Consolidated Income Statement
Dividends received from joint ventures in
the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets of joint ventures
Group share of net assets recognised in the
Consolidated Balance Sheet at 30 June
2016
£m
4.9
(3.7)
1.2
–
1.2
2015
£m
84.6
(55.8)
28.8
–
28.8
2016
£m
58.8
(51.3)
7.5
–
7.5
2015
£m
126.6
(98.3)
28.3
–
2016
£m
89.3
(73.1)
16.2
–
28.3
16.2
2015
£m
7.5
(8.3)
(0.8)
–
(0.8)
2016
£m
146.7
(114.4)
32.3
–
32.3
0.6
14.4
3.8
14.1
8.1
(0.4)
16.2
–
3.3
–
27.0
19.6
–
(0.7)
(18.2)
–
2.6
1.3
–
1.4
0.7
10.0
–
–
–
–
142.0
186.1
230.8
176.0
116.9
–
(39.4)
(25.6)
77.0
–
(47.7)
(64.3)
74.1
–
(101.9)
(60.5)
68.4
–
(70.5)
(82.3)
23.2
–
(40.0)
(2.1)
74.8
38.5
37.1
34.2
11.6
37.4
21.3
2015
£m
22.2
(19.2)
3.0
–
3.0
1.5
–
95.1
0.4
(29.5)
(23.5)
42.5
2016
£m
84.6
(62.7)
21.9
–
21.9
16.4
18.0
47.9
–
(39.6)
(3.7)
4.6
3.4
2015
£m
22.1
(17.1)
5.0
–
5.0
3.8
–
57.4
0.1
(45.5)
(5.3)
6.7
5.1
2016
£m
95.8
(72.8)
23.0
–
23.0
11.5
–
93.4
–
(40.4)
(23.4)
29.6
14.8
2015
£m
23.2
(18.9)
4.3
–
4.3
2.1
–
97.6
–
(27.3)
(63.8)
6.5
3.3
2016
£m
77.1
(55.8)
21.3
–
2015
£m
40.0
(29.1)
10.9
–
2016
£m
98.2
(83.6)
14.6
(2.7)
2015
£m
2016
£m
2015
£m
101.0
655.4
427.2
(87.5)
(517.4)
(334.2)
13.5
(2.9)
138.0
(2.7)
93.0
(2.9)
90.1
21.3
10.9
11.9
10.6
135.3
10.7
–
35.3
–
(3.0)
–
32.3
16.1
5.4
–
40.5
–
(29.7)
–
10.8
5.4
4.6
0.1
121.5
61.9
(33.1)
(86.6)
63.7
4.5
71.9
45.4
–
28.1
27.0
116.0
61.0
(34.4)
(82.4)
60.2
791.1
61.9
(298.1)
(201.9)
353.0
788.3
61.5
(302.8)
(321.6)
225.4
38.8
36.7
184.5
121.2
During the year, the Group and Company entered into a number of transactions with their joint
ventures in respect of funding and development management services (with charges made
based on the utilisation of these services) in addition to the provision of construction services.
Further details on these transactions are provided in note 7.3. The Group and Company have
a number of contingent liabilities relating to their joint ventures. Further details on these are
provided in note 7.2.
As at 30 June 2016 all of the preferred capital has been repaid. BDWZest Developments LLP has
an external loan arrangement, the covenants and terms of which restrict the transfer of funds
from it and its subsidiaries (Alie Street LLP, Queensland Road LLP, Fulham Wharf LLP and Nine
Elms LLP) which are guarantors, to the Group. The terms of these agreements are such that the
members’ capital invested must at least match the external loan balance, limiting repayments
of capital to the Group.
The Group has made loans of £84.9m (2015: £87.6m) to its joint ventures, which are included
within Group investments accounted for using the equity method. Included within the Group’s
share of net assets of joint ventures is a proportion of loans to the joint ventures calculated using
the Group’s ownership share of £80.7m (2015: £85.7m).
The transfer of funds from the Group’s joint ventures to the Group is determined by the terms of
the joint venture agreements, which specify how available funds should be applied in repaying
loans and capital, and distributing profits to the partners. The joint venture agreement entered
into in respect of Rose Shared Equity LLP provides for the return of the capital invested by our
joint venture partner (the ‘preferred capital’) before any funds can be transferred to the Group.
A number of the Group’s joint ventures prepare financial statements which are non-coterminous
with the Group in order to comply with the terms of their joint venture agreements and to align
with the year ends of our joint venture partners. Alie Street LLP, Fulham Wharf LLP, Queensland
Road LLP, Nine Elms LLP, BDWZest Developments LLP, BDWZest LLP, ZestBDW LLP and
51 College Road LLP prepare financial statements to 31 March. Barratt Osborne Bexley LLP
prepares financial statements to 30 September and Barratt Osborne Worthing LLP prepares
financial statements to 30 April. BK Scotswood LLP and Ravenscraig Limited prepare financial
statements to 31 December. Management financial information is available for all joint ventures
with non-coterminous year ends as at 30 June 2016 and 30 June 2015.
Barratt Developments PLC – Annual Report and Accounts 2016
133
Strategic ReportGovernanceFinancial StatementsOther Information
4.3 Investments in jointly controlled entities and associated entities
continued
4.3.1 Joint ventures continued
The Company has an investment in one joint venture, Rose Shared Equity LLP.
Investment in joint venture containing non-current available for sale assets – Rose Shared
Equity LLP holds non-current available for sale financial assets comprising interest free loans
that are secured by way of a second charge on the respective property. The Group’s investment
is accounted for using the equity method of accounting. In line with the Group’s other joint
venture investments, the carrying value is reviewed at each balance sheet date. This review
requires estimation of the cash flows expected to be received by the Group which is based upon
calculation of the fair values of the loans held by the entity including an estimate of future cash
flows expected from the redemption of interest free loans, including an estimate of the market
value of the property at the estimated time of redemption, and requires the determination of
a suitable discount rate to calculate the present value of the cash flows. The estimated market
value is based on original selling prices and local market conditions with an allowance for low
single-digit sales price inflation. The estimated repayment profile is based on historic data for
first time buyers selling their property. The discount rate used is consistent with the interest
rate payable on a third party second charge loan of a similar amount and duration.
Summarised financial information relating to Rose Shared Equity LLP is as follows:
Income
Expenditure
Tax
Profit for the year, being total comprehensive income
Group share of profit for the year recognised in the Consolidated Income Statement
Dividends received from joint venture in the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets of joint venture
Group share of net assets recognised in the Consolidated Balance Sheet at 30 June
Company Total
2015
£m
27.4
(24.3)
3.1
–
3.1
–
–
1.6
49.1
(0.1)
–
50.6
25.6
2016
£m
14.5
(10.7)
3.8
–
3.8
–
–
1.1
39.1
(0.1)
–
40.1
23.1
4.3.2 Associated entities
The Group has significant interests in the following associated entity:
Associate
New Tyne West Development Company LLP
Percentage
owned
25.0%
Country of registration
Principal activity
England and Wales
Housebuilding
New Tyne West Development Company LLP prepares financial statements to 31 December,
which is non-coterminous with the Group, as agreed between the partners at the inception
of the joint arrangement.
In relation to the Group’s interests in associates, the Group’s share of assets and liabilities
of the associates is an asset of £0.3m at 30 June 2016 (2015: asset of £0.1m). The Group’s share
of the associate’s profit during the year was £0.2m (2015: £0.3m).
The Group has made loans of £nil (2015: £nil) to its associate. Further details of transactions
with associates are provided in note 7.3.
The Group has contingent liabilities relating to its associates. Further details on these are
provided in note 7.2.
4.4 Jointly controlled operations
Jointly controlled operations – The Group’s share of profits and losses from its investments
in jointly controlled operations is accounted for on a direct basis and is included in the Income
Statement. The Group’s share of its investments, assets and liabilities is accounted for on
a directly proportional basis in the Group’s Balance Sheet.
The Group enters into jointly controlled operations as part of its housebuilding and property
development activities. The Group has acquired one new joint operation during the year, Chapel
Hill. The Company has no jointly controlled operations (2015: none).
The Group has significant interests in the following jointly controlled operations:
Joint operation
Barrier Park East
Lawley House
Trenchard House
Chapel Hill
Share of profits and
assets consolidated
Principal place
of business
50.0%
33.3%
50.0%
50.0% *
UK
UK
UK
UK
Principal activity
Housebuilding
Housebuilding
Housebuilding
Housebuilding
* Subject to achieving forecast profitability, 50% of profits are attributable to the Group. 50% of assets are consolidated
excluding land, land creditors and any part-exchange properties.
134
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Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
4.4 Jointly controlled operations continued
The Group’s share of the joint operations’ income and expenses, included in the Consolidated
Income Statement during the year and the assets and liabilities of the joint operations which
are included in the Consolidated Balance Sheet are shown below:
Group share of:
Income
Expenses
Share of profit from joint operations
Group share of:
Current assets
Non-current assets
Current liabilities
Share of net assets of joint operations
4.5 Property, plant and equipment
2016
£m
41.6
(27.1)
14.5
15.6
0.2
(11.1)
4.7
Group
2015
£m
24.7
(16.5)
8.2
43.0
0.2
(20.7)
22.5
Property, plant and equipment – Property, plant and equipment is carried at cost less
accumulated depreciation and accumulated impairment losses. Depreciation is provided
to write-off the cost of the assets on a straight-line basis to their residual value over their
estimated useful lives. Residual values and asset lives are reviewed annually.
Freehold properties are depreciated on a straight-line basis over 25 years. Freehold land
is not depreciated. Plant is depreciated on a straight-line basis over its expected useful life,
which ranges from one to seven years.
Cost
At 1 July 2014
Additions
Disposals
At 30 June 2015
Additions
Transfers to other Group companies
Disposals
At 30 June 2016
Depreciation
At 1 July 2014
Charge for the year
Disposals
At 30 June 2015
Charge for the year
Transfers to other Group companies
Disposals
At 30 June 2016
Net book value
At 30 June 2015
At 30 June 2016
Group
Company
Property
£m
Plant and
equipment
£m
Total
£m
Property
£m
Plant and
equipment
£m
2.8
–
–
2.8
0.4
–
–
3.2
2.6
0.1
–
2.7
0.1
–
–
2.8
0.1
0.4
15.9
5.4
(0.7)
20.6
5.7
–
(0.2)
26.1
10.0
3.2
(0.7)
12.5
4.4
–
–
18.7
5.4
(0.7)
23.4
6.1
–
(0.2)
29.3
12.6
3.3
(0.7)
15.2
4.5
–
–
16.9
19.7
8.1
9.2
8.2
9.6
0.2
–
–
0.2
–
–
–
0.2
0.2
–
–
0.2
–
–
–
0.2
–
–
6.5
2.8
–
9.3
3.2
(0.1)
(0.2)
12.2
4.2
1.3
–
5.5
2.0
(0.1)
–
7.4
3.8
4.8
Total
£m
6.7
2.8
–
9.5
3.2
(0.1)
(0.2)
12.4
4.4
1.3
–
5.7
2.0
(0.1)
–
7.6
3.8
4.8
Authorised future capital expenditure that was contracted but not provided for in these Financial
Statements amounted to £0.3m (2015: £0.5m).
Barratt Developments PLC – Annual Report and Accounts 2016
135
Strategic ReportGovernanceFinancial StatementsOther Information
Section
5
Capital structure and financing
5.1 Net cash
Net cash is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings
and foreign exchange swaps.
Net cash at 30 June is shown below:
Cash and cash equivalents
Drawn debt
Non-current borrowings
Term loans
Government loans
Private placement notes
Total non-current borrowings
Current borrowings
Bank overdrafts
Government loans
Total current borrowings
Notes
5.1.1
2016
£m
758.0
(90.9)
(21.0)
(59.6)
Group
2015
£m
360.4
(88.2)
(24.7)
(50.4)
(171.5)
(163.3)
–
(6.0)
(6.0)
–
(13.2)
(13.2)
Total borrowings being total drawn debt
(177.5)
(176.5)
Derivative financial instruments
Foreign exchange swaps
Net cash
5.4
11.5
592.0
2.6
186.5
2016
£m
729.0
Company
2015
£m
294.1
(90.9)
–
(59.6)
(150.5)
(42.7)
–
(42.7)
(193.2)
11.5
547.3
(88.2)
–
(50.4)
(138.6)
(58.5)
–
(58.5)
(197.1)
2.6
99.6
Included within non-current borrowings are prepaid facility arrangement fees of £9.5m
(2015: £12.3m).
Movement in net cash is analysed as follows:
Net increase in cash and cash equivalents
Net loan repayments/(drawdown) including foreign exchange loss
Foreign exchange gain on swaps
Other fees relating to amendment of financing arrangements
Movement in net cash in the year
Opening net cash
Closing net cash
2016
£m
397.6
(1.0)
8.9
–
405.5
186.5
592.0
Group
2015
£m
85.7
23.7
4.1
(0.1)
113.4
73.1
186.5
2016
£m
434.9
3.9
8.9
–
447.7
99.6
547.3
Company
2015
£m
35.1
(5.9)
4.1
–
33.3
66.3
99.6
5.1.1 Cash and cash equivalents
Cash and cash equivalents are held at floating interest rates linked to the UK bank rate, LIBOR
and money market rates as applicable. Cash and cash equivalents comprise cash held by the
Group and short term bank deposits with an original maturity of three months or less from
inception and are subject to an insignificant risk of changes in value. Cash and cash equivalents
are classified as ‘loans and receivables’. Further disclosures relating to financial assets are set
out in note 5.3.1.
