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BUILDING EXCELLENCE
Annual Report and Accounts 2019
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Our vision
Our vision is to lead the future of
housebuilding by putting customers
at the heart of everything we do.
We are proud not only to be Britain’s leading housebuilder but also
to lead the industry, both in customer service and build quality.
We are building homes the country needs, creating jobs and supporting
economic growth whilst delivering for our shareholders.
Our first integrated report
With a commitment to sustainability throughout our business,
we believe integrated thinking enables us to deliver long term value for
our stakeholders. This integrated Annual Report illustrates our focus on
the connection between economic, environmental, social and governance
matters and how this creates and preserves value for stakeholders.
For a detailed description of our approach to integrated reporting, go to the Appendix on page 209
Notice regarding limitations on Directors’ 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 2 to 65 and the Directors’ Report contained on pages 66
to 121. 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 2 to 65 inclusive comprise the Strategic Report and pages 66 to 122 inclusive comprise the Directors’ Report,
both of which have been drawn up and presented in accordance with, and in reliance upon, English Company Law.
The 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.
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What you will find inside
Contents
Strategic Report
Our business in summary
Key performance indicators
Our performance highlights
Market review
Chairman’s statement
Chief Executive’s statement
Our business model
Stakeholder engagement
Our sustainability focus areas
Our strategic priorities
Risk management
Principal risks
Governance
Executive Committee
Regional Managing Directors
The Board
Corporate governance report
Nomination Committee report
Audit Committee report
Safety, Health and Environment
Committee report
Remuneration report
Other statutory disclosures
Statement of Directors’
Responsibilities
02
04
07
08
10
12
20
22
30
33
57
59
66
67
68
70
80
84
92
94
118
122
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123
124
131
132
133
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Financial Statements
Financial Statements contents
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Statement of Changes in
Shareholders’ Equity – Group
Statement of Changes in
Shareholders’ Equity – Company
Balance Sheets
Cash Flow Statements
Notes to the Financial Statements
Other Information
Greenhouse Gas Emissions Disclosure 202
138
Glossary
Five year record and alternative
performance measures
Integrated reporting approach
Group Advisers and Company
information
205
207
209
210
Non-financial information statement
The following aligns to the non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006.
Description of the business model
Our business in summary
Our business model
Social matters
Market review
Our sustainability focus areas
Affordability
Employees
Employee engagement
Diversity
Wellbeing
Development and training
Gender pay gap
Board diversity
02
20
08
30
35
44
44
44
42
45
69
Human rights
Human rights
Third parties
Anti-bribery and corruption
Anti-bribery and corruption
Anti-bribery and corruption suppliers
Environmental matters
Waste
Safeguarding the environment
Policy, due diligence and outcomes
Risk management
Principal risks
Long term viability statement
Audit Committee report
Our policies
All of our public policies, codes and
standards are available on
www.barrattdevelopments.co.uk.
57
59
65
84
45
49
45
49
40
52
Greenhouse Gas Emissions Disclosure 202
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www.barrattdevelopments.co.uk
02
Our business in summary
Our home completions (including JVs)
Developing homes across Britain where people want to live
■ Scotland
1,862
(2018: 1,729)
■ Northern
3,156
(2018: 2,965)
■ Central
3,130
(2018: 3,258)
■ West
2,778
(2018: 2,639)
■ London and Southern
3,175
(2018: 3,448)
■ East
3,755
(2018: 3,540)
Our brands
We have three housebuilding brands – Barratt Homes, David Wilson Homes and Barratt London.
Commercial developments are delivered by Wilson Bowden Developments.
Total home completions1
17,856
(2018: 17,579)
Average active sales
outlets
370
(2018: 368)
Housebuilding
divisions
27
(2018: 27)
Owned and controlled
land bank plots
80,022
(2018: 79,432)
Employees2
6,504
(2018: 6,330)
1 Total home completions, including JVs, were
17,856 (2018: 17,579) for the year. Private
home completions were 13,533 (2018:13,439).
Affordable home completions were 3,578 (2018:
3,241) and JV home completions in which the
Group has an interest were 745 (2018: 899).
2 Employee numbers, excluding sub-contractors,
taken at 30 June
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Our home completions (including JVs)
Developing homes across Britain where people want to live
Our brands
We have three housebuilding brands – Barratt Homes, David Wilson Homes and Barratt London.
Commercial developments are delivered by Wilson Bowden Developments.
03
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Investment proposition
We have clear differentiators which underpin our investment
proposition:
• We have a fast build and sell model and run one of the
shortest land banks in the industry.
• We maintain a resilient balance sheet, with a clearly defined
and embedded operating framework, and focus on strong
cash generation.
• We have a strong and experienced workforce who deliver
quality homes.
• Quality and customer service are fundamental to all of our
business operations and we are proud to lead the industry in
this area. We are the only major housebuilder to be awarded a
HBF 5 Star rating for customer satisfaction for ten consecutive
years.
• We operate across Britain diversifying our business and
managing risk.
These differentiators drive delivery for our shareholders and other
stakeholders. We remain focused on our medium term targets
of 3 – 5% volume growth per annum in wholly owned home
completions, margin improvement and a minimum 25% ROCE
over the medium term.
Shorter
owned land
bank
Strong balance
sheet and cash
generation
Highly
experienced
build and
sales teams
Industry
leading quality
and service
standards
Broad
geographic
spread
Growing volumes
Delivering margin improvement
Attractive cash returns
3 – 5% volume growth per annum
in wholly owned home completions over
the medium term
Land acquisition hurdle rate of
minimum 23% gross margin
2.5 times dividend cover supplemented by
special returns when market conditions allow
See progress on page 4
See progress on page 4
See progress on page 5
Our homes
We are committed to building high quality homes and have been
awarded 84 NHBC Pride in the Job Awards on our sites in 2019,
more than any other housebuilder for 15 consecutive years.
Our customers
We put our customers first and have a long standing commitment
to quality and service.
Completions by unit type
Completions by deal type
■ 1 and 2 bedroom homes
■ 3 bedroom homes
■ 4 bedroom homes
■ 5 and 6 bedroom homes
■ Flats London
■ Flats non-London
2019 2018
11%
33%
33%
4%
5%
14%
13%
35%
30%
4%
5%
13%
■ Help to Buy
■ Part-exchange
■ Other private
■ Investor
■ Affordable
2019 2018
36%
9%
31%
5%
19%
36%
11%
27%
5%
21%
www.barrattdevelopments.co.uk
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04
Key performance indicators
Operational targets
Financial
Measure
Total home
completions
Growing
volumes
Medium term
targets
3 – 5% growth
per annum
in wholly
owned home
completions
Present
business
capacity of
20,000 homes
per annum
KPI target
Progress
Definition
Why we measure
Number of completions
17,319 17,395 17,579 17,856
16,447
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Legally completed homes
during the year including
100% of JV homes legally
completed in which the
Group has an interest
Reflects activity and
growth of the business
Method by which
business capacity is
monitored
Disciplined
growth in
completion
volumes
Status:
2.6% growth in
wholly owned
completions
to 17,111 with
total home
completions at
17,856
Gross
margin
(%)
New land
acquisitions at
minimum 23%
gross margin
New land
acquisition at a
minimum 23%
gross margin
Gross margin %
19.0
18.9
20.7
20.0
22.8
Gross profit divided by
total revenue, expressed
as a percentage
Key internal metric
for assessing site
profitability
Status:
On track
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
N/A
Operating
profit
(£m)
Driving further
improvements
£m
901.1
862.6
799.2
Profit from operations
Status:
Good progress
delivered in the
year
668.4
576.8
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
N/A
Operating
margin
(%)
Driving further
improvements
Operating margin %
15.3
15.8
17.2
17.7
18.9
Operating profit divided by
total revenue, expressed
as a percentage
Delivering
margin
improvement
N/A
Profit
before tax
(£m)
Status:
Good progress
delivered in the
year
In line with
consensus at
the start of the
financial year
Status:
Achieved
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
£m
565.5 682.3 765.1
909.8
835.5
The Group’s profit before
tax including its share
of profits from JVs and
associates
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Enables consistent
comparison of land
acquisitions
Demonstrates
profitability of our
business before
finance costs, share of
profits from JVs and
associates and tax
Assesses the efficiency
of our operations
Demonstrates
profitability of our
business before
finance costs, share of
profits from JVs and
associates and tax
Assesses the efficiency
of our operations
Shows the profitability
of the Group subject
to tax
Key metric for
assessing performance
for Executive Directors’
remuneration
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05
KPI target
Progress
Definition
Why we measure
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Medium term
targets
Minimum 25%
Measure
ROCE
(%)
Delivering
ROCE
Minimum of
25%
Status:
Achieved
ROCE
27.1
23.9
29.8
29.6
29.7
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
N/A
Earnings
per share
(pence)
In line with
consensus at
the start of the
financial year
Status:
Achieved
Pence
45.5
55.1
73.2
66.5
61.3
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Calculated as earnings
before amortisation,
interest, tax, operating
charges relating to the
defined benefit pension
scheme and adjusted
items, divided by average
net assets adjusted for
goodwill and intangibles,
tax, cash, loans and
borrowings, retirement
benefit assets/obligations
and derivative financial
instruments
Calculated by dividing
the profit for the year
attributable to ordinary
shareholders by the
weighted average number
of ordinary shares in issue
during the year, excluding
those held by the EBT on
which no dividend is paid
Ensures efficient and
effective use of capital
within the business
Key metric for
assessing performance
for Executive Directors’
remuneration
Shows profit
attributable to each
share and used to
calculate the amount
of dividend per share
Key metric for
assessing performance
for Executive Directors’
remuneration
Attractive
cash returns
N/A
Total
shareholder
return (%)
36.8%
for the three years
ended 30 June 2019
(2018: 15.6% for the
three years ended
30 June 2018)
Threshold
19.2%
Maximum
44.2%
Status:
26.2% of a
potential 33.3%
of the 2016/17
LTPP award
vesting
TSR is a measure of
the performance of the
Group’s share price over
a period of three financial
years. It combines share
price appreciation and
dividends paid to show
the total return to the
shareholders expressed
as a percentage
Shows the appreciation
and income a
shareholder receives
from holding each
share
Key metric for
assessing performance
for Executive Directors’
remuneration
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06
Key performance indicators
continued
Operational targets
Non-financial
KPI target
Progress
Definition
Why we measure
94%
Health
and safety
(SHE audit
compliance)
96%
(2018: 96%)
The percentage of internal inspections
which are compliant with SHE
guidelines
Demonstrates compliance with
safety standards on our sites
Lead indicator highlighting areas of
SHE focus
Land
approvals
(plots)
Customer
service
Employee
engagement
score
Waste
intensity
(per 100 sq.m.
of legally
completed
build area)
Carbon
intensity
(per 100 sq.m.
of legally
completed
build area)
18,000 – 22,000 plots
approved for purchase 18,448
The number of plots approved for
purchase
Monitors that the Group is approving
enough land for purchase to support
future business activity
(2018: 20,951)
HBF 5 Star customer
satisfaction
The percentage of homebuyers
who would recommend us to family
and friends taken from the HBF
Homebuilder Survey
Ensures land is approved at
minimum hurdle rates
Customer satisfaction is a strategic
priority and fundamental to our
business
HBF Homebuilder Survey is an
industry recognised independently
measured indicator of our customer
service and build quality
Upper quartile
engagement
82%
(2018: 79%)
Achieved upper quartile
engagement
The percentage level of satisfaction of
our people measured using an annual
independently conducted survey
To gain an insight of, and provide a
forum for, employee views
To retain and invest in the
best people and focus on their
development and success
Tonnes per 100 sq.m.
7.09
7.11
6.18
6.06
6.53
Reduce construction
waste intensity
(tonnes per 100 sq.m.
of legally completed
build area) to 5.67 by
2025
See page 38
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Reduce carbon
intensity (tonnes
CO2e per 100 sq.m.
of legally completed
build area) from
our construction
operations, offices
and business travel to
2.53 (restated)
See page 202
Tonnes per 100 sq.m.
2.82
2.57
2.52
2.28
2.21
*
5
1
0
2
*
6
1
0
2
*
7
1
0
2
*
8
1
0
2
9
1
0
2
(*restated)
The measure for waste intensity
applies to above ground construction
waste only (i.e. excludes demolition
and excavation waste). It measures
tonnes of waste generated for every
100 sq.m. of legally completed build
area
To maximise operating efficiency
and use materials as efficiently as
possible in the construction process
Monitors progress in waste
reduction
Measures tonnes of greenhouse gas
emissions associated with our Scope
1, 2 and 3 emissions, which includes
energy and fuel use on our sites, in
offices and business travel, for every
100 sq.m. of legally completed build
area
Monitors environmental impact of
our business activities
Monitors progress in carbon
reduction arising from our
operations
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Our performance highlights
07
Operating framework
We have a strong operating framework to maintain an appropriate capital structure. Shareholders’ funds and land creditors are used to fund
longer term investment, while working capital is funded from existing cash resources as our business operates with modest average net
cash, supported by bank facilities. We put in place our revised operating framework in September 2018 and summarise our progress below.
Target
Measure
Progress
Definition
Why we measure
c.3.5 years
owned/c.1.0 year
controlled
Owned and
controlled land
bank (years)
Land bank years
4.5
4.5
4.5
4.8
4.7
The number of years supply of
owned and controlled land
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Drives the ownership of
the optimum amount
of land to support
business activities
Key metric for
assessing performance
for Executive Directors’
remuneration
Further
information
See pages
36 to 37
Reduce to 25 –
30% of the land
bank over the
medium term
Land creditors
as a percentage
of owned land
bank
%
35
38
37
34
31
Calculated as land creditors
as a percentage of owned land
bank
Shows the
indebtedness related to
the owned land bank
See pages
54 to 56
Land
bank
Land
creditors
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Modest average
net cash over the
financial year
Net cash
Year-end net cash
To be
moderately
cash positive,
on average,
throughout the
year (£m)
Year-end net
cash (£m)
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Average net cash of
£298.3m
(2018: £127.4m)
Calculated as the sum of the
daily borrowings, deposits
and current account balances
divided by the number of days
in the financial year
791.3 765.7
723.7
592.0
£m
186.5
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Calculated as cash and
cash equivalents, less total
borrowings being total drawn
debt, plus/minus the value
of any foreign exchange
swaps held
Shows the Group’s
liquidity
Helps to assess the
Group’s ability to fund
its ongoing operational
commitments
Shows the Group’s
liquidity
Helps to assess the
Group’s ability to fund
its ongoing operational
commitments
Appropriate
financing facilities
Level and
duration of
committed
financing
facilities
£700.0m RCF
expiring in 2023,
£200.0m USPP
notes expiring in
2027
Treasury
No more than 80% of committed
facilities are to mature within
a two-year period and the
weighted average maturity is a
minimum of two years. The RCF
refinancing is to be completed
a minimum of 12 months prior
to maturity
Reduces refinancing
risk. If the financial
markets were in crisis,
all debt maturing
in a short period of
time would create
a significant risk to
the Group
See pages
54 to 56
See pages
54 to 56
See pages
54 to 56
Capital
Return
Plan
2.5× dividend
cover
Ordinary dividend
supplemented by
special returns
when market
conditions allow
Ordinary
dividend of
2.5× cover,
plus special
returns in line
with Board
announcements
46.4p
total proposed
dividend representing
2.5× cover
and special return
(2018: 43.8p)
Dividend cover is calculated
as the ratio of the Group’s
profit or loss for the period
attributable to the owners of
the Company to total ordinary
dividend. Special returns
are supplementary amounts
announced by the Board
Shows the income a
shareholder receives in
relation to the Group’s
profit or loss
See pages
18 to 19
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08
Market review
The UK economy and
the housing market
• The UK economy grew by 1.8%
year on year in the first quarter of
2019 but contracted by 0.2% in the
second quarter1
• Bank of England base rate of
interest remains low at 0.75%2
• 1.19m residential property
transactions in the UK in 2018 – 193
Uncertainty around the UK leaving the EU and the political environment has heightened over the
last year. The medium term economic outlook will depend on the form of the UK’s withdrawal from
the EU. In particular, new trading arrangements and the transition over to these, as well as the
response of households, businesses and financial markets will all affect the economic outlook for
the UK. Despite this backdrop, a low unemployment rate and wage growth5 outstripping inflation6
since the beginning of 2018, suggests that the economy is, for now, proving to be resilient against
the uncertainty.
The housing market remains stable and customer demand for new build homes continues to be
strong. The positive lending environment and the Government’s support for Help to Buy underpins
this demand. Mortgage rates remain at historic lows7, and there is an increasing number of high-LTV
mortgage products available8. This has eased affordability pressures and created more routes into
home ownership, which remains the tenure of choice for the vast majority of people9. There were
1.19 million residential property transactions in 2018–19 (flat year on year) and there has been a
modest growth in average house prices.
UK average house
price in June 20194
£230,292
0.9%
Housing supply
Market conditions
• Demand continues to outstrip supply of
housing;
• Government has calculated 300,000 homes
per year are required by the mid 2020s10;
• Output of the housebuilding sector
continues to increase, with 195,290 new
build completions in 2017 – 18, up 65% over
the last five years11;
• New housing accounts for only a small
proportion of overall housing stock; and
• A rapid increase in housing supply could
exacerbate the existing skills shortage,
put upward pressure on build cost, and
raw material availability may become
constrained.
Our response
•
Increased our volumes by 20.3% over the
past five years;
• Committed to disciplined growth whilst
maintaining our high quality standards;
• Created an organisation structure with a
capacity to build 20,000 homes annually;
• At 30 June 2019, hold a 4.7 year owned
and controlled land bank, to support our
disciplined volume growth aspirations of
3 – 5% per annum in wholly owned home
completions over the medium term; and
• Taken steps to address the skills shortage.
See Skilled labour shortage section for our
response to the skills shortage. See page 40
for more details on how we are reducing waste
to protect resources.
Government policy and the
planning system
Market conditions
• The Government remains supportive of the
industry;
• Planning permissions granted have
increased by 90% since the introduction of
the NPPF in 2012;
• 369,417 units received planning permission
in England in 201812;
• Help to Buy to continue in its current form
until March 2021, and thereafter for two
further years limited to first time buyers
with regional price caps; and
• New legislation expected on reducing
carbon emissions and enhancing biodiversity
on new developments.
Our response
• Maintained good momentum in achieving
planning consents during the year;
• Utilised technical and planning expertise to
focus on compliance with regulations and
achieve implementable planning consents to
meet local requirements;
• Planned for the end of Help to Buy through
our land buying decisions, product designs
and product mix on sites;
• Maintained a strong, well-capitalised
balance sheet to provide the flexibility and
the resilience to react to potential changes
in the operating environment; and
• Taken steps to address climate risks and
habitat loss.
See Great Places on pages 36 and 37 and
Safeguarding the environment on pages 52 and
53 for how we are addressing climate risks and
habitat loss.
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Savills UK Residential Land Index versus
HBF planning consents
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Halifax Mortgage Affordability Index(14)
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1985 1989 1992 1996 2000 2004 2007 2011 2015 2019
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Positive lending environment
Market conditions
• Affordability remains a challenge when
purchasing a home, especially in areas such
as the South East and the West;
• Affordability has been constrained by low
interest rates and the support of Help to Buy;
• Over 80% of customers require a mortgage;
• Competition amongst lenders has created a
favourable lending environment for potential
customers;
• Bank of England guidance has indicated that
any rise in the base rate of interest will be ‘at
a gradual pace and to a limited extent’2; and
• The tapering and eventual withdrawal of
Help to Buy will have a big impact on the
housing industry.
Our response
• Approved land in the right locations
with local amenities and good access to
transport;
• Developed a range of homes which are suitable
for a diverse range of incomes and lifestyles;
• Worked with banks, building societies and
other finance companies to introduce more
lenders to the new build sector and to increase
their understanding of our customer needs,
resulting in better and more appropriate
lending criteria, reduced interest rates, easier
buying processes and increased affordability;
and
•
Introduced housing ranges which provide
flexibility to replan sites to suit market
conditions and meet consumer demand
should the need arise.
Skilled labour shortage
Market conditions
• There is a significant skills shortage in the
housebuilding industry;
• As the volume of new housebuilding
increases, skills shortages remain a key
constraint which, if not addressed, will
intensify; and
• The workforce continues to age and
large numbers of skilled workers left the
construction industry during the financial
crisis and have not returned.
Our response
• Focused on bringing more people into
the industry from a more diverse range of
sources;
• Continued to prioritise attracting and
retaining the best people;
• Continued to build a diverse and inclusive
workforce that reflects the communities in
which we operate; and
• Continued to develop award-winning
schemes for apprentices, trainees,
graduates, undergraduates and Ex-Armed
Forces personnel.
87:13
ratio of men to women
in the construction
industry15
20%
home building
workforce aged
50 or above16
>8,000
new recruits needed
in 12 key roles for
every 10,000 extra
new homes16
See pages 42 to 45 for more details of
how we are investing in our people.
See pages 57 to 64 for more details on our
Risk management and Principal risks.
Sources
1 ONS, Gross Domestic Product Quarter on
Quarter growth: CVM SA %.
2 Bank of England.
3 HMRC, UK Property Transactions Statistics June 2019.
4 Land Registry, UK House Price Index.
5 ONS, Average Weekly Earnings, June 2019.
6 ONS, Consumer Price Inflation, June 2019.
7 Bank of England, Monthly interest rate of two-year
90% LTV fixed rate mortgage, July 2019.
8 Financial Times Adviser, Fixed rate mortgage
availability reaches 12-year high, February 2019.
9 British Social Attitudes Survey 28,
Chapter 8: Housing, 2011.
12 HBF, New Housing Pipeline report, April 2019.
13 Rates are from an average of five lenders. Standard
85% product based on available rate with a fee not
exceeding £1,000. Help to Buy product based on the
best available Help to Buy equity share rate with no
fee. Rates as at August 2019.
14 The mortgage to earnings ratio is calculated
using the Halifax standardised average house
price (seasonally adjusted), average disposable
earnings for all full time employees and the Bank of
England monthly average rate for new advances to
households.
15 Women into Construction, Changing the Face of
10 GOV.UK, Government announces new housing
Construction report Oct 2018.
measures.
16 HBF, Home Building Workforce Census 2017, Dec 2017.
11 DCLG, Components of housing supply: net
additional dwellings England 2006 – 07 to 2017 – 18.
www.barrattdevelopments.co.uk
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10
Chairman’s statement
❝ Another successful year, in which we continued to lead the
industry in the quantity and just as importantly, the quality
of our homes, underpinned by sound governance. ❞
We have once again performed strongly
against our key financial and operational
metrics, and we continue to lead the industry
in the quantity and just as importantly, the
quality of our homes. This year we delivered
17,856¹ high quality new homes across
Britain, the highest number for 11 years.
The revised NPPF published last year has
provided additional clarity for housebuilders,
and the majority of local authorities
now have an up-to-date, adopted local
plan. In total over 369,000⁴ units secured
planning permission in England in 2018,
demonstrating that the planning system
continues to facilitate new development.
John Allan
Chairman
Total proposed dividend
46.4p
(2018: 43.8p)
Quality
The Group’s vision is to lead the future of
housebuilding by putting our customers
at the heart of everything we do. This year
we once again demonstrated our industry
leading credentials for quality and service.
We achieved a 5 Star rating in the HBF
customer satisfaction survey for the tenth
year in a row, a record that is unprecedented
for a major housebuilder. Our 5 Star rating
means that over 90% of our customers would
recommend us to their family and friends,
and is the leading industry benchmark
of quality and service. In addition, our
site managers achieved 84 NHBC Pride
in the Job Awards for excellence in site
management this year – more than any other
housebuilder for 15 years in a row, and our
highest number of awards for five years.
Political and economic environment
Despite increased political uncertainty, the
prevailing economic and political backdrop
for the industry is positive. Home ownership
is still the tenure of choice for the majority of
people, and this combined with the long term
undersupply of new housing means that
underlying demand remains strong.
The Government continues to support new
housebuilding. We welcome the extension
of Help to Buy until 2023, albeit subject to
restrictions from 2021 onwards. We believe
Help to Buy is a successful scheme that has
supported new development whilst helping
over 221,000² families to buy a new home.
The Government’s stamp duty cut has also
assisted over 340,000³ first-time buyers since
its inception in November 2017.
Read more about the value we
are creating for shareholders
on pages 18 and 19
Barratt Developments PLC Annual Report and Accounts 2019
Low interest rates continue to keep
mortgages at historically affordable
levels and there is increased competition
amongst lenders. This robust mortgage
market makes demand more effective and
further strengthens the backdrop for the
housebuilding sector.
Our employees
The Group’s continued good progress is
only possible because of the dedication
and ability of our management team and
all of our employees. I would like to take
this opportunity to thank everyone in
our business for their contribution over
the last year. We aim to recruit the best
talent available from within our industry
and beyond, and the Board believes that
this approach provides a solid foundation
from which we can grow our business and
continue to provide our customers with
outstanding quality and service.
The views of our employees are important to
the Board. They are the ones that shape the
culture of the business and are at the heart
of our operations. Our Workforce Forum,
established in 2018, met three times during the
course of this year to discuss a variety of topics
including enhancing workforce engagement,
health and wellbeing strategy, benefits,
charitable giving, diversity and inclusion.
To enhance the Board’s engagement with its
employees further, the Board has appointed
Richard Akers, the Chair of the Remuneration
Committee and our Senior Independent
Director, as the designated Non-Executive
Director for workforce engagement. Richard
will attend at least one Workforce Forum
meeting a year to discuss matters relating to
working at Barratt. Richard and the Group HR
Director will update the Board in respect of
any key issues raised at meetings.
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Delivering returns to our
shareholders
In line with the Group’s extended Capital
Return Plan announced in February 2019,
I am pleased to confirm that the Board
will be recommending a final dividend of
19.5 pence per share (2018: 17.9 pence per
share) and a special dividend of £175.0m
(17.3 pence per share) for approval by
shareholders at the 2019 AGM. The total
proposed dividend for FY19, including the
interim dividend of 9.6 pence per share paid
in May 2019, is therefore 46.4 pence per
share (2018: 43.8 pence per share).
Summary
We continue to have an experienced and
committed Board who are focused on
promoting the success and long term
sustainable value of the Group. We will
continue to review our composition and
ensure that it aligns with our strategy as
we move forward.
Our performance this year has put us in
a strong position to progress our medium
term targets of increasing volume, improving
margin and improving ROCE over the
forthcoming years. We will continue to focus
on the quality of the homes that we build
and putting the customer at the heart of
everything we do.
On behalf of the Board, I thank you for your
continued support and look forward to
welcoming you to our AGM on 16 October 2019.
John Allan
Chairman
3 September 2019
Culture
The success of our business is rooted in our
culture. This is based on the values and the
behaviours exhibited by our people across
our business who are working towards our
vision to lead the future of housebuilding by
putting customers at the heart of everything
we do. It’s important to examine the culture
of an organisation to make sure that it is
encouraging the right behaviours, providing
the right incentives and leading by example.
Consequently the Board will be undertaking a
review of the Group’s culture later this year.
Safety, health and the environment
The safety and health of all individuals on
and around our sites and in our offices is
a fundamental priority. We were therefore
deeply saddened that a sub-contractor
working on one of our sites was fatally
injured in June 2019. Our thoughts are with
the family, friends and colleagues of the
individual concerned. We are cooperating
fully with the Health and Safety Executive
during its ongoing investigation and await
the outcome.
We continuously reinforce the importance
of safety and health to our workforce and
details of how we did this in FY19 can be
found in the Safety, Health and Environment
Committee report on pages 92 to 93. Our
injury incidence rate for reportable injuries
per 100,000 employees and contractors
decreased during FY19 to 297 (2018: 462).
Our social and environmental impact is
an important concern for the Board. To
identify those issues that matter most to
our stakeholders we undertook a materiality
review process in 2019. This review
reconfirmed that the issues that we are
focusing on remain key to our stakeholders.
Details of the process that we undertook
and the outcomes of the review can be found
on page 30. We have also embraced the
UN SDGs, details of which can be found on
pages 31 to 32. We updated our sustainability
framework, which sets out the areas of
priority in terms of sustainability and how
we will deliver against these, to reflect the
feedback received from the materiality
process and the UN SDGs that we will
be focusing on. We will monitor progress
against this throughout FY20.
Acquisition and disposals
In June 2019, we announced the acquisition
of Oregon, a supplier of timber frames. This
acquisition was in line with our strategy to
progress construction through the use of
MMC. We are excited to work with the team
at Oregon and welcome each and every one
of them into the Barratt family. Throughout
FY20, we will focus on integrating the
Oregon business into the Group. Details of
the acquisition process can be found in the
Corporate Governance section on page 75.
During the year, we disposed of our property
management company, Barratt Residential
Asset Management. We also sold our
remaining 50% interest in the Aldgate Place
joint venture to our joint venture partner, in
line with our strategy to trade out of central
London.
The New Code
In July 2018, the Financial Reporting Council
published the new UK Corporate Governance
Code and Guidance on Board Effectiveness.
Whilst these provisions do not apply to
the Company for FY19, we have decided to
early adopt those relating to Section 172
of the Companies Act: Duty to promote the
long term success of the Company (page
22); Stakeholder engagement (pages 22
to 29); CEO pay ratio (page 116); malus
and clawback (page 95) and pension
contributions (page 94).
Board appointments and succession
The Nomination Committee continues to
oversee Board appointments and succession
of Board members. It annually assesses the
composition of the Board and its Committees.
No new appointments were made to the
Board or any of the Committees during the
year. The Board effectiveness review, which
was this year externally facilitated by Linstock
(see page 77 for more details), supported the
view that the Board currently comprises the
appropriate skills and experience to drive our
strategy forward. It did however highlight the
need to consider what skills any new Non-
Executive Director would need to possess
to support our succession plan for Non-
Executive Directors and continuous refresh of
the Board.
1
Including JVs in which the Group has an interest
2 MHCLG, Help to Buy (Equity Loan Scheme) Data to 31 March 2019, England, July 2019
3 HMRC Quarterly Stamp Duty Land Tax Statistics, July 2019
4 HBF New Housing Pipeline report, p5 www.hbf.co.uk/documents/8440/HPL_REPORT_2018_Q4_FINAL.pdf
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12
Chief Executive’s statement
❝ We have made good progress in our medium
term targets and further improved our margin,
whilst maintaining our leadership in quality and
customer care. ❞
David Thomas
Chief Executive
Overview
We have delivered a strong operational and financial performance this year and are making
good progress against our medium term targets.
Primary operational targets
Profit before tax
£909.8m
(2018: £835.5m)
Home completions
Gross margin
Medium term targets
3 – 5% growth per annum in
wholly owned completions
Present business capacity
of 20,000 per annum
New land acquisitions
at minimum 23% gross
margin
ROCE
Minimum of 25%
Progress in the year
2.6% increase in wholly
owned home completions
to 17,111 with total home
completions of 17,8561
210 bps increase in gross
margin to 22.8%, resulting
in 120 bps improvement in
operating margin to 18.9%
Strong ROCE of 29.7% for the
12 months to 30 June 2019
ROCE
29.7%
(2018: 29.6%)
Read more about the value we
are creating for customers on
page 34
Read more about the value we
are creating for employees on
page 42
We are very proud to be Britain’s largest
housebuilder and to lead the industry in
both build quality and customer service.
Quality and customer service has been a
long term commitment for us, and we strive
to meet our customers’ expectations. We
believe that high quality homes and excellent
customer service are fundamental to our
ongoing success. We are building homes the
country needs, creating jobs and supporting
economic growth whilst also delivering
both operationally and financially for our
shareholders.
We are operating across England, Scotland
and Wales through our three brands: Barratt
Homes, David Wilson Homes and Barratt
London. We remain committed to playing our
part in addressing the housing shortage.
growth in our wholly owned completions
to 17,111 homes (2018: 16,680 homes) and
delivered 745 homes through our JVs (2018:
899 homes), making our total completions
including JVs 17,856 homes (2018: 17,579
homes) for the year.
We have grown margin significantly over
the last five years and this year delivered
a gross margin of 22.8% (2018: 20.7%).
Operating margin increased by 120 bps to
18.9% (2018: 17.7%) for the year with profit
from operations of £901.1m (2018: £862.6m).
We delivered 80 bps of operating margin
improvements from trading driven mainly
by sites purchased at higher gross margins
and the benefits of the new product range
delivery, partly offset by an increase in
administration expenses.
We continue to increase volumes whilst
maintaining our industry leading quality.
In line with expectations, we saw 2.6%
We also benefited from a further net
40 bps of operating margin from non-
recurring items, being the disposal of a
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legacy commercial asset and net reversal
of inventory provisions offset by costs
associated with legacy properties. Our
operational improvements, including
new product ranges, underpin our
land acquisition at a minimum of
23% gross margin.
In addition, we delivered a strong
performance from our JVs at £37.5m
(2018: £18.6m).
As a result we delivered a record profit before
tax for the year of £909.8m (2018: £835.5m).
ROCE has grown from 23.9% in the 12 months
to June 2015 to 29.7% in the 12 months to
June 2019, and our target is for it to be a
minimum of 25% over the medium term.
Our balance sheet remains robust, with year
end net cash of £765.7m (2018: £791.3m),
net tangible assets of £3,960.8m (2018:
£3,705.5m) and minimal total gearing
(including land creditors) of 4.9% (2018: 5.5%).
Our disciplined approach combined with
our financial strength enables us to keep
investing in our business and the future of
housebuilding.
Strong housing market fundamentals
The housing market fundamentals remain
attractive. The Government has set a target
of 300,000 homes to be built per year by the
mid-2020s to meet existing demand and in
July 2018, Ministers released an updated
NPPF to ensure that local authorities plan
positively for housing and will be held
accountable for under-delivery.
The lending environment also remains
positive with greater competition in the
mortgage market and a broad spread of
lenders supporting homebuyers. We continue
to see strong Government support for the
new build industry and to help people to get
onto the housing ladder. In October 2018,
the Government announced that Help to Buy
will continue in its current form until March
2021, and thereafter will be in place for two
further years, limited to first-time buyers
with regional price caps. Up to March 2019,
over 221,000 homes had been bought using
the scheme, 81% by first-time buyers2.
The land market remains stable and we
continue to see excellent land opportunities
that exceed our minimum hurdle rates.
Committed to building
more high quality homes
As Britain’s largest housebuilder we remain
committed to playing our part in addressing
the housing shortage. We design attractive
developments that meet our high quality
standards and will enhance local communities
for years to come. We continue to increase
volumes whilst maintaining our industry
leading quality, and remain committed to
investing in the future of housebuilding.
Leadership in quality
and customer service
We have an absolute and long term
commitment to quality and customer service
and we believe our industry leadership in this
is fundamental to business resilience. Our
quality is recognised through the NHBC Pride
in the Job Awards for site management. In
June 2019 our site managers were awarded
84 awards, more than any other housebuilder
for the 15th consecutive year. We are also the
only major housebuilder to be awarded the
maximum 5 Star rating by our customers in
the HBF customer satisfaction survey for ten
years in a row which means that our customer
satisfaction rating is consistently over 90%.
Investing in our people
We are committed to the development of
our people in order to drive our success.
A shortage of skilled workers in our sector
means that attracting and retaining the
best people is an important priority for
the business. We are building a diverse
and inclusive workforce that reflects the
communities in which we operate, delivering
excellence for our customers by drawing on a
broad range of talents, skills and experience.
Employee engagement remains a key measure
of our success and we are pleased to have
maintained upper quartile performance in our
engagement survey for the sixth consecutive
year. Our focus on retention has resulted in a
reduction in employee turnover this year.
We are investing for the future and continue
to develop award winning schemes including
those for graduates, apprentices, ex-Armed
Forces personnel and our own Degree
Apprenticeship in Residential Development
and Construction, run in conjunction with
Sheffield Hallam University. Building on the
success of our programme, we have created
a fast track bricklaying apprenticeship, which
has attracted more candidates and reduced
the programme duration by six months. We
currently have 470 apprentices, graduates
and trainees on programmes, which is 7.2%
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of our workforce. We have recruited a further
269 apprentices, trainees and graduates for
our FY20 intake.
We also continue to collaborate with the
wider housebuilding industry. We actively
participate in the Home Building Skills
Partnership, the aims of which include
attracting new entrants to the industry,
providing the skills for today and the future,
and supporting the supply chain in attracting
and developing the skills they need to
support our industry.
We aim to create an open, honest and
fair working environment that embraces
diversity and inclusion and we are committed
to delivering our Diversity and Inclusion
Strategy. We have identified targets in areas
such as gender and ethnicity and our aim
is to improve in all areas over the next two
years. We have introduced flexible working
which can help us retain talented employees
and can be particularly beneficial for those
with family and caring responsibilities. Over
1,600 managers have now completed our
diversity and inclusion training programme,
and a diversity and inclusion e-learning
module has been rolled out to all employees.
During the year we have also launched a
career development programme, Catalyst,
for high potential female employees.
In celebration of us achieving the maximum
5 Star rating in the HBF Customer Satisfaction
Survey for the tenth year in a row and to
recognise the hard work and dedication of our
teams, in July 2019 we awarded all employees
below Senior Management level a special
award of 200 shares.
MMC
We are committed to increasing the
number of homes we build using MMC to
increase efficiency and to help mitigate the
challenges posed by the shortage of skilled
workers within the industry. We continue to
develop, trial and implement MMC, building
and selling 2,626 homes using timber frame,
large format block and light gauge steel
frame. We also use offsite manufactured
ground floor solutions and roof cassettes.
We have achieved our 2020 target of 20% of
home completions using MMC a year ahead
of schedule. Our new target is to use MMC
to build 25% of our homes by 2025.
1
Including JVs in which the Group has an interest
2 MHCLG, Help to Buy (Equity Loan Scheme) Data to
31 March 2019, England, July 2019
www.barrattdevelopments.co.uk
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Chief Executive’s statement
continued
Tarleton Lock, Tarleton,
Preston, Lancashire.
Over the last three years, we have built 5,274
homes using timber frame with the majority
in Scotland and we are also increasing its
use across England and Wales. Timber
frame construction is a sustainable, low
energy method of build manufacture from
the world’s most renewable building material
and is built in factories to high standards.
In June 2019, we acquired Oregon, a
manufacturer of timber frames. Oregon was
already one of our key timber frame suppliers
providing high quality products and excellent
customer service. The experienced Oregon
management team continue to lead our
timber frame business.
Our financial performance
Full year results
The Group has delivered a strong performance with good customer demand for high quality
new homes supported by a stable market backdrop. Overall our net private reservation rate was
0.70 (2018: 0.72) per active outlet per week and 0.76 (2018: 0.77) in the second half of the year.
During the year, we operated from an average of 379 active outlets (2018: 380 active outlets)
including JVs. We made good progress on new site openings, launching 163 new outlets
(2018: 142 new outlets) including JVs in the year. In FY20 we expect to operate from a similar
number of active outlets and to legally complete a similar proportion of affordable homes.
Completions (homes)
Private
Affordable
Wholly owned
JV
Total (including JVs)
FY19
13,533
3,578
17,111
745
17,856
FY18
13,439
3,241
16,680
899
17,579
Change
0.7%
10.4%
2.6%
(17.1%)
1.6%
Our total ASP for the year was £274,400 (2018: £288,900), with private ASP at £312,000 (2018:
£328,800), reflecting changes in our mix and our trade out of central London, partly offset by
some underlying house price inflation.
Outside of London, our private ASP reduced by 1.7% to £297,200 (2018: £302,400), driven by
an increase in the proportion of two and three bedroom homes offset by some underlying
house price inflation. Affordable ASP increased by 6.9% to £132,200 (2018: £123,700)
reflecting changes in mix.
We have made good progress in our strategy to trade out of central London, delivering 127 wholly
owned central London completions in the year, resulting in 18 private homes being left to legally
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15
Completions
17,856
(2018: 17,579)
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Gross margin
22.8%
(2018: 20.7%)
Operating margin
18.9%
(2018: 17.7%)
Reflecting our strong performance, profit
before tax for the year was up 8.9% to £909.8m
(2018: £835.5m). The tax charge for the year
was £170.4m (2018: £164.0m) at an effective
rate of 18.7% (2018: 19.6%). Basic earnings
per share increased by 10.1% to 73.2 pence
per share (2018: 66.5 pence per share).
Operating framework and
capital structure
We will continue to maintain an appropriate
capital structure and a sustainable operating
framework, with shareholders’ funds and
land creditors funding the longer term
requirements of the business and with
term loans and bank debt funding shorter
term requirements for working capital. On
22 November 2018, we amended and extended
our £700m RCF to 22 November 2023.
In order to preserve a resilient balance sheet,
we maintain a modest average net cash
position over the financial year and are cash
positive at year end. As at 30 June 2019, the
Group had a net cash balance of £765.7m
(2018: £791.3m). We expect a net cash balance
of around £450m – £500m at 30 June 2020,
with the expected reduction from 30 June 2019
due to: an increase in corporation tax payable
in the year of around £80m following changes
in corporation tax payment dates announced
by the Government in 2017 for all very large
companies; additional land investment; and
the reduction of land creditors as we move
towards 25 – 30% of the owned land bank in
line with our operating framework.
As at 30 June 2019 the Group had reduced
land creditors to 31.3% (2018: 33.6%) of the
owned land bank in line with guidance. Whilst
we continue to seek to defer payment for
some land purchases to drive a higher ROCE,
we expect to reduce land creditors to our
targeted level of 25 – 30% of the owned land
bank in FY20. Our total gearing including
land creditors has reduced from 28.8% at
30 June 2015 to 4.9% at 30 June 2019.
complete. We also have 262 units left to
complete in our two remaining active central
London JVs, of which 85% are now forward
sold. We continue to focus on the strong growth
opportunities that exist in outer London.
We have grown margin significantly over the
last five years. Our gross margin improved
to 22.8% (2018: 20.7%) mainly reflecting the
benefit of our new product ranges and sites
that we have purchased at improved margins.
We delivered an operating margin of 18.9%
(2018: 17.7%) in the year. Operating margin
improvements from trading of 80 bps were
driven mainly by sites purchased at higher
gross margins and the benefits of the new
product range delivery, partly offset by an
increase in administration expenses. We
also benefited from a further net 40 bps of
operating margin from non-recurring items
being the disposal of a legacy commercial
asset (10 bps) and reversal of inventory
provisions (40 bps) offset by additional costs
associated with legacy properties (10 bps)
related to cladding.
Administration expenses reduced operating
margin by 80 bps, largely reflecting a reduction
in other income. As a result of our operating
margin improvement, Group operating profit
increased by 4.5% to £901.1m (2018: £862.6m).
Net finance charges were £28.8m (2018:
£45.1m), £16.3m lower than prior year, mainly
due to a reduction in the imputed interest
on land creditors, as land creditors as a
proportion of our owned land bank reduced
in line with our operating framework. In FY20,
finance costs are expected to increase to
c.£35m, due to non-cash charges arising from
the new lease accounting standard and lower
interest income as we expect a lower average
net cash holding in the year as we move
towards our operating framework of 25 – 30%
land creditors.
JVs delivered a better than expected profit
for the year of £37.5m (2018: £18.6m) mainly
as a result of profit generated from land
sales and additional home completions.
In FY20, we expect to deliver around 750 JV
completions and c.£30m of profit based on
expected build programmes.
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Read more about value we
are creating for suppliers on
page 48
www.barrattdevelopments.co.uk
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Chief Executive’s statement
continued
❝ Our strong financial
position provides us with
resilience and flexibility
to react to potential
changes. ❞
Year end cash
£765.7m
(2018: £791.3m)
Owned and controlled
land bank
80,022
(2018: 79,432)
Read more about the value we
are creating for wider society
on pages 50 and 52
Read more about the value we
are creating for communities
on page 50
We continue to tightly control work in progress which has appropriately increased to
£1,632.8m at 30 June 2019 (2018: £1,463.1m) reflecting an expected increase in volume
delivery in the next six months, whilst maintaining our high standard of quality and
service and recognising safety and health needs. It also reflects associated infrastructure
requirements and an increase in owned show homes following our decision to cease our
leaseback programme as one of our margin initiatives. Our ROCE has remained strong at
29.7% for the 12 months to 30 June 2019 (2018: 29.6%) as a result of our focus on delivery
of progress on our medium term targets, maintaining an appropriate capital structure and
focus on our operating framework.
Our operating framework has remained consistent throughout the year and is as follows:
Operating framework
Progress in the year
Land bank
c.3.5 years owned and
c.1.0 year controlled
3.9 years owned
and 0.8 years controlled
(2018: 3.7 years owned
and 1.1 years controlled)
Land creditors
Reduce to 25 – 30% of the land
bank over the medium term
Reduced to 31.3%
(2018: 33.6%)
Net cash
Modest average net cash
over the financial year
Average net cash of £298.3m
(2018: £127.4m)
Year-end net cash
£765.7m (2018: £791.3m)
Treasury
Appropriate financing facilities
Capital Return Plan
2.5× ordinary dividend cover
Ordinary dividend
supplemented by special
returns when market
conditions allow
£700m RCF extended
to November 2023
Total proposed dividend,
including special dividend, of
46.4p (2018: 43.8p) per share
and Capital Return Plan
extended to November 2020
Net tangible assets were £3,960.8m (389 pence per share) (2018: £3,705.5m, 366 pence
per share) of which land, net of land creditors, and work in progress totalled £3,743.7m
(368 pence per share) (2018: £3,429.8m, 339 pence per share).
The key dimensions underpinning delivery of our strategy
Land and planning
In addition to stable market conditions during the year, our successful land investment
strategy has helped to drive increased completion volumes and improvements in profitability.
The land market remained attractive throughout the year and we secured excellent
opportunities that exceeded our minimum hurdle rates. In the year the Group approved
£859.8m (2018: £933.9m) of operational land for purchase, which we expect to equate to
18,448 plots (2018: 20,951 plots). To support our volume growth aspirations we expect to
approve between 18,000 – 22,000 plots in FY20. During the year, our cash expenditure on land
was £941m (2018: £1,083m) and we expect to invest c.£1.1bn on land during FY20.
We continue 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 our fast build and sell model. Reflecting
the excellent land opportunities we have seen over the year as well as our growth ambitions,
at 30 June 2019 we were slightly above this target with a 4.7 years land supply, comprising
3.9 years owned land and 0.8 years of controlled land, with the owned land bank including
land with both outline and detailed planning consents.
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Our land bank at 30 June comprised:
Our land bank
Owned and
unconditional (plots)
Conditionally
contracted (plots)
Total owned and
controlled (plots)
Number of years
supply
JVs owned and
controlled (plots)
Strategic land (acres)
Land bank carrying
value
30 June
2019
30 June
2018
66,423
61,504
13,599
17,928
80,022
79,432
4.7
4.8
5,207
11,995
5,137
12,435
£3,071.6m £2,963.4m
At 30 June 2019, the ASP of plots in our
owned land bank was £275k (2018: £270k),
which is representative of our expected
delivery in FY20. During the year 26%
(2018: 27%) of our home completions were
from strategically sourced land and we are
on track to deliver our medium term target
of 30% of completions from strategic land,
which we believe is an appropriate level for
our business. During the year, 7,915 plots
(2018: 2,788 plots) of strategic land were
converted to our owned land bank.
Following our success with planning over the
past 12 months we are very well positioned,
with all of our expected FY20 completions
(2018: all of FY19 completions) having outline
or detailed planning consent.
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Improving efficiency and reducing costs
Improving the efficiency of our operations
and controlling costs remains a key focus
for the Group, as it will further enhance our
margin and improve business resilience.
We have launched our new cost effective
housetype ranges and continue to seek ways
to improve efficiencies and reduce costs
across our business.
The new housetype ranges maintain our high
standards of design whilst being faster to
build, help us to reduce build cost and waste
and are more suitable for MMC. We continue
to roll out our new housing ranges across our
regional business as our London business
primarily builds apartments. This year we
have delivered 6,024 completions (2018: 1,522
completions) from these ranges across the
country. Over 70% of our outlets now have
the new product ranges. We have made
further refinements to our housing range
in response to the changing costs of certain
trades and materials, without affecting our
quality or design standards. Our new housing
ranges cover all segments of our market
providing us with the flexibility to replan sites
to suit market conditions and meet consumer
demands should the need arise.
We have a robust and carefully managed
supply chain with around 90% of housebuild
materials sourced by our centralised
procurement function being manufactured
or assembled in the UK. We have fixed price
agreements in place for all of these materials
to December 2019 and 65% to June 2020.
We continue to see some pressure on skilled
labour supply with shortages remaining
location and trade specific. We are improving
construction efficiency and reducing demand
on labour through implementing the new
housetype ranges, which are easier and
quicker to build, and through the use of MMC
such as timber frames, large format block
and light gauge steel frames. We saw build
cost inflation of 3% in the year and anticipate
c.3-4% inflation for FY20.
In FY20 we expect to receive both lower
management fees from our joint ventures
and less other income. Accordingly, despite
carefully controlling our administrative cost
base, with expected underlying inflation of
c.3%, we expect administrative expenses for
FY20 to be around £195m.
Health and safety
A fundamental priority is to provide a safe
working environment for all our employees
and sub-contractors. We are committed to
achieving the highest industry health and
safety standard and the wellbeing of our
people is paramount to us and everyone
across our business is responsible for this.
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.
Whilst we recognise that entirely eradicating
risk is a challenge, we have stringent
standards and a continuous focus on health
and safety throughout our business to seek
to reduce the number of injuries occurring.
Following the Grenfell Tower tragedy,
amendments to the Building Regulations
and related guidance have been made.
The Group carried out a review of all of
its current and legacy buildings where it
has used cladding. Approved Inspectors
signed off all of our buildings, including
the cladding used, as compliant with
the relevant Building Regulations during
construction and on completion.
However, in line with our commitment to put
our customers first, we have incurred and
accrued an additional £13.9m (including JVs)
of costs for work involved in removing and
replacing cladding where otherwise costs are
likely to have fallen on leaseholders, many of
whom bought their properties from us.
Further to continuing and evolving
Government advice on the cladding of
multi-storey buildings, we continue to work
with building owners and management
companies on assessment and review of
buildings we have constructed.
We are signatories to the Building Safety
Charter and active members of the Early
Adopters Group, which is committed to
supporting cultural change across the
industry to ensure buildings are safe for
those living and working in them, now and in
the future.
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18
Chief Executive’s statement
continued
Charitable giving
We are committed to creating a positive
legacy in the communities in which we
live and work and we aim to be industry
leading in our approach to charitable giving
and social responsibility. We believe it is
important to support charitable causes
locally and nationally and we actively
promote charitable giving and volunteering
amongst our employees. In March 2019,
to mark our tenth year as a HBF 5 Star
housebuilder, we announced a new £500,000
three-year partnership with St Mungo’s to
help improve the lives of those experiencing
homelessness. This partnership builds
on our work with the RBLI to help them
build a Centenary Village to provide crucial
housing support to ex-servicemen and
women, and our long term commitment to
the RSPB to improve the sustainability of
our developments, enhancing and improving
habitats and supporting wildlife.
Two of the Group’s five principles are ‘Building
strong community relationships’ and ‘Being
a trusted partner’ and we are committed to
partnering with local organisations to support
and improve communities and leave a positive
legacy in the areas in which we work. In
January 2019, we launched the Barratt &
David Wilson Community Fund through which
each of our operating divisions and Group
support functions give £1,000 a month to
community groups and charities local to them
or their sites.
The Community Fund operates in addition
to the divisional charity matching that
already takes place across the Group.
Each of our operating divisions and Group
support functions support local charities
and the Group matches the funds raised
by our employees. We recently announced
that we will also start to match the money
raised by individuals for the charities close
to their hearts. We also encourage all of
our employees to take paid time off work
to volunteer in their local communities and
ask them to consider using the Give As You
Earn scheme.
The Barratt & David Wilson Community Fund
is expected to donate around £1m to local
charities and organisations over the next
three years.
Sustainability
ESG issues are increasingly important to
our stakeholders and we believe the right
sustainability management approach will
deliver sustainable value for them.
We aim to be the leading national sustainable
housebuilder. With a commitment to
sustainability throughout our business,
we believe integrated thinking enables us
to make better long term decisions. By
focusing on the connection between social,
environmental and economic value, we can
create long term value for our stakeholders.
Since our first sustainability strategy in 2015
we have aligned our organisation around ESG
priorities. The Board has overall responsibility
for our sustainability framework, with delivery
delegated to the Executive Committee to
ensure it is embedded into the business.
In 2016 we set out six sustainability issues
that matter most to our business and our
stakeholders, based on what they had told us.
Targets, actions, metrics and accountabilities
are assigned within our sustainability
framework. Investor, community, local and
national Government focus on ESG issues
is continuing to accelerate, particularly in
relation to climate change, biodiversity and
waste. During the year we commissioned
an independent consultant to conduct a full
materiality assessment and we revised the
issues that matter most to our business and
stakeholders.
Additional areas we will be including in our
future framework to reflect stakeholder
views are: the mental health and wellbeing
of our employees; diversity and inclusion
performance targets; affordability; and an
increasing focus on the lifetime environmental
performance of the homes we build.
Based on our stakeholders’ views we have
adopted a number of the UN SDGs, after
researching their relevance to the UK, our
sector, and then specifically considering
the linkage to the items that matter most
to our stakeholders, and our priorities and
principles. We describe this process and
the seven UN SDGs that we have chosen
within this report, and we will report on our
progress next year.
To date, we have made some good progress
on our goals. Operational carbon emissions
relative to build area have fallen by 3.1%
during FY19, a 21.6% reduction since
2015. Nearly half of all of our electricity
consumption has been matched by the
purchase of renewable energy. We continue
to work on our programme of improvements
for waste intensity and although it increased
during the year by 7.8% measured on housing
completions and 3.4% measured on build
activity including work in progress, we have
made good progress since 2015 with a
reduction of 7.9% overall.
Concerns over biodiversity loss and the
impact poor ecology planning can have on our
business have underpinned our drive to work
closely with the Government and our partners
on developing practical biodiversity net gain
guidance. Over 65% (2018: 56%) of new
developments have a biodiversity action plan.
We have shown our commitment to eradicating
modern slavery and human trafficking in
the supply chain by signing the Construction
Protocol. This is championed by the
Gangmasters Labour Abuse Authority. We will
be working with them and our sector partners
and the Supply Chain Sustainability School to
improve knowledge and awareness of this with
our suppliers and employees.
Capital Return Plan
We have a well-defined dividend policy, with
the Group paying an ordinary dividend cover
of 2.5 times. We have previously announced
that when market conditions allow, ordinary
dividends will be supplemented with special
returns and in February 2019 the Board
proposed to extend the special return
commitment and pay special returns of
£175m in November 2019 and 2020. This is
expected to total £2.1bn in respect of the five
years ended FY20 based on current analyst
estimates.
In September 2018, the Board introduced
flexibility to the mechanism for delivering
cash returns to shareholders to include
share buybacks. Given no share buybacks
were undertaken in the year ended 30 June
2019, the Board proposes to pay the £175m
special return due in November 2019 by way
of a special dividend of 17.3 pence per share.
The special return proposed for November
2020, and any future special returns, may
be made through share buybacks, special
dividends or a combination of both. This
recognises that at certain price points the
Board believes that Group is undervalued
and share buybacks may be in the best
interests of all shareholders.
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19
Employee engagement
score
82%
(2018: 79%)
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Waste intensity (tonnes
per 100.sq.m. of legally
completed build area)
6.53
(2018: 6.06)
Capital Return
PlanA
Total paidB
Interim dividend
FY19
Proposed final
dividend and
special return in
respect of FY19
Total proposed
dividend and return
in respect of FY19
Consensus
estimate dividend
and special return
in respect of FY20
Total
Dividend
pence per
share
Ordinary
dividend
£m
Special
return pence
per share
Special
dividend
£m
Total
£m
Total pence
per share
–
697.6
9.6
97.1
–
–
474.3
1,171.9
116.2
–
97.1
9.6
19.5C
197.1D
17.3C
175.0
372.1
36.8D
29.1
294.2
17.3
175.0
469.2
46.4
28.2E
285.0D, E
17.3C
175.0
460.0
1,276.8
824.3
2,101.1
45.5
208.1
A. All future ordinary and special returns are subject to shareholder approval
B. Comprises total dividend payments for FY16 – FY18
C. Based upon 30 June 2019 share capital of 1,016,985,862
D. Based upon 30 June 2019 shares for proposed payments of 1,010,813,607
E. Based on Reuters consensus estimates of earnings per share of 70.6 pence for FY20 as at 30 August 2019 and applying a 2.5 times dividend cover in line with the
announced policy. 30 June share capital 1,016,985,862 less shares held by the EBT of 6,172,255 resulting in 1,010,813,607 shares for proposed payment calculation.
This consensus estimate is provided for illustration purposes. No member of the Group nor any of their respective directors, officers or employees: (i) has commented
on the consensus estimate; (ii) endorses the consensus estimate; or (iii) accepts any responsibility whatsoever for the accuracy of the consensus estimate and shall
accordingly have no liability whatsoever in respect of the consensus estimate.
In accordance with this policy, the Board
proposes to pay a final ordinary dividend of
19.5 pence (2018: 17.9 pence) per share for
the financial year ended 30 June 2019, which
subject to shareholder approval, will be paid
on Tuesday 5 November 2019 to shareholders
on the register at the close of business on
Friday 11 October 2019. Together with the
interim ordinary dividend of 9.6 pence per
share (2018: 8.6 pence per share), which was
paid in the year, this gives a total ordinary
dividend for the year of 29.1 pence per share
(2018: 26.5 pence per share). With basic
earnings per share of 73.2 pence (2018: 66.5
pence) the ordinary dividend is therefore
covered around 2.5 times by earnings, in line
with our ordinary dividend policy.
Under the special cash payment programme
the Board is also proposing a payment of
£175m (17.3 pence per share), which subject
to shareholder approval, will be paid by way
of a special dividend on Tuesday 5 November
2019 to shareholders on the register at the
close of business on Friday 11 October 2019.
Current trading and outlook
We remain focused on delivering our
medium term targets of volume growth in
wholly owned home completions of 3 – 5%
per annum over the medium term, land
acquisition at a minimum 23% gross margin,
and a minimum 25% ROCE.
We have delivered a robust sales
performance across the Group in the new
financial year to date of 0.70 net private
reservations per active outlet per average
week (FY19: 0.75). As previously stated, last
year we benefited from reservations on two
bespoke design and build arrangements,
excluding these we delivered a net private
reservations rate per active outlet per
average week of 0.70, in line with this year.
Strong total forward sales1 as at
1 September 2019 of 12,911 homes
(2 September 2018: 12,648 homes) at a value
of £2,998.6m (2 September 2018: £3,054.0m).
Private
Affordable
Wholly owned
JV
Total
1 September 2019
Homes
4,963
7,061
12,024
887
12,911
£m
1,549.4
1,130.5
2,679.9
318.7
2,998.6
2 September 2018
Homes
5,273
6,592
11,865
783
12,648
£m
1,650.4
1,013.1
2,663.5
390.5
3,054.0
Variance %
Homes
(5.9)
7.1
1.3
13.3
2.1
£m
(6.1)
11.6
0.6
(18.4)
(1.8)
Based on current market conditions, we
expect to grow volume towards the lower end
of our medium term target range in FY20, in
line with current market expectations, whilst
ensuring we maintain our industry leading
standards of quality and service. The housing
market fundamentals remain attractive,
with a long term undersupply of new homes,
strong Government support to the sector and
a positive lending environment.
Whilst there is increased economic and
political uncertainty, the Group is in a strong
position. We recognise that the economic
outlook will depend on the form of the
UK’s EU withdrawal in the medium term.
We have a substantial net cash balance, a
well-capitalised balance sheet, a healthy
forward sales position, a continued focus on
delivery of operational improvements across
our business and an ongoing commitment
to deliver high quality homes across the
country. The Board will continue to monitor
the market and economy and believes that
our strong financial position provides us
with the resilience and flexibility to react
to potential changes in the operating
environment in FY20 and beyond.
David Thomas
Chief Executive
3 September 2019
www.barrattdevelopments.co.uk
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Our business model
Our vision is to lead the future of housebuilding by putting customers at the heart of everything we do.
Key resources
Investment in the housebuilding value chain
Our key resources are what we utilise
to create value, and the outcomes
resulting from this value creation.
We have a number of metrics to
assess the change over time of our
key resources.
Financial health
• Financial capital
Construction and developments
• Building materials
Our people
• Employees and sub-contractors
• Health and Safety procedures
• Training of our employees
Strong community relationships,
our partners and supply chain
• Local government and engagement
• Landowner engagement
• Mortgage availability and
affordability
• Community relations
• Supply chain partnerships
• Joint venture partnerships
• Planning permissions
• Customer satisfaction
Design and innovation
• Design of homes and developments
• Approaches to building homes
using MMC
Land and environment
• Land bank
• Land approvals
• Energy
• Water
• Timber sourcing
Read more on pages 33 to 45
Outstanding design
We design outstanding
homes and places for
our customers, using
standardised house
designs. Through
customer research we
continually strive to
innovate and develop
these designs.
Targeted land buying
and effective planning
We purchase land in
targeted locations
which at least meet our
hurdle rates and enable
us to satisfy the needs
of our customers and
communities.
We work closely with
local communities and
authorities to deliver
effective planning
permissions that enable
us to create sustainable
places for our customers
to live.
Construction
excellence, innovation
and efficiency
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 our developments and
continue to work with
our suppliers to develop
and test various forms of
MMC and reduce waste,
carbon emissions and
water use.
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Investment in the housebuilding value chain
Value for stakeholders
Long term value creation
Our vision is incorporated within our business model, enabling us to deliver value, creating
sustainable returns for shareholders and making a positive difference for stakeholders and
the communities in which we operate.
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Industry leading
customer experience
We focus on maintaining
the very highest levels
of quality, seeking to
understand customer
needs and provide a
first-class customer
experience throughout
the home buying process.
Innovative sales
and marketing
We constantly
innovate our sales and
marketing methods to
customers and invest in
IT to help deliver strong
sales rates.
We have strong, well-
recognised brands –
Barratt Homes,
David Wilson Homes
and Barratt London –
that have carefully
defined market
positions.
Customers
We are the only major national
housebuilder to achieve the maximum
5 Star HBF rating for customer
satisfaction for ten consecutive years.
Our focus on maintaining the very
highest levels of quality and customer
service provides a first-class customer
experience throughout the home
buying process, as well as after sales
customer care.
Shareholders
Our revenue derives principally from
the sale of the homes we build.
Maintaining a good sales rate of our
homes leads to increased revenues
and returns to shareholders. We
continually focus on improving our
operations and their efficiency through
our medium term targets of 3 – 5%
volume growth per annum in wholly
owned home completions, improving
operating margin and a minimum
25% ROCE. These support sustainable
shareholder returns.
Employees
We aim to attract and retain the best
people by investing in their development
to ensure they have the right skills. We
create a great place to work, founded on
an open and honest culture that
embraces diversity and inclusion.
Suppliers
We recognise that our suppliers and
sub-contractors are critical to the
delivery of our strategic objectives and
we invest in our relationships with them
to make us the developer of choice.
Communities
We seek to ensure our work creates
a positive legacy that helps local
communities to thrive.
Wider society
We are building homes the country
needs, creating jobs and supporting
economic growth whilst delivering for
our shareholders.
Read more on pages 33 to 56
Financial health
Shareholder returns:
• In total £2.1bn expected Capital
Return Plan to November 2020
(based on analyst estimates)
• 2.5 times ordinary dividend cover
Construction and developments
• High quality homes and developments
that enhance the community socially
and environmentally, and leave a
lasting legacy for future generations
Our people
• Job creation and skills enhancement,
addressing the industry’s skills
shortage. Skilled and engaged
workforce protected by high
standards of health and safety
Strong community relationships,
our partners and supply chain
• Delivery of quality homes while
addressing the UK’s housing
shortage
• Positive legacy for local communities
from building great places to live
• Local investment in infrastructure
and regeneration
• Taxation contribution
Design and innovation
• High quality and trusted reputation
with sustainable brand recognition
• Continual improvement and
innovative solutions developed in
collaboration with supply chain
Land and environment
• Creation of a net gain for
biodiversity in design across all
new developments and reduction
in water and energy consumption,
waste generation and carbon
emissions
• Use of timber frames, renewable
materials that use less energy than
conventional construction methods
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Stakeholder engagement
Engagement with our shareholders and wider stakeholder groups plays a vital role throughout
the business, including at Board level. It helps us gain a better understanding of the impact of
our decisions on stakeholder interests as well as gain an insight into their needs and concerns.
It underpins good governance, which is embedded throughout our business.
In July 2018, the New Code reinforced the importance of s.172 of the Act, which requires directors to act in a way that promotes the success of
the Company for the benefit of shareholders as a whole. In doing so s.172 requires the directors to have regard (amongst other matters) to:
• the likely consequences of any decision in the long term;
• the interests of the Group’s employees;
• the need to foster the Group’s business relationships with suppliers, customers and others;
• the impact of the Group’s operations on the community and the environment;
• the desirability of the Group maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between members of the Company.
An overview of the actions currently undertaken by the Board to demonstrate the Company’s compliance ahead of the implementation of the
New Code (which will make the above requirements applicable to the Company in the next financial year) was provided to the Board together
with suggestions of how further feedback could be obtained from our stakeholders. In addition, throughout the year the Board has received
updates from the Executive Directors on how the business has engaged with stakeholders, the feedback received and the impact this has
had on the Group’s existing policies, processes and procedures. We also undertook a further materiality review during the year, to determine
whether the views of our stakeholders had changed in terms of what matters most since our last review in 2016. Details of the process we
undertook and the outcomes of this review can be found on pages 30 to 32.
Details of how we have engaged with, and taken into consideration, the interests of those stakeholders who are material to the long term
success of the business can be found on the following pages. These stakeholders represent the key resources and relationships that support
the generation and preservation of value in the Group, as well as our culture of openness and communication.
Engagement
Shareholders
Investor meetings and consultation
Outcome from engagement
• The Executive Directors and investor relations team manage and develop the
• Additional information has been provided in results
announcements and trading updates on:
− Progress against operating framework and medium
term targets;
− Strengthened operating framework;
− Progress on the strategy to trade out of central
London;
− General market conditions, including affordability,
Help to Buy and the land market;
− Build cost inflation and supply chain management;
and
− Quality and customer care.
Group’s external relationships with institutional investors, prospective investors,
and analysts. They follow a comprehensive programme of investor meetings and
calls, particularly following the release of annual and half year results and trading
updates.
•
In FY19, we engaged with our shareholders as follows:
− The Executive Directors, supported by Senior Management, attended 182
investor meetings (159 one-to-one meetings and 23 group meetings), engaging
with around half of our current shareholders (by shareholding value). Key
themes discussed included future strategy, the housebuilding and wider second
hand market, margin improvement initiatives, dividends and other matters
relevant to individual parties. Investor roadshows were organised in London,
New York, Boston, Toronto and Edinburgh and also five site visits were arranged
for investors;
− The Remuneration Committee Chairman consulted with major shareholders on
the application of the Remuneration Policy for the year;
− The Chairman, the Senior Independent Director and other Non-Executive
Directors were available to attend meetings with major shareholders at the
request of either party to gain an understanding of any issues and concerns;
and
− Our comprehensive investor website was updated and reviewed every quarter
to ensure that our information, including matters relating to sustainability, were
up to date.
Barratt Developments PLC Annual Report and Accounts 2019
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Engagement
Shareholders continued
Outcome from engagement
Board awareness of shareholder views
• The Chief Financial Officer reported regularly to the Board on the Company’s
investor relations activities, including updates from the Company’s brokers to
ensure that all Directors are aware of, and have a clear understanding of, the views
of major shareholders.
• The Company’s brokers provided an analysis of investor and analyst feedback
during the year under review and the investor relations team regularly circulated
updates to the Board.
Views of retail shareholders
• Additional information provided in results
announcements and trading updates as outlined above;
• Gives the Board a clear understanding of shareholder
sentiment (usually through verbatim comments) and
the way in which this changes over time.
• The Company Secretarial team, together with the Company’s Registrars, engaged
with our retail shareholders throughout the year to deal with enquiries relating to
their shareholdings or information requests.
• Many retail shareholders attended the AGM and had the opportunity to meet with and
put questions or comments to the Board.
• The Company Secretary notifies the Chairman and the Chief Executive of any areas
of concern or importance raised by retail shareholders. No such queries were
raised during the year.
• This provides a good perspective on the different
drivers for investment in the Group and the reasons
as to why retail shareholders may hold shares in the
Company, such as brand recognition, capital growth
and dividends.
• Provides further understanding of the importance of
sustainability features in the homes and developments
we build, and of becoming a Living Wage accredited
employer, to our retail shareholders.
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Views of voting agencies
•
The Board is fully aware of the influence that voting agencies, such as the ISS and
the IA, have on the way in which our investors will vote at the AGM or via proxy. Every
year we write to investors and voting agencies to update them in respect of our
Remuneration Policy and practices for Executive Directors.
• More insight into what our shareholders expect.
• Any feedback from the voting agencies helps us to
form our Remuneration Policy and ensure that our
remuneration practices remain satisfactory.
Annual General Meeting
• At the 2019 AGM, the Chief Executive will update shareholders on the Group’s
• At the 2018 AGM shareholders asked the Board to
performance and activities during the year.
consider the timing of the AGM.
• Shareholders will also have the opportunity to meet Board members and air any
issues or queries they may have about the business.
• The Chairman and each Board Committee Chair will be available throughout the
AGM to answer any queries raised by those shareholders in attendance.
• The Notice of AGM will be circulated to all shareholders at least 20 business days
prior to the meeting. All resolutions will be voted on by way of a poll, as the Board
believes that this is more representative of shareholder voting intentions.
Trading updates
• We continue to keep our shareholders fully informed of the performance of the business
on a regular basis, through the publication of three trading updates, in May, July and in
October (on the morning of the AGM) as well as the half and full year announcements
early in February and September.
Effect of engagement with shareholders and investors on Board decisions
• Capital Return Plan policy was reviewed by the Board, resulting in the extension of the special dividend to November 2020.
• Reviewed and updated our materiality issues to ensure that they continue to represent stakeholders’ interests, see page 30 for further details.
• Decided to pursue a number of UN SDGs which will have a significant impact on the business and also which the business could have a
substantial effect on (see pages 30 to 32 for more details on the UN SDGs selected).
• The Board has reviewed matters such as: the timing of dividend payments; results announcements and the AGM as well as other matters raised by
shareholders at the AGM.
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Stakeholder engagement
continued
Engagement
Employees
Health, safety and wellbeing
• The health and safety of our employees, as well as that of our customers, suppliers,
sub-contractors and all other visitors to our sites and offices, is a fundamental
priority for us. The SHE Director updated the Board on key SHE matters twice during
the year whilst the Chief Operating Officer provided shorter updates on health and
safety matters at each Board meeting.