5.1.2 Borrowings and facilities
Loans and borrowings – Interest bearing loans and overdrafts are recorded at the proceeds
received plus accrued interest applied to the account less any repayments made, net of direct
issue costs.
Where bank agreements include a legal right of offset for in hand and overdraft balances, and
the Group intends to settle the net outstanding position, the offset arrangements are applied
to record the net position in the Balance Sheet.
136
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
5.1 Net cash continued
5.1.2 Borrowings and facilities continued
All debt (excluding Get Britain Building loans) is unsecured.
The principal features of the Group’s debt facilities at 30 June 2016 and 30 June 2015 were
as follows:
Facility
30 June 2016
30 June 2015 Maturity
Amount drawn
Committed facilities
Revolving credit facility (RCF)
£700.0m
–
–
£150.0m on 29 December 2017
£550.0m on 17 December 2019
Term loan
£100.0m
£100.0m
£100.0m Repayments scheduled: 25% on
1 July 2019; 25% on 1 July 2020; and
50% on 1 July 2021
5.2 Net finance costs
Finance costs and income – The Group recognises finance costs and income on bank
borrowings and deposits and other borrowings in the Income Statement in the period
to which they relate.
Recognised in the Consolidated Income Statement:
Notes
6.2.2
Government loans*
£22.5m
£22.5m
£27.9m Repayments due between
Imputed interest on available for sale financial assets and interest free loans
Local government loan agreements
£4.6m
£4.6m
including
£0.1m
interest
£10.0m
including
£0.2m
interest
Fixed rate US$ private placement notes
$80.0m
$80.0m
$80.0m 23 August 2017
* Government loans comprise:
Finance income
Finance income on short term bank deposits
6 December 2016 and 31 March 2018
Repayments due between 31 March
2018 and 31 March 2020
Finance income related to employee benefits
Other interest receivable
Finance costs
Interest on loans and borrowings
Imputed interest on deferred term payables
> Get Britain Building – The Group has received cash upon specific sites under the Government’s ‘Get Britain Building’
Amounts reclassified to the Income Statement in respect of hedged cash flows
5.4.3
scheme, which is repayable as described in the table above.
> Growing Places Fund – The Group has received cash under a local government ‘Growing Places Fund’ scheme which
is repayable over four years in eight six-monthly instalments, the first of which was in December 2013.
The Group also uses various bank overdrafts and uncommitted borrowing facilities that
are subject to floating interest rates linked to UK bank rate, LIBOR and money market rates
as applicable.
Weighted average interest rates are disclosed in note 5.2.
Foreign exchange losses on US Dollar debt
Amortisation of facility fees
Other interest payable
Net finance costs
Barratt Developments PLC – Annual Report and Accounts 2016
2016
£m
(0.7)
(2.9)
(0.4)
(1.9)
(5.9)
14.1
34.5
(1.1)
8.9
2.9
4.8
64.1
58.2
2015
£m
(0.1)
(4.6)
(0.4)
(2.5)
(7.6)
19.1
31.6
2.9
4.1
3.0
3.9
64.6
57.0
137
Strategic ReportGovernanceFinancial StatementsOther Information
5.2 Net finance costs continued
Recognised in equity:
5.3 Financial instruments
Amounts deferred in respect of effective cash flow hedges
Total fair value movement on cash flow swaps included in equity
Notes
5.4.3
Amounts reclassified to the Income Statement in respect of hedged cash flows
5.4.3
Total fair value movement on cash flow swaps transferred from equity
2016
£m
(6.3)
(6.3)
1.1
1.1
2015
£m
0.5
0.5
(2.9)
(2.9)
The weighted average interest rates, excluding fees, paid in the year were as follows:
Recognition – Financial assets and financial liabilities are recognised on the Balance Sheet
when the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset only when the contractual rights to the cash flows
from the asset expire or it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
The Group derecognises a financial liability only when the Group’s obligations are discharged,
cancelled or they expire.
Bank loans excluding swap interest
Net swap payment
Government loans
Term loans
Private placement notes
2016
%
2.1
5.2
2.2
4.7
8.2
Group
2015
%
2.4
5.1
2.4
4.9
8.1
Company
2015
%
2.4
5.1
–
4.9
8.1
2016
%
2.1
5.2
–
4.7
8.2
Classification and measurement – Non-derivative financial assets are classified as either
‘available for sale financial assets’ or ‘loans and receivables’. The classification depends on the
nature and purpose of the financial assets and is determined at the time of initial recognition.
All non-derivative financial liabilities are classified as ‘other financial liabilities’ and are initially
measured at fair value, net of transaction costs. Other financial liabilities consist of bank
borrowings and trade and other payables.
Financial liabilities are classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least 12 months after the balance sheet date.
The fair value of available for sale assets is determined as described in note 3.5. The fair values
of other non-derivative financial assets and liabilities are determined based on discounted cash
flow analysis using current market rates for similar instruments. Other financial liabilities are
subsequently measured at amortised cost using the ‘effective interest rate’ method.
All of the Group’s interest rate and cross currency swaps are designated as cash flow
hedges. Derivative financial instruments are measured at the present value of future cash
flows estimated and discounted based on the applicable yield curves derived from quoted
interest rates.
138
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Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
5.3 Financial instruments continued
5.3.1 Financial assets
The carrying values and fair values of the Group and Company financial assets are as follows:
Fair
value
£m
2016
Carrying
value
£m
Fair
value
£m
Notes
Group
2015
Carrying
value
£m
Fair
value
£m
2016
Carrying
value
£m
Company
2015
Carrying
value
£m
Fair
value
£m
Designated as cash
flow hedges
Derivative financial
instruments
Loans and
receivables
Cash and cash
equivalents
Trade and other
receivables *
Available for sale
Non-current
available for sale
financial assets
Current available
for sale financial
assets
Total financial
assets
5.4
11.8
11.8
2.3
2.3
11.8
11.8
2.3
2.3
5.1
758.0
758.0
360.4
360.4
729.0
729.0
294.1
294.1
Intercompany loans
3.2
–
–
–
–
106.9
106.9
112.6
112.6
3.5
3.8
3.8
96.8
96.8
3.5
0.8
0.8
10.2
10.2
0.7
75.9
–
–
0.7
0.3
0.3
75.9
695.6
695.6
–
–
–
–
–
–
881.3
881.3
582.3
582.3
817.4
817.4
992.3
992.3
* Trade and other receivables exclude accrued income, amounts recoverable on contracts, prepayments and tax and
social security.
5.3.2 Financial liabilities
The carrying values and fair values of the Group and Company financial liabilities are as follows:
Fair
value
£m
2016
Carrying
value
£m
Fair
value
£m
Notes
Group
2015
Carrying
value
£m
Fair
value
£m
2016
Carrying
value
£m
Company
2015
Carrying
value
£m
Fair
value
£m
Designated as cash
flow hedges
Derivative financial
instruments
Other financial
liabilities
Bank overdrafts
Trade and other
payables*
Intercompany
payables
Loans and
borrowings
Total financial
liabilities
5.4
13.1
13.1
17.0
17.0
13.1
13.1
17.0
17.0
5.1
–
–
–
–
1,883.2
1,870.2
1,717.9
1,707.8
42.7
16.7
42.7
16.7
–
–
–
–
108.4
108.4
58.5
14.4
23.0
58.5
14.4
23.0
179.0
177.5
178.4
176.5
152.0
150.5
140.5
138.6
2,075.3
2,060.8
1,913.3
1,901.3
332.9
331.4
253.4
251.5
3.3
5.1
* Trade and other payables excludes deferred income, payments received in excess of amounts recoverable on contracts,
tax and social security and other non-financial liabilities.
Trade and other payables include land payables, which may bear interest on a contract specific
basis, and items secured by legal charge as disclosed in note 3.3.
5.3.3 Financial assets and liabilities measured subsequent to initial recognition
at fair value
The following tables provide an analysis of financial assets and financial liabilities that are
measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
> Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical liabilities;
> Level 2 fair value measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
> Level 3 fair value measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
There have been no transfers of liabilities between levels of the fair value hierarchy and
no non-recurring fair value measurements.
Barratt Developments PLC – Annual Report and Accounts 2016
139
Strategic ReportGovernanceFinancial StatementsOther Information
5.3 Financial instruments continued
5.3.3 Financial assets and liabilities measured subsequent to initial recognition
at fair value continued
Financial assets measured subsequent to initial recognition at fair value are as follows:
5.3.4 Financial instruments gains and losses
The net (gains)/losses recorded in the Consolidated Income Statement, in respect of financial
instruments (excluding interest shown in note 5.2), were as follows:
Notes
Level 1
£m
Level 2
£m
Level 3
£m
2016
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Group
2015
Total
£m
Loans and receivables
Impairment of trade receivables
Available for sale financial assets
Net profit transferred on sale
Net impairment of available for sale financial assets
2.3
–
2.3
Other financial liabilities
Foreign exchange losses on US Dollar debt
Transfers from hedged items
11.8
–
11.8
5.4
3.5
3.5
–
–
–
–
–
–
11.8
3.8
0.8
4.6
–
–
–
–
–
–
96.8
96.8
10.2
10.2
2.3
107.0
109.3
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Level 1
£m
Level 2
£m
Level 3
£m
Company
2015
Total
£m
3.8
0.8
16.4
2016
Total
£m
Derivative instruments in
designated hedge accounting
relationships
Derivative financial assets
Available for sale
Non-current available for sale
financial assets*
Current available for sale
financial assets*
Total
Derivative instruments in
designated hedge accounting
relationships
Derivative financial assets
5.4
Total
–
–
11.8
11.8
–
–
11.8
11.8
–
–
2.3
2.3
–
–
2.3
2.3
* Further disclosures for available for sale assets are provided in note 3.5.
Financial liabilities measured subsequent to initial recognition at fair value are as follows:
Notes
Level 1
£m
Level 2
£m
Level 3
£m
2016
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
2015
Total
£m
Group and Company
Derivative instruments in
designated hedge accounting
relationships
Derivative financial liabilities
5.4
Total
140
–
–
13.1
13.1
–
–
13.1
13.1
–
–
17.0
17.0
–
–
17.0
17.0
Notes
2016
£m
2015
£m
3.2
2.4
(5.6)
7.7
8.9
2.6
(9.9)
8.5
4.1
Transfer from equity on currency cash flow hedges
5.4.3
(8.9)
(4.1)
5.4 Derivative financial instruments – swaps
The Group has entered into derivative financial instruments in the form of interest rate
swaps and cross currency swaps to manage the interest rate and foreign exchange rate risk
arising from the Group’s operations and sources of finance. The use of financial derivatives is
governed by the Group’s policies approved by the Board of Directors as detailed in note 5.5 to
the Financial Statements. Neither the Group nor the Company enters into any derivatives for
speculative purposes.
Derivative financial instruments – Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently re-measured to their fair value at each
balance sheet date. The resulting gain or loss is recognised in the profit or loss immediately
unless the derivative is designated and effective as a hedging instrument, in which event the
timing of the recognition in profit or loss depends on the nature of the hedge relationship.
The interest rate and cross currency swap arrangements are designated as hedging
instruments, being either hedges of a change in future cash flows as a result of interest
rate movements or hedges of a change in future cash flows as a result of foreign currency
exchange rate movements. At the inception of the hedge relationship, the Group documents
the relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedged transactions.
In addition, at the inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument is highly effective in offsetting the changes in cash flows
of the hedged items.
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
5.4 Derivative financial instruments – swaps continued
Derivative financial instruments continued – The fair value of hedging derivatives is classified
as a non-current asset or a non-current liability if the remaining maturity of the hedge
relationship is more than 12 months and as a current asset or a current liability if the remaining
maturity of the hedge relationship is less than 12 months.
Hedge accounting – The Group has adopted hedge accounting for its swaps. If it ceases to be
highly probable that there is sufficient forecast debt to match with the period of the interest rate
swaps or if the cross currency hedges cease to be highly effective, any changes in fair value of
the swaps would be recognised in the Consolidated Income Statement, rather than equity.
The Group includes foreign exchange swaps within net debt. These swaps were entered into
to hedge the foreign exchange exposure upon the Group’s US Dollar denominated private
placement notes. The Group’s foreign exchange swaps have both an interest rate and an
exchange rate element and only the exchange rate element on the notional amount of the swap
is included within the net cash note.
The Group’s derivative financial instruments at 30 June are shown below:
As at 30 June 2016, the Group had outstanding floating rate Sterling debt and overdrafts,
excluding fees, of £122.0m (2015: £126.9m) and the Company had outstanding net floating
rate Sterling debt and overdrafts, excluding fees, of £143.3m (2015: £158.5m). In obtaining
this funding, the Group and the Company sought to achieve certainty as to the availability
of, and income statement charge related to, a designated proportion of anticipated future
debt requirements.