• During FY19 the following engagement took place with employees on health and
safety:
− Regional and Managing Directors visited sites with their respective SHE Manager
to understand any SHE-related matters impacting the workforce;
− Our construction site employees provided feedback to our SHE Director on
operational procedures, which were fed back to the SHE Operations Committee;
− Information on new campaigns and programmes were promoted in a variety of
interactive ways throughout the year, including quizzes, lunchtime walks and
mindfulness sessions, to illustrate the importance of such issues; and
− Key SHE messages were reiterated at the Workforce Forum meetings, and
opinion sought on what more could be done to improve the safety, health and
wellbeing of the workforce.
Workforce Forum
• The Board approved the terms of reference for the establishment of a Workforce
Forum, (the ‘forum’) in 2018. The members of the forum are representatives from
across the business from senior management to sales advisers and site managers.
The forum is chaired by the HR Director with the Chief Executive and the Chief
Operating Officer acting as co-chairs.
• The objectives of the forum are to:
− achieve closer engagement between the Executive Committee and the workforce;
− provide further opportunity for employees, via forum members, to influence
working conditions and ways of working;
− provide an initial indication of possible employee reaction to proposed policy and
benefit changes;
− share results of our engagement survey and generate ideas for action; and
− be a standing forum, which could be convened at the discretion of the Executive
Committee for formal employee consultation if necessary.
• Since it was set up, the forum has met three times. During these meetings, they
have discussed and considered various matters ranging from health, wellbeing and
safety, employee engagement scores, employee benefits and charitable donations,
to career progression opportunities, IT development and diversity and inclusion.
• Following the conclusion of each formal meeting, forum members received a
presentation from the teams operating at the meeting site (or a site adjacent to it)
and participated in a tour of the site, to enhance their understanding of the Group’s
activities.
•
If required, the forum will also be used as a formal consultation group.
Barratt Developments PLC Annual Report and Accounts 2019
Outcome from engagement
• Reviewed and updated our SHE Management system and
our SHE policies and procedures to ensure they continue to
be appropriate to safeguard our workforce.
• Reviewed and updated the SHE training provided to our
employees and those on our sites to ensure that they
remain fit for purpose and reflect the feedback received
from our employees.
• Our drugs and alcohol testing has been updated to
incorporate the feedback received from the initial
programme of random sampling.
• A health and wellbeing promotion programme was rolled
out across the business during the year, in line with UK
national campaigns to increase the impact of our internal
messaging.
• Health and wellbeing hubs were established in every
office and site with branded notice boards and a variety of
information and assistance options to help the workforce
with health and wellbeing issues.
• HR issued a calendar which contains key facts, figures and
tips on how employees can improve their own health and
wellbeing, such as keeping hydrated, taking regular breaks,
eating healthily and taking regular exercise.
• Updated the format and usability of statutory forms provided
via our e-forms platform.
• Undertook a review and made alterations to the proprietary
fall protection platforms to improve usability.
• The forum has provided valuable input into action plans
following the Employee Engagement Survey. For example,
benchmarking reward packages with our peers, having
visible career paths in all functions, senior management
being available at a specific time on a monthly basis, and
the challenges associated with balancing the need to
meet targets and delivering high levels of customer care.
• The forum has helped shape our health and wellbeing
offering and suggested ways to help us improve our
benefits portal. The benefits portal has been re-
configured so that it is easier to navigate and we have
replaced vouchers with cash sums for long service
awards following suggestions from the forum. The
forum is also undertaking a review of our current portal
provider and comparing it to alternative providers.
• Forum members have helped select charities for the
Group to support, for example, they selected MIND and
the British Heart Foundation to be the recipients of any
funds raised from the Big Barratt Hike taking place in
September 2019.
• Following suggestions from forum members, the
availability of annual health and occupational health
screenings is being extended to all employees.
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Engagement
Employees continued
Internal communications
Outcome from engagement
• We continue to ensure that our employees are kept informed of developments and
important issues. These are cascaded throughout the business through a variety of
channels including the Group’s intranet, emails and newsletters.
• Senior Management came up with a number of
suggestions to further the strategy of the Group
including vertical integration with our supply chain.
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•
In addition, Senior Management are invited to attend a conference twice a year at
which the performance of the Group, key areas of focus and issues are discussed in
detail. After the event the key messages and actions are cascaded throughout the
organisation.
Diversity and inclusion
• The Group has undertaken a number of actions to promote diversity and inclusion
and increase engagement with employees in this area. These include:
− The successful launch of our Women’s Career development programme and our
reverse mentoring programme;
− Delivered diversity and inclusion training for over 500 middle managers and over
4,000 employees via e-learning;
− We are trialling dignity and respect toolbox talks for cascading messaging to both
our employees and our sub-contractors;
− We are a Stonewall Diversity Champion, a member of the Business Disability
Forum and have achieved the “committed” level of the Government led disability
confident scheme;
− We utilised a variety of campaigns, such as LGBT media, Mumsnet and Able
Magazine, to promote our employer brand and reach a more diverse pool of
applicants;
− We continue to work with charities, such as the RBLI and Leonard Cheshire, to
provide opportunities for work placements or employment;
− The Built by Both initiative undertook a networking event in Manchester. Built
by Both is a Barratt led industry-wide initiative designed to provide networking
events and a forum for both women and men. It showcases role models within
the industry in order to encourage those from diverse backgrounds to consider
working in the industry with a primary focus on women’s career choices;
− In April 2019, the Company again invited all employees in the Group to participate
in a grant of share options under the Sharesave. The invitation enabled eligible
employees to contribute up to £500 per month over all Sharesave grants; and
− In July 2018 and in July 2019, an award of 200 shares (pro-rated for part-time
employees) was made to all employees below Senior Management level,
conditional only on their continued employment with us for a period of two years.
Regional/Divisional site visits
• There has been a rise in female representation at
leadership level and BAME figures are improving.
• The most improved responses from our 2019
engagement survey included two questions relating to
diversity and inclusion.
• We have recently won several awards for our progress in
diversity and inclusion throughout our business. These
included the Homes for Scotland Company Innovation
and Best Practice Award – Overall winner for diversity;
the Inspire Awards Most Inspiring Employment Initiative
Award – Overall winner for our ex-Armed Forces
Programme; and the Inspire Awards Most Inspiring
Training Programme – Highly commended for our work
on diversity training.
• At 30 June 2019, approximately 46% of employees
participate in one or more active Sharesave grants and
6,388 employees (including 172 Oregon employees) were
invited to participate in the July employee share award.
• The inclusion of employees in share schemes, aligns
their interest with that of the Executive Directors and
other shareholders and increases their engagement
with the performance of the Group through investment
in the Company’s shares.
• During the year, the Board has undertaken three regional site visits, visiting the
Scotland (July 2018), Central (March 2019) and Northern (May 2019) Regions. The
visits included meetings with Senior Management as well as a tour of a number of
sites with the site teams.
• The Board gained an insight to the challenges faced by
the teams on site in terms of supply chain and labour
availability and reviewed the processes around fire
stopping utilised by the business.
Culture
• Our Group’s culture defines the behaviours we expect from each and every one
of our employees when going about their business. We have well established
processes through which we seek feedback from our workforce about their
perception of our culture such as our employee engagement survey, exit interviews,
our Workforce Forum and regular visits by the Board and Senior Management to our
sites and offices. During the year, we asked our Executive Committee and Regional
Managing Directors to provide feedback on their perceptions of our culture and
where we can improve.
• A report on all of the feedback about the Group’s culture
is being drafted for the Board to review. The report
will set out how our current culture is perceived (both
positive and negative), and how we plan to address
areas for improvement to ensure we embed the positive
behaviours throughout the business. The report will also
outline how we propose to measure and report on our
culture in the Annual Report going forward.
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Stakeholder engagement
continued
Engagement
Employees continued
Engagement survey
• We annually undertake an employee engagement survey to gain insight into the
issues that matter most to our employees. For the year under review, the survey
results showed the overall level of engagement is above upper quartile and above
the top decile score. More than 80% of our employees took part in the survey.
• Each divisional and functional head received a report setting out the results for their
respective teams. These results have been shared with the teams and plans have
been put in place to maintain or enhance employee engagement levels. We will be
conducting pulse surveys during the course of the year to measure changes in any
key areas.
• A number of changes were made to this year’s survey to encourage employees to
participate. These included:
− Introduction of the survey, by video from the Chief Executive;
− Fewer questions with more encouragement of open ended comments; and
− Drill down questions, where appropriate, to further investigate answers provided.
• Downloadable reports have been produced with actionable insights and guidance for
line managers.
Outcome from engagement
• We have increased the emphasis on innovation
around the Group within existing schemes such as the
Customer First Recognition Scheme.
• New strategies to promote health and wellbeing have been
put in place as detailed in the Health, safety and wellbeing
section above.
• We have continued to streamline ways of working and
build interdepartmental relationships.
• We have been more active in promoting our flexible
working policy initiatives such as home working and
job shares.
• We have put in place a number of initiatives to improve
internal communications, both to and from employees.
• We have actively promoted secondments and
opportunities for involvement in projects across the
business to help career and self development of our
employees.
• To enable employees to see what changes are being
made as a result of the survey we promote a ‘You Said,
We Did’ on the Group’s intranet.
Effect of engagement with employees on Board decisions
• The Board continues to encourage improvements in systems, processes and benefits which impact the health, safety and wellbeing of our employees.
• To increase its engagement with the workforce, the Board nominated Richard Akers, the Senior Independent Director, as the designated Non-Executive
Director for workforce engagement. Richard will attend his first Workforce Forum meeting in October 2019 and report back to the Board thereafter. He
will attend at least one meeting annually going forward and is also available to members of the Workforce Forum throughout the year.
• The Board discussed the benefits of a number of the suggestions made by Senior Management in respect of driving the Group’s strategy and agreed to
explore the opportunity to vertically integrate with our supply chain. Ultimately, this resulted in the acquisition of Oregon.
• The Board continues to encourage management to find ways of improving our diversity and inclusion position. It has requested diversity and inclusion
data to be provided as part of the regional site visits that it undertakes on an annual basis. In addition, the Board monitors progress against, and the
appropriateness of, the targets established to drive our diversity and inclusion initiative.
• The Board gained further insight into the importance of fire stopping and how it works.
•
In order to ensure that the tone of our culture is driven from the top, the Board’s involvement in the review process is critical. The Board is scheduled to
undertake a detailed review of our culture and will agree with management as to what, if any, actions need to be taken to further improve, develop and
embed the culture across the business.
Customers
Customer satisfaction
• We place customers at the heart of everything we do and focus on delivering
• Achieved a 5 Star rating in the HBF customer satisfaction
excellent build quality, robust policies, industry leading training and resolving any
customer problems quickly and efficiently.
• We ensure that our customers have the opportunity to speak to members of the
team working on their home throughout each step of their journey with us.
survey for the tenth consecutive year. No other
major, national builder has achieved this outstanding
accomplishment.
•
Introduced new resourcing guidelines to optimise staffing
levels of Customer Care teams.
• Delivered a new customer service training programme to
208 employees, in conjunction with NHBC.
• Launched a new app for Site Managers to improve defect
capture and resolution.
•
Introduced new performance management measures to
increase speed of defect resolution.
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Customers continued
Outcome from engagement
Customer insight
• Customer insight is crucial to decision making and continuous improvement of
our business. In the last year we have completed a number of research initiatives
including:
− Systematically reviewing our most popular housetypes with previous
purchasers;
− Understanding the key reasons customers choose to buy our homes;
− Reviewing Help to Buy with customers who have used the scheme;
− Capturing future requirements for home specification; and
− Gaining feedback on our Great Places approach to the design and layout of
our developments.
Customer feedback
• Feedback from our customers is used in a number of ways to support the continued
success of our business:
− Verbatim comments from the HBF survey are shared with senior managers on a
weekly basis;
− Issues raised by customers are collated and shared with our Procurement
and Commercial teams for consideration when planning future design and
specification; and
− Complaints are analysed and reviewed by the Executive Committee to agree
actions to resolve root causes.
Industry trends
• We continue to work closely with industry bodies such as the HBF and UK Finance.
This enables us to keep informed on any trends or changes that will affect
customers, and also gives us a voice to contribute to industry-wide issues.
• Results from the research into our housetypes has directly
led to improvements in its design and layout.
• Amended the Customer Choices range of optional extras
based on the most popular items.
• The Great Places research has generated improved
training content for sales advisers.
• Refined internal policies, processes and procedures on an
ongoing basis to take into account customer feedback.
• Analysis of frequently raised issues has led to a number of
improvements:
− Enhanced content on our website to help customers
self-serve;
− An additional training programme on defect resolution
for our Customer Care teams; and
− Changes to suppliers for various elements of specification.
Effect of engagement with our customers on Board decisions
• The Board found the feedback from customers insightful and have instigated a review of the design of the current and potential new product ranges to
reflect customer trends.
• The Board is cognisant of the focus that the quality of new homes is receiving, particularly within the media. As a result, the Board has requested
regular updates on customer satisfaction and quality scores and details of what the business is doing to continue to improve our position. The Board
considers customer satisfaction and quality in all decisions that may impact on our customers.
Sub-contractors and supply chain
Annual supplier conference
• At this conference we set out our objectives for the financial year and how suppliers
could help us achieve them. It allows suppliers to network and discuss any areas of
concern with the Executive Directors and Senior Management.
Ongoing supplier relations
• The Chief Executive, Chief Operating Officer and Group Procurement Director
meet with suppliers and sub-contractors on a regular basis to ensure that: (i) we
are receiving the level of service expected; (ii) we have contracted on favourable
commercial terms, locally and nationally; and (iii) any issues or challenges they are
facing can be considered and suitable solutions found.
• During the year, our Chief Operating Officer led a visit to European based suppliers
to look at different technologies in use for housebuilding.
• Our divisional management held business briefings for new and existing sub-
contractors to ensure that they are aware of our plans and can provide performance
feedback.
•
Introduction of a new supplier evaluation and
development programme.
• Ongoing discussions with suppliers have led to
mutually beneficial arrangements improving costs and
the consistency of supply of materials.
•
Informed the business of innovative and alternative
technologies available for possible future adoption.
• Keeps our sub-contractors and supply chain up to date
in respect of any changes to our working practices as
appropriate.
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Stakeholder engagement
continued
Engagement
Sub-contractors and supply chain continued
Outcome from engagement
Research and development
• We invite all of our supply chain to bring product and service innovations and
• Development of advancements in floor cassettes with
our suppliers.
improvements to our attention. We hold ‘sand-pit’ sessions with our suppliers on a
regular basis and this allows new ideas to be discussed in an informal setting.
•
Introduction of the Nu-Span and Spantherm offsite
ground floor systems.
Payment terms
• We are fully aware of the importance to both the Group and our sub-contractors and
suppliers of complying with all payment terms.
• We are a signatory to the Prompt Payment Code.
• We have complied with the requirements to disclose our payment terms as required
by Section 3 of the Small Business, Enterprise and Employment Act 2015.
• Our payment practices compare favourably with the
industry.
Effect of engagement with our sub-contractors and our supply chain on Board decisions
• Engagement with our timber frame suppliers regarding future capacity planning helped inform the Board decision to acquire Oregon whilst
managing the relationship with other suppliers.
• Helps the Board to understand the challenges our sub-contractors and supply chain are facing in delivering for our business.
Local Communities
Volunteering
• We encourage all of our employees to dedicate one working day per year to
volunteer in their local communities. During FY19, employees across the business
spent time out in the community. Among the good causes supported were nature
reserves and local schools.
Views of the local community
• We obtain the views of the local community prior to starting work on any site. Plans
are developed based on the feedback received and we ensure that members of the
local community are kept fully informed of progress throughout the construction of
the site.
• Employees gained a better understanding of the needs
of their local community.
• Re-planning of sites to take into account needs of the
community such as communal spaces, parks and schools.
• We continue to find ways to protect the environment
through our operations. See pages 52 and 53,
Safeguarding the environment and Our sustainability
focus areas on pages 30 to 32 for how we maintain and
improve our social and environmental value.
Charitable giving
• We believe that it is important to support charitable causes, both locally and nationally.
We have therefore allocated funding in the form of the Barratt & David Wilson
Community Fund for each of our operating divisions and Group support functions which
can be used to support local good causes. In addition, the Group matches funds (with an
appropriate financial cap) raised by divisions and individuals for their chosen charities.
• At a Group level, we have a longstanding partnership with the RSPB aimed at improving
the way in which nature and wildlife are incorporated into our new communities. In the last
12 months we have announced further Group partnerships with the RBLI and St Mungo’s.
• Substantially increased the focus on charities and
•
•
charitable giving, see pages 50 and 51 for details of the
amounts donated.
Increased focus on employee volunteering days and
payroll giving.
Identified ways of making our developments more
sustainable and nature friendly in conjunction with both the
RSPB and the Group Ecology and Biodiversity Manager.
Increased focus on support for charitable causes throughout our business.
Effect of engagement with local communities on Board decisions
•
• The Board having reviewed the outcomes of the materiality review undertaken during the year (see pages 30 to 32) and the seven UN SDGs
proposed by management and agreed to update the Group’s Sustainability Framework to focus the business on what matters most to our
stakeholders, including local communities, and the work required to progress the UN SDGs selected. A copy of our Sustainability Framework
can be found on our website: www.barrattdevelopments.co.uk.
• The Board takes into account, environmental factors, such as flood risks, open spaces and preservation of wildlife, when approving any major
land acquisitions. They also consider the needs of the community, such as transport links, and outcomes of any local engagement that has taken
place to compile the land proposal.
• Given that the Group has increased its focus on charitable giving, the Board has agreed corporate donations to charities such as St Mungo’s and the
RBLI. For more details on our charitable donations see pages 50 and 51 of this Annual Report and Accounts.
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Engagement
Banks and Analysts
Meetings and webcasts
Outcome from engagement
• Following the annual results, the Chief Financial Officer and Head of Treasury held
meetings with each of the banks in the RCF and two of the USPP investors. The
remaining USPP investors are based in the US and calls were held with them.
• The Chief Financial Officer and Head of Treasury also held meetings in March with the
five top-tier banks following the half year results.
• Each of the banks in the RCF and the USPP investors were invited to events to allow
them to meet with Senior Management from across the business on a more informal
basis.
• Provided an opportunity to discuss the market
environment and recent trends in the market with the
banks. Also provided the banks with an opportunity to
discuss the Group’s latest results and broaden their
understanding of the Group.
•
In November, we extended our RCF with the banks, due
to the open relationship we have with them and their
knowledge of our business.
Mortgage lender relations
• As most of our customers require a mortgage, we have a dedicated Head of Mortgage
Lender Relations who engages with those banks and building societies that facilitate our
customers’ purchases.
• We have a structured meeting schedule with those lenders that have a specific new build
proposition. We met with them on a regular basis, across a range of disciplines including
senior management, sales, property risk and valuation and operational processing in
order to improve process, products and criteria . We also met with lenders who did not
have new build specific propositions, in order to share information and build support
more generally for our sector. The Group’s operational management and the Executive
Directors supported these meetings.
• Supported and engaged with Accord Mortgages (part of
Yorkshire Building Society) in the launch of their New
Build proposition which included new build specific
criteria and products, resulting in a market share of
our customers of 5.5% in the six months from launch
(up from less than 1% in the prior six months).
• Supported a pilot and roll out of Barclays specialist
New Build processing desk, which resulted in a 25%
uplift in market share in the last financial year.
Effect of engagement with banks and analysts on Board decisions
• During the year, based on the relationship that management have with the banks and the feedback received from them, the Board considered and
agreed to extend the Group’s RCF.
• Based on the engagement that the Chief Financial Officer had with the banks, the Board reviewed the Group’s counterparty credit limits and agreed to
include a new deposit facility.
Government and Regulators
Government
• The Chief Executive and the Head of Corporate Communications met with
members of Government, other political parties and senior officials to provide an
overview of the housing industry and to provide feedback on potential changes
being considered by the Government. Members of Parliament have visited a
number of our sites during the year.
Regulators and local authorities
• Government and ministers gain a better understanding
of the challenges facing the industry which will in turn
potentially result in a favourable housing policy.
• The Board is committed to ensuring that it is open and transparent with regulators
• Ability to obtain planning consent more quickly.
and take their regulatory responsibilities very seriously.
• We work closely with local authorities to ensure that our developments meet the
relevant planning requirements and will enhance the facilities and housing within
the local area.
Effect of engagement with Government and Regulators on Board decisions
• Broad understanding of Government policy and regulation ensures that Board decisions are based on the full understanding of the environment in
which we operate.
• Helps the Board understand the key drivers for housing policy at a national and local level and the impact that this can have on the land bids that
we participate in.
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Our sustainability focus areas
Overview of process taken to identify material issues
An independent consultant conducted a full materiality assessment during December 2018 and January 2019, building on our 2016
assessment. An extensive list of issues was provided for internal and external stakeholders’ consideration using GRI G4 Sustainability
Reporting Guidelines cross-referenced with the UN SDGs.
Stakeholders responded to an online consultation which allowed for robust quantitative analysis and statistical calculation to produce
the material issues categorisation. A number of material issues were found and they determined five key focus areas. The detailed
research findings are available on our website (www.barrattdevelopments.co.uk/sustainability/what-matters-most). Through this report
we have highlighted the material issues that are delivered via our vision, strategic priorities and principles and the links to our principal
key risks.
Demonstrating our wider contribution to social and environmental value: the UN SDGs
Whilst we are a UK-based business, many of the issues that drive sustainability in our business are global, with implications for every
nation and industry sector. The 17 UN SDGs provide the world with a blueprint to achieve a better sustainable future. We consulted
our stakeholders on the importance of these in our 2018/19 materiality survey and their feedback expressed their expectation that we
should review our strategy against them. We can use the UN SDGs, and the 169 targets that sit behind them, as a model to help us
focus efforts where we can make the most difference and have the greatest positive impact.
Rather than simply adopting some or all of the goals that sound appropriate, we have researched each one, and carefully considered
what the UN SDGs really mean to the housebuilding sector, wider society and, in particular, to what we do. Most importantly, we focused
on the underlying indicators, to discover where we can make the biggest contribution, and which have the biggest impact upon us.
As a result, we have adopted seven UN SDGs set out in the next few pages. A full description of the process behind our choosing of
the UN SDGs, and the targets which sit behind them is available on our website (www.barrattdevelopments.co.uk/sustainability/what-
matters-most). We will report on our progress against our targets in our Annual Report and Accounts and on our PLC website.
Barratt Developments PLC Annual Report and Accounts 2019
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Risk
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D
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Our sustainability focus areas UN SDGs
The challenge
Our aspiration
Keeping people
safe and healthy
Material issues:
• Our approach to health
and safety
• Promoting the physical
and mental wellbeing
of our employees
Innovative, efficient
construction
Material issues:
• Innovation (MMC)
• Waste created by our
operations
• The energy we use and
carbon emissions of
our operations
Increased activity levels across the
industry in terms of site openings
and production volumes combined
with shortages of skilled workers can
increase the risk of accidents on sites.
Links between physical and mental
health are well known. A major study
in 2017 showed that 34% of construction
workers had experienced mental health
issues in the last 12 months1 and
82,000 construction workers suffered
from physical or mental work-related
ill health in 2018.2
We want to raise the bar in our industry through
health awareness training and the provision of direct
medical, health and mental health services.
This starts from the premise that all accidents are
avoidable. We are committed not only to improving
performance in health and safety but to provide
support for the health and wellbeing of our people.
This commitment is underpinned by the philosophy
of self-help and individual responsibility within a
corporate framework, promoting and supporting
good practice to comply with legislation, addressing
key workplace risks to health and encouraging a
healthy lifestyle culture.
Meeting Government targets for our
industry to build 300,000 homes a year
will require skilled labour, energy and
materials. Avoiding strain on these
resources entails building as efficiently
as possible.
We are committed to increasing the number of
homes completed using MMC to 25% by 2025,
and are conducting further research to assess the
environmental and other efficiency benefits of MMC
through the AIMCH project, more detail on which can
be found on page 49.
A goal has been set to reduce waste tonnage relative
to build area by 20% by 2025 on 2015 levels and we
are working with our suppliers and sub-contractors
to reduce waste on our sites and improving resource
efficiency in the packaging of construction materials.
We are committed to minimising single-use plastics in
our supply chain.
Through committing to set a science based target
for our operational carbon emissions we will
simultaneously decarbonise our housebuilding
operations and reduce harmful emissions from
diesel. This will be achieved through generating
more renewable energy on our sites, using the most
efficient plant equipment, and reducing work related
travel through investment in technology.
MMC shows potential to increase
efficiency and reduce environmental
impacts across the build process.
This is particularly important given the
environmental challenges ahead.
The UK Parliament has declared a
climate emergency, and Government has
set an ambition for the UK to become
net zero carbon by 2050. Local planning
authorities are declaring climate
emergencies, many with ambitions of
carbon neutrality by 2030. At the same
time concerns over air quality in our cities
add to the pressure to reduce reliance on
diesel and increase fuel efficiency.
With 61% of UK waste being construction,
demolition and excavation waste, this
is a crucial issue for the industry to
tackle3. While packaging plays a role in
preventing waste building materials,
there remain opportunities to minimise
single-use, hard to recycle materials.
Principal risk key
A Economic environment, including housing demand and mortgage availability
B Land availability
C Availability of finance and working capital
D Attracting and retaining high-calibre employees
E Availability of raw materials, sub-contractors and suppliers
F Government regulation and planning policy
G Construction
H Joint ventures and consortia
I
Safety, health and environmental
J IT
1 Randstad (2017) Taking down the walls around mental health in construction.
2 HSE (2018) Key statistics in the construction sector.
3 DEFRA (2016), UK Statistics on Waste.
Read more about our principal
risks on page 59
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Our sustainability focus areas
continued
Our sustainability focus areas UN SDGs
The challenge
Our aspiration
Attracting, inspiring
and retaining people
Material issues:
• How we recruit and
retain the best talent
• The development
and training of our
employees
• How we are creating
opportunities for young
people
• How we are engaging
with our employees
Sustainable places to live
Material issues:
• The lifetime
environmental
performance of our
homes and buildings
we build
• Affordability
Sustainable and
responsible sourcing
Material issues:
• Having an energy
efficient and low carbon
supply chain
Risk
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The construction industry requires an
estimated 33,700 new workers each
year until 20234 with the risk of a more
acute skills shortage dependent on the
outcome of the negotiations for the UK’s
exit from the EU.
Addressing the skills gap will require the
industry to put forward an attractive career
proposition to the future workforce and
reaching out to a broader, more diverse
range of people. At the same time we need
to retain and develop our existing talent.
Our industry is traditionally male-
dominated and our business prioritises
diversity and inclusion in response to this.
Leadership in these areas will be shown by
developing initiatives for people that innovate and go
above and beyond our legislative obligations.
We aspire to work at both an industry-wide and
business level to provide training and recruitment
schemes that appeal to a broad range of people.
Our focus areas include ensuring equal employment
opportunities, tackling the gender pay gap and
providing leadership opportunities for women.
In this way we can address the industry skills gap
while simultaneously providing social value to
communities through quality work opportunities.
Energy efficient and low carbon homes
will play a crucial role in achieving net
zero carbon by 2050, outlined by the
Committee on Climate Change5 and
major legislative change is expected
alongside a renewed emphasis on
energy efficiency through planning.
Housebuilders need to contribute to the
debate on how that can be done most
effectively, and at the same time work
towards homes that are affordable,
inclusive and accessible to communities.
We contribute to these UN SDGs by providing affordable
homes in communities that are green, accessible,
inclusive and resilient to climate change. We can positively
influence the policy and planning that sits behind this by
working with local and central Government on industry
standards. We can also have a direct impact through best
practice sustainable placemaking, using industry leading
tools such as our Great Places design commitment.
A
B
F
J
We will continue to play a leading role in setting
placemaking and design standards while simultaneously
delivering net gains for biodiversity and meet the
challenge of decarbonising homes.
With 56% of native species in decline
between 1970 and 2013,6 DEFRA
has committed to ensuring new
developments create a net gain for
biodiversity.
Through progressing our design standards we will
continue to prioritise the creation of places that
provide social and economic value for customers
and communities. We are reviewing how we can influence
affordability to meet all our stakeholder expectations.
More than 60% of our carbon emissions
are created in our supply chain and by
our sub-contractors.
We will publish a science based carbon reduction
target, and engage our suppliers to drive
transformation collectively.
Close working partnerships with our
supply chain to drive low carbon, resource
efficient manufacturing are critical and
will reduce the risk of increases in energy
costs and changing legislation.
This will encompass a responsible approach to raw
material use, reducing packaging and single use
plastics within our supply chain, innovating in low
carbon building products and the specification of
energy efficient plant.
E
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Housebuilders must support their
supply chains to develop innovative,
sustainable solutions to challenges
facing the industry, requiring increased
recruitment and training capabilities
with the financial security to invest in the
future. Supporting work and economic
growth through the supply chain is
therefore essential to meeting our other
supply chain ambitions.
Through setting clear expectations of our suppliers
and sub-contractors and harnessing the expertise of
our partners such as the Supply Chain Sustainability
School we will actively pursue sustainable supply chain
solutions.
We will continue to ensure vigilance in our supply
chain and among our employees on the risks of
modern slavery, contributing to industry efforts. We will
safeguard our valued suppliers and sub-contractors
through payment on a prompt and fair basis.
4 CITB (2019), Construction Skills Network Forecast.
5 CCC (2019) Net zero: the UK’s contribution to stopping global warming.
6 Hayhow et al. (2016) State of nature.
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Our strategic priorities
33
Our vision is to lead the future of housebuilding by putting customers 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.
Our priorities
Aligning business goals – the actions that drive improvements across our business
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Customer first
Read more on page 34
Great places
Read more on page 36
Leading construction
Read more on page 38
Investing in our people
Read more on page 42
Our principles
Acting responsibly – embedding the desired culture that underpins all of our operations
Keeping
people safe
Being a
trusted partner
Building strong
community
relationships
Safeguarding
the environment
Ensuring the
financial health
of our business
Read more on page 46
Read more on page 48
Read more on page 50
Read more on page 52
Read more on page 54
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Customer first
Our priorities
The Thanduparakkal family
purchased a home at
Heathwood Park, Lindfield.
The challenge
Britain needs more homes to address
its housing shortage. There is continued
customer demand, good mortgage
availability and affordability and an
undersupply of new homes.
While the industry needs to increase
volumes, it must maintain customer
service and build quality whilst
addressing the industry skills shortage.
Strategic priority
The quality of our homes and our high
levels of customer service are key to
our ongoing success. We deliver this
through:
• Building high quality homes
and providing a good customer
experience throughout the sales
process, with quick resolution of post
occupational issues.
• Anticipating our customers’ needs
by continuously improving the
homes and places we build to meet
changing lifestyles and tastes.
KPIs
HBF 5 Star
(2018: HBF 5 Star)
Why we measure
• Customer satisfaction is
fundamental to our business
• HBF Homebuilder Survey is an
industry recognised, independently
measured indicator of our customer
service and build quality
Risks A J
Delivery of quality is key to our brand
and reputation.
Changes in economic environment
could affect customer confidence and
the availability of mortgages which
could reduce sales rates volumes.
Progress in FY19
Customer service is a long term
commitment for Barratt and we are the
only major national housebuilder to be
awarded the maximum HBF 5 Star status
for ten years in a row. During the year,
we have continued to drive improvements
to our customer journey to improve
customer experience, including website
enhancements, additional training for our
employees, development of technology
solutions and continued investment in
customer and stakeholder research.
Key material issues
• Development and training of our
employees.
• The lifetime environmental performance
of our homes and buildings we build.
• Affordability.
Operational risk management
Training and development
We place customers at the heart of
everything we do and the first stage of
this is to gain a detailed understanding
of their requirements and needs. We have
developed a rigorous programme of
research to gather insight at every stage
of our customer journey. This provides
insight into our marketing, sales,
customer service, product design and
development layouts. We are committed
to acting on our customers’ feedback and
in particular driving improvements to
our training and development to improve
customer experience.
We know that our people are key to providing
an excellent customer service experience
and we are committed to continuing to invest
in training and development programmes
for our Construction, Sales & Marketing and
Customer Care teams to ensure they remain
best in class.
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Customer first
Our priorities
35
During the year, we have designed and
delivered a bespoke NHBC training course
to Customer Care teams to improve their
construction and technical knowledge and
ultimately enhance the service that they can
provide to our homeowners.
Within our sales team, we have delivered
induction training to 217 new starters as
well as providing additional skills training
to our Sales and Marketing team of around
1,300 people. To enhance the digital skills
of our sales team and to maximise the
usage and the effectiveness of our online
marketing channels, we have a formal
sales methodology programme, which
170 employees passed during the year.
Effective communication
using technology
We understand buying a home is a big
decision and customers need timely and
relevant communications throughout
the process. One of the main channels
of communication and marketing is via
our website which has been upgraded to
provide a more user friendly and informative
experience including, interactive site plans
across all device types. These enable
customers to see real time plot availability
across their chosen development.
One of the key components of customer care
during the after sales period is the speed
of resolving any defects. Our policy is that
within the first few months after completion,
it is the site managers’ responsibility to look
after each customer and resolve any such
issues. To support this, we have launched
iFIX, an app developed to improve defect
capture and resolution by allowing Site
Managers to log, update and close defects in
real time.
Quality of our products
We are committed to delivering high quality,
sustainable, energy efficient places to live
that satisfy the needs of customers and
communities. We are addressing housing
needs by ensuring we provide quality housing
in the right locations to create communities
that are right for our customers.
We understand it is of the utmost importance
that we build homes that are right for our
customers’ lifestyles. We understand that
lifestyles can change over time and our
product should do too. During the year,
we conducted research to gather actual
customer experience of our best-selling
housetype.
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This led to direct improvements in the design
and layout of this housetype and this will be
extended to other popular housetypes next
year. Our new product ranges have been
consolidated to ensure efficiency of build
and consistency across the Group without
affecting our quality or design standards.
To ensure that quality is consistent across
our business, we have an external mystery
shopper programme in place, this results
in year on year improvement in the capability
of our sales teams.
Finance and mortgage – affordability
Most of our customers require advice on
mortgages and financial assistance which
they can, if they choose, obtain through
our network of recommended Independent
Mortgage Advisers. To provide a seamless
and efficient service we have launched
an online mortgage advice service via a
regulated third party (L&C Mortgages) in
order to better inform our customers.
In order to ensure that appropriate mortgage
finance is available to our customers, we work
with lenders’ property risk teams and valuers
to make sure that they fully understand
the nature of the security for their loans,
for example, providing full transparency to
mortgage providers, education on MMC and
involvement in site visits.
Value created for stakeholders
Customers
Customers have always been at the heart
of everything we do. Buying a home is a
major financial commitment and personal
investment. We are committed to delivering
a best in class service for our customers
at every step of their journey, from initial
viewing right through to after sale care.
We also understand that we don’t always get
it right the first time. We continue to develop
research to gather insight at every stage of
our end-to-end customer journey in order
to devise continuous improvement initiatives
and training for our people.
Future focus
In the medium term, we plan to roll out
automated solutions to improve speed
and consistency of our service as well
as maintaining our focus on training and
development:
• We will replace our CRM system
and following this, we will launch an
online customer portal to improve
communications between customers and
our Customer Care teams. The portal will
be a central hub – both during the sales
process and following handover – and
will enable customers to store important
documents as well as diagnose any
problems with their home and then log
issues direct into our CRM system for
faster resolution;
• We will continue the development of our
website to enable more personalised and
relevant content for different buyer types;
• We are developing additional new build
specific financial content for our website
to give customers access to a real time
affordability assessment as well as
decisions in principle at the earliest
opportunity;
• We are enhancing our social media
capabilities to support our customers;
• We will continue to develop and
enhance our training, development
and performance management of all
our employees to deliver the highest
standards of customer service;
• We are reviewing our upgrade options
to ensure they continue to meet the
evolving needs of our customers and
also improving the interactive website
experience when considering upgrades
for their new home;
• We will implement technology to manage
the deployment of our Customer Care
Operatives in order to minimise drive
times and maximise efficiency;
• We are reviewing the Government plans
for the future of Help to Buy to develop
our approach. In addition, we are working
with lenders to develop appropriate
lending for our customers in the future;
and
• We will investigate actions to increase
affordability of homes.
In addition to the above, we are working
closely with the HBF to develop our approach
to the request from Government for greater
consumer redress and specifically the
launch of a new homes Ombudsman.
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Great places
Our priorities
The challenge
The future of our business depends
on securing the right land in the right
locations where quality homes are most
needed whilst exceeding our investment
hurdle rate.
Strategic priority
Our priority is building long term
relationships to secure good value land
and planning consents where people
aspire to live. Our developments are of
great design, are a pleasure to live on
and will enhance local communities for
years to come.
KPIs
Owned and controlled
land bank
4.7 years
(2018: 4.8 years)
Why we measure
• Drives ownership of the optimum
amount of land to support business
activities
Land approvals (plots)
18,448
(2018: 20,951)
Why we measure
• Monitors that the Group is approving
enough land for purchase to support
future business activity
• Ensure land is approved at minimum
hurdle rates
Risks A B F J
The inability to secure sufficient consented
land and strategic land options at
appropriate cost and quality would affect
our financial position.
Changes to the regulatory environment
could affect our ability to achieve our
medium term targets.
Riverside Quarter,
Aberdeen, which
won the 2018 RSPB
Nature of Scotland
Business Award.
Progress in FY19
Our priority is to build in locations where
people aspire to live. Land is our key
component and our land bank remains an
important driver of value as it enables us
to build the right product, create the right
communities, and supports our volume
aspirations of 3 – 5% growth per annum
in wholly owned home completions over
medium term. Home completions from
strategic land were 26% in FY19. During the
year, we have continued to roll out our new
product range. We have achieved detailed
or outline planning permission on all of our
FY20 expected home completions and 93%
of FY21 expected home completions.
Our own design initiative, Great Places,
aligns with the Government endorsed
Building for Life, a tool for assessing design
quality of homes and neighbourhoods in
England, developed by the Commission for
Architecture and the Built Environment.
In our annual Great Places design awards,
85% of all submitted schemes achieved a
Gold or Silver Standard.
Key material issues
• The lifetime environmental performance
of our homes and buildings we build.
• Affordability.
• Biodiversity.
Operational risk management
Placemaking principles are fundamental
to our business: our customers want to
live in great places that leave behind a
positive legacy.
Building the right homes
We build homes in locations where our
customers want to live with good transport
connections and access to their workplace,
schools and other amenities. Land is the key
component of housebuilding and we continue
to see high quality land opportunities across
the country. We have highly specialised
divisional land teams with extensive local
knowledge and strong relationships with
landowners. This, combined with detailed
research into local market conditions, means
we are able to secure land, which can drive
higher returns for our business. We target
locations where we can provide the housing
that the local communities desperately
need, with local amenities and good access
to transport. This helps to ensure strong
customer demand for our developments.
Our land buying also reflects Government
policy towards affordable housing and first-
time buyers.
We continue to target a high quality and
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.
At 30 June 2019, we achieved this target with
a 4.7 years land supply comprising 3.9 years
owned land and 0.8 years controlled land,
with the owned land bank including land with
both outline and detailed planning consents.
In FY19, we approved the purchase of 18,448
plots. In FY19 26% (2018: 27%) of our home
completions came from strategic land and
we have a target of 30% in the medium term.
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Great places
Our priorities
Water efficiency
We have reviewed our approach to water
efficiency in the design of our homes and
the management of surface water in our
developments and will publish our approach
in FY20. See Safeguarding the Environment
on page 52.
Biodiversity
Enhancing biodiversity is important to us
in both protecting our environment for
future generations and in creating Great
Places to live for our customers today. It
is important that we take care to protect
habitats and wildlife on our sites. Barratt
is the largest volume housebuilder to have
worked with CIRIA, IEMA, CIEMM, DEFRA
and Natural England in the development
of net gain guidance for the UK. We also
provided our experiences and knowledge
of delivering biodiversity net gain projects
through our developments to help shape a
measured and appropriate response to the
DEFRA consultation. We have undertaken
a retrospective analysis of six sites to
understand the commercial and practical
implications of biodiversity net gain.
Our work with RSPB has led to our
commitment to install swift bricks in ten key
cities across the UK, and the development
of wildlife friendly gardens in all of our show
home gardens. The sale of Manthorpe Swift
Nesting bricks, which we helped to design
and produce, passed the 2,000 mark in this
financial year.
During the year, Barratt North Scotland
won the Business category of the RSPB
Nature of Scotland Award for the restoration
of 800 metres of river and otter habitat that
passes through their Riverside Quarter
development.
Bringing land through the planning system
quickly and into production is important to
support our business objectives. The new
NPPF published in July 2018 provides
the framework for the planning system
to continue to provide a stable supply of
consented units into the land market.
We have maintained good momentum in
achieving planning consents and during the
year we secured planning on 18,280 plots
(2018: 16,997 plots).
Designing great places
Throughout our business, we use the
Government endorsed Building for Life tool
to aid discussions with stakeholders during
the pre-application stage. This tool allows
us to maintain standards for creating well
designed residential places and ensure
these designs are aligned with Government
endorsed criteria.
A post occupancy evaluation of our Great
Places design principles at Montague Park,
West Bedford led to embedding greater
awareness of Great Places design principles
in product knowledge for sales teams and
the development of an e-learning module.
We aim to build high quality homes that are
long lasting and sustainable and we seek to
ensure our build processes are efficient and
minimise waste produced.
We launched the new housing range in 2016
for both Barratt and David Wilson and we
have been successful in using this range on
6,024 homes completed in the year (2018:
1,522 homes). The feedback from both
building teams and customers has been
positive. Customers are positive about new
design features, such as more open-plan
living areas, whilst sub-contractors like
the simpler designs and footprints as they
are less complex, making them easier and
quicker to build.
The Group’s central Technical team
continue to assist divisions and their
external consultants in choosing the right
housetypes in the right places, to ensure
plotting efficiency while not compromising
on the quality and design of our homes.
During the year we have continued to
consolidate the new range to ensure
efficiency of build and consistency across
the Group, whilst maintaining our high
standard of quality and design of our homes.
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Value for stakeholders
Customers
We are the UK’s largest housebuilder
and we know the designs of our homes
are very important to our customers and
lead to long term satisfaction. We design
outstanding homes and places for our
customers, and our high quality products
fit in with our customers’ lifestyle and
needs, in developments that enhance local
communities, enabling them to very quickly
become part of the community.
Communities
We continue to invest in design and
placemaking to ensure all our developments
become communities that are socially,
environmentally and economically viable and
sustainable.
Local authorities
We engage actively with local authorities
in each of our 27 divisions as we believe
this requires local knowledge to ensure we
purchase the right land and obtain effective
planning permission for our sites. Our
planning teams build good relationships with
local planners by understanding what their
goals and priorities are.
Future focus
In the short term, to promote our Great
Places principles to our customers, we
will be launching training material for our
sales advisers and eLearning modules
for all employees, to further support
our commitment to placemaking across
the Group.
We are committed to achieving Great Places
Silver standard on all developments by the
end of FY20.
Over the medium term, we will continue to
develop high quality designs for our homes
and ensure effective planning. The Group’s
central Technical team will continue to
work with divisions to amend and improve
our housetypes as necessary in order to
meet changing planning and customer
requirements.
We will continue to seek to create a net
positive impact on biodiversity and ecology
across all new developments where there
is no prior planning permission from FY20.
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Leading construction
Our priorities
The challenge
The housing shortage has increased
demand for new homes, which has
resulted in pressures on the availability
of materials, skilled labour and sub-
contractors.
Strategic priority
We deliver the highest quality homes by
focusing on excellence across all aspects
of construction. We are embracing MMC
to increase build efficiency.
KPIs
Total home completions
(including JVs)
17,856 homes
(2018: 17,579 homes)
Why we measure
• Reflects activity and growth of the
business
• Method by which business capacity
is monitored
Waste intensity
6.53 tonnes per
100 sq.m. of build
(2018: 6.06 tonnes per 100 sq.m. of build)
Why we measure
• To maximise operating efficiency
and use materials as efficiently as
possible in the construction process
• Monitors progress in waste reduction
Risks A D E G H J
Failure to maintain sufficient material
and skilled sub-contractor availability
may lead to increased costs and delays
in construction, which in turn, would
affect our financial position.
Delays in construction, or poor product
quality, could harm reputation, increase
costs, reduce selling prices and sales
volumes and result in litigation and
uninsured losses.
Assistant Site
Manager Tanya
Overton-Summers
on site at Minerva,
Exeter.
This year we have seen an increase of
7.8% in construction waste intensity to 6.53
tonnes per 100 sq.m. of legally completed
build area. When we analyse this trend
the increase in tonnage per house build
equivalent, (a way of capturing build area
that is work in progress) is lower at 3.4%,
reflecting our increase in work in progress
in FY19 compared to FY20. This is however
a 7.9% reduction compared to the baseline
in FY15, but still represents a challenge in
meeting our 2025 goal.
Key material issues
• Our approach to health and safety.
• Lifetime environmental performance of
our homes and buildings we build.
• Having an energy efficient and low carbon
supply chain.
• The energy we use and carbon emissions
of our operations.
• Waste created by our operations.
• Innovation (MMC).
Progress in FY19
The housing shortage has increased demand
for new homes, which has resulted in
pressures on the availability of materials,
skilled labour and sub-contractors. As a
business we want to be able to meet this
demand while continuing to deliver the
highest quality homes for our customers.
Key to our long term success is our
focus on excellence across all aspects of
construction. In response to the pressures
and our wider environmental impact we
focus on three principal areas: delivering
high quality, safe sites which help us
maintain customer demand and attract the
skills we need; using MMC to improve the
efficiency of our construction process; and
using our resources more effectively.
Our quality is recognised through the NHBC
Pride in the Job Awards for site management.
In June 2019, our site managers won 84
(2018: 83) awards, more than any other
housebuilder for 15 years in a row.
We have continued our construction
efficiency programme, increasing the
number of total home completions using
MMC and we have achieved our target of 20%
of total home completions by 2020, one year
early. We have now launched a target of 25%
of completions using MMC for 2025.
Barratt Developments PLC Annual Report and Accounts 2019
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Leading construction
Our priorities
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❝ Our quality is recognised through the NHBC Pride in
the Job Awards for site management. In June 2019, our
site managers won 84 (2018: 83) awards, more than
any other housebuilder for 15 years in a row. ❞
Operational risk management
Delivering high quality homes
As Britain’s largest housebuilder we remain
committed to playing our part in addressing
the housing shortage. We continue to
increase volumes while maintaining our
industry leading quality, delivering 17,856
homes (including JVs) in FY19 (2018: 17,579).
We believe building high quality homes is a
key priority for business resilience over the
longer term and attracting ongoing customer
demand for our homes.
We put customer satisfaction at the heart
of our construction processes with a focus
on getting it right first time. This also drives
operating efficiencies in the build process.
We continue to focus on maintaining safety
and quality standards and responding to
skills shortages. During the year, we revised
and relaunched our Best Practice Guide to
ensure the high standards are maintained
at every stage of our build processes and
are applied consistently throughout the
business.
To support this we have continued to
consolidate and enhance our new range of
housetypes.
We have improved designs and simplified
build by removing bay windows and lightboxes
from the majority of our Barratt homes.
We have also reduced roof pitches, whilst
maintaining architectural and design
quality and desirability. These changes have
minimal impact to the customer experience
but significantly increase build efficiencies,
both in terms of material and labour costs.
Innovating to improve efficiency
The need to build homes more efficiently
in Britain requires innovative approaches.
Innovation enables us to respond to skills and
materials shortages, maintain safe working
environments, continue to produce high
quality homes and deliver returns for our
investors.
We pride ourselves on the quality of our
sites and how they are managed. We
understand that sub-contractors and
employees prefer to work on well-managed
sites. The proper management of any site
supports our principle of Keeping people safe.
See page 46 for more details.
MMC provide opportunities to address the
skills shortage facing the industry, diversify
the types of materials we use and build at
a greater speed and increase efficiency.
Our knowledge of these technologies has
improved as trials have expanded into major
roll-outs. Details of the MMC used during the
year can be found in the table below.
MMC
Timber frame
Roof cassettes
Offsite ground floors
Large format block
Light gauge steel frame
Offsite garages
Total¹
Percentage of completions¹
FY19
2,321
1,699
718
242
63
17
3,609
20.2%
FY18
1,683
1,405
313
113
138
7
3,252
18.5%
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Total and percentage of completions includes JVs and has been adjusted for homes where more than one
technology has been used.
www.barrattdevelopments.co.uk
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Leading construction continued
Our priorities
❝ Increases in customer demand result in
further pressures upon the availability of
materials. In response, we continue to focus
on waste and resource efficiencies. ❞
As part of our efforts to encourage the use
of MMC, our in-house Group Design and
Technical team has visited sites and divisional
offices delivering site start and design reviews
for MMC and energy efficiency.
We recognise that there is more research
to be done in exploring the advantages of
MMC, in terms of design, construction, and
use through the whole life of a building.
Together with our partners we will have
the opportunity to explore these benefits
through the AIMCH project which is designed
to identify and develop industrialised
offsite solutions to meet current and future
housebuilding demands.
Technologies new to Barratt go through
a rigorous New Product Introduction
testing and analysis process before full
implementation. Studies are conducted with
a number of key stakeholders, including the
NHBC, BBA, TRADA and UK Finance, who
add a further level of analysis, factoring in
any implications for mortgages, insurance
and customer satisfaction.
In addition, we are constantly engaging
with our suppliers to find, understand and
consider innovative products and services
that can be used to increase our efficiency on
site whilst maintaining our high quality and
customer satisfaction requirements.
Waste and resource efficiency
As an industry the demands on materials are
high. Increases in customer demand result
in further pressures upon the availability
of materials. In response, we continue to
focus on waste and resource efficiencies.
Reductions in waste lessen the environmental
and cost impacts of raw material extraction,
manufacturing and transportation.
By being more efficient in skip utilisation
and segregation, we have maintained our
diversion of waste from landfill at 97%
(2018: 97%). This year we have seen an
increase in construction waste intensity
to 6.53 tonnes per 100 sq.m. of legally
completed build area (a 7.8% increase from
FY18). This is however a 7.9% reduction
compared to the baseline in FY15).
Our multi-functional waste reduction project
team, sponsored by our Chief Operating
Officer, is focused on standardisation to
design out waste and employee, (particularly
commercial and site construction teams)
and supplier engagement, with a view to
reducing waste in the future.
We continue to action findings from our 2016
waste analysis study at Saxon Gate, near York.
Actions include the installation of insulation,
improved kitchen design specifications, and
reduced timber joists waste through the use
of a reusable stairwell protection system
across seven divisions.
This year, we have undertaken a larger
comparative study of the waste created by
masonry and timber built homes at our Barley
Fields and Prospect Rise developments, also
in Yorkshire. Waste from these sites, is being
analysed to determine the levels of waste
created by the different build methods. This
will help inform new efficiency initiatives.
Collaboration with suppliers has also produced
new opportunities for waste reduction in
our business and for efficiencies in theirs.
Opportunities have included removing plastic
protection on the triangular roof (spandrel)
panels between homes in summer months,
and removing shrink wrapping from painted
fascia. We have worked with timber joist and
truss suppliers to ensure only exact timber
components are provided and implemented
measures to ensure compliance.
Barratt Developments PLC Annual Report and Accounts 2019
We are retendering our waste contract
focusing on prevention, recycling and reuse
of construction waste.
It is not just on our sites where we are
focused on using our resources efficiently.
Our 2018 graduate cohort delivered a
‘WasteWise’ project to reduce waste
generated in our offices. The project
resulted in the issuance of guidelines, waste
reduction checklists, and promoted waste
saving opportunities to all our divisions.
Other initiatives include the removal of
plastic cups from water coolers to avoid
disposal of an estimated 89,000 plastic cups
each year and the use of glass milk bottles
to save an estimated 26,700 single use
plastic two-pint bottles annually.
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Leading construction continued
Our priorities
41
A timber frame home
being erected by Oregon
at our Heritage Grange
development in Edinburgh
NHBC Pride in the Job
Awards
84
(2018: 83)
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Percentage of home
completions using MMC
20.2%
(2018: 18.5%)
Percentage of construction
waste diverted from landfill
97%
(2018: 97%)
Value created for stakeholders
Customer
We build outstanding quality homes for our
customers.
Employees and Suppliers
We seek to ensure that our sites are well-
managed and safe to work.
Wider Society
Our investment in innovative approaches
provides opportunities to address the skills
shortage facing the industry, diversify the
types of materials we use, build at a greater
speed and increase efficiency.
Future focus
We will seek to continue to lead the industry
in site management and quality.
In the short term, we will continue to
learn more about the potential benefits of
MMC through participation in the AIMCH
research project. This will assess all aspects
of construction and quality, including an
analysis of whole life costs and embodied
energy.
A quarterly waste data analysis review is to
be implemented, and we will seek to extend
non-financial data assurance to include
waste reduction KPI’s.
In the medium term, we aim to increase
use of timber frame with additional capacity
available following our acquisition of Oregon.
Outcomes from our waste analysis study
comparing different build methods will
be implemented, with the aim of further
reducing our waste intensity and that of our
supply chain.
We will continue to engage with suppliers to
reduce packaging, particularly around single
use plastics.
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42
Investing in our people
Our priorities
The challenge
The housebuilding industry is facing a
skills shortage and as the UK’s largest
housebuilder we are committed to
playing our part to help address this
shortage and to reduce the impact on
our business.
Strategic priority
Our people are the heart of our business
and we aim to attract and retain the best
people by investing in their development
and success. We have well-established
apprenticeship schemes to attract the
next generation to enter our industry.
We seek to create a great place to work,
founded on an open and honest culture
that embraces diversity and inclusion.
KPIs
Upper quartile employee
engagement
82%
(2018: 79%)
Why we measure
• To gain an insight of, and provide
a forum for, employee views.
• To retain and invest in the
best people and focus on their
development and success
J
Risks D I
The skills shortage in our industry
means it is of utmost importance to
recruit and retain best in class people.
Progress in FY19
Our people are the heart of our business and
our continued success has been achieved
through the hard work and dedication
of our employees. Our future growth is
underpinned by our aim to attract and retain
the best people and our commitment to
playing our part to help address the industry
skills shortage.
We have 470 apprentices, graduates and
trainees on programmes, around 7% of our
workforce. A further 146 apprentices have
been recruited in FY19 for our FY20 intake.
During the year, average training days per
employee increased to 4.7 days (2018: 4.0
days) and we have maintained our upper
quartile performance in our engagement
survey and reduced employee turnover.
In March, we became the only major
housebuilder to be awarded HBF’s maximum
5 Star customer satisfaction rating for ten
years in a row. In light of this achievement
and to recognise our employees’ dedication
and hard work we have, for the second
year in a row, awarded a share award to all
employees below Senior Management.
Key material issues
• Development and training of
our employees.
• How we recruit and retain the best talent.
• How we are creating opportunities for
young people.
• How we are engaging with our employees.
• Our approach to health and safety.
• Promoting the physical and mental
wellbeing of our employees.
Operational risk management
The development and training
of our employees
We continue to invest in the development
and success of our people, helping them to
contribute to the long term success of the
business.
As the UK’s largest housebuilder we are
committed to playing our part to help
address the industry skills shortage and
to reduce the impact on our business. Key
to this is developing and training trade and
site-based employees which we do through
a number of award-winning and established
training and development programmes.
Barratt Developments PLC Annual Report and Accounts 2019
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Investing in our people
Our priorities
Jack Ford, an Apprentice with
Cherelle Greenway, Technical Project
Manager and Jasmine Sommers
Assistant Site Manager.
❝ Our future growth is underpinned by our
aim to attract and retain the best people and
our commitment to playing our part to help
address the industry skills shortage. ❞
43
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We want to support our leaders and
managers of the future and effective
succession planning is an important
element in our long term success.
We continue to develop internal talent
through our Rising Stars programme which
was launched last year and in total over 180
employees have been or are going through
the programme. We recognise that diverse
teams mean a stronger and more dynamic
business. We’ve launched a number of
career development programmes, including
Catalyst, which supports future female
leaders in our business. The aim is to make
our business more inclusive and to reflect
the communities we operate in. More detail
on our Diversity and Inclusion strategy is
provided on page 44 and 45.
Our learning management system enables
us to provide enhanced learning and
development for all our employees. To make
internal training more efficient, and enable
more of our people to develop their skills
further, we have increased the usage of
virtual online classrooms and have a greater
focus on digital learning. There were over
35,000 learning activities on our e-learning
platform and this is becoming a major part of
our Learning and Development programme.
During the year, on average each employee
received 4.7 days of training, an increase
from 4.0 days last year.
How we recruit and retain our best talent
It is vital for us to recruit the best candidates
and to focus upon developing talent within
our business to ensure that we have the
necessary skills for continued operational
delivery and future growth.
Our schemes focus not only on bringing new
talent to the industry but also on retaining it
for the future. In FY19, we have recruited or
have planned to recruit 269 new apprentices,
trainees and graduates.
We recently launched our new apprentice
programme for all bricklaying and carpentry
apprentices. The objective being to achieve
apprenticeship level within a reduced
timeframe.
We have continued to expand the scope of
qualifications under our degree programme
with plans to introduce a new technical
based degree programme in the future.
We actively participate in the Home Building
Skills Partnership which aims to attract new
people to housebuilding, providing the skills
for today and the future, and supporting the
supply chain in attracting and developing the
skills they need to support our industry.
During the year, we have increased our use
of technology to attract the best candidates.
Recognising the importance of social media
in recruitment, we launched a campaign
targeting new audiences, demonstrating
what it is like to work at Barratt. We have
also completed a new career website
with an integrated application tracking
system to increase the efficiency of the
recruitment process.
We focus on remuneration and benefits
which is an important element of employee
retention. We continue to review our
employee packages ensuring these are
effective for our employees and we remain
competitive.
www.barrattdevelopments.co.uk
Our employee development schemes have
delivered 1,162 new apprentices, trainees,
graduates and undergraduates into our early
career programmes over the past five years.
We continue to expand on our successful
Ex-Armed Forces Site Management
Transition Programme. We are proud to
announce that this programme has won
the Heropreneur award during the year
and we now have over 90 ex-Armed Forces
personnel who are completing or have
completed this programme, with a further
51 personnel planned.
We have the first internal industry degree
programme in Residential Development
Construction and Quantity Surveying.
Currently, we have 127 people who have
completed, are part qualified or who are
studying at Sheffield Hallam University.
Our Construction and Sales Academy
programmes continue to expand with the
introduction of refresher and advanced
selling skills for our sales teams as well
as continuing to deliver an internal NHBC
accredited warranty programme.
Whilst we are focused on the development
of our site based employees, it is equally
important for us to develop all of our
people across all aspects of our business.
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Investing in our people continued
Our priorities
1,162
New apprentices,
trainees, graduates and
undergraduates in the
past five years
16%
Employee staff
turnover
(2018: 17%)
4.7
Training days
per employee
(2018: 4.0 days)
15%
Females in senior
manager roles
(2018: 13% females)
In April 2019, we invited all eligible
employees of the Group to participate in the
eleventh grant under the Group’s Sharesave
scheme which allows eligible employees to
contribute a maximum of £500 per month in
one or a combination of Sharesave schemes.
At 30 June 2019, approximately 46% of
employees participate in one or more of the
active Sharesave schemes. The Sharesave
scheme was approved by shareholders at the
Company’s AGM held in November 2008, and
renewed and amended by shareholders at
the Company’s AGM held in October 2018.
Promoting the physical and mental
wellbeing of our employees
The health, safety and wellbeing of our
employees is a fundamental priority. During
the year we devised a strategy for enhancing
mental health awareness throughout the
business and maintained programmes
for healthy workplaces. We will be further
enhancing these areas with specific training
and support initiatives. More details are
covered under our Keeping People Safe
section on page 46.
Recruitment and retention will continue to
be an ongoing focus for us over the longer
term. The Group’s employee turnover has
decreased during the year to 16% as at
30 June 2019 (2018: 17%).
How we are creating opportunities
for young people
We attract our future workforce by
reaching out to schools, through great
apprenticeships as well as a range of other
schemes, including the ASPIRE Graduate
Scheme, Sponsored Construction and
Commercial Degree and Armed Forces
Transition Programme.
Our well-established apprenticeship
programme continues to attract young
people to join the housebuilding sector and
we continue to expand on our Academy and
Leadership programmes such as ‘Rising
Stars’ programme for those who are seen as
being our leaders and managers of the future.
How we are engaging with
our employees
We seek to create a great place to work,
founded on an open and honest culture.
We understand that to continue to improve
this we need to engage with our employees
on a regular basis so we can understand
their issues and concerns and address them.
Our annual employee engagement survey
is in the upper quartile performance at 82%
(2018: 79%), with participation levels the
highest since the survey began. The feedback
received is used to take action and devise
improvement measures going forward.
We have also introduced a Workforce
Forum of employee representatives from
all areas of our business consulting with
Senior Management on matters that affect
the workforce as a whole. See page 24 for
more details.
Diversity and Inclusion
We aim to create a fair working environment
that embraces diversity and inclusion.
We recognise that housebuilding has not
traditionally been the most diverse industry
both in terms of gender and ethnicity. Our
long term focus is to recruit and retain
people with different backgrounds, beliefs,
lifestyles and skills and ensure our business
is representative of the communities in which
we operate. We know more diverse teams
mean a stronger and more dynamic business.
We have an active working party focused
on delivering our Diversity and Inclusion
strategy. Target areas such as gender and
ethnicity have been identified and our aim
is to improve in all areas over the next two
years. We recognise that flexible working can
help us retain talented employees and can be
particularly beneficial for those with caring
responsibilities. Our divisional offices now
operate a more flexible approach to working.
The diversity policy relating to the
appointment of PLC Directors is set out on
page 83.
We are committed to 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. We are also
committed to ensuring that our workplaces
are free from discrimination and that
everyone is treated with dignity and respect.
We strive to ensure that our policies and
practices provide equal opportunities in
respect of issues such as training, career
development and promotion for all existing
or potential employees irrespective of age,
disability, gender reassignment, marriage
and civil partnership, pregnancy and
maternity, race, nationality, religion or belief,
sex, and sexual orientation.
Barratt Developments PLC Annual Report and Accounts 2019
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Male and female employees
PLC Directors
Senior Managers
Employees
Executive Committee
Reports to
Executive Committee
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Total
■ Female
Total
2019
62.5%
5
2018
56%
5
37.5%
44%
■ Male
Total
■ Female
3
4
Total
2019
85%
247
15%
43
2018
87%
251
13%
36
■ Male
Total
■ Female
Total
2019
69%
4,288
31%
1,918
2018
69%
4,152
31%
1,882
■ Male
Total
■ Female
Total
2019
67%
4
2018
67%
4
33%
33%
■ Male
Total
■ Female
2
2
Total
2019
68%
21
32%
10
2018
76%
22
24%
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Every effort is made to retain and support
employees who become disabled while
working within the Group. Further details
on the Group’s diversity initiatives are
available in the sustainability section
of our website which is available from
www.barrattdevelopments.co.uk/
sustainability.
In April 2019, we published our second
Gender Pay Gap report. The report identifies
that as a Group, our mean pay gap stands at
6.0% and our median pay gap at 3.5%, which
is low compared to the mean gender pay gap
across the UK of 17.1%. Our mean bonus gap
stands at 42.6% with our median bonus gap
at -15.3%. Our negative median bonus gap
exists because our sales team, which has
a high proportion of female employees, has
pay structures which include a significant
bonus percentage. We will continue to work
hard to close our gender pay gap and ensure
we build a diverse, inclusive and attractive
working environment for all our employees.
Human rights
Our respect for human rights underpins
our strategic priorities and is an embedded
principle. We have policies and procedures
in place that support the core values of the
United Nations Universal Declaration of
Human Rights and the UN Guiding Principles
of business and human rights and we ensure
we act in accordance with our principles
in relation to diversity and the Modern
Slavery Act 2015. Concerns can be raised
anonymously to our whistleblowing process,
details of which can be found in the Audit
Committee report on page 91.
Our non-financial KPIs in respect of Health
and Safety and Employee Engagement
reflect our belief that it is a fundamental
human right of our employees to work in a
safe and supportive environment. In addition,
employees undertake training in respect of
modern slavery and we are in the process of
rolling out Diversity and Inclusion training to
all employees.
We have a strict anti-bribery and corruption
policy and conduct our business in a fair,
open and transparent manner. All employees
are required to undertake training under our
anti-bribery and corruption policy at regular
intervals.
Value created for stakeholders
Employees
Our continued success and growth is achieved
through the hard work and dedication of our
employees. We aim to attract and retain the
best people by investing in their development
and success, recognising our employees’
dedication through share awards and
ensuring our employee packages are effective
and competitive.
Customers
By ensuring our employees have the right
skills at all levels, we will continue to provide
excellent award-winning service and build
quality homes for our customers.
Wider society
We comply with relevant Government and
Regulator guidelines including the Health
and Safety regulations, Gender Pay Gap
Reporting and Diversity and Inclusion.
Future focus
In the short term, we will continue to
implement further attraction campaigns to
attract the best candidates to join us. We will
continue to focus on high potential employees
development through our Rising Star
programme and create more opportunities for
young people by extending our apprenticeship
offer and including non-trade disciplines.
We recognised the learning curve is shorter
for our ex-employees who have had our
training and development previously. In order
to encourage these past employees to return
to Barratt.
To further build on our employees training
programme we will continue to enhance
our digital learning offer including more
accessibility through mobile devices.
Our long term focus is our Diversity and
Inclusion strategy to ensure our business is
representative of the communities in which
we operate and our programmes focus on
addressing the skills shortage in our industry.
www.barrattdevelopments.co.uk
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Keeping people safe
Our principles
The challenge
To ensure our operations are incident
and injury free and we have a positive
health impact on all those employed
and affected by what we do.
Our principle
Health and safety is a core business
value and a fundamental priority. We
are committed to achieving the highest
industry health and safety standards for
which all of our people are responsible.
KPIs
Health and safety
(SHE audit compliance)
96%
(2018: 96%)
Why we measure
• To demonstrate compliance with
safety standards on our sites
• Lead indicator highlighting areas of
SHE focus
J
Risks I
Health and safety or environmental
breaches could cause harm to
individuals, potential reputational
damage, criminal prosecution and civil
litigation, delays in construction or
increased costs.
Sean Regan,
Site Manager with
Martin McVarnock
divisional SHE
Manager at
Nomvula Park,
Knowsely.
Progress in FY19
We continue to prioritise and focus on health
and safety across our business and seek to
manage the inherent risks in the construction
process by applying our management system
and continuously reviewing our safe systems
of work. During the year we achieved the
maximum 5 Star status as part of the British
Safety Council Occupational Health and
Safety Audit. Our new BDW Cambridgeshire
division will go through this accreditation
process in FY20. Our housebuilding
divisions, other than our new division in
Cambridgeshire, are certified to OHSAS 18001
(all are moving towards ISO 45001 as part of
their next assessments) and ISO 14001; BD
Living, our bespoke wardrobe supplier, is
also certified to these standards. We will be
working with our Cambridgeshire division and
Oregon, over the next year, to ensure their
processes meet these standards.
In order to ensure that health and safety
procedures are adhered to, compliance with
our SHE management system is verified
by a programme of site monitoring and
internal and external audits. Our SHE audit
compliance scores and IIR are assured in
accordance with ISAE 3000 revised.
Key material issues
• Our approach to health and safety.
• Promoting the physical and mental
wellbeing to our employees.
Operational risk management
Our approach to health and safety
We believe all injuries are avoidable and
whilst we recognise that entirely eradicating
risk is a challenge, we are determined
to improve our performance and reduce
the number of injuries occurring in our
working environment. We maintain stringent
standards and have a continuous focus on
health and safety with all areas and levels of
the business.
To reflect our commitment to continuously
improving our policies and processes,
during the year we updated the SHE
management system to ensure compliance
with new health and safety standard ISO
45001. We have undertaken a new campaign
this year to raise awareness of good
housekeeping on sites to reduce risk.
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Keeping people safe
Our principles
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stairwell protection have been developed,
which are being rolled out across our business.
Promoting physical as well as
mental wellbeing
Compliance to our SHE management
system is verified by a programme of site
monitoring and internal and external audits.
During the year, we carried out 6,916 (2018:
6,895) monitoring visits and achieved an
average compliance rate of 96% (2018: 96%).
We have also completed internal audits
of all our operating divisions which are
assessed against criteria to ensure that our
management system is clearly understood
by our management teams.
Following an increase in the Group’s IIR rate
in 2018, we worked with management teams
to drive improvements in the prevention
of injuries. The Group IIR rate for the year
is 297 (2018: 462) per 100,000 persons
employed (including sub-contractors). We
were pleased to see a reduction in the IIR
rate for the year; however, we will continue to
focus on improvements in this area to reflect
our business’s commitment.
We have continued to operate our 5 Steps
to Safety Campaign (Stand Back/Take time
to review/ Evaluate the Risk/ Plan the Task/
Keep People Safe) and during the year have
reviewed and restructured our health and
safety training strategy for employees at all
levels within our business.
Despite our best efforts, in June 2019,
one of our sub-contractors was fatally
injured at our North West division’s site at
Stapeley Gardens in Nantwich. Our deepest
sympathies are with his family, friends and
colleagues. We are cooperating fully with
the Health and Safety Executive during its
ongoing investigation.
We are committed to health promotion by
encouraging our people to adopt healthier
lifestyles. This commitment is underpinned
by individual responsibility within a corporate
framework, promoting and supporting good
practice to comply with legislation and
addressing key workplace risk to mental and
physical health.
We have continued with our strategy to
improve the focus on occupational health
including awareness campaigns linked to the
wellbeing of our workforce. Information has
been provided on mental wellbeing and raising
awareness of general health issues that
could affect our workforce. We will be further
enhancing these areas with specific training
and support initiatives over the next year.
We have also enhanced our drugs and
alcohol policy and have continued with
a programme of random sampling and
responding to suspicion reports across
the business.
Value created for our stakeholders
Employees and sub-contractors
As the nation’s largest housebuilder, a
key priority is to provide a safe working
environment for all our employees and
sub-contractors. We are committed to
achieving the highest industry health and
safety standards and the wellbeing of our
people is a key element of our strategy.
Future focus
We will work with our Groundworks sub-
contractors to improve the use of plant on
our sites and consider ways in which the
interface between plant and pedestrians
can be improved.
Our work on enhancing our health and
wellbeing strategies will continue by
providing mental wellbeing training for
those in line management roles with the
aim of providing guidance on identifying
signs of potential issues with themselves
and colleagues.
We will enhance our site teams’ ability
to report incidents and near misses by
working on the provision of an App to enable
more efficient capture of information and
images. This will increase the speediness of
response time to incidents and information
will be utilised to consider any learning or
enhancements to our policies and procedures.
www.barrattdevelopments.co.uk
As part of our engagement with our supply
chain, we held 26 seminars during the year
to engage with Groundworks sub-contractors
and enhance their standards of management.
A number of initiatives are being considered
based on feedback from sub-contractors
and we will be reviewing how these can be
implemented over the next year.
In conjunction with key suppliers, we evaluated
the risk of falls during construction and in
particular the risk during construction from
open stairwells. Following a detailed review
with our suppliers, proprietary platforms for
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Being a trusted partner
Our principles
The challenge
Housebuilding is a long term business
and the development of sustained
business partnerships with landowners,
local authorities, suppliers and
sub-contractors is critical to our success.