The Group and Company have entered into swap arrangements to swap £137.0m (2015: £137.0m)
of this debt into fixed rate Sterling debt in accordance with the Group and Company treasury
policy outlined in note 5.5. After taking into account swap arrangements, the fixed interest rates
applicable to the debt were as follows:
Fixed rate
payable %
2016
Maturity
6.06
6.18
5.83
5.61
2017
2017
2017
2022
£m
60.0
19.5
32.5
25.0
137.0
£m
60.0
19.5
32.5
25.0
137.0
Fixed rate
payable %
2015
Maturity
6.06
6.18
5.83
5.61
2017
2017
2017
2022
During the year ended 30 June 2016 hedging ineffectiveness of £0.7m (2015: £nil) was charged
to the Consolidated Income Statement.
Designated as cash flow hedges:
Foreign exchange swap – exchange rate element
Foreign exchange swap – interest rate element
Non-current asset
Interest rate swaps – non-current liability
Interest rate swaps – current liability
Total liability
Net derivative financial instruments
Group and Company
Further disclosures relating to financial instruments are set out in note 5.3.
2016
£m
11.5
0.3
11.8
(7.5)
(5.6)
(13.1)
(1.3)
2015
£m
2.6
(0.3)
2.3
(17.0)
–
(17.0)
(14.7)
5.4.2 Foreign exchange swaps
The Group and Company enter into derivative transactions in the form of swap arrangements
to manage the cash flow risks related to foreign exchange arising from the Group’s sources
of finance denominated in US Dollars.
As at 30 June 2016, the Group and Company had outstanding fixed rate US Dollar loan notes
of $80.0m (2015: $80.0m).
The Group and Company have entered into swap arrangements to swap all of this debt into fixed
rate Sterling debt in accordance with the Group and Company Treasury policy outlined in note
5.5. After taking into account swap arrangements, the fixed interest rates applicable to the debt
were as follows:
5.4.1 Interest rate swaps
The Group and Company enter into derivative transactions in the form of swap arrangements to
manage the cash flow risks, related to interest rates, arising from the Group’s and Company’s
sources of finance.
$m
80.0
Fixed rate
payable %
8.14
2016
Maturity
2017
$m
80.0
Fixed rate
payable %
8.14
2015
Maturity
2017
There was no ineffectiveness to be taken through the Consolidated Income Statement during
the year or the prior year. Further disclosures relating to financial instruments are set out in
note 5.3.
Barratt Developments PLC – Annual Report and Accounts 2016
141
Strategic ReportGovernanceFinancial StatementsOther Information
5.4 Derivative financial instruments – swaps continued
5.4.3 Hedge accounting and hedging reserve
To the extent that the Group’s cash flow hedges are effective, gains and losses on the fair
value of the interest rate and cross currency swap arrangements are deferred in equity in the
hedging reserve until realised. On realisation, such gains and losses are recognised within
finance charges 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 immediately in finance charges in the Income Statement.
Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item
is recognised in profit or loss.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the
hedging instrument expires, is sold or terminated or no longer qualifies for hedge accounting.
At that time, any cumulative gain or loss deferred in equity remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was deferred in
equity is recognised immediately in profit or loss.
The hedging reserve represents the cumulative effective portion of deferred fair value gains
or losses on derivative financial instruments that have been designated as cash flow hedges
by the Company, where the hedged cash flows are still expected to occur.
Transfers to hedging reserve:
Loss on interest rate swaps
Gain on foreign exchange swaps
Gain/(loss) transferred to hedging reserve
Transfers from hedging reserve:
Hedged interest cash flows
Hedged foreign currency cash flows
Ineffectiveness on interest rate swap transferred to Income Statement
(Loss)/gain transferred to Income Statement
Group and Company
2016
£m
2015
£m
Notes
(3.2)
9.5
6.3
7.1
(8.9)
0.7
(1.1)
(4.6)
4.1
(0.5)
7.0
(4.1)
–
2.9
5.2
5.2
Movements on the hedging reserve in equity are detailed in the Statements of Changes in
Shareholders’ Equity.
5.5 Financial risk management
The Group’s approach to risk management and the principal operational risks of the business
are detailed on pages 41 to 45. The Group’s financial assets, financial liabilities and derivative
financial instruments are detailed in notes 5.3 and 5.4.
The Group’s operations and financing arrangements expose it to a variety of financial risks that
include the effects of changes in debt market prices, credit risks, liquidity risks and interest
rates. The most significant of these to the Group is liquidity risk and, accordingly, there is a
regular, detailed system for the reporting and forecasting of cash flows from the operations
to Group management to ensure that risks are promptly identified and appropriate mitigating
actions taken by the Treasury department. These forecasts are further stress-tested at a
Group level on a regular basis to ensure that adequate headroom within facilities and banking
covenants is maintained. In addition, the Group has in place a risk management programme that
seeks to limit the adverse effects of the other risks on its financial performance, in particular by
using financial instruments, including debt and derivatives, to hedge interest rates and currency
rates. The Group does not use derivative financial instruments for speculative purposes.
See principal risks on page 42 for more details.
The Board approves Treasury policies and certain day-to-day treasury activities have been
delegated to a centralised Treasury Operating Committee, which in turn regularly reports to the
Board. The Treasury department implements guidelines that are established by the Board and
the Treasury Operating Committee.
5.5.1 Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its liabilities as they fall due.
The Group actively maintains a mixture of long term and medium term committed facilities that
are designed to ensure that the Group has sufficient available funds for operations. The Group’s
borrowings are typically cyclical throughout the financial year and peak in April and May; and
October and November of each year, due to seasonal trends in income. Accordingly, the Group
maintains sufficient facility headroom to cover these requirements. On a normal operating
basis, the Group has a policy of maintaining a minimum headroom of £150.0m. The Group
identifies and takes appropriate actions based upon its regular, detailed system for the reporting
and forecasting of cash flows from its operations. The Group’s drawn debt, excluding fees,
represented 20.0% (2015: 21.0%) of available committed facilities at 30 June 2016. In addition,
the Group had £758.0m (2015: £360.4m) of cash and cash equivalents.
The Group was in compliance with its financial covenants at 30 June 2016. At the date of
approval of the Financial Statements, the Group’s internal forecasts indicate that it will remain
in compliance with these covenants for the foreseeable future, being at least 12 months from
the date of signing these Financial Statements.
One of the Group’s objectives is to minimise refinancing risk. The Group therefore has a policy
that the average maturity of its committed bank facilities and private placement notes is at least
two years on average with a target of three years. At 30 June 2016, the average maturity of the
Group’s facilities was 3.0 years (2015: 4.0 years).
142
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 5.5 Financial risk management continued
5.5.1 Liquidity risk continued
The Group maintains certain committed floating rate facilities with banks to ensure sufficient
liquidity for its operations. The undrawn committed facilities available to the Group, in respect
of which all conditions precedent had been met, were as follows:
Company
2016
Loans and borrowings
(including bank overdrafts)1
Trade and other payables2
Expiry date
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
2016
£m
–
150.0
550.0
–
700.0
Group
2015
£m
–
–
701.7
–
701.7
2016
£m
–
150.0
550.0
–
700.0
Company
Intercompany payables
2015
£m
–
–
2015
Loans and borrowings
(including bank overdrafts)1
700.0
Trade and other payables2
Intercompany payables
–
700.0
Notes
5.3.2
5.3.2
5.3.2
5.3.2
5.3.2
5.3.2
Carrying
amount
£m
Contractual
cash flow
£m
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
Over
5 years
£m
193.2
16.7
108.4
318.3
197.1
14.4
23.0
234.5
264.4
16.7
108.4
389.5
314.3
14.4
23.0
351.7
66.9
16.7
108.4
192.0
84.9
14.4
23.0
68.8
78.7
50.0
–
–
–
–
–
–
68.8
78.7
50.0
26.4
125.5
77.5
–
–
–
–
–
–
122.3
26.4
125.5
77.5
In addition, the Group had £71.2m (2015: £71.2m) of undrawn uncommitted facilities available at
30 June 2016.
The expected undiscounted cash flows of the Group and Company financial liabilities, excluding
derivative financial liabilities, by remaining contractual maturity at the balance sheet date were
as follows:
1 The disclosure of contractual cash flows in the preceding tables is calculated on the basis that the Group’s £700.0m
revolving credit facility is fully drawn down. At 30 June 2016 none of this facility was drawn.
2 Trade and other payables exclude deferred income, payments received in excess of amounts recoverable on contracts,
tax and social security and other non-financial liabilities.
The expected undiscounted cash flows of the Group’s and the Company’s derivative financial
instruments, by remaining contractual maturity, at the balance sheet date were as follows:
Group
2016
Loans and borrowings
(including bank overdrafts)1
Trade and other payables2
2015
Loans and borrowings
(including bank overdrafts)1
Trade and other payables2
Carrying
amount
£m
Contractual
cash flow
£m
Less than
1 year
£m
Notes
1-2 years
£m
2-5 years
£m
Over
5 years
£m
5.3.2
177.5
249.9
30.8
88.9
80.2
5.3.2
1,870.2
1,935.0
1,260.7
2,047.7
2,184.9
1,291.5
351.2
440.1
277.1
357.3
50.0
46.0
96.0
5.3.2
176.5
295.4
40.6
32.8
144.5
77.5
5.3.2
1,707.8
1,773.9
1,143.7
1,884.3
2,069.3
1,184.3
269.0
301.8
322.8
467.3
38.4
115.9
Group and Company
2016
Financial assets
Gross settled derivatives:
Receive leg
Pay leg
Financial liabilities
Net settled derivatives
2015
Financial assets
Gross settled derivatives:
Receive leg
Pay leg
Financial liabilities
Net settled derivatives
Carrying
amount
£m
Contractual
cash flow
£m
Less than
1 year
£m
Notes
1-2 years
£m
2-5 years
£m
Over
5 years
£m
5.4
5.4
5.4
5.4
5.4
5.4
11.8
–
(13.1)
(1.3)
2.3
–
(17.0)
(14.7)
68.9
(56.2)
(19.7)
(7.0)
62.2
(60.1)
(17.5)
(15.4)
4.5
(3.9)
(7.3)
(6.7)
3.8
(3.9)
(7.1)
(7.2)
64.4
(52.3)
(7.6)
(4.5)
3.8
(3.9)
(6.3)
(6.4)
–
–
(3.7)
(3.7)
54.6
(52.3)
(2.6)
(0.3)
–
–
(1.1)
(1.1)
–
–
(1.5)
(1.5)
Under the Group’s International Swaps and Derivatives Association Master Agreement (‘ISDA’),
the interest rate swaps are settled on a net basis.
Barratt Developments PLC – Annual Report and Accounts 2016
143
Strategic ReportGovernanceFinancial StatementsOther Information
5.5 Financial risk management continued
5.5.2 Market risk (price risk)
5.5.2.1 Interest rate risk
The Group has both interest bearing assets and interest bearing liabilities. Floating rate
borrowings expose the Group to cash flow interest rate risk and fixed rate borrowings expose
the Group to fair value interest rate risk.
The Group has a conservative treasury risk management strategy and the Group’s interest rates
are fixed using both swaps and fixed rate debt instruments. The Group’s policy target is for 0-40%
of average borrowings over the three-year plan period to be at fixed rates of interest. Due to the
seasonality of the Group’s funding requirements, 108.6% (2015: 105.4%) of the Group’s gross
borrowings were fixed as at 30 June 2016 and the average over the three-year plan period is 42.4%
(2015: 43.2%). Group interest rates are fixed using both swaps and fixed rate debt instruments.
The exposure of the Group’s financial liabilities to interest rate risk is as follows:
Group
2016
Financial liabilities (excluding derivatives)
Impact of interest rate swaps
Financial liability exposure to interest rate risk
2015
Financial liabilities (excluding derivatives)
Impact of interest rate swaps
Financial liability exposure to interest rate risk
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
Non-interest
bearing
financial
liabilities
£m
Total
£m
112.8
(137.0)
(24.2)
115.1
(137.0)
(21.9)
64.7
137.0
201.7
61.4
137.0
198.4
1,870.2
2,047.7
–
–
1,870.2
2,047.7
1,707.8
1,884.3
–
–
1,707.8
1,884.3
The exposure of the Company’s financial liabilities to interest rate risk is as follows:
Company
2016
Financial liabilities (excluding derivatives)
Impact of interest rate swaps
Financial liability exposure to interest rate risk
2015
Financial liabilities (excluding derivatives)
Impact of interest rate swaps
Financial liability exposure to interest rate risk
144
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
Non-interest
bearing
financial
liabilities
£m
133.5
(137.0)
(3.5)
169.7
(137.0)
32.7
59.6
137.0
196.6
50.4
137.0
187.4
16.7
–
16.7
14.4
–
14.4
Total
£m
209.8
–
209.8
234.5
–
234.5
Floating interest rates on Sterling borrowings are linked to the UK bank rate, LIBOR and money
market rates. The floating rates are fixed in advance for periods generally ranging from one
to six months. Short term flexibility is achieved through the use of overdraft, committed and
uncommitted bank facilities. The weighted average interest rate for floating rate borrowings
in 2016 was 3.6% (2015: 3.1%).