Our principle
We build meaningful, long term
relationships that make us the
developer of choice for our partners.
We are innovating in our supply chain
to drive efficiency and meet our
customer needs.
Risks B E H J
Failure to maintain sufficient material
and skilled sub-contractor availability
may lead to increased costs and delays
in construction, which in turn, would
affect our financial position.
The inability to secure sufficient
consented land and strategic land
options at appropriate cost and quality
would affect our financial position.
Progress in FY19
During the year, we secured several key
partnerships with landowners such as
Homes England.
Barratt remains focused on developing
best in class supplier relationships with
our supply chain. We are the only major
developer to consistently run a Supply Chain
Conference, attended by all of our Group
Suppliers. During FY19 we entered into a
three-year research project collaborating
with a number of our partners, aimed at
identifying and developing industrialised
offsite solutions which are needed to meet
current and future housebuilding demands.
Key material issues
• The lifetime environmental performance
of our homes and buildings we build.
• Having an energy efficient and low carbon
supply chain.
• Our approach to health and safety.
• Innovation (MMC).
Operational risk management
Working with our partners to build homes
We are committed to delivering high quality,
sustainable, energy efficient places to live
that satisfy the needs of customers and
communities. Key to this is ensuring we provide
quality housing in the right locations to create
communities that are right for our customers.
It is vital that we have a good relationship with
landowners and other partners to ensure we
are their developer of choice.
We continue to work with private landowners,
operators and agents to identify and
bring forward land for development.
Our experienced divisional land teams
actively engage with our stakeholders to
ensure we are the developers of choice.
We have a comprehensive Group Partnerships
Policy to ensure proper engagement with
our key land partners and stakeholders.
In FY19 we updated our Affordable Housing
Guide to support divisions in partnering with
Registered Providers.
During the year, we started to deliver homes
on our Kings Quarter and Saviours Place
sites in Pewterspear, Warrington, working
together with Homes England. Both Barratt
and Homes England have a shared strategic
objective to use more MMC in the delivery
of homes which is a more cost-effective
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Being a trusted partner
Our principles
Duncan Inglis, Homes
England with Neil Goodwin,
Managing Director of Barratt
Manchester and Matthew
Wackett, Homes England on
our site at Saviours Place,
Pewterspear, Warrington.
❝ We have entered into a three-year research project
collaborating with a number of our partners, aimed
at identifying and developing industrialised offsite
solutions which are needed to meet current and future
housebuilding demands. ❞
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Barratt achieved Gold status with the Supply
Chain Sustainability School. In addition,
we were the first national housebuilder to
sign up to the Gangmasters Labour Abuse
Authority Construction protocol, helping us
share and receive information and training
materials to present modern slavery. We are
also a signatory to the Prompt Payment Code.
It is a condition of all our supplier and sub-
contractor contracts that they comply with
the Bribery Act and our anti-bribery and
corruption policy which is available on the
Group’s website.
As we purchase substantial amounts of
timber, we implemented a timber sourcing
policy in December 2013. We have audited
and reviewed this policy this year. All timber
and timber products that we purchase via
Group agreements are from suppliers with
FSC/PEFC chain of custody certification.
Innovation with our suppliers
During FY19 we have entered into a three-year
research project collaborating with a number
of our partners, Stewart Milne, London
& Quadrant Housing Trust, Tarmac, the
Manufacturing Technology Centre, the
Construction Scotland Innovation Centre
and Forster Roofing Services. The Advanced
Industrialised Methods for the Construction
of Homes (AIMCH) project aims to tackle
challenges currently facing the housing
sector, including skills shortages, an ageing
workforce, poor productivity, low output and
low affordability. The project aims to identify
and develop industrialised offsite solutions
which are needed to meet current and
future housebuilding demands such as low
embodied carbon emissions.
In addition, we have successfully rolled out
a flooring solution across the business this
year: 718 homes have been constructed using
a high performance offsite precast flooring
system. Our Group Design and Technical
team partnered with our suppliers Nu-Span
to develop a product solution to meet our
business’s needs. We continue to apply our
New Product Introduction process to introduce
innovative suppliers with new systems.
Value for stakeholders
Suppliers
Suppliers and sub-contractors are critical
to our business success, carrying out the
majority of construction on our sites and
providing the materials and services we
require for our operations. It is therefore
essential for us to build long-lasting, good
relationships that make us the developers
of choice to work and partner with.
Wider society
We engage with local authorities and other
key Government agencies to understand
their priorities and needs and ensure we
build quality homes in the right locations.
Future focus
We will continue to work and engage with a
variety of partners to bring forward land for
development.
In the short term, we will continue developing
our partnerships offsite solutions to ensure
successful roll-out and we will continue
to develop our business know how to
incorporate the changes successfully.
We aim to attain living wage status for
suppliers and sub-contractors by FY21.
Over the medium term, we will work with our
current offsite partners on more advanced
forms of MMC. This is being led at our
Homes England Pewterspear site through
our AIMCH project which will investigate and
develop industrialised offsite solutions to
meet housing demand.
In FY20 we will launch a new science
based carbon reduction target which will
encompass purchased goods and services.
We also plan to continue the deployment of
our strategic supplier capability assessment,
a process designed to work with our
suppliers in highlighting and addressing
potential supply performance risks to ensure
deliverability and reliability of suppliers.
www.barrattdevelopments.co.uk
and efficient method of construction.
It is hoped the project will provide a better
understanding of how MMC could be used
in the future for both Barratt and Homes
England while also providing much needed
homes for the area in an efficient manner.
Working with our suppliers
We recognise our suppliers and sub-
contractors are critical to the delivery of
our strategic objectives and we invest in
our relationships with them. We engage in
continuous communication with our suppliers
holding regular performance and business
reviews, focusing on our ongoing relationship
and health and safety. We are committed to
providing a safe place in which our employees
and sub-contractors can work.
Barratt operates a model of centralised
procurement for the majority of our
construction materials, site equipment and
business consumables. This arrangement
enables us to manage both cost, sustainability
specifications and supplier relationships
effectively. We believe it is important to
engage openly with our suppliers regarding
the challenges they are facing and help
them identify and address opportunities and
mitigate risk. We have a ‘supplier evaluation
and development programme’ in order to
improve this dialogue.
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Building strong community relationships
Our principles
Penny Harrison representing
Whizz-Kidz visiting our
Highfields site in Derby.
The challenge
To ensure our work creates a positive
legacy that helps local communities to
thrive. To build strong communities in
our developments.
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.
Raised and donated to
charities in the year
£2.9m
(2018: £1.2m)
Jobs supported
47,360
(2018: 45,080)
Local contributions
£665m
(2018: £553m)
Risks B D F J
Failure to build strong community
relationships could lead to negative
reputational impact.
Progress in FY19
During the year, we have raised over
£2.9m for national and local community
charities and supported 47,360 jobs. In
FY19 we provided more than 3,800 school
places and handed over 13 local facilities to
communities, including sports and leisure,
health, youth and community centres.
Operational risk management
Building strong communities in
our developments
Without local identity and supporting
infrastructure, developments are just houses
as opposed to homes. This is why we put
so much time and investment into building
strong community relationships.
Across the country we have also made
over £665m in local contributions and
physical works contributions for section
106 or equivalent agreements and the
Community Infrastructure Levy to benefit
local communities through affordable
homes, highways, environmental and other
improvements. Taken all together, we
provided some £3.0bn of Gross Value Added
to the UK’s economic output and supported
47,360 jobs this year.
We put great emphasis on working closely
with children and young people in local
schools as they play such a big part in
any community. We go to schools to
teach children about health and safety,
construction and sustainability, and about
careers in the construction industry.
Charitable giving
Aligned with our principle to create a positive
legacy, we are committed to giving back to
the communities we live and work in. We
believe it is important to support charitable
causes both locally and nationally and
encourage our employees in that pursuit.
During the year, we launched the Barratt &
David Wilson Community Fund to help our
divisions do more for local organisations and
charities which matter to them. Our operating
divisions and Group support functions are
able to donate £1,000 each month to a local
charity or organisation working to improve the
quality of life for those living in their area. In
FY19, £155,000 was donated to local charities
and organisations.
Since the fund launched in January 2019, we’ve
seen some great charitable activity across the
Group. Our divisional team in Bristol combined
their community fund donation with their
volunteering day, with employees lending a
hand to a local homeless charity in Bristol.
The team were involved in a wide range of
tasks from clearing an area of the site through
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Building strong community relationships
Our principles
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❝ Our operating divisions and Group support functions
are able to donate £1,000 each month to a local charity
or organisation working to improve the quality of life
for those living in their area. ❞
representing Whizz-Kidz across the
country. Members of Kidz Board visited
our developments across the UK looking
at the accessibility of communal areas
and produced a list of recommendations
for improving the accessibility of our sites.
Around £64,000 in total was donated to
Whizz-Kidz including over £40,000 raised by
employees running in the London Marathon.
During the year, we made our largest ever
corporate donation of £750,000 to RBLI, and
provided cost and construction expertise for
a new centenary village. The RBLI provides
vital employment support, advice and homes
to Britain’s ex-Armed Forces, particularly
those who are wounded, injured or sick. In
addition, they offer a range of employment
support services helping individuals with
disabilities and the long term unemployed
into sustained and rewarding work. RBLI
is also the chosen charity for this year’s
graduate project.
We have entered into a new three-year
partnership with St Mungo’s, a homeless
charity. We will be donating a total of
£500,000 to help fund the expansion of their
innovative ‘Putting Down Roots’ training
programme. This programme uses social
and therapeutic horticulture to support the
recovery of homeless people with mental
health challenges. The partnership began
with an additional £60,000 donation to the
charity’s social lettings service to fund two
Housing Management and Lettings Officers
for a year.
Value created for stakeholders
Employees
Providing a framework for fundraising offers
team building, health and wellbeing benefits.
Communities and wider society
We seek to ensure our work creates a positive
legacy and helps local communities thrive.
Future focus
We look forward to continuing our long term
partnerships with our charitable partners
and are committed to supporting more
charities in the future.
Some of our 23 employees who ran the
London Marathon on behalf of Whizz-Kidz
raising over £40,000.
www.barrattdevelopments.co.uk
to painting. This was a good opportunity for
them to learn more about the charity which is
transforming old containers into homes while
people wait to access permanent residences
and is a vital resource in the city.
We also support the dedication, energy
and enthusiasm of our employees across
the country raising money for their chosen
charities each year. In addition to divisional
charity matching, we have introduced
individual charity matching. When an
employee raises £1,000 for a registered
charity, it is matched by the Group; £77,000
has been raised and matched in the year.
We encourage all of our employees to take
paid time off work to volunteer in their
local communities. Employees across the
business spend time helping their local
communities, including maintaining nature
reserves and volunteering at local schools.
We continue to partner with the RSPB on
how nature and wildlife are incorporated
into and enhanced by our new communities.
During 2019, 150 employees will complete
the ‘Big Barratt Hike’ with an aim to raise
£100,000 for Mind and the British Heart
Foundation, the two charities chosen by
members of the Workforce Forum.
Nationally, we teamed up with the ‘Kidz
Board’, a group of eight young people
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Safeguarding the environment
Our principles
The challenge
The global challenge of climate change
has implications for every nation and
industry sector. The UK Government’s
response to this challenge, achieving
net-zero carbon emissions by 2050, will
impact construction processes and the
built environment where people live.
In addition, there are interconnected
environmental concerns over air quality,
water resources and habitats that
are likely to feature in new legislation
encompassing biodiversity and then
wider environmental net gain.
Our principle
Our operations should be energy
efficient and low carbon, minimising air
pollution and water use. We aim to build
homes and places that are adapted to
climate change with reduced carbon
emissions over their lifetime. We seek to
enhance local habitats and biodiversity
on developments.
KPIs
Carbon intensity
(per 100 sq.m. of legally
completed build area)
2.21
(2018 (restated): 2.28)
Why we measure
• Monitors environmental impact of
our business activities.
• Monitors progress in carbon
reduction arising from our
operations.
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Risks B E F G H I
Changes to Government regulation
and planning policy could impact the
way we design our developments and
deliver our homes. There are also risks
associated with climate change and the
use of new technology and materials in
the build process, including materials
related to carbon reduction.
Greenhouse gas emissions
(tonnes CO2e)1
Scope 1
Direct
Scope 2
Energy
indirect
Scope 3
Other
indirect
Total
Carbon
intensity
tCO2e
per
100m2
Scope 1
Direct
Scope 2
Scope 3
Energy
indirect
Other
indirect
Total
Carbon
intensity
tCO2e
per
100m2
2019
2018 (restated)
Building homes
22,224
3,420
291
25,935
1.52
22,170
4,526
423
27,119
1.57
Building other properties
27
35
483
545
0.03
18
13
344
375
0.02
Administrative activities
2,381
1,447
7,107
10,935
0.64
2,534
1,910
7,143
11,587
0.67
Share of joint ventures
200
114
15
329
0.02
244
145
13
402
0.02
Total location based
24,832
5,016
7,896
37,744
2.21
24,966
6,594
7,923
39,483
2.28
Total market based
24,832
3,411
7,896
36,139
2.12
24,966
4,992
7,923
37,881
2.19
1
see page 202 for our Greenhouse Gas Emissions Disclosure
and a detailed description of our operational boundary
Progress in FY19
Operational carbon emissions
We have reduced our carbon emissions relative
to build area during FY19 by 3.1%, a 21.6%
reduction since 2015. Overall, our absolute
carbon emissions for scope 1, 2 and 3
emissions have decreased by 4.4% during the
year. The decarbonisation of the UK electricity
mix over the past year has accounted for 2.6%
of this reduction. Other changes, including
initiatives relating to our offices and business
travel, contributed to the remaining 1.8%.
The use of diesel on site accounts for 59%
of our scope 1 and 2 carbon emissions. We
are taking steps to reduce this by trialling
initiatives such as low carbon generators and
challenging suppliers and divisions to ensure
diesel generators are correctly specified
for developments.
The market based carbon reporting method
takes our electricity purchasing decisions into
account and 46% of our scope 2 electricity
is backed by REGO certificates. All offices
where we control supply were moved to a
renewable tariff in October 2018, representing
66% of our office electricity in FY19. We have
REGO certificate backed energy for 37% of the
electricity supplied to sites, show homes and
sales offices.
Our energy and carbon information
has limited assurance to the ISAE 3000
revised standard, which is available
at www.barrattdevelopments.co.uk/
sustainability/our-publications.
Our construction waste relative to build area
has increased by 7.8% in FY19 measured
on housing completions and 3.4% measured
on build activity including work in progress,
which has reduced our progress on waste
reduction since 2015 to 7.9%, against our
2025 target of 20%. We diverted 97% of our
construction waste from landfill against our
95% target. See more details on pages 38 to
41, Leading Construction.
We seek to create a net gain for biodiversity
in design across all new developments
where there is no prior planning permission
from 2020. See more details on pages 36 and
37, Great Places.
Key material issues
• The energy use and carbon emissions of
our operations.
• Having an energy efficient and low carbon
supply chain.
• Waste created by our operations.
• The lifetime environmental performance
of the homes and buildings we build.
Operational risk management
The energy use and carbon emissions
of our operations
The need for industry decarbonisation
to meet the Government net-zero target
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Greenhouse gas emissions
(tonnes CO2e)1
Scope 2
Scope 3
Scope 1
Energy
Other
Direct
indirect
indirect
Total
Scope 1
Direct
Scope 2
Energy
indirect
Scope 3
Other
indirect
Total
Carbon
intensity
tCO2e
per
100m2
2019
2018 (restated)
Carbon
intensity
tCO2e
per
100m2
for example, through the Homes Builders
Federation Futures Group and the UK Green
Building Council’s Housing Standards Group.
We have also attended Government panels on
the topic of energy efficiency.
Building homes
22,224
3,420
291
25,935
1.52
22,170
4,526
423
27,119
1.57
Building other properties
27
35
483
545
0.03
18
13
344
375
0.02
Administrative activities
2,381
1,447
7,107
10,935
0.64
2,534
1,910
7,143
11,587
0.67
Share of joint ventures
200
114
15
329
0.02
244
145
13
402
0.02
Total location based
24,832
5,016
7,896
37,744
2.21
24,966
6,594
7,923
39,483
2.28
Total market based
24,832
3,411
7,896
36,139
2.12
24,966
4,992
7,923
37,881
2.19
Waste, air quality and water use
Construction, excavation and demolition waste
amounts to 61% of all UK waste1. Recent
months have seen increased public concern
and scrutiny over the issue, in particular with
single use plastics. Waste also puts pressure
on the raw material availability and our Waste
Reduction Group monitors waste performance
regularly. See Leading Construction on pages
38 to 41.
Air quality is of increasing concern in major
cities, with larger cities such as Manchester
and London consulting on and introducing
in-depth strategies on how to tackle the issue.
We can play our role in improving air quality
through measures to reduce diesel use on
site before utility connection and through the
efficiency of mobile plant.
requires robust data to make the right
decisions, and to track progress. We are
committed to introducing a science-based
carbon emission target in FY20, which makes
the scoping of our emissions and basis of
reporting increasingly important.
Through building partnerships with
water companies, we are laying the basis
for addressing regional water shortages
that are likely to be exacerbated through
climate change by exploring customer
and infrastructure solutions.
We have aligned data collection for mandatory
carbon reporting with accounting and reporting
requirements, formalising and embedding
policies and procedures in our Group and
divisional finance teams. This, and a review of
carbon emission factors used in calculations,
resulted in a restatement of our 2018
carbon emissions. We will continue to make
improvements going forward. Our Corporate
Sustainability and Group Finance teams
have received training on Mandatory Carbon
Reporting and Streamlined Energy and Carbon
Reporting (SECR).
Our indirect carbon footprint: supply
chain emissions and low carbon homes
We aim to use our influence to reduce
indirect emissions through goods and
services we purchase and from carbon
emissions released from energy use during
the lifetime of our homes. In FY19 we have
quantified our priority scope 3 emissions
and will integrate this into our future science
based target.
Through industry bodies and engagement
with policymakers directly, we are contributing
to discussions on low carbon future homes,
Biodiversity
We have contributed to Government
discussions over policy on creating net gains
for biodiversity on new developments, and have
worked with research groups and professional
associations to develop guidance and
principles that can be used for the industry,
testing a sample of our own developments to
establish the costs and practical implications
of achieving net gain. More information is
available in the Great Places section of this
report on pages 36 and 37.
Value created for stakeholders
Shareholders
Through improved data collection and
carbon reduction initiatives we can reduce
transitional risks for investors and provide
transparency expected as a result of TCFD
recommendations. The Bank of England
plans to stress test financial institutions
for their investment exposure to physical
and transitional risks along the lines
recommended by the TCFD. This will lead to
more scrutiny from investors in the areas of
carbon emission reduction activities and the
climate risks inherent in their investments.
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More information on how we are mitigating
and adapting to climate change can be found
in our annual disclosure to the CDP Climate
Survey (cdp.net). We scored a B grade in 2018.
Customers and communities
By considering operating efficiencies through
process and technological improvements
we can reduce diesel use. This has potential
not only to reduce energy costs and carbon
emissions for our business, but also reduce
noise, air pollution and the risk of diesel
spills, to the benefit of local communities
and our customers.
Suppliers
The process of setting a science-based target
will help us to identify opportunities to lower
embodied carbon in our materials and our
supply chain as they also transition to a low
carbon economy and mitigate associated
risks and costs.
Future focus
In the short term, we will continue to focus
efforts on reducing site diesel use. Initiatives
will include the roll-out of renewables and
battery enabled generation for new site starts.
We will engage site teams and use telemetry
data to track and reduce idling time.
We will continue to roll out LED lighting
and energy improvements to heating and
air conditioning across the office portfolio,
complete more rigorous energy efficient
checks in our office inspections, reduce
business travel using remote working
technologies and will increase the proportion
of our electricity backed by REGO certificates
for sites, sales offices and showhomes.
Over the medium term to 2025 we will
lead research and collaboration with our
suppliers to deliver viable solutions that
meet the proposed Future Homes Standard
and our customer needs.
Longer term, with new and improved
information on our direct and indirect energy
use and emissions, our science-based
target will set out a long term trajectory
for decarbonisation aligned with the latest
IPCC report. This will ensure the business
is focused on the right strategic priorities to
maximise carbon emission reduction.
1 DEFRA (2016) UK Statistics on Waste.
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Ensuring the financial health of our business
Our principles
The challenge
Maintain a strong balance sheet
underpinned by clear financial
principles providing resilience and
flexibility to react to changes that arise
in the operating environment.
Our principle
Our people take individual responsibility,
appropriate to their level of seniority,
for the financial management and
performance of our business. We
maintain financial discipline across all
aspects of our operations.
Risks A B C D E F G H
I
J
Availability of sufficient committed and
surety facilities provides resilience for
the Group to respond to changes in
the economic environment and take
advantage of appropriate land buying
and operational opportunities to help
deliver sustainable shareholder value.
Land bank
Land creditors
Operating framework
30 June 2019
c.3.5 years owned and
c.1.0 year controlled
3.9 years owned and
0.8 years controlled
30 – 35% for 30 June 2019
Reduce usage to 25 – 30%
over the medium term
31.3%
Net cash
Modest average net cash
Treasury
Capital Return Plan
Year end net cash
Appropriate financial
facilities
2.5× dividend cover
Ordinary dividends
supplemented by special
returns when market
conditions allow
Average net cash of
£298.3m
30 June 2019:
net cash of £765.7m
See Treasury section
See Capital Return Plan
section
Business resilience
The Group has a clear operating framework
that is focused on building and maintaining a
resilient business model to enable the delivery
of sustainable shareholder returns. We believe
financial discipline across our key drivers
Key drivers of our business resilience:
enables the Group to deliver its operational
targets of disciplined volume growth, margin
improvement and cash returns whilst
maintaining our industry leading standards of
customer and build quality.
Key drivers
Financial discipline
Financial discipline across
all aspects of our operations
Land
Maintenance of strong financial control environment
Improvement of operating margin
Strong balance sheet position Compliance with operating framework
Cash generation
Appropriate capital structure Overall gearing
Capital Return Plan
Treasury
Taxation
Tax strategy
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Ensuring the financial health of our business
Our principles
55
Financial discipline across all aspects
of our operations
Land
We continue to target a regionally balanced
high quality land portfolio and to hold an
appropriate land bank of c.3.5 years of
owned land and c.1.0 year of controlled land.
This level of land ownership supports our
aspirations of disciplined volume growth
whilst maintaining our focus on return on
capital. To support this aspiration and given
the excellent land opportunities during the
year, we currently hold 3.9 years of owned
land and 0.8 years of controlled land in good
locations where customers want to live.
Across our regional business our land teams
use their expertise to identify suitable, high
quality sites that will enable us to create
great places for our customers. Our Land
Committee approves all land purchases to
manage capital allocation, risk and ensure
commercial, operational and financial
matters are considered in depth. In addition,
we continue to secure strategic land and
have a medium term aim to achieve 30%
of home completions from this source.
Maintenance of a strong financial
control environment
The Group has a clear organisational
structure with embedded financial and
management reporting systems and
controls. More detail on these can be found
in the Audit Committee Report on pages 84
to 91.
Our principal financial operational risk is
the valuation of land and work in progress.
In order to determine margin recognition,
the Group has to make a number of estimates
on future costs and sale prices. The Group’s
key control is the site valuation process
where these assessments are determined.
Through this cross functional control process,
management review build programmes,
challenge site margins, review forecast
sales prices and consider costs to complete
in depth. More detail on these can be found
on pages 84 to 91. We are currently piloting
a new valuation system to improve efficiency
and further strengthen controls around the
valuation process.
In addition, we have robust controls across
the other financial aspects of our operations
including, but not limited to: tendering,
authorisation and payment of sub-contractors
and suppliers; forecasting of working capital
requirements and covenant compliance; sales
policies and review of pricing and joint ventures
performance and control.
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Improving operating margin
We believe our industry leading customer
service and build quality is not only the right
thing to do for our customers, but is also
fundamental to improving the efficiency of our
operations. Operating margin is a medium
term target of the Group, with ongoing weekly,
monthly and yearly reporting on forecasts
and budgets closely reviewed and monitored
across our business. We have implemented
a number of levers to improve margins and
continue to focus on improving the efficiency
of our operations, whilst maintaining
customer service and quality, generating
sustainable returns for our shareholders.
Operating margin bridge
The drivers of our operating margin improvement from FY18 to FY19 were:
60bps
(20bps)
110bps
10bps
(20bps)
18.5%
10bps
18.5%
(60bps)
(10bps)
Increase
Decrease
40bps
18.9%
19.5%
19.0%
18.5%
18.0%
17.5%
17.7%
17.0%
FY18
Regional
new sites
starting
trading
Showhomes
Central
London
trading
Mix/
commercial/
other
Operating
Expenses
Other
Income
Subtotal
Disposal of
legacy
commercial
asset
Costs
associated
with legacy
non commercial
properties
Adjusted
operating
profit
Reversal
of inventory
provisions
FY19
Trading items – 80 bps
Non recurring items – 40 bps
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Ensuring the financial health of our business continued
Our principles
Strong balance sheet position
Compliance with operating framework
We have a strong operating framework to
maintain an appropriate capital structure.
Shareholders’ funds and land creditors are
used to fund longer term investment, while
working capital is funded from existing cash
resources as the business operates with
modest average net cash, supported by
bank facilities.
Appropriate capital structure
Overall gearing
In order to continue to reduce gearing and
further strengthen our balance sheet, the
Group is committed to reducing our usage of
land creditors to 25 – 30% of the owned land
bank in the medium term. We are making
good progress against this: at 30 June 2019
our land creditors stood at 31%, a reduction
from 34% in 2018.
Cash generation
Cash generation remains high through
effective working capital management and
operational controls. In order for the Group to
fund its ongoing operational commitments,
we have strong controls and discipline on
working capital management, checks and
controls including weekly and monthly cash
flow forecasting. We maintain a modest
average net cash over the financial year, and
had £765.7m net cash as at 30 June 2019.
We are focused on ensuring that we manage
our total gearing and against our operating
framework. Since June 2013 total gearing
including land creditors has reduced
substantially from 35% to 5% at 30 June 2019.
Improving business resilience
m
£
800
700
600
500
400
300
200
100
34.0%
29.0%
24.0%
19.0%
14.0%
9.0%
4.0%
FY15
FY16
FY17
FY18
FY19
Operating margin
Net cash as at 30 June
Net gearing (inc land creditors) as at 30 June
Capital Return Plan
We have a well-defined dividend policy, with
the Group paying an ordinary dividend cover
of 2.5 times. We have previously announced
that when market conditions allow, ordinary
dividends will be supplemented with special
returns. For more details please refer to
page 18 and 19.
Treasury
Relationships with banks and cash
management are coordinated centrally as a
Group function. The Board approves Treasury
Policy and Senior Management control day-
to-day operations. The Treasury Policy is
intended to maintain an appropriate capital
structure and provide the right platform for
the business to manage its operating risks.
More detail on Treasury Policy is included in
note 5.4 to the Financial Statements.
Tax strategy
While the Group has a responsibility to
its shareholders to deliver value, it also
recognises its broader, social responsibilities
to pay the right amount of tax at the right
time. All of the profits of the Group are
subject to full UK corporation tax and the tax
charge for the year ended 30 June 2019 was
£170.4m (2018: £164.0m).
The Group does not enter into business
transactions which are for the sole purpose
of reducing potential tax liabilities. The
Group’s tax strategy is to only take advantage
of any available reliefs and exemptions
which have been set out in any current tax
legislation to minimise its tax liabilities.
The Group does not have a target effective
tax rate and the rate for the year ended 30
June 2019 was 18.7% (2018: 19.6%) which
is marginally lower (2018: higher) than
the standard effective rate of tax of 19.0%
(2018: 19.0%).
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Ensuring the financial health of our business continued
Risk management
Our principles
Process for identifying our
principal risks
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, including at site, divisional
and regional level. We evaluate risks, how
these have changed over time and what
actions are being taken to mitigate them.
They are then fed into the Group’s detailed
risk register which also includes a number
of cross-functional Group wide risks.
Risks are reviewed by divisional and
regional management as well as by Senior
Management and the Board which ensures
there is a regular ‘bottom-up’ and ‘top-down’
consideration of risks. The risk register
is reviewed on a regular basis by the Risk
Committee which considers the severity of
each risk, the required mitigating actions
and business procedures and controls.
The severity of the risk is determined based
on a defined scoring system assessing risk
impact and likelihood.
Strengthening our framework
During the year, the Group’s risk framework
has been further strengthened. The Risk
Committee, which met three times during
the year, has expanded the breadth of its
membership. At each Risk Committee,
updates on principal risk areas are
presented as well as a consideration of new
and emerging risks and an ongoing review
of mitigating actions. The Chairman of the
Audit Committee routinely attends meetings
in order to provide independent challenge to
the risk management process.
The Risk Committee has, during the
year, created the, ‘Data Protection and
Technology Crisis Risk Sub-Committee’,
specifically focused on managing, evaluating
and taking action against data protection
and technology risk. This sub-committee
comprises both members with specialised
understanding of technology risks and
Senior Management.
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, 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. The Board, as part
of its regular risk assessment procedures,
also takes into account the significance of
environmental, social and governance matters
to the business of the Group. Based on the
regular and adequate information provided to
the Board on such matters, it identified and
assessed the significant risks to the Group’s
short, medium and long term value as well
as potential opportunities to enhance value
that may arise from an appropriate response
to such matters. 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 page 58.
Risk appetite
The risk appetite for the Group is set by
the Board. It has identified operational
categories against which both our current
risk profile and our risk tolerance range have
been defined. These risk categories may be
dependent on the macroeconomic context and
we may adjust our risk appetite accordingly.
In defining our risk appetite, the Board has
taken into account the expectations of its
shareholders and other stakeholders.
Overall assessment
The current risk profile is within our tolerance
range; the Group is willing to accept a moderate
level of operational risk in order to deliver
financial returns. There may be occasions
where these risks could have a moderate
adverse impact on the Group, be it financially
or operationally, although the impact can be
mitigated through some management actions.
Why and how our risks change
The principal risks identified, either separately
or in combination, could have a material
adverse effect on the implementation of
the Group strategy, our business, financial
performance, shareholder value and returns
and reputation.
Reputational risk could potentially arise
from a number of sources including external
and internal influences relating to the
housebuilding sector which, when combined
or over a period of time, could create a new
principal risk. The Group actively manages
the impact of reputational risk by carefully
assessing the potential impact of all the
principal risks and implementing mitigation
actions to minimise those risks.
Whilst the principal risks for the Group related
to the execution of its business strategy have
not fundamentally changed, the likelihood of
the risk factors occurring can change.
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The risk profiles listed in the table on pages
59 to 64 show the estimated likelihood of each
principal risk following our risk mitigation
review and strategies implemented. The
principal risks are not listed by order of
importance and the illustration of the
probability does not consider the relative size
of any associated financial or reputational
impact of each item. No new principal risks
have emerged during the financial year.
Climate change risk
As explained more fully in ‘Our sustainability
focus areas’ climate change presents an ever
increasing focus for both the Government and
wider society. For our business, the risk from
climate change presents itself in a number
of principal areas. Transitional risks and
opportunities are those relating to actions
the business takes to meet the challenge
of operating in a net zero carbon economy.
These include the risks to construction from
the use of new technology and materials
aimed at reducing carbon emissions. These
risk areas are embedded within the Group’s
risk management process in a number of
areas, including Construction, Availability of
raw materials, sub-contractors and suppliers
and Government planning and regulation.
Physical risks and opportunities relate to
changing climate, which can impact on
the comfortable heating of homes and the
ability of developments to withstand extreme
weather events such as heavy rainfall.
Failure to address the risks from climate
change or not follow climate related regulation
could further increase the overarching risk to
the Group’s reputation. Inclusion within the
Group’s risk management process means
climate change risk and its potential impact is
carefully monitored and mitigated.
As a business, we are focused on minimising
the operational impact of our business and
improving the energy efficiency of our sites
and operations, mitigating climate change
through the design and build of our homes
and developments and by working with our
suppliers to reduce carbon in our supply
chain. More information can be found in our
online Climate Change Policy and our annual
submission to the Carbon Disclosure Project,
available at www.cdp.net.
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58
Risk management
continued
Monitoring risk throughout the Group
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
Reviews the
effectiveness of
internal controls,
including systems to
identify, assess and
monitor risks
Nomination
Committee
Ensures an
appropriate balance
of skills, knowledge
and experience on
the Board
Remuneration
Committee
Assesses the
appropriate
incentivisation
of the Executive
Directors and Senior
Management
Safety, Health
and Environment
Committee
Responsible for
the stewardship
of safety, health
and environmental
performance
Disclosure
Committee
Responsible for
compliance with
the requirements of
the Market Abuse
Regulation
Regular performance and risk reports to the Board
Executive Committee
Whistleblowing
line and
audit reports
throughout
the year
Monitoring business and operational performance and changes in key risks facing the business
Responsible for ensuring that the risk management policy is implemented and embedded within
the business and appropriate actions are taken to manage risks
Treasury
Operating
Committee
Manages liquidity
and counterparty
risk and ensures
that treasury
policies are
implemented and
embedded within
the business
Land Committee
Reviews and
authorises all
proposed land
acquisitions to
manage land
acquisition risk
Safety, Health
and Environment
Operating
Committee
Reviews the
effectiveness of
health and safety
policies and
establishes controls
and procedures to
manage these risks
Operations
Committee
Reviews operating
performance
Risk Committee
Considers identified
risks and their
mitigation
Identifies new and
emerging risks
Data Protection
and Technology
Crisis Risk Sub-
Committee
Identifies and
considers
technology related
risks and their
mitigation
Implementation and embedding of the risk management policy
Site Management
Maintains an effective system of
risk management and internal
control at site level including
construction and sub-contractor
risks and SHE
Regional and Divisional
Management
Responsible for risk identification,
management and control within
their region or division
Independent Assurance
Internal audit, external auditors
and other independent experts
test the design and
effectiveness of procedures
and controls
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Principal risks
What we do with our principal risks
Accountability
Assigns ownership for risks and mitigations
Tolerance
Sets tolerance for risk taking and benchmark
against our current position
Risk reduction
Identify and track actions when out of tolerance
Informed decisions
Inform budget and strategic decisions
Oversight
Focal point for Executive Committee, Risk Committee
and Board deep dives
Assurance
Audit and Compliance teams use the risks to inform assurance
planning and test how effectively risks are being managed
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Risk level/appetite H High risk M Medium risk L Low risk Change in risk level from previous year ↑ Increase ↓ Decrease — No change
A Economic environment, including housing demand and mortgage availability
Risk level H Risk appetite M Link to strategic priorities and principles
Change from previous year —
Description of risk level
The impact of the UK’s
forthcoming exit from the EU
has heightened uncertainty
in the wider macroeconomic
environment over the last year.
There is also an increased level
of political uncertainty in the
UK. Against this, however, sales
rates and the housing market
have remained stable. The new
build market continues to be
characterised by undersupply, low
interest rates and good mortgage
availability. The economic outlook
will depend on the form of
the UK’s EU withdrawal in the
medium term.
Risk description
Changes in the UK and European
macroeconomic environments including,
but not limited to, the impact of the UK’s
forthcoming exit from the EU and any
change or removal of the Government’s
Help to Buy scheme, flat or negative
economic growth, inflation, interest rates,
buyer confidence, mortgage availability,
competitor pricing and falls in house
prices or land values.
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.
Changes in the economic environment
may lead to falling demand or lower prices
achieved for homes, which in turn would
affect our volume targets and ability to
provide profitable growth and lead to
impairments of the Group’s inventories,
goodwill and intangible assets.