US Dollar denominated private placement notes of £59.6m (2015: £50.4m) were arranged at
fixed interest rates and exposed the Group to fair value interest rate risk. The weighted average
interest rate for fixed rate US Dollar denominated private placement notes, after the effect of
foreign exchange rate swaps, for 2016 was 8.2% (2015: 8.1%) with, at 30 June 2016, a weighted
average period of 1.2 years (2015: 2.2 years) for which the rate is fixed.
Sensitivity analysis:
In the year ended 30 June 2016, if UK interest rates had been 50 basis points higher/lower, as
this is a reasonably possible change, and all other variables were held constant, the Group’s
pre-tax profit would decrease/increase by £0.1m (2015: £0.9m), the Group’s post-tax profit would
decrease/increase by £nil (2015: £0.6m) and the Group’s equity would decrease/increase by £nil
(2015: £0.6m).
5.5.2.2 Foreign exchange rate risk
As at 30 June 2016, the Group had fixed rate US Dollar denominated private placement notes
of $80.0m (2015: $80.0m). In order to mitigate risks associated with the movement in the foreign
exchange rate the Group has entered into foreign exchange swap arrangements all of which
are designated as cash flow hedges, which fully hedge the principal of its US Dollar denominated
debt and the US Dollar interest payments.
Details of the Group’s foreign exchange swaps are provided in note 5.4.2.
5.5.3 Credit risk
In the majority of cases, the Group receives cash upon legal completion for private sales and
receives advance stage payments from registered providers for affordable housing. The Group
and Company have an investment of £23.1m (2015: £25.6m) in a joint venture that holds available
for sale financial assets, which exposes the joint venture to credit risk, although this is spread
over a large number of properties. Included within trade and other receivables £48.8m
(2015: £45.9m) is due from the Homes and Communities Agency in respect of the Help to Buy
scheme. Since this receivable is due from a UK Government agency, the Group considers that
this receivable has an insignificant risk of default. Other than this, neither the Group nor the
Company have a significant concentration of credit risk, as their exposure is spread over a large
number of counterparties and customers.
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
5.5 Financial risk management continued
5.5.3 Credit risk continued
The Group manages credit risk in the following ways:
> The Group has a credit policy that is limited to financial institutions with high credit ratings,
as set by international credit rating agencies, and has a policy determining the maximum
permissible exposure to any single counterparty.
> The Group only contracts derivative financial instruments with counterparties with which the
Group has an ISDA Master Agreement in place. These agreements permit net settlement,
thereby reducing the Group’s credit exposure to individual counterparties.
The maximum exposure to any counterparty at 30 June 2016 was £144.4m (2015: £64.4m) of
cash on deposit with a financial institution. The carrying amount of financial assets recorded
in the Financial Statements, net of any allowance for losses, represents the Group’s maximum
exposure to credit risk.
As at 30 June 2016, the Company was exposed to £75.9m (2015: £695.6m) of credit risk in relation
to intercompany loans, as well as financial guarantees, performance bonds and the bank
borrowings of subsidiary undertakings. The Company was also exposed to credit risk through
its joint venture as explained on page 144. Further details are provided in notes 7.2 and 7.3.
5.5.4 Capital risk management (cash flow risk)
The Group’s objectives when managing capital are to safeguard its ability to continue as a going
concern in order to provide returns for shareholders and meet its liabilities as they fall due whilst
maintaining an appropriate capital structure.
The Group manages its share capital as equity, as set out in the Statement of Changes in
Shareholders’ Equity; and its bank borrowings (being overdrafts, loan notes and bank loans)
and its private placement notes as other financial liabilities, as set out in note 5.3.
The Group is subject to the prevailing conditions of the UK economy and the quantum of the
Group’s earnings are dependent upon the level of UK house prices. UK house prices are
determined by the UK economy and economic conditions including employment levels, interest
rates, consumer confidence, mortgage availability and competitor pricing. The management
of these operational risks is set out in the principal risks and uncertainties on pages 42 to 45.
In addition, the other methods by which the Group can manage its short term and long term
capital structure include: adjusting the level of dividends and special cash payments paid to
shareholders (assuming the Company is paying a dividend or a special cash payment); issuing
new share capital; arranging debt to meet liability payments; and selling assets to reduce debt.
5.6 Share capital
Equity instruments – Ordinary share capital is recorded at the proceeds received, net of direct
issue costs and is classified as equity.
5.6.1 Ordinary share capital
Allotted and issued ordinary shares
10p each fully paid: 1,003,607,066 ordinary shares (2015: 995,452,663)
Options over the Company’s shares granted during the year
Options granted:
Long Term Performance Plan
Savings-Related Share Option Scheme
CFO Scheme
Deferred Bonus Plan
Senior Management Incentive Scheme
Allotment of shares during the year
At 1 July
Issued to satisfy early exercises under Sharesave schemes
Issued to satisfy exercises under matured Sharesave schemes
Issued to satisfy vesting of LTPP awards
Issued to satisfy exercises under the Deferred Bonus Plan
2016
£m
100.4
2015
£m
99.5
2016
number
2015
number
1,880,862
2,176,347
1,782,338
2,542,574
121,880
305,468
–
–
813,663
639,148
4,090,548
6,171,732
2016
number
2015
number
995,452,663
984,983,475
106,614
218,051
1,968,683
3,622,372
4,620,159
6,590,688
1,458,947
38,077
1,003,607,066
995,452,663
Barratt Developments PLC – Annual Report and Accounts 2016
145
Strategic ReportGovernanceFinancial StatementsOther Information 5.6 Share capital continued
5.6.2 Own shares reserve
The own shares reserve represents the cost of shares in Barratt Developments PLC purchased
in the market and held by the Barratt Developments PLC Employee Benefit Trust (the ‘EBT’)
on behalf of the Company in order to satisfy options and awards that have been granted under
the Barratt Developments PLC Executive and Employee Share Option Plans, Long Term
Performance Plans and Deferred Bonus Plans. These ordinary shares do not rank for dividend
and do not count in the calculation of the weighted average number of shares used to calculate
earnings per share until such time as they are vested to the relevant employee.
Ordinary shares in the Company held in the EBT (number)
Market value of shares held in the EBT at 405.4p (2015: 614.5p) per share
2016
2015
1,367,707
1,860,071
£5,544,684
£11,430,136
During the year the EBT purchased 150,000 shares and disposed of 642,364 shares in
settlement of exercises under the Senior Management Share Option Plan 2009/10 and the Senior
Management Incentive Scheme.
Section
6
Directors and employees
6.1 Key management and employees
Key management personnel, as defined under IAS 24 ‘Related Party Disclosures’, have been
identified as the Board of Directors, as the controls operated by the Group ensure that all key
decisions are reserved for the Board. Detailed disclosures of Directors’ individual remuneration,
pension entitlements and share options, for those Directors who served during the year, are
given in the audited sections of the Remuneration Report on pages 76 to 97, which form part
of these Financial Statements.
A summary of key management remuneration is as follows:
Salaries and fees (including pension compensation)
Social security costs1
Performance bonus
Benefits
Share-based payments2
2016
£m
2.7
1.2
2.2
0.1
3.4
9.6
2015
£m
2.6
2.8
2.3
0.1
3.4
11.2
1 Excluded from the Executive Directors and Non-Executive Directors single figure of remuneration tables on page 86.
2 IFRS 2 ‘Share-Based Payment’ charge attributable to key management.
146
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
6.1 Key management and employees continued
Total staff numbers and costs are as follows:
6.2 Retirement benefit obligations
The Group operates defined contribution and defined benefit pension schemes.
Average staff numbers (excluding sub-contractors, including Directors):
Housebuilding
Commercial developments
2016
Number
Group
2015
Number
6,106
25
5,952
25
Defined contribution schemes – The Group’s contributions to the schemes are charged in the
Income Statement in the year in which the contributions fall due.
Staff costs (including Directors):
Wages and salaries including bonuses
Redundancy costs
Social security costs
Other pension costs
Share-based payments
Total staff costs
Notes
2016
£m
Group
2015
£m
Company
2015
£m
2016
£m
306.6
289.0
1.1
40.9
8.4
12.8
1.7
42.6
8.1
11.6
7.9
0.1
3.8
0.1
3.4
7.1
–
2.6
0.1
3.4
369.8
353.0
15.3
13.2
6.2
6.3
2.3
Staff costs for the Company in both years are stated after the recharge of staff to other
Group companies.
Defined benefit scheme – The cost of providing benefits is determined using the Projected
Unit Credit Method, with actuarial valuations being carried out at each balance sheet date.
Actuarial gains and losses are recognised in full in the period in which they occur. They are
recognised outside profit or loss and presented in the Statements of Comprehensive Income.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset.
Past service cost, until the scheme ceased to offer future accrual of defined benefit pensions
to employees from 30 June 2009, was recognised immediately to the extent that the benefits
were already vested, and otherwise was amortised on a straight-line basis over the average
period until the benefits become vested.
The retirement benefit obligation recognised in the Balance Sheet represents the present
value of the defined benefit obligation as adjusted for unrecognised past service cost, and as
reduced by the fair value of the scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available refunds and reductions in future
contributions to the scheme.
Defined benefit pension scheme – The Directors engage a qualified independent actuary to
calculate the Group’s asset in respect of its defined benefit pension scheme. In calculating
this asset, it is necessary for actuarial assumptions to be made, which include discount rates,
salary and pension increases, price inflation, the long term rate of return upon scheme assets
and mortality. As actual rates of increase and mortality may differ from those assumed, the
pension asset may differ from that included in these Financial Statements.
Barratt Developments PLC – Annual Report and Accounts 2016
147
Strategic ReportGovernanceFinancial StatementsOther Information
6.2 Retirement benefit obligations continued
6.2.1 Defined contribution schemes
The Group operates defined contribution retirement benefit schemes for all qualifying
employees, under which it pays contributions to an independently administered fund.
Contributions are based upon a fixed percentage of the employee’s pay and once these have
been paid, the Group has no further obligations under these schemes.
2016
£m
2015
£m
The most recent full actuarial valuation of the Scheme was carried out at 30 November 2013.
The results of this valuation have been updated to 30 June 2016 by a qualified independent
actuary. The Group agreed with the Trustees of the Scheme to make contributions to the Scheme
of £13.3m per annum until 30 November 2015 and then £9.5m per annum until 31 December
2016 to address the Scheme’s actuarial deficit. The Group also continues to meet the Scheme’s
administration expenses and Pension Protection Fund levy.
At the balance sheet date, there were outstanding contributions of £0.8m (2015: £1.1m).
The Scheme exposes the Group to a number of risks, the most significant being:
Contributions during the year
Risk
Description
Group defined contribution schemes Consolidated Income Statement charge
8.4
8.1
Volatile asset returns
At the balance sheet date, there were outstanding contributions of £0.6m (2015: £0.9m), which
were paid on or before the due date.
6.2.2 Defined benefit scheme
The Group operates a funded defined benefit pension scheme in Great Britain, the Barratt Group
Pension & Life Assurance Scheme (the ‘Scheme’), which, with effect from 30 June 2009, ceased
to offer future accrual of defined benefit pensions. Alternative defined contribution pension
arrangements are in place for current employees.
The Scheme provides benefits to members based on their length of service and their salary in
the final years leading up to retirement or date of ceasing active accrual if earlier. The Group
operates the Scheme under the UK regulatory framework, with a legally separate fund that is
Trustee administered. The Trustees are responsible for ensuring that the Scheme is sufficiently
funded to meet current and future benefit payments and for the investment policy with regard
to scheme assets.
The Trustees must agree a funding plan with the Group such that any funding shortfall is
expected to be met by additional contributions and investment performance. In order to assess
the level of contributions, triennial valuations are carried out using prudent assumptions.
The defined benefit obligation (‘DBO’) is calculated using a discount rate set with reference to high
quality corporate bond yields. If assets underperform this discount rate, this will create a plan
deficit. The Scheme holds a proportion of its assets in equities and other growth assets which
are expected to outperform corporate bonds in the long term. However, returns are likely to be
volatile in the short term, potentially resulting in short term cash requirements and an increase
in the defined benefit obligation recorded on the Balance Sheet. The allocation to growth assets
is monitored to ensure it remains appropriate given the Scheme’s long term objectives.
Changes in bond yields
A decrease in corporate bond yields will increase the funding and accounting liabilities, although
this will be partially offset by an increase in the value of the Scheme’s investments in corporate
and government bonds.
Inflation risk
Life expectancy
A significant proportion of the DBO is indexed in line with price inflation, with higher inflation
leading to higher liabilities.
The majority of the Scheme’s obligations are to provide a pension for the life of each of the
members, so increases in life expectancy will result in an increase in the liabilities.