Response/mitigation
• Board, Executive Committee,
regional and divisional
management reviews.
• Quarterly site valuations.
Key risk indicators
Gross and operating
margins, PBT, ROCE,
EPS, TSR, total home
completions
• Comprehensive sales policies
and regular review of pricing,
local markets and developing
good working relationships with
mortgage lenders.
• Maintenance of an appropriate
capital structure and balance
sheet control.
• Planning for the impact of
the UK’s forthcoming exit
from the EU and adapting the
businesses’ operations as
necessary.
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Principal risks
continued
B Land availability
Risk level M Risk appetite M Link to strategic priorities and principles
Change from previous year —
Risk description
The inability to secure sufficient consented
land and strategic land options at
appropriate cost and quality.
Securing more sites that meet our hurdle
rates of margin and site ROCE will enable
disciplined volume growth. Insufficient
land would affect our ability to achieve
our volume targets and ability to provide
profitable growth.
Description of risk level
The Group’s land bank is in a
strong position and the Group
continues to see a good supply
of new land and strategic land
opportunities. The hurdle
rates for land purchases were
increased in FY18 to help support
margin growth and ensure we
remain selective on acquisitions.
Response/mitigation
• All potential land acquisitions
Key risk indicators
Land approvals (plots)
are subject to formal appraisal
and approval by the Land
Committee.
• Group, regional and divisional
review of land currently owned,
committed and identified
against requirements.
• Formal relationship
management with key land
suppliers, landowners and local
authorities.
• Review by Land Committee and
management on strategic land
and sites.
• Land forum and academy
training events.
• Increased usage of strategic
land.
C Availability of finance and working capital
Risk level L Risk appetite L Link to strategic priorities and principles
Change from previous year —
Key risk indicators
Average net cash
Risk description
Unavailability of sufficient borrowing
facilities 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,
JVs and the cash flows related to them.
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 to help deliver sustainable
shareholder value. Reduced borrowing
facilities and/or working capital would
affect the Group’s ability to service
liabilities (including pension funding).
Description of risk level
In November 2018 the Group
extended its £700m RCF until
2023 with the option to extend
this further by two one-year
extension options. In addition,
the Group holds £200m of fixed
rate USPP notes until 2027.
The Group has £765.7m net cash
and net assets of £4,869.0m as at
30 June 2019.
Response/mitigation
• Committed bank facilities and
private placement notes of
around £900m with maturity on
the RCF in 2023 and the private
placement notes in 2027.
• Regular forecasts of working
capital and cash requirements
and compliance with banking
covenants.
• Policy requiring minimum
headroom of £150m of drawings
against committed facilities.
• Maintenance of an appropriate
capital structure and balance
sheet control.
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D Attracting and retaining high-calibre employees
Risk level H Risk appetite M Link to strategic priorities and principles
Change from previous year —
Risk description
The ability to recruit and/or retain a
sufficient number of employees with the
appropriate skills.
Development of skilled employees is critical
to delivery of the Group’s strategy of profit
and volume growth through a focus on
efficiency and the continued delivery of
attractive cash returns. Failure to attract or
retain employees with the appropriate skills
would affect these targets.
Description of risk level
There continues to be ongoing
competitiveness for employees in
the operational business, including
from new entrants to the market.
The Group has implemented
a number of initiatives to
improve employee retention and
engagement.
Key risk indicators
Employee
engagement score
Response/mitigation
• Comprehensive human
resources programme including
apprenticeship schemes,
a graduate development
programme, succession
planning and training academies
tailored to each discipline.
• Ongoing monitoring of employee
turnover and absence statistics
and feedback from exit interviews.
• Annual employee engagement
survey to measure employee
satisfaction.
• Remuneration benchmarking
against industry competitors.
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E Availability of raw materials, sub-contractors and suppliers
Risk level M Risk appetite L Link to strategic priorities and principles
Change from previous year ↓
Risk description
Shortages or increased costs of materials
and skilled labour, the failure of a key
supplier or the inability to secure supplies
on appropriate credit terms.
Description of risk level
There continues to be pressure
on the availability of certain build
materials and a shortage of skilled
labour in the housebuilding industry.
Maintaining sufficient material and skilled
sub-contractor availability will enable
disciplined volume growth. Failure to do so
may lead to increased costs and delays in
construction which in turn would affect our
financial position.
The impact of the UK’s
forthcoming exit from the EU
on the ongoing supply of skilled
labour and imported materials is
currently uncertain. Around 10%
of the Group’s materials, by spend,
are imported and a further 30%,
by spend, contain some imported
components.
Changes in legislation in FY20
have the potential to change
processes for the Group and its
sub-contractors.
The risk level has reduced during
FY19 as additional capacity of our
key materials and components
has become available in the UK. In
addition, the Group acquired Oregon
to secure our timber frame supply.
Where appropriate we have entered
into longer term arrangements to
ensure supply continuity over an
extended period. In the current
climate, particular attention has
been given to negotiating such
arrangements where imported
goods are involved.
Response/mitigation
• Centralised team procures the
majority of the Group’s materials
from within the UK including sub-
contractor materials, ensuring
consistent quality and costs.
Key risk indicators
Customer service,
gross and operating
margin, PBT, ROCE,
EPS, TSR, total
home completions
• 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.
• The Group has a key supplier audit
programme to assess risks to the
reliability of supply continuity.
• Group policies include tendering,
the requirement for multiple
suppliers for both labour
contracts and material supplies
and contingency plans, should
any key supplier fail.
• Control of build and material
costs throughout build
programmes.
• All key suppliers have confirmed
that they have plans in place to
seek to minimise disruption on
the UK’s exit from the EU.
•
In June 2019 the Group acquired
Oregon.
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62
Principal risks
continued
F Government regulation and planning policy
Risk level M Risk appetite M Link to strategic priorities and principles
Change from previous year —
Risk description
Changing complex regulatory environment
which affects planning and the time
taken to obtain planning approval
and technical requirements including
Building Regulations.
Securing sufficient, appropriate planning
permissions on new sites will enable the
Group to deliver disciplined volume growth.
Changes to the regulatory environment
could affect our financial position.
Description of risk level
Following the introduction of
the NPPF in 2012, planning
permissions granted in England
have increased. However, the
planning process remains lengthy
and complex.
Response/mitigation
• Considerable in-house technical
and planning expertise focused
on complying with regulations
and achieving implementable
planning consents that meet
local requirements.
Key risk indicators
Gross and operating
margin, PBT, ROCE,
EPS, TSR, total home
completions
Other potential regulatory
changes may impact how we
design our developments and
deliver and sell our homes.
Changes to Building Regulations
and Fire Safety Regulations
may occur as a result of the
Government’s consultation on
reforming the building safety
regulatory system following
recommendations from
the Independent Review of
Building Regulations and Fire
Safety, the impact of which is
currently unknown.
• Robust and 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.
• Consultation with Government
agencies, membership of
industry groups to help
understand and monitor
proposed regulation change.
G Construction
Risk level M Risk appetite L Link to strategic priorities and principles
Change from previous year —
Risk description
Failure to identify and achieve key
construction milestones (due to factors
including the impact of adverse weather
conditions), failure to identify cost overruns
promptly, design and construction defects,
exposure to environmental and unadopted
site infrastructure liabilities. There are also
risks associated with climate change and
the use of new technology and materials
in the build process, e.g. materials related
to carbon reduction.
We aim to reduce the risks inherent in the
construction process and help address the
shortage of skilled employees and sub-
contractors through the use of MMC which
is implemented where appropriate. Delays
in construction, or poor product quality,
could increase costs, reduce selling prices
and sales volumes and result in litigation
and uninsured losses.
Description of risk level
The Group’s construction process
and policies have remained
unchanged in the last year. The
Group continues to expand the
use of new product ranges which
maintain our high standards of
design while it simplifies the
build, helps us to reduce build
cost and waste and are more
suitable for MMC.
Response/mitigation
• Executive Committee, regional
and divisional reviews and
quarterly site valuations.
• Continuous review of MMC and
the quality of materials which are
evaluated by external and internal
technical experts, including the
NHBC, to ensure compliance with
all building and other regulations.
Key risk indicators
Customer service,
total home
completions, gross
margin, operating
margin, PBT, ROCE,
EPS, construction
waste intensity and
carbon intensity
reduction
• Monitoring and improving
environmental and sustainability
impact of construction methods
and materials used.
• Maintenance of appropriate
insurance cover.
• Detailed build programmes and
quality reviews, divisional monthly
valuation meetings and sign off.
• Review of use of MMC by Group
Design & Technical.
• Technologies new to Barratt
go through a rigorous testing
and analysis process before full
implementation.
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63
H Joint ventures and consortia
Risk level L Risk appetite M Link to strategic priorities and principles
Change from previous year ↓
Description of risk level
Our investment in JVs is £189.0m
(2018: £234.1m) a reduction from
the previous year. The Group sold
its investment in the Aldgate
Place JV in June 2019 and there
are some active JVs which are
due to finish trading in FY20.
Response/mitigation
• All potential JVs are subject to
formal appraisal and approval
by the Group’s Land Committee
and the Board.
• Once operational, the
performance of JVs and
consortia are subject to
regular review.
Key risk indicators
ROCE, total home
completions
Risk description
Large development projects, some of
which involve joint ventures or consortia
arrangements and/or commercial
developments, are complex and
capital intensive.
Securing more JV sites that meet our hurdle
rates enables disciplined volume growth.
Engaging with JVs assists in reducing and
sharing risks on complex, capital intensive,
bespoke and commercial developments.
Changes in complex developments may
negatively impact on cash flows or returns.
I
Safety, health and environment
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Risk level M Risk appetite L Link to strategic priorities and principles
Change from previous year —
Risk description
Health and safety or environmental
breaches can result in incidents affecting
employees, sub-contractors and site
visitors.
We continue to prioritise and focus on
health and safety to seek to reduce injury
rates and manage the risks inherent in the
manufacturing and construction process.
SHE breaches could cause potential
reputational damage, criminal prosecution
and civil litigation, delays in construction or
increased costs.
Description of risk level
There was a fatal incident on one
of the Group’s sites in June 2019.
The Group continues to focus
on health and safety including
ensuring consistent controls
are in place to reduce accidents
and injuries.
The Group IIR rate for the year
is 297 (2018: 462) per 100,000
persons employed (including sub-
contractors).
Response/mitigation
• Internally resourced health
and safety team.
• Regular health and safety
Key risk indicators
Health and
safety (SHE audit
compliance)
monitoring by our in-house
team, internal and external
audits of all operational units
and regular Senior Management
reviews of developments.
• Continued reinforcement
of Group SHE policies and
procedures.
• Dedicated SHE and
Operations Committees which
review key performance
indicators, improvement
plans and reinforce the
importance of health, safety
and environmental compliance.
• Quarterly performance reviews
by divisional management
within all operating units.
• Independent reviews of our
SHE processes.
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64
Principal risks
continued
J IT
Risk level M Risk appetite L Link to strategic priorities and principles – ALL Change from previous year —
Risk description
Failure of any of the Group’s IT systems,
in particular those relating to customer
information, surveying and valuation. The
Group could suffer significant financial and
reputational damage due to the loss, theft
or corruption of data either inadvertently or
via a targeted cyber attack.
Description of risk level
The threat of external cyber
attacks and phishing attempts
continues to increase with a
number of high profile incidents
being reported in the media
during the year.
We continue to improve integration of
IT systems to enhance business control
and drive efficiency. Failures of any of the
Group’s IT systems could adversely impact
the performance of the Group.
Key risk indicators
Customer service,
gross and operating
margin, PBT, ROCE,
EPS
Response/mitigation
• Centrally maintained IT
systems.
• Fully tested disaster recovery
programme.
• Regular reviews to seek to
reduce the risk of successful
cyber attacks.
• Business processes and
data management which are
GDPR compliant. There is an
ongoing review and governance
approach, including a specific
Data Protection Risk and
Technology Crisis Committee to
assess our risks and implement
mitigating actions.
• Group-wide compliance and
policies on passwords and
transferring data to third
parties.
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Long term viability statement
In accordance with provision C.2.2 of the
Code, the Directors have assessed the
prospects and financial viability of the Group
over the longer term, taking into account
both its current position and circumstances,
and the potential impact of its principal risks.
The Group’s future prospects are primarily
monitored through the risk management
processes detailed on page 57 and 58.
For the Long term viability statement, the
Directors consider that a three-year review
period is appropriate. This 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. Additionally, the
Group’s objective is for a shorter than sector
average land bank, reflecting its focus on
return on capital and a fast build and sell
model. Our target is 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. Accordingly, we consider it
appropriate that our viability review period is
broadly aligned with the expected longevity of
our owned land supply.
The Group considers it is subject to a
number of principal risks (as set out in more
detail in pages 59 to 64), and its Long term
viability statement review considers the
impact that these risks (particularly those
related to the economic environment and
availability of finance and working capital)
might have on its ability to meet its targets in
current market conditions. The high profile
risks with severe but plausible impacts
were modelled over the three-year period
by changing assumptions in the Group’s
forecasts. The scenarios tested were as
follows:
65
Principal risk
Risk Reference
Scenarios modelled
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A sudden decline in demand leading
to reduced sales volumes and sales
prices, increased costs for materials
and labour, and increased finance
costs, followed by a gradual recovery,
arising, for instance, as a potential
consequence of the UK leaving the EU
on unfavourable terms.
An increase in build and administration
costs arising from inefficiency.
An increase in costs incurred on
completed developments and a delayed
reduction in sales volumes. Additional
provisions are required for defects and
legal costs.
An increase in the cost of material and
labour and an extended average build
time for houses.
Economic environment,
including housing
demand and mortgage
availability
Attracting and
retaining high-calibre
employees
Cost and availability
of raw materials,
sub-contractors and
suppliers
A
D
E
Each scenario included the Capital Return
Plan as announced, including the November
2019 and November 2020 special returns.
Where necessary, in each scenario,
mitigating actions were modelled that would
be adopted by the Group in response to these
risks. The modelled mitigating actions were
based on those identified and successfully
deployed during the previous downturn in
2007-2008.
Under the above scenarios, the Group is
able to continue in operation and meet its
liabilities as they fall due in the assessed
period.
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 the
three-year period.
The Strategic Report on pages 2 to 65 was
approved by the Board and is signed on its
behalf by:
David Thomas
Chief Executive
3 September 2019
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66
Executive Committee
The Executive Committee consists of:
1 David Thomas
Chief Executive
See page 68.
2 Steven Boyes
Deputy Chief Executive and
Chief Operating Officer
See page 68.
3 Jessica White
Chief Financial Officer
See page 69.
11
4 Rob Tansey
Group HR Director
Rob has responsibility for the Group’s
human resources strategy including
recruitment, remuneration and benefits,
talent and performance management and
training and development programmes.
Career and experience:
Rob joined the Group in 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. Rob was a member
of the CITB Council until December 2017 and
is now a member of the new CITB Nation
Council for England.
5 Jeremy Hipkiss
Group Sales and Marketing Director
Jeremy is responsible for the Group’s
overall sales, marketing and customer
experience strategy and delivery.
In addition to these responsibilities,
Jeremy has executive responsibility for IT
and our business improvement programme,
Building Excellence.
Career and experience:
Jeremy joined the Group in 2008 and has
wide experience in marketing and retail
operations, having held a similar role at the
Spirit Group. Prior to that, Jeremy worked
for Allied Domecq PLC and Marston’s PLC
having graduated in Economics at Leeds
University.
6 Tina Bains
Company Secretary
See page 69.
1
9
12
6
7
3
5
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Regional Managing Directors
67
The Group operates through six geographic housebuilding regions and a commercial division,
each of which has a Managing Director as follows:
7 Doug McLeod
Regional Managing Director, Scotland
9 Bernard Rooney
Regional Managing Director, Central
11 Chris Burton
Regional Managing Director, West
Doug is responsible for the Group’s
operations in the Scotland Region which
consists of three divisions. He is also now
responsible for the operations at Oregon.
Career and experience:
Doug joined the Group in January 1974.
Formerly Regional Director of Barratt
Scotland and Managing Director of Barratt
North Scotland, he was appointed to his
current role in January 2017.
8 Mike Roberts
Regional Managing Director, Northern
Mike is responsible for the Group’s
operations in the Northern Region which
consists of four divisions. He is also
responsible for the Group’s commercial
and construction functions.
Career and experience:
Mike joined the Group in June 2004.
Formerly Managing Director of Barratt North
East, he was appointed to his current role in
January 2017.
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.
10 Richard Brooke
Regional Managing Director, East
Richard is responsible for the Group’s
operations in the East Region which consists
of six divisions. He is also responsible for the
Group’s procurement function.
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
Limited. He was appointed to his current
position in July 2008.
8
2
13
4
10
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Chris is responsible for the Group’s
operations in the West Region which consists
of three divisions.
Career and experience:
Chris joined the Group in 1985. Formerly
Managing Director of Barratt Yorkshire West
for 13 years, he was appointed to his current
role in July 2012.
12 Gary Ennis
Regional Managing Director,
London and Southern
Gary is responsible for the Group’s
operations in the London and Southern
Region which consists of six divisions.
Career and experience:
Gary joined the Group in 1995. Formerly
Managing Director of Barratt North London
he was appointed Regional Managing
Director of Southern in January 2006 and of
London in October 2016.
13 Nick Richardson
Managing Director,
Wilson Bowden Developments
Nick is responsible for our commercial
business, Wilson Bowden Developments.
Career and experience:
Nick joined Wilson Bowden plc 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.
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68
The Board
We have an experienced and committed Board which continues to focus on promoting the
success and long term sustainable value of the Group.
8
1
5
9
6
7
3
2
4
1 John Allan
Non-Executive Chairman
2 David Thomas
Chief Executive
Appointment to the Board:
John joined the Board as a Non-Executive Director
on 1 August 2014 and became Chairman on
12 November 2014.
Appointment to the Board:
David joined the Board 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 Disclosure Committee.
Career and experience:
David brings a wealth of financial and leadership
experience acquired over a number of years in
senior positions. He is a Non-Executive Director
of the HBF and 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.
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 is Chairman of Tesco
PLC, President of the CBI and a regent of the
University of Edinburgh. He will become the Chair
of the Council at Imperial College from 1 January
2020. Previously, John was Chairman of London
First and 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 Chairman
(2011-2016) and then Non-Executive Director
(2016-2018) of Worldpay plc. John 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 include CFO of Deutsche Post until
2009 and Chief Executive of Exel plc until 2005.
Barratt Developments PLC Annual Report and Accounts 2019
3 Steven Boyes
Deputy Chief Executive and
Chief Operating Officer
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 is responsible
for the Group’s housebuilding operations.
Committee membership:
Member of the Safety, Health and Environment
Committee.
Career and experience:
Steven has over 40 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. Steven was
also previously a trustee of the UK Green Building
Council (2015–2018).
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4 Jessica White
Chief Financial Officer
7 Jock Lennox
Non-Executive Director
Appointment to the Board:
Jessica joined the Board as an Executive Director
and Chief Financial Officer on 22 June 2017.
Appointment to the Board:
Jock joined the Board as a Non-Executive
Director on 1 July 2016.
69
Board composition, diversity and
experience as at 30 June 2019
Board composition
12.5%
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50.0%
37.5%
Chairman
Executive Directors
Independent Non-Executive Directors
Non-Executive Director tenure
(including the Chairman)
Committee membership:
Chairman of the Audit Committee and a member
of the Remuneration and Nomination Committees.
Career and experience:
Jock, a Chartered Accountant, brings a wealth of
business and finance experience to the Board. He
is currently Chairman of Hill and Smith Holdings
plc and Enquest plc and will be stepping down
from both positions at the end of September 2019
as he has completed his nine year tenures. Jock
was previously Senior Independent Director of
Oxford Instruments plc (2009-2016) and Non-
Executive Director and Chairman of the Audit
Committees of Dixons Carphone plc (2012-2018)
and A&J Mucklow Group plc (2010-2016). He also
spent 30 years with Ernst & Young LLP holding
a number of leadership positions in the UK and
globally, including 20 years as a partner.
8 Sharon White
Non-Executive Director
Appointment to the Board:
Sharon joined the Board as a Non-Executive
Director on 1 January 2018.
2
2
Committee membership:
Member of the Audit, Nomination and
Remuneration Committees.
37.5%
Career and experience:
Sharon brings over 25 years’ experience in the
public sector to the Board and is currently Chief
Executive of Ofcom. She will be stepping down from
Ofcom at the end of the year to become Chairman
of the John Lewis Partnership. Sharon was formerly
Director General, Public Spending (2011-2013)
and Second Permanent Secretary to HM Treasury
(2013-2015). She also previously held roles at the
British Embassy in Washington, the No 10 Policy
Unit, the World Bank and various Government
departments including, the Department for
International Development, the Department of Work
2
and Pensions and the Ministry of Justice.
9 Tina Bains
Company Secretary
Appointment to the Board:
Tina was appointed to the role of Company
Secretary on 1 January 2016.
Committee membership:
Member of the Disclosure Committee.
1
0-3 years
3-6 years
6+ years
Gender split
(including the Chairman)
37.5%
62.5%
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.
Male
Female
See page 83 for details
on Board diversity
See pages 44 to 45 for details
on diversity in the workforce
www.barrattdevelopments.co.uk
Committee membership:
Member of the Disclosure Committee.
Career and experience:
Jessica brings a wealth of financial experience to
the Board. She joined the Group in 2007 as Head
of Financial Accounting and was promoted to
Group Financial Controller in 2010. Prior to this,
Jessica held various positions at Wilson Bowden
plc (2005-2007) and PricewaterhouseCoopers LLP
(2000-2005). Jessica is a member of the Institute of
Chartered Accountants of Scotland.
5 Richard Akers
Senior Independent Director
Appointment to the Board:
Richard joined the Board as a Non-Executive
Director on 2 April 2012 and became Senior
Independent Director on 16 November 2016.
Committee membership:
Chairman of the Remuneration and the Safety,
Health and Environment 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
Shaftsbury plc and of Unite Group plc, 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 Non-Executive Director of Emaar Malls PJSC
(2014-2017). Previously, he was a senior executive
of Land Securities Group plc (1995-2014), joining
the main Board in May 2005 and a Director and
President of the British Council of Shopping
Centres (2009-2012), the main industry body for
retail property owners.
6 Nina Bibby
Non-Executive Director
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 Chief Marketing Officer
at O2 (Telefonica UK). Nina is also a Trustee for the
Great Ormond Street Hospital Childrens’ Charity.
She was formerly the Global Chief Marketing
Officer at Barclaycard, the payments subsidiary
of Barclays plc until 2013. Prior to Barclaycard,
Nina was Senior Vice President, Global Brand
Management at InterContinental Hotels Group plc
(2006-2009) and worked at Diageo plc (1997-2006),
latterly as Commercial Strategy Director.
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70
Corporate governance report
Introduction and Overview
❝ Good corporate governance
is the foundation of our success. ❞
John Allan
Chairman
Leadership
Your Board is collectively responsible for the long term success
of your Company. The Executive Directors manage the business
on a day-to-day basis. The Non-Executive Directors provide an
appropriate level of scrutiny, constructive challenge and support
to all proposals, including those relating to strategy, performance,
responsibility, accountability and sustainability taking into account
the interests of stakeholders as a whole. This enables Board
decisions to be well considered. Board processes are in place to
ensure adequate oversight of the implementation of 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 FY19;
•
• the recruitment and induction process for new
its main focus areas for FY20; and
Directors.
See
pages
71-75
Effectiveness
Your Board regularly reviews its composition to ensure it retains
a balance of skills, experience, independence and knowledge
which enables it to discharge its duties and responsibilities
effectively. The Board undertakes an annual evaluation of its own
effectiveness, that of its Committees as well as that of individual
Directors. This evaluation is facilitated by an external third party
every third year.
Accountability
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 impacting the business. The Board assesses
the appropriate appetite for risk in striving to achieve the
Group’s strategic objectives.
This section outlines:
• the progress made on the actions arising from the
internal evaluation for FY18; and
• the process and outcomes of the externally
facilitated evaluation for FY19.
See
pages
76-78
This section details:
• the work undertaken by the Audit Committee;
• the Board’s approach to risk management, its
internal control and risk management systems;
and
•
its processes for evaluating whether the Annual
Report and Accounts of the Company are fair,
balanced and understandable.
See
page
79
Stakeholder
Engagement
Your Board recognises the importance of maintaining open
dialogue with its various stakeholders. Events and communications
take place throughout the year to maintain regular contact with
stakeholders and receive feedback on all areas of the business,
including governance, operational processes and Executive
Directors’ remuneration.
This section summarises:
• how the Board and individual Directors engaged
with stakeholders throughout FY19; and
• how stakeholders can communicate with the
Company.
See
pages
22-29
Remuneration
The Board, through its Remuneration Committee, has established
a formal and transparent procedure for developing its policy on
executive remuneration. Shareholders approved the Group’s
current Remuneration Policy at the 2017 AGM. The Policy is
designed to promote the long term success of the Group.
No changes are proposed to the Policy for FY19.
This section sets out:
• a summary of the Group’s Remuneration Policy;
• how the policy operated during FY19;
• how it will be applied in FY20; and
• the remuneration outcomes for FY19 based on the
See
pages
94-117
Company’s performance.
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Corporate governance report
Leadership
71
Corporate governance statement
The Board confirms that during the year
ended 30 June 2019, and as at the date of
this report, the Company has fully applied
the provisions of the Code issued in 2016.
This report, together with the other statutory
disclosures and the reports from the
Nomination, Audit, SHE and Remuneration
Committees, provides details of how the
Company has applied the main principles
and complied with the provisions of the
Code during the year under review (pages 70
to 117). The Board welcomes the changes
introduced by the New Code published in
July 2018 to enhance long term success and
trust in businesses. The New Code will apply
fully to the Company in the financial year
ending 30 June 2020. During the year under
review, the Board, together with its advisers,
has assessed its position under the New
Code and has been working towards applying
the Principles as set out in the New Code
and the associated guidance. The Board
will provide full disclosure of how it has
applied the Principles during the financial
year ending 30 June 2020 in its report
for that year. Copies of both these codes
are available from www.frc.org.uk.
The Company has also complied with the
relevant requirements of the Disclosure
Guidance and Transparency Rules, the
Listing Rules, Directors’ Remuneration
Reporting regulations and narrative
reporting requirements.
Board balance
The Board believes the balance of Executive
and independent Non-Executive Directors
remains appropriate having regard to the
size and nature of the business. In addition,
the combination of the experience, diverse
backgrounds, length of service and calibre
of the Non-Executive Directors further
enhances this balance and the ability to
deliver the Group’s strategy whilst mitigating
against the risk of ‘group think’. The
composition of the Board, including the
names, responsibilities and other details of
each of the Board Directors, is set out on
pages 68 and 69.
Board independence
The Company recognises the importance
of its Non-Executive Directors remaining
independent throughout their appointment,
as it enables them to provide objective advice
and guidance to the Executive Directors (and
Senior Management). 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 and other
stakeholders. 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. The review of
Directors’ conflict of interests confirmed that
none of the Non-Executive Directors has
any business or other relationship with the
Group (or other outside interests) that might
influence their independence or judgement.
John Allan was considered to be independent
on appointment to the Board and on taking
up the role of Chairman. As part of the
FY19 annual review of the Chairman’s
effectiveness, the Non-Executive Directors
led by Richard Akers, as Senior Independent
Director, considered John’s other business
commitments 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 Committee meetings, being available
to Board members whenever required and
spending time in the business and at the
Group’s corporate office in London. John Allan
continues to show dedication to his role and
commits the time necessary to discharge his
duties effectively and completely.
In addition the Chairman met at least
once with the Non-Executive Directors
independently of the Executive Directors.
The Non-Executive Directors meet regularly
without the Executive Directors being
present usually prior to or immediately
following Committee meetings.
Details of the Directors’ interests in shares
of the Company are contained in Table 25
on page 114 of the Remuneration report.
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 below.
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Table 1 – Board membership and attendance for FY19
Member
John Allan
David Thomas
Steven Boyes
Jessica White
Richard Akers
Nina Bibby
Jock Lennox
Sharon White
Note:
Role
Chairman
Chief Executive
Deputy Chief Executive and Chief Operating Officer
Chief Financial Officer
Senior Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
X/ Number of meetings attended whilst a Director.
/X Number of meetings held whilst a Director.
Number of
meetings attended
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
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Board Committees and delegation to Committees
Decisions, matters reserved to the Board and delegated authorities
The Board takes decisions on strategy and in relation to items set out in the matters reserved for the Board. It has also delegated various
operational decisions to several Board and Management Committees (see below). The schedule of matters reserved to the Board and the Terms of
Reference of the Board Committees are available on the Company’s website at www.barrattdevelopments.co.uk/investors/corporate-governance.
Board committees
Group management committees
Audit Committee
• Monitors the integrity of the Group’s Financial
Statements and its systems for internal control and risk
management.
• Monitors the independence, objectivity and effectiveness
of the external auditor and the internal audit function,
and the tenure of the external auditor.
• Considers whether the Group’s Financial Statements are
fair, balanced and understandable.
• Assesses the long term viability of the Company.
See page 84 for full report
Remuneration Committee
• Designs and implements the Group’s overall
remuneration strategy and policy, ensuring alignment
with strategy.
• Sets the remuneration of the Executive Directors and
Senior Management.
• Monitors performance against targets.
• Determines remuneration outcomes for Executive
Directors and Senior Management.
• Considers workforce remuneration and related policies
and the alignment of incentives and rewards with that of
the wider workforce.
See page 94 for full report
Nomination Committee
• Monitors the composition and balance of the Board to
ensure the right combination of skills, experience and
knowledge, and progressive refreshing of the Board and
its Committees.
• Reviews succession plans for Board and Senior
Management roles and oversees the development of a
diverse pipeline for succession.
• Promotes diversity of Board Directors and Senior
Management.
See page 80 for full report
Disclosure Committee
• Ensures that the Company remains compliant with the
requirements of the Market Abuse Regulation.
Safety, Health and Environment Committee
• Oversees the SHE issues impacting the business
including, but not limited to, the Group’s compliance with
the SHE management system.
• Monitors any significant SHE risks and exposure to the
business and the steps taken to mitigate against these.
See page 92 for full report
Barratt Developments PLC Annual Report and Accounts 2019
Risk Committee
• Reviews the effectiveness of the Group’s internal
control policies and procedures for the identification,
assessment and reporting of risks.
• Assesses individual key risks on a rolling basis (including
the identification of the Group’s principal risks) together
with the appropriateness of any mitigations.
The Board
Land Committee
• Reviews and approves all land acquisition and disposal
proposals across the Group.
• Refers proposals to the Board for approval depending
on the value of the land acquisition or its complexity,
e.g. high-rise apartments or joint venture arrangements.
Chief Executive
Executive
Committee
Supports the Chief
Executive in carrying
out the day-to-day
management of the
activities of the Group.
Chief Operating
Officer
Treasury Operating Committee
• Reviews the Group’s treasury arrangements and
approval of changes to debt facilities.
• Obtains Board approval for certain types of facility and
where the facility is above the levels delegated to the
Treasury Operating Committee.
Allotment Committee
• Approves the allotment of shares within dilution limits
and the authorities obtained from shareholders.
Operations Committee
• Manages operational performance.
Safety, Health and Environment
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.
• Monitors the effectiveness of the Group’s health and
safety systems.
• Keeps informed of changes in legislation surrounding
safety, health and the environment.
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Board roles and their responsibilities
Chairman
John Allan
• Leads the Board in the achievement of its objectives, sets its agenda and chairs its meetings.
• Shapes the culture in the Boardroom.
• Responsible for the effectiveness of the Board and its governance.
• Facilitates the effective contribution of Non-Executive Directors and constructive relations between
Executive and Non-Executive Directors.
• Responsible for the identification and provision of inductions and continued development needs of each Director.
• Ensures effective communication with shareholders and other stakeholders and participates in corporate
relations activities as appropriate.
Chief Executive
David Thomas
• Develops the Group’s strategy for the enhancement of long term shareholder return taking into account the
needs of the Group’s stakeholders.
• Leads the implementation of the Group’s 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 and policy as determined by the Board.
• Chairs the Executive Committee through which he carries out his duties.
• Oversees corporate relations with shareholders and other stakeholders.
• Responsible for sustainability policies and practices of the Group.
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Deputy Chief
Executive and Chief
Operating Officer
Steven Boyes
• Responsible for the Group’s operations including day-to-day responsibility for safety, health and the
environment ensuring stakeholder requirements are appropriately addressed.
• Chairs the Operations Committee meetings, the other members of which include the Regional
Managing Directors.
Chief Financial Officer
Jessica White
• Devises and implements the Group’s financial strategy and policies.
• Responsible for the management of the Finance, Tax, Internal Audit, Treasury, Legal and Investor Relations
functions.
• Supports the Chief Executive with his corporate relations responsibilities with shareholders and other
stakeholders.
• Manages the Group’s relationship with the external auditor.
Senior Independent
Director
Richard Akers
• In addition to his role and responsibilities as an Independent Non-Executive Director,
the Senior Independent Director is available to shareholders, when required, to:
i. address any material issues or concerns which the Chairman and/or Chief Executive have failed to
resolve; and
Independent
Non-Executive
Directors
Nina Bibby,
Jock Lennox and
Sharon White
Company Secretary
Tina Bains
ii. listen to their views to gain a balanced understanding of their issues and concerns.
• Evaluates the performance of the Chairman, at least annually.
• Acts as a sounding board for the Chairman and, if necessary, an intermediary for the other Directors.
• Provides a conduit from the workforce to the Board as the designated Non-Executive Director for workforce
engagement.
• Support and constructively challenge the Executive Directors using the broad range of their experience and
external perspective ensuring the needs of stakeholders are appropriately considered.
• Develop proposals on strategy.
• Monitor the implementation of the Group’s strategy within its risk and control framework.
• Supports the Chairman and Chief Executive in fulfilling their duties especially in respect of induction,
training and Board and Committee effectiveness evaluations.
• Available to all Directors for advice and support.
• Keeps the Board regularly updated on governance matters and best practice.
• Ensures Group policies and procedures are maintained and updated on a regular basis.
• Attends and maintains a record of the matters discussed and approved at Board and Committee meetings.
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Board activity FY19
Main activities undertaken during the financial year (including matters reserved)
The Board provides clear, entrepreneurial, responsible and executive leadership to the Group in order to promote the long term success of the Group
whilst ensuring an appropriate risk and control framework, adequate resources and appropriate values and standards are in place to deliver its strategy.
Strategy and management
• Held detailed strategy sessions throughout
the year to further develop future strategy.
• Received presentations from business
functions on risks and opportunities both
strategic and otherwise.
• Reviewed and approved various significant
land investments/transactions and conducted
post investment appraisals.
• Received internal and external presentations
on the wider housing market.
• Considered and approved the acquisition of
Oregon.
Stakeholder engagement
• Reviewed shareholder feedback on half
and full year results, trading updates and
outcomes from investor roadshows.
• Received presentations from the Group’s
corporate brokers on shareholder matters.
• Reviewed and approved the 2018 AGM Notice.
• Met with shareholders at the 2018 AGM.
• Reviewed the 2018 AGM proxy voting figures.
• Considered presentations from the business
regarding emerging trends in customer
expectations.
• Considered progress towards greater diversity
in the workforce.
•
Individual Directors attended various
stakeholder meetings, such as the Workforce
Forum.
Further details on Stakeholder Engagement are
provided on pages 22-29.
Other
• Visited sites within the Scotland, Central and
Northern regions.
•
Individual Directors visited various divisions
to meet management and employees to
understand their perspective of the Group’s
operations.
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.