148
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
6.2 Retirement benefit obligations continued
6.2.2 Defined benefit scheme continued
The amounts recognised in the Consolidated Income Statement were as follows:
For the purposes of calculating the accounting costs and obligations of the Scheme, the assets
of the defined benefit scheme have been calculated at fair (bid) value. The liabilities of the
Scheme have been calculated at each balance sheet date using the following assumptions:
Interest cost
Interest income
Principal actuarial assumptions
Weighted average assumptions to determine benefit obligations
Discount rate
Rate of price inflation
Weighted average assumptions to determine net cost
Discount rate
Rate of price inflation
2016
2015
Total pension income recognised in net finance costs in the
Consolidated Income Statement
Total pension income recognised in the Consolidated Income Statement
2.90%
2.80%
3.80%
3.30%
3.80%
3.30%
4.30%
3.30%
The amounts recognised in the Group and Company Statements of Comprehensive Income were
as follows:
Expected return less actual return on Scheme assets
Loss arising from changes in the assumptions underlying the present value of benefit obligations
Total pension cost recognised in the Group and Company Statements of
Comprehensive Income
2016
£m
(34.9)
43.9
9.0
2015
£m
(25.1)
36.6
11.5
The amount included in the Group and Company Balance Sheets arising from obligations in
respect of the Scheme is as follows:
Members are assumed to exchange 19% of their pension for cash on retirement.
The assumptions have been chosen by the Group following advice from Mercer Limited, the
Group’s actuarial advisers.
The following table illustrates the life expectancy for an average member on reaching age 65,
according to the mortality assumptions used to calculate the Scheme liabilities:
Assumptions
Retired member born in 1951 (life expectancy at age 65)
Non-retired member born in 1971 (life expectancy at age 65)
Male
Female
23.4 years
25.9 years
25.2 years
27.9 years
Present value of funded obligations
Fair value of Scheme assets
The base mortality assumptions are based upon the S1NA mortality tables with an adjustment
to allow for the Scheme members being 1.5 years younger than the population of the S1NA
mortality tables. Allowance for future increases in life expectancy is made in line with the CMI
2014 projections with a long term trend of 1.25% per annum (2015: 1.25% per annum).
The sensitivities regarding the principal assumptions used to measure the Scheme liabilities
are set out below:
Assumptions
Discount rate
Rate of inflation
Life expectancy
Change in
assumption
Decrease by 0.1%
Increase by 0.1%
Increase by 1 year
Increase in
Scheme
liabilities
%
2.1
1.1
3.8
£m
8.5
4.6
15.3
Barratt Developments PLC – Annual Report and Accounts 2016
Surplus for funded Scheme/net asset recognised in the Group and Company Balance Sheets
at 30 June
Net asset for defined benefit obligations at 1 July
Contributions paid to the Scheme
Income recognised in the Consolidated Income Statement (note 5.2)
Amounts recognised in the Group and Company Statements of Comprehensive Income
Net asset for defined benefit obligations at 30 June
2016
£m
(5.3)
(11.4)
(0.4)
9.0
(8.1)
A deferred tax liability of £1.6m (2015: £1.1m) has been recognised in the Group and Company
Balance Sheets in relation to the pension asset (note 2.6.3).
2015
£m
(3.1)
(13.3)
(0.4)
11.5
(5.3)
149
2016
£m
13.6
(14.0)
(0.4)
(0.4)
2015
£m
13.9
(14.3)
(0.4)
(0.4)
2016
£m
405.4
(413.5)
2015
£m
367.5
(372.8)
(8.1)
(5.3)
Strategic ReportGovernanceFinancial StatementsOther Information
6.2 Retirement benefit obligations continued
6.2.2 Defined benefit scheme continued
Movements in the present value of defined benefit obligations were as follows:
6.3 Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Present value of benefit obligations at 1 July
Interest cost
Actuarial loss
Benefits paid from Scheme
Present value of benefit obligations at 30 June
Movements in the fair value of Scheme assets were as follows:
Fair value of Scheme assets at 1 July
Interest income
Actuarial gain on Scheme assets
Employer contributions
Benefits paid from Scheme
Fair value of Scheme assets at 30 June
The analysis of Scheme assets was as follows:
Quoted equity securities
Debt securities
Other
Total
The actual return on Scheme assets was as follows:
Actual return on Scheme assets
£m
96.3
315.8
1.4
413.5
2016
%
23.3
76.4
0.3
100.0
2016
£m
367.5
13.6
43.9
(19.6)
405.4
2016
£m
372.8
14.0
34.9
11.4
(19.6)
413.5
£m
91.8
279.7
1.3
372.8
2016
£m
48.9
2015
£m
327.0
13.9
36.6
(10.0)
367.5
2015
£m
330.1
14.3
25.1
13.3
(10.0)
372.8
2015
%
24.6
75.0
0.4
100.0
2015
£m
39.4
The expected employer contribution to the Scheme in the year ending 30 June 2017 is £9.5m.
The Group has obtained legal advice on the rights to the Group’s defined benefit pension
scheme’s assets after the death of the last member. Based on this advice, the Group has
concluded that it is appropriate to recognise an asset related to this scheme.
Share-based payments – In accordance with the transitional provisions, IFRS 2 ‘Share-based
Payments’ has been applied to all grants of equity instruments after 7 November 2002 that had
not vested at 1 January 2005.
Equity-settled share-based payments are measured at the fair value of the equity instrument
at the date of grant. Fair value is measured either using Black-Scholes, Present-Economic
Value or Monte Carlo models depending on the characteristics of the scheme. The fair value
is expensed in the Income Statement on a straight-line basis over the vesting period, based on
the Group’s estimate of shares that will eventually vest where non-market vesting conditions
apply. Non-vesting conditions are taken into account in the estimate of the fair value of the
equity instruments.
Analysis of the Consolidated Income Statement charge:
Equity-settled share-based payments:
Long Term Performance Plan
Savings-Related Share Option Scheme
Senior Management Incentive Scheme
CFO Scheme
Deferred Bonus Plan
2016
£m
2015
£m
7.2
2.1
1.2
0.2
2.1
6.9
1.3
1.2
–
2.2
12.8
11.6
As at 30 June 2016, an accrual of £3.3m (2015: £7.7m) was recognised in respect of social security
liabilities on share-based payments.
6.3.1 Share-based payments reserve
The share-based payments reserve represents the obligation of the Group in relation to equity-
settled share-based payment transactions. Details of movements in the share-based payments
reserve are shown on the Statement of Changes in Shareholders’ Equity.
150
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
6.3 Share-based payments continued
6.3.2 Outstanding equity-settled share-based payments
At 30 June 2016, the following options were outstanding:
Date of grant
Executive Share Option Scheme
10 December 2009 (approved¹)
10 December 2009 (unapproved¹)
Total Executive Share Option Scheme options
Senior Management Share Option Plan
10 December 2009 (approved¹)
10 December 2009 (unapproved¹)
Total Senior Management Share Option Plan options
Savings-Related Share Option Scheme
28 March 2012 – 5 year plan
27 March 2013 – 3 year plan
27 March 2013 – 5 year plan
30 April 2014 – 3 year plan
30 April 2014 – 5 year plan
29 April 2015 – 3 year plan
29 April 2015 – 5 year plan
27 April 2016 – 3 year plan
27 April 2016 – 5 year plan
Total Savings-Related Share Option Scheme options
CFO Scheme
21 December 2015
21 December 2015
Total CFO Scheme options
Option price
pence
2016
Number
Not exercisable
after
118
121
118
121
125
205
205
349
349
447
447
482
482
10
10
8,350
9 December 2019
443,132
9 December 2019
451,482
281,229
9 December 2019
77,701
9 December 2019
358,930
1,350,144 30 November 2017
420,118 30 November 2016
266,535 30 November 2018
2,300,296 31 December 2017
361,814 31 December 2019
1,992,909 31 December 2018
209,954 31 December 2020
1,624,859 31 December 2019
146,652 31 December 2021
8,673,281
45,705
76,175
121,880
–
–
1 The Executive Share Option Scheme and the Senior Management Share Option Plan are divided into two sub-schemes,
one of which is approved under the Income Tax (Earnings and Pensions) Act 2003 and the other which is not, and the
exercise price is calculated differently for each sub-scheme in accordance with the rules of the sub-scheme.
Barratt Developments PLC – Annual Report and Accounts 2016
Date of grant
Long Term Performance Plan
23 October 2013 – Executive
20 October 2014 – Executive
19 October 2015 – Executive
21 December 2015 – Executive
19 October 2015 – Senior Management
Total Long Term Performance Plan awards
Deferred Bonus Plan²
2 October 2013
9 October 2014
19 October 2015
Total Co-Investment Plan awards
Senior Management Incentive Scheme
23 October 2013
20 October 2014
Total Senior Management Incentive Scheme awards
Total
Option price
pence
2016
Number
Not exercisable
after
–
–
–
–
–
–
–
–
–
–
2,316,020
1,904,899
1,073,799
122,440
633,081
6,050,239
636,651
688,297
305,468
1,630,416
554,761
544,388
1,099,149
18,385,377
2 For awards prior to November 2015, the Deferred Bonus Plan utilises the rules of the Group’s Co-Investment Plan.
For more information see page 81.
–
–
–
–
–
–
–
–
–
–
151
Strategic ReportGovernanceFinancial StatementsOther Information
6.3 Share-based payments continued
6.3.3 Further information relating to the share-based payment schemes
Long Term Performance Plan (‘LTPP’) and the Executive Share Option Scheme (‘ESOS’)
The grant of awards under the LTPP and options under the ESOS are at the discretion of the
Remuneration Committee taking into account individual performance and overall performance
of the Group. Vesting under these schemes is dependent upon performance conditions based
on total shareholder return, earnings per share and, for recent LTPP awards, return on capital
employed. Further details can be found in the Remuneration report on pages 76 to 97.
Deferred Bonus Plan (‘DBP’)
For any bonus deferred prior to November 2015, the Remuneration Committee utilised the
rules of the Group’s Co-Investment Plan (‘CIP’) for the purposes of the DBP. From FY16,
deferred shares will be held in accordance with the DBP as approved by the shareholders at
the 2015 AGM. The Deferred Bonus Plan is currently utilised to hold shares awarded in respect
of any bonus earned in excess of 100% of base salary. The Executive Directors also have the
opportunity to voluntarily defer additional amounts of annual bonus up to a maximum of 25% of
basic salary. The Remuneration Committee has the discretion to award matching shares against
the deferred shares; however, no matching shares have been awarded to date. Further details
are on page 81.
Savings-Related Share Option Scheme (‘Sharesave’)
Under the Sharesave, participants are required to make monthly contributions to a HM Revenue
and Customs (‘HMRC’) approved savings contract with a bank or building society for a period of
three or five years. On entering into the savings contract, participants are granted an option to
acquire ordinary shares in the Company at an exercise price determined under the rules of the
Sharesave. The Sharesave is open to all eligible employees as determined by the Board and is
not subject to the satisfaction of any performance conditions.
Senior Management Share Option Plan (‘SMSOP’)
The Board approved the grant of share options to employees under the SMSOP, which are
normally exercisable between three and ten years from the date of grant, provided the
employee remains employed by the Group. The 2009/10 SMSOP vested on 10 December 2012.
Individuals who participate in the SMSOP are not eligible to participate in the LTPP or ESOS;
therefore Executive Directors do not participate in the SMSOP. There is currently no intention
to make any further grants under the SMSOP.
Senior Management Incentive Scheme (‘SMIS’)
Awards under the SMIS are at the discretion of the Chief Executive (or in his absence, the
Chairman of the Board). Any awards under the SMIS must be held for a minimum of three years
from the date of grant. Executive Directors and those individuals directly below this level are not
eligible to participate in the SMIS. Any award granted under the SMIS is subject to performance
conditions as set for the LTPP, excluding the total shareholder return condition, granted in the
same financial year.
CFO Scheme
The Company granted to Neil Cooper awards on joining the Company which were designed
in quantum to compensate for awards which were forfeited by him on leaving his previous
employment. They were structured to approximately mirror the vesting timescales and
performance conditions of the Company’s LTPP awards made in 2013 and 2014, so his incentives
are aligned with those of other Executives. Further details can be found in the Remuneration
report on pages 88 to 89.
6.3.4 Number and weighted average exercise price of outstanding
share-based payments
The number and weighted average exercise prices of options and awards made under the
Group’s share option schemes were as follows:
Long Term Performance Plan
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
Executive Share Option Scheme
Outstanding at 1 July
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
2016
2015
Weighted
average
exercise
price in
pence
–
–
–
–
–
–
Weighted
average
exercise
price in
pence
121
–
121
121
Number
of award
units
9,203,809
(414,273)
(4,620,159)
1,880,862
6,050,239
–
2016
Number of
options
451,482
–
451,482
451,482
Weighted
average
exercise
price in
pence
–
–
–
–
–
–
Weighted
average
exercise
price in
pence
121
121
121
121
Number
of award
units
13,906,376
(288,226)
(6,590,688)
2,176,347
9,203,809
–
2015
Number of
options
1,392,327
(940,845)
451,482
451,482
152
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 6.3 Share-based payments continued
6.3.4 Number and weighted average exercise price of outstanding
share-based payments continued
Senior Management Share Option Plan
Outstanding at 1 July
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
Savings-Related Share Option Scheme
Outstanding at 1 July
Forfeited during the year
Granted during the year
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
Deferred Bonus Plan
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
Weighted
average
exercise
price in
pence
119
119
119
119
Weighted
average
exercise
price in
pence
294
358
482
177
355
205
Weighted
average
exercise
price in
pence
–
–
–
–
–
–
2016
2015
Weighted
average
exercise
price in
pence
119
119
119
119
Number of
options
1,358,461
(774,822)
583,639
583,639
Number of
options
583,639
(224,709)
358,930
358,930
2016
2015
Weighted
average
exercise
price in
pence
203
243
447
124
294
125
Number of
options
11,956,053
(885,674)
2,542,574
(3,840,423)
9,772,530
715,852
Number of
options
9,772,530
(806,290)
1,782,338
(2,075,297)
8,673,281
420,188
2016
2015
Number
of award
units
2,844,708
(62,572)
(1,457,188)
305,468
1,630,416
–
Weighted
average
exercise
price in
pence
–
–
–
–
–
–
Number
of award
units
2,192,596
–
(161,551)
813,663
2,844,708
–
Senior Management Incentive Scheme
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
CFO Scheme
Outstanding at 1 July
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
Weighted
average
exercise
price in
pence
–
–
–
–
–
–
Weighted
average
exercise
price in
pence
–
10
10
–
2016
2015
Number
of award
units
1,672,540
(141,818)
(431,573)
–
1,099,149
–
Weighted
average
exercise
price in
pence
–
–
–
–
–
–
Number
of award
units
1,187,512
(154,120)
–
639,148
1,672,540
–
2016
2015
Number
of award
units
–
121,880
121,880
–
Weighted
average
exercise
price in
pence
Number
of award
units
–
–
–
–
–
–
–
–
The weighted average share price, at the date of exercise, of share options exercised during the
year was 607.6p (2015: 478.4p). The weighted average life for all schemes outstanding at the end
of the year was 1.8 years (2015: 1.8 years).
6.3.5 Fair value of options and awards granted in the year
Savings-Related Share Option Scheme
The weighted average fair value of the options granted during 2016 was 106.7p (2015: 119.8p)
per award. The awards have been valued using a Black-Scholes model.
Long Term Performance Plan
The weighted average fair value of the options granted during 2016 was 538.9p (2015: 357.8p).
The awards have been valued using a Black-Scholes model for the earnings per share element
of the scheme and a Monte Carlo model for the total shareholder return element of the scheme.
Barratt Developments PLC – Annual Report and Accounts 2016
153
Strategic ReportGovernanceFinancial StatementsOther Information 6.3 Share-based payments continued
6.3.5 Fair value of options and awards granted in the year continued
Deferred Bonus Plan
The weighted average fair value of the options granted during 2016 was 540.2p (2015: 323.0p)
per award. The awards have been valued using a Black-Scholes model.
CFO Scheme
The weighted average fair value of the options granted during 2016 was 550.9p per award.
The awards have been valued using a Black-Scholes model for the earnings per share element
of the scheme and a Monte Carlo model for the total shareholder return element of the scheme.
Inputs used to determine fair value of options
The weighted average inputs to the Black-Scholes and Monte Carlo models were as follows:
Grants
2016
Sharesave
544p
482p
LTPP
630p
nil
CFOS
605p
10p
DBP Sharesave
632p
nil
536p
447p
LTPP
411p
nil
SMIS
411p
nil
Grants
2015
DBP
370p
nil
Section
7
Commitments, contingencies and related parties
7.1 Operating lease obligations
7.1.1 The Group as lessee
At 30 June 2016, the Group had outstanding commitments for future minimum lease payments
under non-cancellable operating leases, which fall due as follows:
Average share price
Average exercise price
Expected volatility
Expected life
Risk free interest rate
Expected dividends
33.5%
33.5%
33.5%
33.5%
33.5%
33.5%
33.5%
33.5%
3.0 years
3.0 years 1.4 years
3.0 years 3.2 years
3.0 years
3.0 years 3.0 years
1.10%
5.17%
1.09%
5.17%
1.09%
5.17%
1.09%
5.17%
0.70%
4.51%
0.93%
4.51%
0.93%
4.51%
0.93%
4.51%
Within one year
More than one year and no later than five years
In five years or more
Land and
buildings
£m
16.4
23.2
27.4
67.0
2016
Other
£m
7.1
7.5
–
14.6
Land and
buildings
£m
15.0
22.1
27.0
64.1
Group
2015
Other
£m
7.4
8.9
0.2
16.5
Expected volatility was determined by reference to the historical volatility of the Group’s share
price over a period consistent with the expected life of the options. The expected life used
in the models has been adjusted, based on the Directors’ best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations.
Operating lease payments represent rentals payable by the Group for certain office properties
and motor vehicles. Motor vehicle leases have an average term of 1.8 years (2015: 2.2 years)
to expiry. Property leases have an average term of 3.2 years (2015: 1.6 years) to expiry.
At 30 June 2016, the Company had outstanding commitments for future minimum lease
payments under non-cancellable operating leases, which fall due as follows:
Within one year
More than one year and no later than five years
Land and
buildings
£m
2016
Other
£m
Land and
buildings
£m
0.6
0.1
0.7
0.7
0.9
1.6
0.7
0.7
1.4
Company
2015
Other
£m
0.5
0.5
1.0
Operating lease payments represent rentals payable by the Company for certain office
properties and motor vehicles. Motor vehicle leases have an average term of 1.6 years (2015: 2.0
years) to expiry. Property leases have an average term of 1.2 years (2015: 1.8 years) to expiry.
154
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued
7.1 Operating lease obligations continued
7.1.2 The Group as lessor
The Group has lease agreements with third parties for certain commercial properties, either
in the process of development or which have been developed by the Group, and units on land
to be subsequently developed for residential use. It is intended that the commercial properties,
with their future rental income, will be sold to third parties in the normal course of business
and therefore they are classified as work in progress until the date of sale.
Property rental income
Carrying value of leased properties:
Stock properties
Land with rental units
Rent receivable during remaining lease period:
Within one year
More than one year and no later than five years
Average lease term
Notes
2.3
2016
£m
0.9
4.0
0.7
4.7
0.6
0.6
1.2
Group
2015
£m
1.0
1.7
0.7
2.4
1.0
1.0
2.0
2016
Years
1.0
2015
Years
0.5
7.2 Contingent liabilities
7.2.1 Contingent liabilities related to subsidiaries
The Company has guaranteed certain bank borrowings of its subsidiary undertakings.
Certain subsidiary undertakings have commitments for the purchase of trading stock entered
into in the normal course of business.
In the normal course of business, the Group has given counter-indemnities in respect of
performance bonds and financial guarantees. Management estimate that the bonds and
guarantees amount to £482.0m (2015: £588.6m), and confirm that at the date of these Financial
Statements the possibility of cash outflow is considered minimal and no provision is required.
Following correspondence with an industry-wide final salary pension scheme, there is a risk
of an obligation arising in respect of section 75 pension scheme funding for employees of a
subsidiary who left the Group on disposal of their business and assets. No provision has been
recognised in relation to this matter as it is not considered probable that this will result in an
outflow of economic resources at present and the amount of any potential outflow cannot be
reliably estimated.
7.2.2 Contingent liabilities related to joint ventures and associates
The Group has given counter-indemnities in respect of performance bonds and financial
guarantees to its joint ventures totalling £56.5m at 30 June 2016 (2015: £39.8m). The Group
has also provided principal guarantees of £9.0m (2015: £12.0m) and cost and interest overrun
guarantees in relation to the borrowings of a number of the Group’s London joint ventures.
At 30 June 2016, no cost or interest overruns had been incurred (2015: £nil). The Group’s
maximum exposure under these cost and interest overrun guarantees is estimated at £17.7m
as at 30 June 2016 (2015: £15.7m).
At 30 June 2016, the Group has an obligation to repay £0.9m (2015: £0.9m) of grant monies
received by a joint venture upon certain future disposals of land.
The Group has also given a number of performance guarantees in respect of the obligations
of its joint ventures, requiring the Group to complete development agreement contractual
obligations in the event that the joint ventures do not perform as required under the terms
of the related contracts.
There are no contingent liabilities in relation to associates at 30 June 2016.
7.2.3 Contingent liabilities related to legal claims
Provision is made for the Directors’ best estimate of all known material legal claims and all legal
actions in progress. The Group takes legal advice as to the likelihood of success of claims and
actions and no provision is made (other than for legal costs) where the Directors consider, based
on such advice, that claims or actions are unlikely to succeed, or a sufficiently reliable estimate
of the potential obligations cannot be made.
No contingent liability in respect of such claims has been recognised.
Barratt Developments PLC – Annual Report and Accounts 2016
155
Strategic ReportGovernanceFinancial StatementsOther Information
7.3 Related party transactions
7.3.1 Remuneration of key personnel
Disclosures related to the remuneration of key personnel as defined in IAS 24 ‘Related Party
Disclosures’ are given in note 6.1. There is no difference between transactions with key
management personnel of the Company and the Group.
7.3.4 Transactions between the Group and its associates
The amount of outstanding loans due to the Group from its associates at 30 June 2016 was
£nil (2015: £nil). There were no other amounts outstanding to the Group from its associates
as at 30 June 2016.
The Group’s contingent liabilities relating to its associates are disclosed in note 7.2.2.
7.3.2 Transactions between the Company and its subsidiaries
The Company has entered into transactions with its subsidiary undertakings in respect of
funding and Group services (which include management accounting and audit, sales and
marketing, IT, company secretarial, architects and purchasing). Recharges are made to the
subsidiaries based on utilisation of these services.
The amount outstanding to the Company from subsidiary undertakings at 30 June 2016 totalled
£75.9m (2015: £695.6m).
During the year ended 30 June 2016, the Company made management and other charges to
subsidiaries of £65.8m (2015: £63.3m) and received net interest on Group loans from subsidiaries
of £33.4m (2015: £56.0m).
The Company and Group have entered into counter-indemnities in the normal course of business
in respect of performance bonds.
7.3.3 Transactions between the Group and its joint ventures
The Group has entered into transactions with its joint ventures in respect of development
management/other services (with charges made based on the utilisation of these services) and
funding. These transactions totalled £14.3m (2015: £11.1m) and £1.3m (2015: £2.2m) respectively.
In addition, one of the Group’s subsidiaries, BDW Trading Limited, contracts with a number of the
Group’s joint ventures to provide construction services.
During the year the Group received dividends totalling £28.1m (2015: £27.0m) from its
joint ventures.
The amount of outstanding loans and interest due to the Group from its joint ventures at 30 June
2016 is disclosed in note 4.3.1. The amount of other outstanding payables to the Group from its
joint ventures at 30 June 2016 totalled £0.4m (2015: £6.9m).
The amount of outstanding loans and other amounts due from the Group to its joint ventures
totalled £47.6m (2015: £nil).
The Group’s contingent liabilities relating to its joint ventures are disclosed in note 7.2.2.
7.3.5 Property purchase by a Director of Barratt Developments PLC
The Board and certain members of Senior Management are related parties within the definition
of IAS 24 (Revised) ‘Related Party Disclosures’ (‘IAS 24’) and the Board are related parties
within the definition of Chapter 11 of the UK Listing Rules (‘Chapter 11’). There is no difference
between transactions with key personnel of the Company and transactions with key personnel
of the Group.
The Group entered into the following transaction which, for the purposes of IAS 24 is considered
to be a ‘related party transaction’.
In August 2014, Mark Clare, at the time, Group Chief Executive, reserved a flat (including a car
parking space) from Fulham Wharf LLP, a joint venture partnership between BDW Trading
Limited (the Company’s main trading subsidiary) and London and Quadrant Housing Trust (L&Q),
at a purchase price of £1,692,350. This purchase was conducted at a fair and reasonable market
price based on four independent market valuations and similar comparable transactions at
that time. An amount of £2,500 was paid on reservation and a deposit of £166,735 was paid on
13 October 2014. The remaining balance was paid on completion on 17 June 2016 in accordance
with the Group’s normal terms of trading.
Fulham Wharf LLP is not controlled by and is not a ‘subsidiary undertaking’ of the Company.
On notification by Mark Clare of the above transaction, the Board sought advice from its legal
advisers and corporate brokers in respect of the application of Chapter 11 and section 190 did
not extend to LLPs and therefore the provisions of Chapter 11 and section 190 did not apply
to this transaction. Consequently, no shareholder approval was required for this transaction.
In June 2016, David Thomas notified the Board of his and his connected person’s intention to
buy one property each at the BDW Trading Limited site at Cane Hill. These transactions have
not impacted these Financial Statements and further information relating to this can be found
on pages 99 and 100.
There have been no ‘smaller related party transactions’ as defined in Listing Rule 11.1.10R
for the year ended 30 June 2016 or in the year ended 30 June 2015.
156
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 7.4 Group subsidiary undertakings
The entities listed below, and on the following pages, are subsidiaries of the Company or Group.