• Approved the re-appointment of Deloitte as
external auditor on the recommendation of
the Audit Committee.
• Undertook six-monthly in-depth health and
safety reviews.
• Reviewed the crisis management process.
• Reviewed Brexit contingency planning.
The Board
Board composition and effectiveness
• Considered and approved the re-appointment
of Nina Bibby as a Non-Executive Director and
Jock Lennox as a Non-Executive Director and
Chairman of the Audit Committee.
• Reviewed, considers and updated potential
conflict of interest at each meeting and
conducted a more detailed annual review.
• Undertook an externally facilitated evaluation
of the Board, its committees and the individual
Directors.
• Reviewed and approved the FY20 fees for the
• Discussed and reviewed management and
Non-Executive Directors.
Board succession plans.
Financial reporting and controls
• Reviewed monthly reports on performance
against budget and forecast.
• Reviewed and approved the proposed budget
and 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 2018 Annual Report and
Accounts.
• Reviewed dividend policy, approved the
payment of an interim dividend and agreed to
recommend payment of a final dividend and
special dividend under the Capital Return Plan.
• Reviewed and renewed the Group’s revolving
credit facility.
• Reviewed and approved process for
the satisfaction of awards under share
performance schemes, dilution and the
admission of further shares to the London
Stock Exchange.
• Reviewed the long term viability of the Group
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.
Environmental, social and
governance
• Received updates on changes and potential
changes in regulations and assessed their
impact, including the New Code.
• Received updates from each of its
Committees.
• Reviewed and approved the Group’s
sustainability framework.
• Reviewed and approved the Board’s principal
policies, including the Modern Slavery
Statement and sustainability policies.
• Reviewed and approved the Group’s Gender
Pay Gap disclosure.
• Reviewed and approved matters reserved to
it, its own terms of reference and those for
the Chairman, Chief Executive and Senior
Independent Director in light of the New Code
requirements.
• Reviewed the Group’s operating structure to
ensure it remains fit for purpose.
Induction
Board visits
No new Directors were appointed during
the year under review. The Group operates a
robust, formal induction programme for all
new Executive and Non-Executive Directors.
The induction programme is designed to
assist the Directors to familiarise themselves
with the business, its culture, and the roles
and responsibilities of the Board and each
member of Senior Management.
Each year the Board visits two regions
which are selected on a rotational basis.
During FY19 the Board visited the Scotland,
Central and Northern Regions. At each of
these regions the Board met with Senior
Management who provided an overview
of the regional business including their
business plan, customer service levels,
employee turnover and engagement, analysis
of the diversity of their workforce and other
operational matters. The site visits enable
the Board to interact with employees to gain
an understanding of any issues that they
may be facing, establish how diversity and
inclusion is being embedded in the business,
as well as gaining a better insight into the
processes involved in building houses,
attracting customers and selling the homes
we have built. During 2019, the Board also
met in the East London divisional office, to
meet the team there and view the new office.
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Main activities undertaken during the financial year (including matters reserved)
The Board provides clear, entrepreneurial, responsible and executive leadership to the Group in order to promote the long term success of the Group
whilst ensuring an appropriate risk and control framework, adequate resources and appropriate values and standards are in place to deliver its strategy.
In June 2019, the Group announced that it had acquired Oregon, a supplier of timber frame for housing.
The below timeline highlights the key actions and decisions of the Board in identifying, pursuing and implementing its strategy to utilise MMC
more to increase volumes, thereby promoting the success of the Company. This strategy was developed taking into account feedback received
from various stakeholders.
Strategy in action
Acquisition of Oregon
75
Summer 2018
The Board:
• reviewed current strategy;
• explored alternatives to develop strategy
further; and
• agreed to the investigation of vertical
integration in the supply chain related to
MMC, in particular timber frame.
Summer 2018
• Executive Directors, with one of the
Corporate Brokers, explored options for:
Vertical integration relating to timber
i
frame; and
Establishing our own in-house timber
frame manufacturing business.
ii
Autumn 2018
• One of the Corporate Brokers presented
their findings to the Board including the
feasibility of vertical integration.
• The Board considered three options:
Acquire a timber frame business;
Develop its own in-house timber frame
manufacturing facilities; and
Continue to source timber frame from
third parties.
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• The Board authorised Executive Directors
to further investigate options (i) and (ii)
and the possibility of entering into a joint
venture with a timber frame supplier.
9 April 2019
• Chief Operating Officer and Regional
Managing Director for Scotland held an
initial meeting with Oregon.
• Oregon confirmed their interest.
Spring 2019
The Board:
• considered the recommendation from
the Executive Directors to enter into
discussions with Oregon; and
• Board authorised Executive Directors to
proceed.
Winter 2018 – Spring 2019
• Executive Directors undertook a detailed
review of options (i) and (ii) and of entering
into a joint venture arrangement.
20 June 2019
• Board approved acquisition and authorised
a committee of the Board to finalise
the terms of the acquisition and the
documentation for execution.
26 June 2019
• Committee of the Board approved
final terms of the acquisition and
documentation.
April – June 2019
• Offer made to Oregon subject to due
diligence, final terms and documentation,
Board approval, and in the case of Oregon,
shareholder approval.
• Due diligence completed and offer
finalised.
• Approval of both boards and Oregon
shareholder approval obtained.
• Integration and communications plans
prepared and agreed.
27 June 2019 to date
• Integration of Oregon operationally,
including SHE systems, processes and HR
matters, commences in line with an agreed
integration plan.
• Oregon employees (excluding Managing
Directors) included in the Employee Share
Award granted in July 2019.
• The Board will receive regular updates on
progress being made with the integration.
27 June 2019
• Acquisition of Oregon completed.
• Communication circulated to all employees
and to key stakeholders.
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Corporate governance report
Effectiveness
Board and Committee evaluation
Each year, the Board undertakes a formal and rigorous annual evaluation of its own performance and that of its Committees and individual
Directors. At least every three years, the Board undertakes an externally facilitated evaluation. Having previously undertaken an externally
facilitated evaluation in FY16, the Board appointed Oliver Ziehn of Linstock to facilitate the evaluation this year. Neither Oliver Ziehn nor
Linstock have any other connection with the Company.
Progress on FY18 evaluation
We reported the outcomes of the internal Board evaluation for the last financial year in the 2018 Annual Report and Accounts. Details of
progress made on these are set out below.
Table 2 – The Board
Strategy
MMC
Succession planning
FY18
outcomes
To continue to review and develop
the Group’s longer term strategy
as required by economic and market
conditions.
To increase the utilisation of MMC
within the business.
To ensure long term succession plans
are in place not only for the Executive
Directors but also for employees
throughout the organisation.
Actions for
FY19
Undertake research to understand
how the business can best meet
the changing demands of its
customers.
Continue to assess the viability of
MMC and to continue to increase
their usage within the business.
To continue to engage with the
Chief Executive and the HR Director
to develop long term succession
plans.
Progress
made in FY19
The Board undertook a detailed
review, with the assistance of
external advisers, to assess its
current strategy and identify future
opportunities. These will be explored
further during the course of FY20.
The business continues to be
encouraged to increase its utilisation
of MMC. In FY19, the Group acquired
Oregon, one of the leading timber
frame manufacturers in the UK.
During FY20 we will work towards
integrating Oregon into the business
and also continue to work closely
with our supply chain to identify new
and innovative ways of working.
The Non-Executive Directors met
with the Chief Executive to discuss
long term succession plans.
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Table 3 – The Committees
FY18
outcomes
FY18
Areas of
improvement
Nomination Committee
Audit Committee
Remuneration 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 increase its focus on succession
planning.
To enhance further the interaction
between Risk Committee and
Audit Committee processes.
To ensure that the Committee continues
to be fully informed of any regulatory
changes relating to remuneration to be
able to assess their impact on the Group.
Actions for
FY19
Continue to meet with the Chief Executive
to review succession plans in detail.
Assess ways in which the relationship
between the Committees could be
strengthened.
Utilise the new remuneration consultants,
PwC, to provide regular updates on the
wider remuneration environment and its
potential impact on the Group.
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Progress
made
in FY19
A meeting was held between the
Nomination Committee and the Chief
Executive in November 2018. The
discussion centred around potential
succession plans for Directors and Senior
Management and included an update on
the assessment of development activity.
It also included an update on the wider
workforce currently progressing through
various internal talent and development
programmes.
Jock Lennox, Chair of the Audit Committee
attended a Risk Committee meeting
during the year to gain insight to how the
Committee is operating and the areas/
topics that it discusses. The intention is for
Jock to continue to attend at least one Risk
Committee meeting each year.
The Chair of the Remuneration
Committee, the HR Director and the
Company Secretary engaged regularly
with PwC throughout FY19 on various
matters relating to remuneration,
including the new requirements
introduced by the New Code and changes
to best practice.
FY19 Board performance evaluation
The Board evaluation for the year under
review was facilitated by Linstock, supported
by the Chairman and Company Secretary.
Board and Committee
evaluation process
Online questionnaires were issued to the
Board and Committee members and to
individuals who attend the Committee
meetings on a regular basis. The
questionnaire was designed by Linstock,
based on an initial conversation with the
Chairman and the Company Secretary.
It looked at a variety of areas including,
among other matters, the composition of
the Board and Committees, understanding
stakeholders, Board dynamics, strategic
oversight, risk management and internal
control, succession planning, the advice and
support provided, the focus of meetings and
priorities for change. Based on the answers
to the questionnaires, interviews were
conducted with each of the Directors and
regular attendees.
The results of the questionnaires and the
outcomes from the interviews were collated
and a summary provided to the Chairman and
Chairs of each of the Committees. The results
were presented and discussed by the Board
and each of its Committees at their respective
meetings in June and August 2019.
FY19 External Board effectiveness
evaluation outcomes
Overall the results of the evaluation were
positive and showed that the Board is running
effectively. The Board continues to be seen
as being cohesive and comprising the
appropriate balance of experience, skills and
knowledge to implement the Group’s strategy
over the next few years. Board meetings
operate in a spirit of openness, fostered by
the Chairman, in which Directors are able
to challenge and discuss openly ideas of
importance to the Group, its strategy and risk.
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Corporate governance report
Effectiveness continued
Table 4 – Areas of improvement for the Board
Stakeholder engagement
Culture
Succession and Diversity
FY19
outcomes
To continue to be involved in engaging
with internal and external stakeholders
and to take their views and interests
into consideration throughout the
decision-making process.
Actions for
FY20
To explore opportunities to gain further
insight into the views and concerns of our
stakeholders and into overall stakeholder
dynamics.
To ensure that the Group’s culture is
recognised and understood across the
business.
To increase focus on management
development, succession and diversity.
Gain insight into how the culture of the
business is perceived by stakeholders and
identify ways to better communicate the
culture and ensure that it continues to
drive appropriate behaviours throughout
the business.
To develop further the succession plans
for the Chief Executive, Chief Operating
Officer and Chief Financial Officer and to
continue to progress our diversity agenda.
Table 5 – Areas of improvement for the Committees
Nomination Committee
Audit Committee
Remuneration Committee
FY19
outcomes
To increase focus on succession in
respect of key management positions.
To continue to enhance the relationship
between the Audit Committee and the
Risk Committee and to further streamline
the agenda items and papers for the
Committee meetings.
To undertake a more risk based
assessment of remuneration structures
and continue to simplify Executive
Directors’ and Senior Management
remuneration.
Actions for
FY20
To support further the Group HR Director
in reviewing succession plans.
Jock Lennox to continue to attend Risk
Committee meetings in FY20.
To undertake an assessment of the
Group’s succession planning processes to
identify any areas of improvement.
To undertake a review of the Committee’s
annual agenda and to promote the use of
more Executive summaries.
To work with our remuneration
consultants in terms of best practice and
risk assessment and refine structures
accordingly following consultation with
shareholders.
Evaluation of the Chairman and
Non-Executive Directors
The evaluation of the effectiveness of the
Chairman was also conducted by Linstock.
A questionnaire was issued to each Board
member (excluding the Chairman) and
the result was unanimous support for
the Chairman. Of particular note was
how supportive the Chairman is of other
Directors and his willingness to listen to all
contributions during the course of a debate. In
addition, Board members found him engaging
and encouraging of building Board cohesion
through activities outside of formal Board
meetings. The Directors were complimentary
of the way in which the Chairman managed
his other commitments, always ensuring
sufficient time is given to his role with the
Company. The Senior Independent Director
shared the feedback with the Chairman.
The Chairman held one-to-one meetings with
each Director to assess their effectiveness
and to agree any areas of improvement
or training and development, including
on environmental, social and governance
matters based on the outcomes of the
questionnaires each of them had completed
on themselves. There were no issues of any
substance arising from this review.
Information and support
The Chairman, with the assistance of
the Company Secretary, ensures that the
Board receives accurate, timely and clear
information. 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.
Any Director who is unable to attend a
meeting is invited to provide their views
to the Chairman ahead of that meeting.
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
As part of the annual effectiveness review,
the Chairman asks the Board as a whole
and individual Directors for any training
requirements they deem necessary or
appropriate. He also annually agrees
development needs with each individual
Director. During FY19, training included
aspects of Social, Health and Environmental
issues and various presentations and
updates relating to the Board’s Strategy
agenda. Such presentations included market
conditions and the economic environment in
which we operate, culture, our customers,
diversity and our workforce, sales and
product development, financial updates and
MMC. In addition, at each Board meeting, the
Company Secretary provides an update on
any developments in corporate governance
on the basis of which future training topics
are often identified. During the year, the
Nomination Committee identified the need
for training and development in digital
trends, which will be scheduled for the
forthcoming financial year.
Barratt Developments PLC Annual Report and Accounts 2019
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Corporate governance report
Accountability
79
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 risk
management and internal control systems,
including controls related to the material
financial, operational and compliance
performance (see the Audit Committee
report on pages 84 to 91).
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 control is
designed to manage risks that may impede
the achievement of the Group’s business
objectives, and identify and appropriately
manage activities where there is a high risk
of corruption (including bribery) amongst
employees, partners or intermediaries,
rather than to eliminate those risks entirely.
The system of internal control therefore
provides only reasonable, not absolute,
assurance against material misstatement
or loss. The system of internal control 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 57 and 58).
We continue to cooperate fully with the
Metropolitan Police on the ongoing
investigation we instigated regarding possible
misconduct in our London business. As stated
in October 2016, Barratt does not anticipate
any materially adverse financial effect and our
London business is operating well.
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 on the feedback shareholders
provided in respect of our 2018 Annual
Report and Accounts. It also set aside
adequate time to review and discuss
significant areas of the 2019 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 Annual
Report and the Financial Statements in
arriving at its conclusion. It also received
a paper from the Company Secretary
explaining the process that had been
undertaken to provide assurance to the
Audit Committee that the report was ‘fair,
balanced and understandable’. The Board’s
formal statement on the Annual Report
and Accounts being fair, balanced and
understandable is contained within the
Statement of Directors’ Responsibilities
on page 122. The process undertaken by
the Audit Committee to assist the Board in
their assessment can be found on pages 88
and 89. After considering the paper from
the Company Secretary and following its
own reflections, the Board was happy to
endorse the recommendations of the Audit
Committee.
Relations with shareholders
Information on relations with shareholders is provided as part of the Stakeholder engagement section of the Strategic Report on pages 22 and 23.
In accordance with the UKLA’s 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 2019, the persons set out in Table 6 below have notified
the Company, pursuant to DTR 5.1, of their interests in the voting rights in the Company’s issued share capital:
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Table 6 – Notifiable interests
Name
FMR LLC
BlackRock, Inc.
Number
of voting
rights1
34,579,199
56,413,704
% of total
issued share
capital2
8.24
5.60
Nature of holding
Indirect
Indirect
1 Represents the number of voting rights last notified to the Company by the respective shareholder in accordance with DTR 5.1.
2 Based on the Total Voting Rights as at the relevant notification dates.
At 2 September 2019, no change in these holdings had been notified and no further notifications of a disclosable interest had been received.
The Total Voting Rights of the Company as announced on 2 September 2019, are 1,018,104,461.
On behalf of the Board
John Allan
Chairman
3 September 2019
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80
Nomination Committee report
John Allan
Chairman of the
Nomination Committee
❝ The Nomination Committee continues to play a vital
role in ensuring that not only the Board but also Senior
Management comprise the right individuals to deliver
the strategy of the Group. ❞
Statement from the Chairman of the
Nomination Committee
I am pleased to present the Nomination
Committee report for the financial year
ended 30 June 2019. The Nomination
Committee continues to play a vital role in
ensuring that not only the Board but also
Senior Management comprise the right
individuals to deliver the strategy of
the Group.
Skills and experience of the Board
The Nomination Committee annually reviews
the composition, skills and experience
of the Board and its Committees. There
have been no changes to the Board or
Committees during the year under review.
The Committee has however, continued to
consider succession planning at both Board
and Senior Management levels.
Diversity and inclusion
The Committee reviewed the Board Diversity
Policy during the year. We also ensured that
the Board considered whether diversity and
inclusion across the wider business was
being progressed, including discussions
with management at site visits during the
year. Further information on the Company’s
progress on Diversity and Inclusion
initiatives is available on page 83 and in
the Stakeholder engagement section of the
Strategic Report on page 25.
Succession planning
A number of recommendations have been
made by the FRC and other key organisations
for Nomination Committees to focus on
diversity, including gender and ethnicity.
The Nomination Committee fully supports
the aims of these recommendations and
will take appropriate action to continue to
promote and strengthen diversity within
the Company.
The following pages set out the work
undertaken by the Committee during
the year.
John Allan
Chairman of the Nomination Committee
3 September 2019
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Nomination Committee role and activity FY19
81
Main role and activities undertaken during the financial year
The Nomination Committee met formally on two occasions during the year to fulfil the responsibilities delegated to it by the Board. The key
areas of focus for the Nomination Committee are: to monitor the size, composition and balance of skills on the Board and its Committees;
to ensure a formal, rigorous and transparent procedure for the appointment of new Directors; and to plan for succession. Full details of the
responsibilities delegated to the Nomination Committee by the Board are set out in the written terms of reference which are available from
www.barrattdevelopments.co.uk/investors/corporate-governance.
The main areas of focus for the Nomination Committee during the year were as follows:
Board composition and balance
• Reviewed the structure, size and
composition of the Board.
• Reviewed skills, experience and
knowledge of each Board member
and of the Board as a whole, against
the needs of the Board.
• Reviewed the time commitment
required from the Chairman and Non-
Executive Directors to fulfil their roles.
• Considered and recommended to the
Board the re-appointments of Nina
Bibby as Non-Executive Director and
of Jock Lennox as Non-Executive
Director and Chairman of the Audit
Committee (page 82).
The Nomination
Committee
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Governance
• Considered and confirmed that
each Non-Executive Director
remained independent and
committed to their role.
• Undertook an annual review of
Directors’ conflicts of interest
and recommended to the Board
the renewal of any authorisations
previously provided.
• Approved the FY18 Nomination
Committee Report.
• Reviewed and updated its terms of
reference in light of the New Code
provisions.
• Reviewed the Board Diversity Policy
and ensured that diversity and
inclusion were being promoted
across the business.
Succession planning
• Assessed the tenure of Board
members and held discussions
with Directors on expected length
of service in order to inform the
succession plan (page 82).
• Considered succession plans for
Directors and Senior Management.
Committee effectiveness
• Reviewed and made progress against
matters arising from the annual
evaluation for FY18.
• Participated in the external evaluation
of its performance and discussed
and agreed an action plan to address
issues arising (page 78).
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82
Nomination Committee report
continued
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 7.
The majority of Committee members are
considered independent by the Company and
in accordance with Code provision B.2.1.
Their biographies and qualifications are
shown on pages 68 and 69.
Table 7 – Nomination Committee
membership and attendance for FY19
Member
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White
Note:
Role
Chairman
Member
Member
Member
Member
Number of
meetings
attended
2/2
2/2
2/2
2/2
1/2
X/ Number of meetings attended whilst a Director.
/X Number of meetings held whilst a Director.
Appointment and re-appointment
of Directors
Re-appointment of Non-Executive
Directors
All of our Non-Executive Directors are
appointed by the Board for an initial
three-year term and normally serve a
second three-year term, subject to annual
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. Given the long
term and cyclical nature of our business, it is
important to retain adequate experience on
the Board over successive economic cycles.
The length of tenure of the Board members
is shown on page 69.
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 2019 AGM for 15
minutes before the meeting and throughout.
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.
During the year, the Nomination Committee
undertook a particularly rigorous review
of the re-appointment of Nina Bibby as
a Non-Executive Director, given that she
had concluded six years of service. The
Committee also undertook a review of
the re-appointment of Jock Lennox as a
Non-Executive Director and Chairman
of the Audit Committee, who had served
three years on the Board. The Nomination
Committee was satisfied that both Nina
and Jock continued to dedicate sufficient
time to their duties and they confirmed that
they would continue to do so. Furthermore,
the Committee was satisfied that there
was no other relationship or circumstance
that would affect the performance of their
roles or their independence. Accordingly,
the re-appointments of Nina Bibby for a
third three-year term and Jock Lennox for a
second three-year term were recommended
to the Board, which it fully endorsed.
Retirement and re-election of Directors
All Board members will stand for re-
election by shareholders at the 2019 AGM.
Biographical details of each of the Directors
are set out on pages 68 and 69 of this report
and supporting statements for their re-
election can be found in the Notice of the
2019 AGM. Details of the Executive Directors’
service contracts can be found in the
Remuneration report on page 102.
Each of the Directors who have served
throughout the year has been subject to
a formal performance evaluation process,
including the appropriateness of a particular
Director’s experience and the effectiveness
with which such experience is utilised in
furthering the Company’s business.
Following these reviews, the Nomination
Committee, and the Board, are satisfied
that each Director continues to be effective
in, and demonstrate commitment to, their
respective roles. The Board, in the light of
the results of the performance evaluation
and the breadth of experience of each
Director, recommends that shareholders
approve the resolutions to be put forward at
Barratt Developments PLC Annual Report and Accounts 2019
the 2019 AGM relating to the re-election of
the Directors.
Succession planning
Succession planning is a live topic at the Board
and Nomination Committee meetings. In
accordance with our succession plan for Non-
Executive Directors, discussions are currently
under way to determine what skills any new
Non-Executive Director would need to possess
to support the succession plans for the Non-
Executive Directors and the continuous refresh
of the Board. The Committee also meets
annually with the Chief Executive to discuss
the succession plans for the other Executive
Directors and Senior Management below
Board level. Succession plans are in place
across the business at all levels for the wider
workforce. Further details on the process used
are set out in the Strategic Report on page 43.
Executive Directors
During the year, the Board undertook its
annual review of the Group’s succession plans,
including those for the Executive Directors and
Senior Management. The aim of this review is
to identify suitable individuals who are capable
of filling senior managerial positions on a
medium and long term basis, whilst ensuring
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
at Board level are 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.
The Nomination Committee plays an active
part in this process.
Non-Executive Directors
The Nomination Committee reviews annually
the length of service of Non-Executive
Directors to support the progressive refresh
of the Board. As part of this review it takes
into account the cyclicality of the business,
lessons gained through one property cycle
can be useful during the next.
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83
Ethnic diversity
The Board already meets the recommendation
of the Parker review for all FTSE 100 Boards
to have at least one Director on the Board by
2021 who identifies as a person of colour.
Use of Recruitment Consultants
and diversity
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. It will also, going forward,
require recruitment consultants to identify
and present potential candidates in
accordance with the Parker review and its
recommendations regarding the ethnic
diversity of boards.
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
3 September 2019
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Board Policy
During the year, the Nomination Committee,
and subsequently the Board, reviewed the
Board’s policy on diversity and inclusion. Our
policy remains to identify the most suitable
candidate to join the Board having regard to
the individual’s skills, experience, knowledge
and potential ‘fit’ with the rest of the Board.
However, it also seeks to ensure that, in
managing an appointment and in succession
planning, the Nomination Committee has
regard to the recommendations of the
Parker and the McGregor-Smith reviews
on ethnicity and race and the benefits of
diversity, including gender, perspective,
background and knowledge.
A copy of our Diversity Policy for Board
appointments can be found at:
www.barrattdevelopments.co.uk/
sustainability/our-policies.
Gender diversity
At 30 June 2019, 37.5% of the Board were
female, exceeding the target set by Lord
Davies in his 2015 review. Whilst the Board
appreciates the benefits that can be gained
from gender diversity, it has agreed not to
impose a gender balance quota preferring
instead to appoint strictly on merit.
In addition, the Board are aware of the
requirements of the Hampton-Alexander
review and the details are kept under review
and disclosed on page 45.
.
Directors’ conflicts of interest
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 conflicts
of interest 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.
Throughout FY19, the Company Secretary
maintained a register of Directors’ conflicts
of interest. A summary of this register
is reviewed at each Board meeting so
that it remains accurate and current.
The full register is reviewed annually and
recommendations are made to the Board in
respect of any changes to the authorisations
that may be required. The Board, when
authorising any conflict or possible conflict
of interest, 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.
Diversity and Inclusion
The Nomination Committee and the Board
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 across the workforce remains an
objective for the Chief Executive and Group
HR Director. A full programme was unveiled
during FY18 including the creation of a
Diversity and Inclusion forum to spearhead
the Group’s action in this important area.
The Group’s aim is for its employee profile
to mirror that of the communities in which it
operates. Further information on the Group’s
progress on diversity and inclusion can be
found on pages 44 and 45.
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84
Audit Committee report
Jock Lennox
Chairman of the Audit Committee
❝ During FY19, the Audit Committee has held a number of
in-depth reviews which have strengthened our processes
around the monitoring and management of risk. ❞
Statement from the Chairman
of the Audit Committee
I am pleased to present to you our Audit
Committee report for the year ended
30 June 2019.
Role and responsibilities
The Audit Committee is given its authority by
the Board and we act in accordance with our
written terms of reference. An important part
of our role is to monitor the integrity of the
Group’s financial and management reporting.
In performing this role, we scrutinise the full
and half yearly financial statements, review
in detail the work of the external auditor and
review any significant financial judgements
made by management to ensure they are
appropriate. We also annually review the risk
management and internal control framework
operating across the Group to ensure that
risks are being carefully identified, assessed
and appropriately mitigated against, and that
sound systems of internal control are in place.
In performing our duties during the year,
we have complied with the requirements
of the Code and followed the best practice
guidance set out by the FRC. We work
closely with both the internal and external
audit teams. This helps us to ensure that
our internal control processes remain
robust, our financial reporting remains clear
and concise and our critical accounting
judgements and key sources of estimation
uncertainty are appropriate.
The Audit Committee has had a full agenda.
We have held a number of in-depth reviews,
which have strengthened our processes around
the monitoring and management of risk.
In our discussions we have considered:
• our systems, processes and controls
in terms of IT and physical security
(including GDPR and cyber security).
We considered in detail planned system
improvements and noted that an external
IT crisis management assessment was to
be conducted;
• the outcomes from the Kingman, Brydon
and CMA consultations into the audit
market. We requested a full report on the
reviews from our auditor, considered the
implications and agreed it was important
to monitor changes in this area;
• the inherent risks to the Group of
potential changes in Government Policy.
We considered the changes to the Help to
Buy scheme from 2021 and their potential
impact on the Group. We requested that
management should keep us updated,
therefore this will be reviewed again in
FY20; and
• the impact of new accounting standards.
Further information on the work we
undertook is reported on page 90.
The Audit Committee has requested and
reviewed a thorough sensitivity analysis to
provide assurance for the Long term viability
statement that is included on page 65.
We have also spent time understanding, and,
where necessary, encouraging improvement
of internal controls and auditing processes.
During the year, I was involved in the
recruitment process for a new Head of
Internal Audit to replace the previous
incumbent, who has taken on other
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responsibilities within the business. The
Chief Financial Officer undertook first round
interviews and created a short-list of potential
candidates. I then carried out the second
round interviews of those who had been
shortlisted in order to bring an independent
view to the selection process. Since being
appointed to the role in March 2019, the Head
of Internal Audit has instigated a full and
thorough strategic review of the Internal Audit
function. Details of the initial improvements
recommended by the Head of Internal Audit
can be found on page 91.
During the year, we ensured that the internal
audit function continues to provide appropriate
assurance to the Audit Committee in an
environment where risks continue to change
and the requirements of internal audit are
increasing. More information on the Internal
Audit function is contained on page 91.
We reviewed our critical accounting
judgements and key sources of estimation
uncertainty and concluded that:
i.
impairment of goodwill and indefinite
life brands remains a key source
of estimation uncertainty due to its
materiality and the judgements that are
required as part of the annual impairment
review; and
ii. margin recognition is a key source
of estimation uncertainty due to the
estimation of the costs to complete that is
required as part of the valuation process.
Further details on key sources of estimation
uncertainty can be found on pages 87 and 88.
Update on FY19 areas of focus
In the 2018 Annual Report and Accounts,
I outlined what our main areas of focus would
be for FY19. I am pleased to update you on
progress to date in each of these areas.
Changes in regulation and
accounting standards
The requirements of IFRS 15 ‘Revenue
from contracts with customers’ and IFRS 9
‘Financial Instruments’ have been applied,
where applicable, for the year under
review. Details of the Committee’s ongoing
consideration of IFRS 16 ‘Leases’ are given on
page 143.
on assumptions where necessary. The Audit
Committee has discussed and agreed the
adoption date and method for this new
accounting standard.
The Audit Committee has considered the
implications of the New Code issued in July
2018 which is applicable to the Company
from FY20. Consequently, the Committee
has updated its terms of reference to
reflect the New Code requirements, a copy
of which can be found on our website at
www.barrattdevelopments.co.uk. Details on
how we have applied the new requirements
will be fully disclosed in the report for the
financial year ending 30 June 2020.
Cyber security
The Audit Committee continues to recognise
that security of the Group’s IT infrastructure
is a key priority for the Group. A successful
cyber attack could affect the Group’s
operational ability and has the potential
to put our data at risk. Given that we are
operating in a time where cyber attacks are
prevalent, we have continued to monitor
closely the actions taken by the Group to
minimise the risks of being affected by a
cyber attack. In FY19, the Group undertook
active penetration testing and the Audit
Committee has considered and approved the
steps taken to improve the Group’s defences.
Principal risks and uncertainties
Risk management continues to be a key
focus for the Audit Committee. We not only
review our principal risks and uncertainties,
but also: the process for identifying,
assessing and managing risks; the Group’s
risk appetite and tolerance; the operations
of the Risk Committee; and policies relating
to insurable risk amongst other aspects
of our risk management system. We have
engaged with management on areas of key
importance and have continued to challenge
and support as necessary. To enhance the
Committee’s relationship with the Risk
Committee, I attended a Risk Committee
meeting in December 2018 to gain insight
into how the Risk Committee is managed,
the level of engagement of the members and
the level of detail included in the papers, all
of which I found appropriate. I will continue
to attend the Risk Committee meetings
periodically going forward.
The Audit Committee has received detailed
updates on preparations and estimates
of the effect of the implementation of
this standard on the Group’s financial
reporting and challenged management
Areas of focus for FY20
When drafting our annual Audit Committee
calendar, we take into account the external
environment, internal operations of the
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business and regulatory changes to ensure
that all the main areas that we need to
prioritise are included.
Our areas of focus for FY20 are to:
i. continue to develop processes and
reporting in respect of IFRS 16 ‘Leases’,
which will impact the Group in FY20;
ii. continue our focus on systems,
including defending against cyber risks
facing the business and reviewing the
implementation of our new valuation
system;
iii. continue to undertake in-depth reviews
of any key areas of risk impacting the
business;
iv. continue to enhance the relationship with
the Risk Committee; and
v. continue to monitor the impact of the
announced changes to the Help to Buy
scheme.
External audit
During the year, the Chief Financial Officer and
I have had a number of discussions regarding
audit fees with the lead audit partner. The
quality of the external audit is of paramount
importance to the Committee. It is vital that
the audit of our business includes both broad
engagement with management and fieldwork
across our business. In addition, we believe
that the audit should be conducted with two
audit partners in order to provide the quality
of audit that both we and the Company’s
shareholders require. The Audit Committee
also recognises the increasing regulatory
demands being placed on the audit profession,
which are resulting in additional costs to
conduct an audit. Following these discussions
we agreed to increase the Group’s audit fee on
a like for like basis by approximately 20% over
the two years to FY21. The level of increase in
the fees is subject to the scope of the audit.
I will therefore report on the final fees for
FY20 and FY21 in each of the respective Audit
Committee reports. In addition, the audit fees
for the JVs in which we participate will be
reported each year once they have been agreed
with the JV partner and the Audit Committee.
Set out in the following pages is more detail
of how we have discharged our duties in
respect of the financial year under review.
Jock Lennox
Chairman of the Audit Committee
3 September 2019
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Audit Committee role and activity FY19
Main role and activities undertaken during the financial year
The main role of the Audit Committee is to assist the Board in fulfilling its corporate governance obligations relating to the Group’s financial
reporting practices, internal control and risk management framework. It follows an annual work programme to ensure that its roles and
responsibilities are completed throughout the year. The Audit Committee’s responsibilities, as delegated by the Board, are formally set out in
its written terms of reference which are available from www.barrattdevelopments.co.uk/investors/corporate-governance.
Committee effectiveness
• Progressed actions arising from the FY18
internal evaluation.
• Participated in the externally facilitated
evaluation of its performance in FY19 and
discussed and agreed an action plan to
address issues identified (page 78).
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 121).
• Assessed the long term prospects of the
Company, and agreed the timescale to be
covered by the long term viability statement
for disclosure in the 2019 Annual Report and
Accounts (page 65).
• Reviewed the adequacy of available finance
to the Group.
Governance
• Considered and recommended for approval
the proposed corporate governance
disclosures for the 2019 Annual Report and
Accounts including that they are fair, balanced
and understandable (pages 88 and 89).
• Received updates on general corporate
governance requirements.
• Reviewed compliance with GDPR.
• Reviewed and updated its terms of reference.
• Reviewed and recommended for approval
the policies relating to anti bribery, anti
money laundering, competition compliance
and ethics.
The Audit
Committee
External audit
• 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 90).
• Assessed and confirmed the independence of
the external auditor (pages 90 and 91).
• Agreed external audit terms of reference, fees
and scope for the half and full year ends.
Internal audit
• Received regular updates from the Chief
Internal Auditor/Head of Internal Audit on
matters arising from the internal audits
undertaken throughout the business.
• Met with the Chief Internal Auditor/Head of
Internal Audit without management being
present.
• Reviewed and agreed the Internal Audit plan
for FY20 with due regard to the principal risks
of the Company.
• Regularly reviewed the ratio between audit and
• Discussed and agreed the proposals for
non-audit fees (page 90).
• Reviewed and updated the policy on auditor
independence and non-audit fees accordingly
(page 90.
improving the efficiency and effectiveness
of the Internal Audit function.
• Assessed the effectiveness of the Internal
Audit function (page 91).
Integrity of Financial Statements and
announcements
• Analysed drafts of half and full year results
announcements.
• Reviewed and addressed critical accounting
judgements and key sources of estimation
uncertainty (see pages 87 and 88).
• Reviewed and approved the Financial
Statements for FY18 and agreed the format for
the Financial Statements for FY19.
• Reviewed the process established for ensuring
that (and opined on whether) the Annual
Report and Accounts are fair, balanced
and understandable (pages 88 and 89).
• Considered and approved material accounting
policies, estimates and judgements.
• Assessed and approved pension assumptions
and reviewed funding levels of the defined
benefit pension scheme.
• Received updates on the implications of new
accounting standards and key regulatory changes.
• Reviewed the tax strategy of the Group.
Internal control and risk
management systems
• Monitored and regularly reviewed the
effectiveness of internal controls and risk
management systems (including ESG’ risks) in
the context of the Company’s appetite for risk.