All are incorporated in England & Wales or Scotland with the exception of SQ Holdings Limited
which is incorporated in Guernsey. Unless otherwise stated, the results of these entities are
consolidated within these financial statements.
Subsidiary
Barratt East Midlands Limited
Barratt East Scotland Limited1
Barratt Eastern Counties Limited1
Subsidiary
Acre Developments Limited1
Advance Housing Limited1
Ambrose Builders Limited1
Barratt Bristol Limited
Barratt Central Limited
Barratt Chester Limited1
Barratt Commercial Limited
Barratt Construction (Southern) Limited1
Barratt Corporate Secretarial Services Limited
Barratt Developments (International) Limited
Barratt Dormant (Atlantic Quay) Limited1
Barratt Dormant (Blackpool) Limited1
Barratt Dormant (Capella) Limited1
Barratt Dormant (Cheadle Hulme) Limited1
Barratt Dormant (Harlow) Limited1
Barratt Dormant (Riverside Exchange Sheffield C2) Limited1
Barratt Dormant (Riverside Exchange Sheffield L/M) Limited1
Barratt Dormant (Riverside Quarter) Limited1
Barratt Dormant (Riverside Sheffield Building C1) Limited1
Barratt Dormant (Rugby) Limited1
Barratt Dormant (Southampton) Limited1
Barratt Dormant (Thetford) Limited1
Barratt Dormant (Tyers Bros. Oakham) Limited1
Barratt Dormant (Walton) Limited1
Barratt Dormant (WB Construction) Limited1
Barratt Dormant (WB Developments) Limited1
Barratt Dormant (WB Properties Developments) Limited1
Barratt Dormant (WB Properties Northern) Limited1
Barratt East Anglia Limited1
Barratt Developments PLC – Annual Report and Accounts 2016
Class of
share held
% of
shares
owned
Barratt Edinburgh Limited1
Barratt Evolution Limited1
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Barratt Falkirk Limited1
Barratt Leeds Limited
Barratt London Horseferry Road Limited1
Barratt London Investments Limited1
Barratt London Limited
Barratt Manchester Limited
Barratt Newcastle Limited1
Barratt North London Limited
Barratt Northampton Limited
Barratt Northern Limited
Barratt Norwich Limited1
Barratt Pension Trustee Limited
Barratt Poppleton Limited1
Barratt Preston Limited1
Barratt Properties Limited1
Barratt Residential Asset Management Limited1
Barratt Scottish Holdings Limited1
Barratt South London Limited
Barratt South Wales Limited
Barratt South West Limited1
Barratt Southern Counties Limited
Barratt Southern Limited
Barratt Southern Properties Limited1
Barratt Special Projects Limited1
Barratt St Mary’s Limited1
Barratt St Paul’s Limited1
Barratt Sutton Coldfield Limited1
Barratt Trade And Property Company Limited1
Barratt Urban Construction (East London) Limited1
Class of
share held
% of
shares
owned
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
157
Strategic ReportGovernanceFinancial StatementsOther Information 7.4 Group subsidiary undertakings continued
Subsidiary
Barratt Urban Construction (Northern) Limited1
Barratt Urban Construction (Scotland) Limited1
Barratt West Midlands Limited
Barratt West Scotland Limited
Barratt Woking Limited1
Barratt York Limited
Bart 225 Limited1
Base Regeneration LLP1
Base East Central Rochdale LLP1
Base Hattersley LLP1
Base Werneth Oldham LLP1
Basildon Regeneration (Barratt Wilson Bowden) Limited1
BDW (F.R.) Limited1
BDW (F.R. Commercial) Limited1
BDW Broadbridge Heath Limited1
BDW North Scotland Limited
BDW Trading Limited
Bradgate Development Services Limited1
Broad Oak Homes Limited1
C V (Ward) Limited1
Cameoplot Limited1
Cannon Wharf London LLP1
CHOQS 429 Limited1
Citystyle Limited
Crossbourne Construction Limited1
David Wilson Estates Limited1
David Wilson Homes (Anglia) Limited1
David Wilson Homes (East Midlands) Limited1
David Wilson Homes (Home Counties) Limited1
David Wilson Homes (North Midlands) Limited1
David Wilson Homes (Northern) Limited1
David Wilson Homes (South Midlands) Limited1
David Wilson Homes (Southern) Limited1
158
Class of
share held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
% of
shares
owned
Subsidiary
100%
100%
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
David Wilson Homes (Western) Limited1
David Wilson Homes Land (No 9) Limited1
David Wilson Homes Land (No 10) Limited1
David Wilson Homes Land (No 11) Limited1
David Wilson Homes Land (No 12) Limited1
David Wilson Homes Land (No 13) Limited1
David Wilson Homes Land (No 14) Limited1
David Wilson Homes Land (No 15) Limited1
David Wilson Homes Limited1
David Wilson Homes Services Limited1
David Wilson Homes Yorkshire Limited1
Decorfresh Projects Limited1
Dicconson Holdings Limited1
E. Barker Limited1
E.Geary & Son Limited1
English Oak Homes Limited
Francis (Springmeadows) Limited1
Frenchay Developments Limited1
G.D. Thorner (Construction) Limited1
G.D. Thorner (Holdings) Limited1
Glasgow Trust Limited1
N/A
Hartswood House Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Hawkstone (South West) Limited1
Heartland Development Company Limited1
Idle Works Limited1
J G Parker Limited1
James Harrison (Contracts) Limited1
Janellis (No. 2) Limited1
Kealoha 11 Limited1
Kealoha Limited1
Kingsoak Homes Limited
Knightsdale Homes Limited
Lindmere Construction Limited1
Class of
share held
% of
shares
owned
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 7.4 Group subsidiary undertakings continued
Subsidiary
Marple Development Company Limited1
Meridian Press Limited1
Milton Park Homes Limited1
Mountdale Homes Limited
Norfolk Garden Estates Limited1
North West Land Developments Limited1
Redbourne Builders Limited1
Roland Bardsley Homes Limited1
Scothomes Limited1
Scottish Homes Investment Company Limited1
Skydream Property Co. Limited1
SQ Holdings Limited1
Squires Bridge Homes Limited1
Squires Bridge Limited1
Swift Properties Limited1
The French House Limited1
The Tin Hat Regeneration Partnership LLP1
Tomnik Limited1
Trencherwood Commercial Limited1
Trencherwood Construction Limited1
Trencherwood Developments Limited1
Trencherwood Estates Limited1
Trencherwood Group Services Limited1
Trencherwood Homes (Holdings) Limited1
Trencherwood Homes (Midlands) Limited1
Trencherwood Homes (South Western) Limited1
Trencherwood Homes (Southern) Limited1
Trencherwood Homes Limited1
Trencherwood Housing Developments Limited1
Trencherwood Investments Limited1
Trencherwood Land Holdings Limited1
Trencherwood Land Limited1
Trencherwood Retirement Homes Limited1
Barratt Developments PLC – Annual Report and Accounts 2016
Class of
share held
% of
shares
owned
Subsidiary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Vizion (Milton Keynes) Limited1
Vizion (Mk) Properties LLP1
VSM (Bentley Priory 1) Limited1
VSM (Bentley Priory 2) Limited1
VSM (Bentley Priory 3) Limited1
VSM (Bentley Priory 4) Limited1
VSM (Bentley Priory 5) Limited1
VSM (Bentley Priory 6) Limited1
Ward (Showhomes) Limited1
Ward Brothers (Gillingham) Limited1
Ward Holdings Limited1
90%
Ward Homes (London) Limited1
100%
100%
100%
100%
Ward Homes (North Thames) Limited1
Ward Homes (South Eastern) Limited1
Ward Homes Group Limited1
Ward Homes Limited1
N/A
Ward Insurance Services Limited1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Wards Construction (Industrial) Limited1
Wards Construction (Investments) Limited1
Wards Country Houses Limited1
Waterton Tennis Centre Limited1
William Corah & Son Limited1
William Corah Joinery Limited1
Wilson Bowden (Atlantic Quay Number 2) Limited1
Wilson Bowden (Ravenscraig) Limited
Wilson Bowden City Homes Limited1
Wilson Bowden Developments Limited1
Wilson Bowden Group Services Limited1
Wilson Bowden Limited
Yeovil Developments Limited1
Abbey Park (Ampleforth) Management Company Limited1, 2
Abbotts Meadow (Steventon) Management Company Limited1, 2
Adderbury Fields Management Company Limited1, 2
Class of
share held
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
% of
shares
owned
100%
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
N/A
N/A
159
Strategic ReportGovernanceFinancial StatementsOther Information Class of
share held
% of
shares
owned
Subsidiary
Class of
share held
% of
shares
owned
7.4 Group subsidiary undertakings continued
Subsidiary
Ambers Rise (Bexhill) Management Company Limited1, 2
Applegarth Manor (Oulton) Management Company Limited1, 2
Artisan Place Residents Management Company Limited1, 2
Ash Tree Court Management Company Limited1, 4
Autumn Brook (Yate) Management Company Limited1, 2
Baggeridge Village Management Company Limited1, 2
Barley Fields Management Company Limited¹ ²
Barley Meadows (Southminster) Management Company Limited1, 2
Beach Road (Pelham Grange) Cottenham Management Company Limited1, 2
Beaufort Park (Wotton Bassett) Management Company Limited1, 2
Belle Vue (Doncaster) Management Company Limited1, 2
Bentley Priory (Stanmore) Residents Management Company Limited1, 2
Bexley College (Tower HIll) Residents Management Company Limited1, 2
Bilberry Chase Residents Management Company Limited1, 2
Bishop Fields (Hereford) Management Company Limited1, 2
Blackwall Road (BDW) Resident Management Company Limited1, 2
Blossombank (Cannon Lane) Tonbridge Management Company1, 2
Bluebell Gate (East Grinstead) Management Company Limited1, 2
Bluebell Woods (Wyke) Management Company Limited1, 2
Bodington Manor (Adel) Management Company Limited1, 2
Broadstone Mead Management Company Limited1, 2
Brook Gardens Barnham Management Company Limited1, 2
Broomhill Park Estates Residents Association Limited¹
Brunel Gardens (Maidenhead) Management Company1, 2
Buckshaw Village Management Company Limited¹
Bure Meadows (Aylsham) Management Company Limited1, 2
Butterfly Mill (Horsford) Management Company Limited1, 2
Butts Lane (Maple Park) Management Company Limited1, 2
Canal Walk (Chichester) Management Company Limited1, 2
Cane Hill Park (Coulsdon) Management Company Limited1, 2
Canterbury Park (High Cross) Management Company Limited1, 2
Cardinal Park (Southampton) Management Company Limited1, 2
160
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary
N/A
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
87%
N/A
50%
N/A
N/A
N/A
Castlegate & Mowbray Park Management Company Limited1, 2
Castle View (Newbury) Management Company Limited1, 2
Cathedral Walk (Wells) Management Company Limited1, 2
Cedar Ridge Management Company Limited1, 2
Central Area Heat Company Limited1, 2
Centurion Fields (Adel) Management Company Limited1, 2
Chatham House Management Limited1, 2
Cherry Tree Grove (West Parley) Management Company Limited1, 2
Cissbury Chase (Worthing) Management Company Limited1, 2
Clements Gate (Hawkwell) Residents Company Limited1, 2
Colliers Court (Speedwell) Management Company Limited1, 2
Coopers Edge (Parcel 8) Management Company Limited1, 2
Coppice Green Lane Management Company Limited1, 2
Copsewood Management Company Limited1, 2
Copseys Nursery (Havant) Management Company Limited1, 2
Croft Gardens (Spencers Wood) Management Company Limited1, 2
Daracombe Gardens Management Company Limited1, 2
Dehavilland Place (Hatfield) Management Company Limited1, 2
De Lacy Fields KM8 Management Company Limited1, 2
De Lacy Fields KM12 Management Company Limited1, 2
Doseley Park Residents Management Company Limited1, 2
Dunnings Mills Management Company Limited1, 2
Earls Park Management Company Limited1, 2
Elm Tree Park Management Company (Beverley) Limited1, 2
Enterprise Way Management Company Limited1, 2
Eton Green Management Company Limited1, 2
Evolve (Gumley Road) Thurrock Management Company Limited1, 2
Fairways (Bedford) Management Company Limited1, 2
Burrium Gate Management Company Limited1
Ordinary
100%
Foundry Place (Crawley) Management Company Limited1, 2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Foxcote Mead Management Company Limited¹
Foxdown Overton Management Limited1, 4
Freemen’s Meadow Residents Management Company Limited1, 2
Fusion (Sun Street) Management Company Limited1, 2
Ordinary
N/A
N/A
N/A
Barratt Developments PLC – Annual Report and Accounts 2016
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
100%
N/A
N/A
N/A
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued 7.4 Group subsidiary undertakings continued
Subsidiary
Garnets Wharf (Otley) Management Company Limited1, 2
Gloucester Gate (Basildon) Management Company Limited1, 2
Grange Park (Hampsthwaite) Management Company Limited1, 2
Greylees Management Company Limited1, 2
GWQ Management Limited1, 4
H2363 Limited1, 2
Halstead Place Residents Company Limited1, 2
Hanham Hall Community Interest Company Limited1, 2
Harlow Gateway Limited1, 2
Hartley Brook (Netherton) Management Company Limited1, 2
Hawley Gardens Management Company Limited1, 2
Hazelmere Management Company Limited1, 4
Heathwood Park (Lindfield) Management Company Limited1, 2
Hewenden Ridge (Cullingworth) Management Company Limited1, 2
High Beeches (Sharston) Management Company Limited1, 2
Hollygate Park (Cotgrave) Management Company Limited1, 2
Impact and Willowbrook Management Company Limited1, 2
Interlink Park Management Company Limited1, 3
Kennett Heath Management Limited1, 2
Kiln Road Thundersley Management Company Limited1, 2
Kingley Gate (Littlehampton) Management Company Limited1, 2
Kingsdown Gate (Swindon) Management Company Limited1, 2
Kings Lodge (Chilwell) Management Company Limited1, 2
Leithfield Park (Godalming) Management Company Limited1, 2
Liberty Green (Hull) Management Company Limited1, 2
Liberty Rise Phase 1 (Hertford) Management Company Limited1, 2
Locksbridge Park (Andover) Management Company Limited1, 2
Lordswood Gardens Residents Management Company Limited1, 2
Lyng Management Company Limited1, 2
Lyttleton Grange Management Company Limited1, 2
Madden Gardens Residents Management Company Limited1, 2
Manor Farm (Denvilles) Management Company Limited1, 2
Market Square Residents Management Company Limited1, 2
Barratt Developments PLC – Annual Report and Accounts 2016
Class of
share held
% of
shares
owned
Subsidiary
Class of
share held
% of
shares
owned
Market Lakes (Barratt) Resident Management Company Limited1, 2
Martindale Place (Southwater) Management Company Limited1, 2
Martingale Chase (Newbury) Management Company Limited1, 2
Mayflower Green (Saxmundham) Residents Company Limited1, 2
Meadow View Watchfield Management Company Limited1, 2
N/A
N/A
N/A
N/A
N/A
Meridian Business Park Extension Management Company Limited1, 3
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
Milford Grange (Storrington) Management Company Limited1, 2
Montague Park (Buckhurst Farm) Management Company Limited1, 2
Montague Park (Wokingham) Management Company Limited1, 2
Montgomery Place Residents Management Company Limited1, 2
Mulberry Park (Poringland) Management Company Limited1, 2
Nexus Point Management Company Limited1, 3
Nexus Point Management Company Number 2 Limited1
N.E. Horley Resident Management Company Limited1, 2
Newbery Corner Management Company Limited1, 2
New Central (Woking) Management Company Limited1, 2
Nightingale Rise (Swindon) Management Company Limited1, 2
Norton Farm Management Company Limited1, 2
N/A
Nottingham Business Park Management Company Limited1, 3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Nottingham Business Park (Orchard Place) Management Company Limited1, 3
NSQ Residents Management Company Limited1, 2
Oaklands (Pontefract) Management Company Limited1, 2
Oakhurst Place (Bexhill) Management Company Limited1, 2
Oakwell Grange Management Company Limited1, 2
Oatley Park Management Company Limited1, 2
Old Cider Works Management Company Limited1, 2
Optimus Point Management Company Limited1
Orchard Gate (Kingston Bagpuize) Management Company Limited1, 2
Parklands Residents Soakway Management Company Limited1, 3
Pavillion Square (Pocklington) Management Company Limited1, 2
Peasedown Meadows Management Company Limited1, 2
Phoenix And Scorseby Park Management Company Limited1, 2
Phoenix Quarter – Apt – Management Company Limited1, 2
N/A
N/A
N/A
N/A
N/A
29%
N/A
N/A
N/A
N/A
N/A
0%
80%
N/A
N/A
N/A
N/A
N/A
2%
2%
N/A
N/A
N/A
N/A
N/A
N/A
100%
N/A
1%
N/A
N/A
N/A
N/A
161
N/A
N/A
N/A
N/A
N/A
Ordinary
Ordinary
N/A
N/A
N/A
N/A
N/A
Ordinary
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary
N/A
Ordinary
N/A
N/A
N/A
N/A
Strategic ReportGovernanceFinancial StatementsOther Information Class of
share held
% of
shares
owned
Subsidiary
7.4 Group subsidiary undertakings continued
Subsidiary
Phoenix Quarter Estate Management Company Limited1, 2
Pilgrims Rest (Kempston) Management Company Limited1, 2
Poppy Fields, Charing Residents Management Company Limited1, 2
Portman Square West Village Reading Management Company Limited1, 2
Preston Grange Residents Management Company Limited1, 2
Priory Fields (Pontefract) Management Company Limited1, 2
Q Park (Dartford) Management Company Limited1, 2
Ravenhill Park Management Company Limited1, 2
Reflections 2 (Colchester) Residents Company Limited1, 2
Regency Place (Leatherhead) Management Company Limited1, 2
Ridgeway Residential Management Company Limited1, 2
Riverdown Park (Salisbury) Management Company Limited1, 2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Riverside Exchange Management Company Limited1,3
Ordinary/Preference
Riverside Meadow Residents Management Company Limited1, 2
Romulus Management Company Limited1, 3
Ronkswood Residents Management Company Limited1, 2
Runshaw Management Company Limited1
Salters Park Management Company Limited1, 2
Sandbrook Park Management Company Limited1, 2
Sandpiper Walk (West Wittering) Management Company Limited1, 2
Saunderson Gardens Management Company Limited1, 2
Saxon Place (Harrietsham) Resident Management Company Limited1, 2
Sholden Fields (Deal) Management Limited1, 2
Silkwood Gate (Wakefield) Management Company Limited1, 2
Silvas Grange (Heathfield) Management Company Limited1, 2
Spinney Fields Resident Management Company Limited1, 2
St. Andrews View (Morley) Management Company Limited1, 2
St. James Gardens (Wick) Management Company Limited1, 2
St. John’s Walk (Hoylandswaine)Management Company Limited1, 2
St. Laurence Meadows Management Company Limited1, 2
St Mary’s Park (Hartley Wintney) Management Company Limited1, 2
Stanstead Road (Caterham) Management Company Limited1, 2
N/A
Ordinary
N/A
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
22.8
N/A
4%
N/A
Stanstead Road (Kingswood Place Elsenham) Management Company Limited1, 2
Stoneyfield Management Company Limited1
Swallows Field (Hemel Hempstead) Management Company Limited1, 2
Swanbourne Park Management Company Limited1, 2
Swan Mill (Newbury) Management Company Limited1, 2
Swinbrook Park (Carterton) Management Company Limited1, 2
Tenbury View Management Company Limited1, 2
The Abacot Fields Residents Management Company Limited1, 2
The Beeches (Nightingale Woods) Residential Management Company Limited1, 2
The Belt Open Space Management Company Limited1, 2
The Chase (Longfield) Residents Company Limited1, 2
The Chocolate Works Management Company Limited1, 2
The Fieldings (Worthing) Management Company Limited1, 2
The Foundry (Wakefield) Management Company Limited1, 2
The Gateway (Handsworth) Management Co Ltd1, 2
The Grange (Lightcliffe) Management Company1, 2
100%
The Hedgerows (Thurcroft) Management Company Limited1, 2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
The Larches (Offenham) Management Company Limited1, 2
The Limes (Lindfield) Management Company Limited1, 2
The Maltings (Wallingford) Management Company Limited1, 2
The Martlets (Crawley) Management Company Limited1, 2
The Meads (Frampton Cotterell) Management Company Limited1, 2
The Mounds Residents Management Company Limited1, 2
The Orchards Oakley Management Company Limited1
The Orchards (Roby) Management Company Limited1, 2
The Paddocks Management Company Limited1, 2
The Paddocks (Skelmanthorpe) Management Company Limited1, 2
The Paddocks (Knaresborough) Management Company Limited1, 2
The Sidings (Hull) Management Company1, 2
The Sidings (Stratford Road) Management Company Limited1, 2
The Spires (Chesterfield) Management Company Limited1, 2
The Vineyards Management Company Limited1, 2
Class of
share held
N/A
Ordinary
% of
shares
owned
N/A
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
60%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
162
Barratt Developments PLC – Annual Report and Accounts 2016
Strategic ReportGovernanceFinancial StatementsOther InformationNotes to the Financial Statements Year ended 30 June 2016 continued Class of
share held
% of
shares
owned
Subsidiary
Willowmead (Wiveliscombe) Management Company Limited1, 2
Winnington Village Community Management Company Limited1, 2
Withies Bridge Management Company Ltd1, 2
Woodhall Grange Management Company Limited1, 2
Woodthorne Residents Management Company Limited1, 2
Woodlands Walk (Branton) Management Company Limited1, 2
Yarnfield Park Management Company Limited1, 2
Class of
share held
N/A
N/A
N/A
N/A
N/A
N/A
N/A
% of
shares
owned
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1 Owned through another Group company.
2 Entity is limited by guarantee and is a temporary member of the Group. Assets are not held for the benefit of the Group
and the entity has no profit or loss in the year.
3 The Group is a minority shareholder but has voting control.
4 The Group does not own any shares but has control via directors who are employees of the Group.
7.4 Group subsidiary undertakings continued
Subsidiary
The Zone (Temple Quay) Management Company Limited1, 2
Tranby Fields Management Company Limited1, 2
Tickledown Limited1, 4
Trinity Square (NW9) Management Company Limited1, 2
Trinity Village Estate Company Limited1, 2
Trinity Village (Phase 1B) Residents Company Limited1, 2
Trinity Village (Phase 3) Residents Company Limited1, 2
Trinity Village (Phase 4) Residents Company Limited1, 2
Trumpington Meadows Residents Management Company Limited1, 2
Trumpington (Phase 6 & 7) Management Company Limited1, 2
Trumpington (Phase 8 – 11) Management Company Limie1, 2
Upton C Management Company Limited1, 2
Victoria Park (Stone House) Management Company Limited1, 2
Victoria Walk Management Company Limited1, 2
Waters Edge (Mossley) Management Company Limited1, 2
WBD Blenheim Management Company Limited1
WBD (Chalfont Park) Limited1, 3
WBD (Chesterfield Management) Limited1
WBD (Chesterfield) Plot Management Company Limited1,
WBD (Kingsway Management) Limited1, 2
WBD (Riverside Exchange Sheffield B) Limited1
WBD Riverside Sheffield Building K Limited1
WBD (Wokingham) Limited1
Wedgwood Residents Management Company Limited1, 2
Westbridge Park (Auckley) Management Company Limited1, 2
West Central (Slough) Management Company Limited1, 2
Western Area Heat Company Limited1, 2
West Village Reading Management Limited1, 4
Weyside Place (Guildford) Management Company Limited1, 2
White Sands Management Company Limited1, 2
Wickhurst Green (Broadbridge Heath) Management Company Limited1, 2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
75%
1%
17%
25%
N/A
100%
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1%
Willow Farm Management Company Limited1, 3
Ordinary
Barratt Developments PLC – Annual Report and Accounts 2016
163
Strategic ReportGovernanceFinancial StatementsOther Information Strategic Report
Governance
Financial Statements
Other Information
Other Information
Five Year Record, Financial Calendar, Group Advisers
and Company Information
Five Year Record
Revenue (£m)
Profit before tax (£m)
Share capital and equity (£m)
Per ordinary share:
Basic earnings per share (pence)
Dividend (interim paid and final proposed (pence))
Special cash payment proposed (pence)
2016
4,235.2
682.3
4,010.2
55.1
18.3
12.4
2015
3,759.5
565.5
3,711.3
45.5
15.1
10.0
2014
3,157.0
390.6
3,354.0
31.2
10.3
–
2013
(*restated)
2,606.2
104.5
3,073.2
7.7
2.5
–
2012
2,323.4
100.0
2,973.8
7.0
–
–
* The Consolidated Income Statement and Statements of Comprehensive Income have been restated for 2013 following
Group Advisers
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Chartered Accountants
and Statutory Auditor
Deloitte LLP
London
Solicitors
Slaughter and May
Brokers and Investment Bankers
Credit Suisse Securities (Europe) Limited
Deutsche Bank AG
the adoption of IAS 19 (Revised) ‘Employee Benefits’.
Financial Calendar
The following dates have been announced:
Announcement
2016 Annual General Meeting and Trading update
Trading update
2017 Interim Results Announcement
Trading update
Trading update
2017 Annual Results Announcement
16 November 2016
12 January 2017
22 February 2017
10 May 2017
12 July 2017
6 September 2017
Company Information
Registered in England and Wales.
Company number 604574
Registered office
Barratt Developments PLC
Barratt House
Cartwright Way
Forest Business Park
Bardon Hill
Coalville
Leicestershire
LE67 1UF
Tel: 01530 278 278
Fax: 01530 278 279
www.barrattdevelopments.co.uk
Corporate office
Barratt Developments PLC
Kent House
1st Floor
14 – 17 Market Place
London
W1W 8AJ
Tel: 020 7299 4898
Fax: 020 7299 4851
164
Barratt Developments PLC – Annual Report and Accounts 2016
Visit us online
www.barrattdevelopments.co.uk
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