• Ensured procedures are in place to identify
emerging risks.
• Considered regular updates from the
Risk Committee which included risks and
mitigations in place for various functions across
the business, including amongst other things,
construction risk, mortgage availability, skills
shortage, a ‘no-deal’ exit from the EU, a change
in Government and supply chain risk.
• Considered regular updates from the Chief
Internal Auditor/Head of Internal Audit on
whistleblowing and suspected fraud reports
and related investigations (pages 89 to 91). The
Audit Committee Chairman reported material
whistleblowing matters to the Board.
• Received updates on the Group’s disaster
recovery policies and processes, including
the impact of cyber security risks.
• Reviewed, and recommended to the Board
for approval, the principal risk disclosures
for inclusion in the 2019 Annual Report
and Accounts.
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Audit Committee report
continued
Membership and attendance at Audit
Committee meetings
In compliance with the Code, the Committee
is composed exclusively of Non-Executive
Directors and each member is considered
to be independent by the Company. The
Chairman, John Allan, is not a member of
the Audit Committee. The Board is satisfied
that Jock Lennox has recent and relevant
financial experience to Chair the Audit
Committee. Jock is a Chartered Accountant
and chairman of another listed company’s
Audit Committee and is therefore well
qualified to undertake this role effectively.
As part of the effectiveness review, the
Nomination Committee was satisfied
that the Audit Committee as a whole has
competence relevant to the sector in
which the Group operates. Details of the
members and attendance at each of the
scheduled meetings is shown in Table 8
and the biographies and qualifications of
the members are shown on pages 68 and 69.
Table 8 – Audit Committee membership
and attendance for FY19
Number of
meetings
attended
4/4
4/4
4/4
4/4
Role
Chairman/
Member
Member
Member
Member
Member
Jock Lennox
Richard Akers
Nina Bibby
Sharon White
Note:
X/ Number of meetings attended whilst a Director.
/X Number of meetings held whilst a Director.
In addition to the Company Secretary
(Tina Bains), the Chief Internal Auditor
(George Dobie until 1 March 2019, and
thereafter his replacement, the Head
of Internal Audit, Kerry Smith) and
representatives from Deloitte LLP attended
each of the Audit Committee meetings.
The Chief Executive, Chief Financial Officer,
Chief Operating Officer and other members
of Senior Management also attended
meetings (or parts thereof), by invitation.
Members of Senior Management included,
amongst others, the Group Financial
Controller, Group IT Director and the Group
Sales and Marketing Director. After each
meeting, the Chairman of the Committee
reported to the Board on the business
undertaken by the Audit Committee.
The Audit Committee met the Chief Financial
Officer, the Chief Internal Auditor and
Deloitte LLP separately and independently of
management and the Chairman of the Board.
Matters discussed with management
During the year, the Committee requested
further information from management on a
number of areas related to accounting, risk
management and financial control. These
included:
• The management of the land acquisition
process and detailed analysis of the
Group’s land bank so that it could consider
further the changes to the Government’s
Help to Buy scheme from 2021. The
Committee considered that the approach
adopted by management was appropriate;
• Review of the critical accounting
judgements and key sources of estimation
uncertainty made with regards to margin
recognition and the associated valuation
of work in progress. The Committee
agreed that this was a critical accounting
judgement as outlined on page 88;
• Review of the Group’s goodwill and
intangible assets, including the
acquisition of Oregon. The Committee
agreed that goodwill and intangible assets
were a critical accounting judgement as
outlined on page 88;
• Analysis of accruals held related to
completed developments and the
related management review and
control processes. The Committee
considered that the approach adopted by
management was appropriate;
• Detail to assess the appropriateness of the
proposed contingent liabilities disclosures
included within the Annual Report and
Accounts. The contingent liabilities
disclosure incorporates refinements made
by the Audit Committee;
• Understanding of the assessment
undertaken by the Risk Committee to
review and confirm that the Group’s
principal risks remain appropriate. The
Committee concurred that the process
operated by the Risk Committee was
robust and that the principal risks and
uncertainties as disclosed on pages 59 to
64 are appropriate; and
• Additional scenarios to be included in the
Group’s analysis of going concern. The
conclusion of the Committee following this
review is outlined under Significant matters
considered during the financial year.
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Significant matters considered during
the financial year
The significant matters considered by the
Audit Committee during the financial year
were addressed as set out below and on
page 88. The Audit Committee considers
each of these items as being significant due
to their potential impact on the performance
of the Group’s activities.
1. Critical accounting judgements and
key sources of estimation uncertainty
See table on page 88.
2. 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 going concern
requirements of the Code to ensure
compliance; and
• continued to monitor market conditions
to ensure any appropriate adjustments
are made to the Group’s strategic and
financial planning.
Further details on the Group’s going concern
assessment can be found on pages 121 and 138.
The Audit Committee required Senior
Management to consider various scenarios
and sensitivities relating to each of the
above significant issues. The information
presented set out how the Group’s activities
would be affected under each scenario and
the potential mitigations available in each
case. Based on this information, the Audit
Committee concurred with management’s
conclusions that the Group is operating
within an appropriate range of sensitivities.
3. 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.
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Audit Committee report
continued
Critical accounting judgements and key sources of estimation uncertainty for FY19 remained unchanged from FY18 and comprise:
Key sources of estimation uncertainty
Margin recognition
Impairment of goodwill and indefinite life brands
The Group holds of £4,704.4m of land and WIP across housebuilding and
commercial developments. During the year, the Group has recognised
£1,068.1m of gross profit from housebuilding and has £4,696.4m of land and
WIP in relation to housebuilding developments at 30 June 2019. The Group’s key
control is the site valuation process in which assessments are determined over
the valuation and profit recognised from housebuilding developments. 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 homes built in the current year and in future years. It also has to
estimate costs to complete on such developments and make estimates relating
to future sales prices on those developments and units, in making these
assessments there is a degree of inherent uncertainty.
The Group has £805.9m of goodwill and £100.0m of intangible assets with an
indefinite useful life. Goodwill of £792.2m was recognised on the acquisition
of Wilson Bowden in 2007 and £13.7m from the acquisition of Oregon in 2019,
all of which is attributable to its housebuilding business (see page 158). 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.
A further £2.3m of intangible assets were also recognised on the acquisition of
Oregon. These assets will be amortised as outlined on page 161.
How the Audit Committee addressed those estimates
Margin recognition
Impairment of goodwill and indefinite life brands
The Audit Committee received feedback from Senior Management, including
the Executive Directors in respect of their attendance at valuation meetings,
including assurance on the efficiency and consistency of the approach on
valuation throughout the business. In addition, Deloitte LLP reported on their
findings and recommendations following their attendance at valuation meetings
as part of the external audit process. The Committee also considered the results
of the Group’s internal audit reviews across the business. Based on the results
of the internal audits and the presentations received, the Audit Committee was
comfortable with the process and controls adopted by management around
the estimation of future income and costs to complete, and thus the process by
which the Group’s inventory is valued and margin recognised.
The Audit Committee considered Management’s assumptions and estimates
in the assessment of margin recognition based on site performance and the
valuation of inventory, based on recoverability over the remaining activity of the
site. The Audit Committee requested regular updates on sites under examination.
The Audit Committee considered the level of goodwill and intangible assets
with an indefinite useful life held on the Group’s balance sheet of £905.9m
and whether, given the future prospects of the Group and Oregon, the value of
goodwill held on the balance sheet remains appropriate. The paper, which was
considered at the Committee’s August 2019 meeting outlined the assumptions
made, the sources for these assumptions, and the resulting valuation. Deloitte
LLP reported upon goodwill and intangible assets valuation also at the August
meeting in the context of the year end audit. Following detailed consideration
of the Material Accounting Policies, the Estimates and Judgements paper and
the findings of Deloitte LLP, the Audit Committee agreed with the estimates
made by management and concluded that the valuation of goodwill and
intangible assets remains appropriate.
2019 Annual Report and Accounts:
fair, balanced and understandable
The Audit Committee undertook a detailed
review of the process undertaken in
drafting the Annual Report and Accounts
to support its deliberations on whether the
2019 Annual Report and Accounts were
fair, balanced and understandable. The
process involved collaboration between
various parts of the Group including the
Group Finance team, Company Secretariat,
Group Communications, Investor Relations,
the Sustainability team and the Company’s
advisers. This approach enabled a clear
link between the Strategic Report, the
Governance section and the Financial
Statements. The Audit Committee received
an early draft of the 2019 Annual Report and
Accounts (including the risk management
and principal risks disclosures) to allow itself
sufficient time to review the disclosures
therein. The Audit Committee then assessed,
at its meeting in August 2019, whether the
2019 Annual Report and Accounts were fair,
balanced and understandable. In reaching its
decision, the Audit Committee reviewed:
• the feedback provided by shareholders
in respect of the 2018 Annual Report and
Accounts;
• the assurances provided in respect of the
financial and non-financial management
information;
• the balance between statutory and
adjusted performance measures;
Barratt Developments PLC Annual Report and Accounts 2019
• 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; and
• 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.
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Following detailed consideration, the Audit
Committee concluded that the 2019 Annual
Report and Accounts:
• accurately reflected the Group’s and
Company’s performance in the year under
review;
• contained an accurate description of the
business model;
• correctly reflected the Group’s and
Company’s strategy;
•
•
included consistent messaging between
each of the sections of the Report and
Accounts; and
included KPIs which were consistent
with the business plan and remuneration
strategy;
and therefore the 2019 Annual Report
and Accounts were fair, balanced and
understandable and contained sufficient
information for shareholders to assess
the Group’s and Company’s position,
performance, business model and strategy
and recommended as such to the Board.
Long term viability statement
In accordance with provision C.2.2. of
the Code and the FRC guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting, the Audit
Committee revisited the timescale over
which it could sensibly assess the Group’s
ability to continue to trade, taking into
account the Group’s business model and
prospects. The Audit Committee assessed
the Group’s resilience to the principal risks
and uncertainties by stress testing forecasts
through the application of a number of
adverse scenarios. These scenarios would
ultimately result in a fall in the average
private selling price, reduction in volume,
an increase in build, warranty, labour and
administration costs, and an increase in
build time. The scenarios considered were
severe representations of the potential
risks, applied over a full three-year period.
The testing highlighted potential covenant
breaches and funding requirements in
excess of the Group’s facilities. However,
on application of the mitigating actions
available, the Group would be able to operate
within its current facilities, meet its financial
covenants and maintain its announced
Capital Return Plan. The Audit Committee
was therefore comfortable that the Group
would maintain resilience in the event such
scenarios occurred and concluded that
there was a reasonable expectation that
the Group would continue to operate and
meet its liabilities over a three-year period.
Taking into account the Group’s three-year
planning cycle, three-year financial plan and
a target controlled land bank of 3.5 years,
the Audit Committee agreed that the long
term viability assessment should continue to
be performed over a three-year timescale.
This conclusion was communicated and
recommended to, and subsequently
approved by, the Board.
The Long term viability statement is shown
in the Strategic Report on page 65.
The effectiveness of internal controls
and the risk management process
The Audit Committee plays a vital role
in reviewing the effectiveness of internal
controls and the risk management processes
on behalf of the Board. The key aspects of
the Group’s system of internal control and
risk management framework are as follows:
• a clear organisational structure
with defined levels of authority and
responsibility for each operating division;
• 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;
•
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 their relevance to the operations
and financial performance of the Group
are set out on pages 57 to 64; and
• 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, which is approved by
the Audit Committee, is set with reference
to the principal risks of the Group,
including those risks associated with
culture, safety, health and environment,
reputation and other business process
areas. It includes full divisional audits and
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targeted audits of key risk areas such as
land acquisition and sale, cost controls,
work in progress, treasury, payroll and
HR. Where the Internal Audit team does
not have the expertise or resources
required to conduct complex audits they
obtain external assistance.
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.
There is a regular, detailed system for the
reporting and forecasting of cash flows from
operations to Senior Management, including
Executive Directors, 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, for example using fixed rate
debt to manage interest rate risk. The Group
does not use derivative financial instruments
for speculative purposes. Activities are
delegated, by the Board, to a centralised
Treasury Operating Committee. The Treasury
department operates in accordance with the
guidelines contained within approved treasury
policies that are established by the Board and
the Treasury Operating Committee.
Specifically, in relation to risk management
and internal control, the Audit Committee,
during the year:
• monitored and reviewed the effectiveness
of risk management and internal
controls;
• 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 2019;
• 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
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Audit Committee report
continued
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 could
threaten the business model, future
performance, solvency and liquidity and
agreed with management’s assessment
that they are being appropriately managed;
• had in-depth discussions around a
number of risks and internal controls
throughout the business including: Group
IT, cyber, Help to Buy and reputational
risk;
• reviewed in detail the output of the half
yearly 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 procedures for the identification,
assessment and reporting of risks;
• reviewed the concurrency of the principal
risks and the risk management framework
to determine if the descriptions of their
operation were up to date, and the system
of internal control remained effective, and
reported their findings to the Board when
considering the draft half year and full year
Financial Statements;
• assisted the Executive Committee
in prioritising the risk framework by
identifying the risks considered most
significant to the Group and assessed the
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 and
Principal risks sections on pages 57 to 64.
The Audit Committee recognises the further
progress the Risk Committee has made to
embed further risk management into the
business. It is anticipated that this will be
developed further during FY20.
Review of accounting policies
IFRS 9 and IFRS 15 have been fully adopted
for the first time for the financial year under
review. The Audit Committee has considered
these and the other accounting standards
applied in the year and reviewed the Group’s
progress on considering the impact of IFRS
16 ‘Leases’ upon the Group’s accounting
policies and Financial Statements.
The Committee continues to oversee
developments of the Group’s processes
and reporting to ensure it will be compliant
with the requirements of IFRS 16 when it
becomes applicable from FY20. Further
information on the impact of new accounting
standards is on page 143.
External auditor
Audit performance and effectiveness
The Audit Committee assessed the
performance of the external auditor and
the effectiveness of the external audit for
FY19. In coming to its conclusion the Audit
Committee reviewed amongst other matters:
• feedback on the effectiveness and
performance of the external audit
from Group, divisional and regional
management and the Chief Internal
Auditor/Head of Internal Audit who were
closely involved in both the half year and
full year reporting processes;
• Deloitte LLP’s fulfilment of the agreed
audit plan for FY19;
• reports highlighting the material issues
and critical accounting judgements and
key sources of estimation uncertainty that
arose during the conduct of the audit; and
• Deloitte LLP’s objectivity and
independence during the process.
The Audit Committee 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. Deloitte LLP’s performance
as auditor to the Company during FY19 was
therefore considered to be satisfactory.
Interaction with the FRC
We can confirm that, during the financial
year under review, the Company had no
interaction with the FRC’s Corporate
Reporting Review Team or its Audit Quality
Review Team.
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 non-audit to audit fees to ensure that it
does not exceed the 1:1 ratio prescribed by
that policy, further details of which are set
out in section (iv). During FY19 £58,000 was
paid to the auditor for non-audit services
(including audit related services) out of a
total fee paid for all services of £459,000.
Non-audit fees therefore represented 12.6%
of audit fees. Further details of the audit and
non-audit fees incurred by the Group can be
found in Note 2.3.3 on page 148.
The non-audit fees related to the work
undertaken by Deloitte LLP in their role as
auditor to the Group for the half year review
and in relation to provision of planning
related information required in the sale of a
subsidiary. 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, are usually
conducted by the Group’s auditor. This
safeguard will be applied to any non-audit
work that the auditor may be asked to
provide by the Committee. 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.
Auditor independence and
non-audit fees policy
In FY19, the Committee reviewed the policy
on Auditor Independence and non-audit
fees to ensure it remains appropriate.
The Committee noted that the policy’s cap
on non-audit fees of 70% of the average audit
fees over the previous three years would take
effect from 1 July 2019. The Policy sets out the
duties of the Audit Committee with respect to
protecting the objectivity and independence of
the auditor and codifies: the limited range of
services which have been pre-approved by the
Audit Committee; permitted services which
must be approved by the Audit Committee
before being provided; and those services that
the Auditor will not be permitted to provide
under any circumstances. The policy is
available at www.barrattdevelopments.co.uk/
investors/corporate-governance. The Audit
Committee monitors non-audit fees paid to
the Auditor by the Group at each Committee
meeting.
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The review confirmed that the Policy remains
fit for purpose and has been drafted in line
with the requirements of the Ethical Standard.
As in 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 of the Chairman
of the Company, the Chair of the Audit
Committee and the Chief Financial Officer.
Deloitte LLP do not provide services to the
Group that are prohibited under the Policy.
Where the auditor does provide non-audit
services, independence and objectivity
are maintained as they are managed by a
partner with no involvement with the Audit
of the Group.
Under the Policy, the Company is required
to annually obtain written confirmation
from Deloitte LLP that they remain
independent. For FY19 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 LLP’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.
External audit tender
Deloitte LLP were first appointed as auditor
to the Group in 2007. The Group therefore
put the office of external auditor out to a
competitive tender process in FY17, which
was fully reported in the 2017 Annual Report
and Accounts. Following due consideration
the Board unanimously agreed to re-appoint
Deloitte LLP with effect from the FY18
audit. Having conducted this competitive
tender, the Company has complied with the
provisions of The Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Processes
and Audit Committee Responsibilities) Order
2014 issued by the CMA on 26 September
2014. Claire Faulkner, having become lead
audit partner in FY18, continued in this role
for the FY19 external audit.
Under current regulations the Company is
not due to re-tender its audit until 2027;
however, the Audit Committee will
continue to monitor the performance of the
external auditor during this time and make
recommendations accordingly.
On the recommendation of the Audit
Committee the Board is recommending a
resolution at this year’s Annual General
Meeting that Deloitte LLP be re-appointed
for a further year.
Internal Audit function
During the year, the Chief Internal Auditor
stepped down from this position to take on
other responsibilities in the business. His
replacement joined the business in January
2019 and took over from him, with the title
Head of Internal Audit, in March. The Audit
Committee received reports from the Chief
Internal Auditor and Head of Internal Audit
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 Head of Internal
Audit 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. As part of
the FY19 Audit Plan, to further improve the
effectiveness of Internal Audit, the Head of
Internal Audit has commenced a strategic
review of the Internal Audit function. Initial
improvements recommended by the Head of
Internal Audit include:
• consolidation of the different types of
audit undertaken;
•
implementation of a formal management
action tracker; and
• streamlining of audit reports.
The final proposals from the strategic review
will be presented to the Committee later in
the year.
The Audit Committee considered the
effectiveness of the Internal Audit team at its
November 2018 meeting, and confirmed that
in its opinion, Internal Audit had operated
effectively and provided an appropriate level
of independent scrutiny of the operations of
the Group.
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Audit Committee effectiveness
The 2018 internal performance evaluation
of the Audit Committee was positive and
actions have been taken with regards to
each recommendation as set out on page 77.
This year the Audit Committee’s evaluation
was externally facilitated, along with the
Board effectiveness review. The outcomes
and actions arising from this review are
described in more detail on page 78.
Whistleblowing
The Chief Internal Auditor or Head of Internal
Audit 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 telephone number is
available to all employees, sub-contractors
and suppliers 24 hours a day, seven days a
week. Any issues reported to the number
that require urgent attention, such as
corruption, human rights, safety, bullying
or harassment, are notified to the Group
immediately, all other issues are notified
within 24 hours. The Head of Internal Audit
reviews and investigates the issues and,
at her sole discretion, can seek guidance
from appropriate individuals within the
Group, such as the Company Secretary,
as and when necessary. As Chairman of the
Audit Committee I update the Board on all
whistleblowing reports and investigations on
a regular basis, and the Board discusses the
most material issues.
This report forms part of the Corporate
governance report and is signed on behalf
of the Audit Committee by:
Jock Lennox
Chairman of the Audit Committee
3 September 2019
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Safety, Health and Environment Committee report
❝ The health and safety of our workforce, customers
and members of the public and the protection of the
environment around our developments remains a
fundamental priority and is embedded within the
day-to-day operations of the business. ❞
Richard Akers
Chairman of the Safety, Health
and Environment Committee
Statement from the Chairman of
the Safety, Health and Environment
(‘SHE’) Committee
The health and safety of our workforce,
customers and members of the public and
the protection of the environment around
our developments remains a fundamental
priority and is embedded within the
day-to-day operations of the business.
The SHE Committee’s activities help to
mitigate some of our key operational
risks relating to SHE. By receiving reports
and challenging those tasked with SHE
performance where necessary, the
Committee helps the business to improve
its SHE standards. It supports and oversees
the direction and implementation of SHE
Policy and Procedures through underpinning
efficient working practices, preventing
direct costs associated with incidents,
and supporting the culture and ongoing
sustainability of the Group.
This Committee continues to work closely with
the SHE Operations Committee to oversee
and provide stewardship of the Group’s SHE
operational performance. The Group SHE
Operations Committee is responsible for
implementing and oversight of the overall
SHE improvement strategy for the Group.
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. We hold
at least one joint meeting during each year
enabling the members of the SHE Committee
to gain more of an in-depth understanding of
the operational issues and to discuss them
directly with those responsible for day-to-
day SHE management. The SHE Committee
has formal terms of reference, which it has
reviewed and approved during the year.
The key aspects of the SHE Committee’s role
as defined in these terms of reference 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;
• review the scope of and 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 how they were caused,
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 measures which are to
be applied to the annual bonus scheme
and monitor performance against such
measures.
Review of activities in FY19
Board SHE visits
All Directors are encouraged to attend a
SHE site visit with the Group SHE Director.
These visits aim to provide an insight into
how SHE is managed in addition to providing
more detailed information on the initiatives
in place to further improve the SHE culture
on our sites. Employee participation is a key
aspect of this and the visit involves a site
tour with the SHE Director and site team
during which the challenges of managing
risk on site are reviewed and discussed. Not
only do these visits play an important role in
ensuring our Board has a full understanding
of this vital part of our business, it also
benefits the site teams to see the emphasis
being placed on SHE by the Board.
IIR
We have continued to monitor our SHE
performance targets, our key performance
indicators and our IIR, all of which are
available in the Strategic Report on pages
46 and 47. Our IIR has decreased during
FY19, as a result of the continued high levels
of focus on SHE management, increased
monitoring by our in-house SHE team and
as a result of our continuous improvement
strategy in this area. However, we remain
focused on continuing to make improvements
to reduce injuries and continue to work with
our management teams on this. Despite
our best efforts, we were deeply saddened
that a sub-contractor working on one of our
sites was fatally injured in June 2019. I can
assure you that we are fully cooperating with
the Health and Safety Executive during its
ongoing investigation. We have also made
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sure that those individuals who have been
affected by this tragic incident have received
the appropriate level of support. Our thoughts
are with the family, friends and colleagues of
the sub-contractor during this difficult time.
SHE Management System
We have continued to operate the SHE
management system that has been in place
for a number of years, and which has been
reviewed and updated during the year.
As reported last year, an audit by the British
Safety Council of our SHE policies, processes
and procedures took place in July 2018,
with our 5 star status retained. We strive to
ensure that our SHE policies and procedures
are kept up to date with the latest regulation
and best practice and that they remain
relevant to the business through continuous
improvement.
The external verification by the British Safety
Council of our health and safety approach
and the quality of our policies and procedures
provides a benchmarking service against
industry standards, but of more importance is
the impact our policies have on keeping our
people safe in the workplace. Consequently,
all employees are required to familiarise
themselves with these policies, processes
and procedures during their induction and
attend prescribed health and safety courses
throughout their time with the Group.
SHE training and compliance
The SHE training provided to employees and
site-based workers is continually reviewed to
ensure it is fit for purpose and up to date. All
Senior Management are required to complete
the IOSH Leading Safely training course.
To ensure compliance, our network
of in-house SHE professionals assist
our management teams and continue
to emphasise the application and
implementation of our SHE management
system. They also carry out site monitoring
visits to all sites at least monthly, which
are in the main unannounced, in order to
monitor the implementation of policies
and procedures. The results of these visits
are reviewed by the SHE Director and the
Committee.
Drugs and alcohol testing
Following feedback from our initial programme
of random sampling, we reviewed and updated
our Drugs and Alcohol policy and put additional
controls in place to ensure we remain GDPR
compliant. The programme has been accepted
by the business and is seen as key to helping
keep our workforce safe.
Occupational and mental health
We continue to concentrate on occupational
and mental health, offering advice on
healthy lifestyles and achieving a healthy
work–life balance. A health and wellbeing
calendar has been made available to all
employees and provides advice on different
health related topics each month. We
are implementing occupational health
surveillance for directly employed employees
and continue to provide mental health
awareness training for line managers and
raise awareness of health related issues
through poster and leaflet campaigns.
NHBC awards 2019
We were particularly pleased to see that six of
our sites had been commended as part of the
NHBC health and safety awards, and three of
these went on to be highly commended.
Areas of focus for FY20
During FY20, we will:
• continue in our wellbeing and
occupational health programmes
and support our supply chain to meet
this obligation;
• progress our programme of random
drugs and alcohol testing in line with
our policy in this area;
• look to further improve our IIR; and
• update our SHE management system
to comply with ISO 45001.
Our most important asset is our workforce
and therefore it is important that the safety
and wellbeing of all employees (direct and
indirect) remains a fundamental priority for
this Committee and the Group Board.
Membership and attendance at SHE
Committee meetings
The Directors who are members of the
SHE Committee and their attendance at
the two scheduled meetings during the
year are shown in Table 9. The Group’s
SHE Director is also a member and the
Company Secretary acts as Secretary to
the Committee.
Engagement with sub-contractors
During FY19 we have held 26 seminars with
124 of our groundworks contractors to help
improve the interface between plant and
pedestrians and work with contractors.
Only members of the SHE Committee have
the right to attend meetings; however, other
individuals may be invited, at the request of
the Chairman, to attend all or part of any
meeting where it is deemed appropriate.
Some of the initiatives that we have embarked
on as a result of the seminars include:
Table 9 – SHE Committee membership
and attendance for FY19
• provision of cabs on dumpers (six tonnes
or over) from January 2021;
• further controls for segregation of plant
and pedestrians, including onsite trials
of auto-detection equipment;
• minimum levels of training for onsite
supervision; and
• minimum standards for all types of plant
provided on site.
Good Housekeeping Campaign
Throughout the year, the SHE team have
been focused on a campaign to enhance
housekeeping and safe access to workplaces.
Communication of key points has been
through the use of posters, briefing cards
and a safety alert being issued to site teams.
Member1
Richard Akers
Steven Boyes
Role
Chairman
Member
Number of
meetings
attended
3/3
3/3
1 The Group’s SHE Director attended 2/3 meetings
during the year.
Note:
X/ Number of meetings attended whilst a Director.
/X Number of meetings held whilst a Director.
Richard Akers
Chairman of the SHE Committee
3 September 2019
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94
Remuneration report
Annual statement from the Chairman of the Remuneration Committee
Richard Akers
Chairman of the
Remuneration Committee
❝ Our Remuneration Policy continues to be fit for purpose,
aligning the interests of our Executive Directors with those
of our shareholders. It also continues to drive appropriate
behaviours for the long term success of the Company. ❞
On behalf of the Board, I am pleased to
present our Remuneration report for the
year ended 30 June 2019. Our Remuneration
report comprises three parts: this Annual
Statement, the Remuneration Policy and the
Annual report on remuneration.
Remuneration Policy
Shareholders last approved the Remuneration
Policy in 2017 with over 98% of votes cast in
favour. This year we have undertaken a review
of the Remuneration Policy and believe that
it continues to be fit for purpose, aligning the
interests of our Executive Directors with those
of our shareholders. It also continues to drive
appropriate behaviours for the long term
success of the Company. Accordingly, we have
agreed that there will be no changes to the
Remuneration Policy for FY20.
We will be undertaking a detailed review of
our Remuneration Policy in FY20, with a view
to presenting it to shareholders for approval
at our 2020 AGM. We will engage with
shareholders as part of this process.
Remit of the Committee
As part of our review of the Remuneration
Policy, we will determine what changes
are required in light of changing market
expectations and the New Code (which is
applicable to all financial years commencing
on or after 1 January 2019). We welcome
the changes introduced by the New Code
including those that extend our remit to
include the setting of remuneration for Senior
Management and to review remuneration
and related policies for the wider workforce
whilst aligning incentive and rewards with
culture when setting Executive Directors’
remuneration. These are tasks that we
already undertake as a Committee and we
will look to embed them further in to our
annual agenda during the course of FY20. We
have already updated our terms of reference
to reflect the requirements of the New
Code which can be found on our website at
www.barrattdevelopments.co.uk/investors/
corporate-governance.
Chief Executive pay ratio
The Committee already uses a variety of pay
ratios to ensure that Executive Directors’
remuneration remains appropriate within
the context of reward arrangements across
the business and with market practice.
We therefore welcome the requirement
to disclose our Chief Executive’s pay
ratio. Whilst this is not yet a mandatory
requirement, we have voluntarily disclosed
the information in this report. Further details
can be found on page 116.
Pension contributions
We are supportive of the requirements of
the New Code, and the guidance of various
advisory bodies (including the IA) on the
alignment of Executive pension contributions
with those of the wider workforce. For new
Executive Directors as of November 2017
(including Jessica White who was promoted
to Chief Financial Officer in 2018), we have
reduced the maximum contribution to
15% of salary from 25%. For new joiners
as of 1 July 2019 the maximum pension
contribution has been reduced further, to 10%
of salary, equal to the maximum employer
contribution available to the workforce in
general.
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As part of the upcoming policy review we
will consider pension provisions in depth,
including those provided to our incumbent
Executive Directors, and make appropriate
adjustments in the context of investor views
and evolving market practice.
Post-employment shareholding
requirements
Our shareholding policy already includes
a requirement that for the Chief Executive
and the other Executive Directors to be
classified as a ‘good leaver’ they must
commit to holding 100% or 75% of their
shareholding respectively, for a period of
two years after they leave employment.
The post-cessation shareholding policy
will be reviewed as part of our wider policy
renewal, and amendments will be made
to ensure compliance with the New Code
and alignment with the expectations of
our investors.
Malus and clawback
With the assistance of our legal advisers,
Slaughter and May, and remuneration
consultants, PwC, we undertook a review of
the malus and clawback provisions contained
within the rules of our share schemes.
Following this review, we have amended our
malus and clawback provisions in order to
adopt a longer list of specific triggers whilst
ensuring that we have sufficient discretion
to apply malus and clawback in appropriate
unforeseen circumstances. The changes
have also enabled us to address the
concerns expressed in the New Code, FRC
Guidance on Board Effectiveness and The
IA’s Principles of Remuneration. Details of
the revised malus and clawback provisions
can be found on page 101.
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Gender pay gap disclosure
In April 2019 we published our second
Gender Pay Gap report. The Group has
a mean gender pay gap of 6.0%, and our
median gap is 3.5%, which, whilst slightly
higher than last year, is still well below the
national average of 17.1%. Our mean bonus
gap stands at 42.6% and our median bonus
gap at -15.3%. The Group is focussed on
improving its gender pay and bonus gaps.
Further details can be found on page 45
of this Annual Report and Accounts and
the full disclosure is on our website at
www.barrattdevelopments.co.uk.
In collating our data and drafting our
disclosure for 2019, we have taken into
consideration the BEIS recommendations
on gender pay reporting published in
August 2018.
Shareholder engagement
In July 2019, we provided an update on
Executive Directors’ remuneration outcomes
for FY19 and proposed remuneration
for FY20 to our major shareholders and
institutional voting agencies. No areas of
concern were raised. Details of Executive
Remuneration for FY20 are summarised
within this statement.
Employee engagement
on remuneration
We are mindful of the value of engagement
with the wider workforce on various matters,
including remuneration policies and
practices. To facilitate this, we established
a Workforce Forum during the year, which
I will attend at least once a year, in my
capacity as the designated Non-Executive
Director for employee engagement.
Employees will be able to raise matters
relating to workforce pay through this forum.
Further details on the Workforce Forum and
the matters it has discussed can be found
on page 24. To further engage with our
employees and to aid retention, we granted
a further award of shares to all employees
below Senior Management under our
Employee Long Term Incentive Plan. Details
can be found on page 25.
FY20 Executive Directors’
remuneration
Details of the remuneration of each of the
Executive Directors for FY20 are set out on
pages 106 to 108. Salary increases are in
line with the wider workforce and pension
contributions, annual bonus opportunity
and LTPP award levels remain unchanged
from the previous financial year. To further
align the Executive Directors’ annual bonus
scheme with that of Senior Management and
below, we have made a few slight changes
to the metrics of the scheme. Details can be
found on page 106. The metrics for the LTPP
remain unchanged and in accordance with
our Remuneration Policy.
FY19 Performance and reward
It has been another year of strong results
for the Group. We have met, or in some
cases exceeded, the financial and non-
financial short and long term performance
targets. This would not have been possible
without the clear direction and leadership
from the Executive Directors and Senior
Management. Accordingly, in recognition
of this and taking into account the extent
to which the Executive Directors have met
their personal objectives (page 110), we have
agreed that the financial performance of
the Group fully supports an annual bonus
payment in the range of 144% to 149% for
Executive Directors and that there has been
no need to use our discretion to vary the
outcomes. Details of individual payouts and
the amounts to be deferred into shares can
be found on pages 109 and 110.
In addition, the performance conditions of
the LTPP award granted in October 2016
were tested after the year end and 92.8%
of the award granted to David Thomas and
Steven Boyes and 100% of the award granted
to Jessica White vested. The difference in
the percentage vesting is explained more
fully in note 1 of Table 20 on page 111. The
net shares (after the payment of any tax
and NI due on release) will be subject to a
further two-year holding period for David
Thomas and Steven Boyes. The Committee
believes these outcomes are reflective of
wider Group performance. Full details of the
achievements against each of the bonus and
LTPP targets can be found on pages 109 to
111.
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96
Remuneration report
Annual statement from the Chairman of the Remuneration Committee continued
In developing its policy, the Committee has
regard to:
• the Group’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 across the
wider workforce, including average base
salary increases;
•
information and surveys from internal and
independent sources; and
• the economic environment and underlying
financial performance of the Group.
For full details of our Directors’ Remuneration
Policy see pages 80 to 89 of the Annual Report
and Accounts 2017.
FY20 Chairman and Non-Executive
Directors’ fees
The Remuneration Committee (excluding
the Chairman) agreed to increase the
Chairman’s fee in line with the Executive
Directors and the wider workforce. In
addition, a committee of the Board,
comprising the Chairman and the Executive
Directors, agreed to increase the fees of
the Non-Executive Directors, in line with
the award to the wider workforce. No fee
increases were proposed or approved
for the Chairs of each of the Committees
or the Senior Independent Director. The
revised fee levels continue to reflect market
benchmarks for companies of a comparable
size and complexity. Details of the fees
proposed for the Chairman and each of the
Non-Executive Directors for the financial
year ending 30 June 2020 are set out on
page 108.
Conclusion
We believe that our Remuneration Policy as
approved by shareholders at the 2017 AGM
and our current remuneration practices
continue to drive appropriate behaviours
by management and align the Executive
Directors with shareholders through: the
performance targets set; the requirement to
retain a specific level of shareholding in the
Company; the deferral of any annual bonus
received over 100% salary into shares and
the two-year net of tax holding requirement
following vesting of any LTPP award.
We therefore hope that you will continue to
support the Annual Report on Remuneration
to be presented at the AGM in October
2019. On behalf of the Board, I would like to
thank you for your continued support of our
remuneration framework and I look forward
to seeing many of you at the AGM.
Richard Akers
Chairman of the Remuneration Committee
3 September 2019
Our remuneration strategy
Without our people, we would not have a
business. It is therefore imperative that our
remuneration strategy appropriately rewards
our employees for their performance against
the Group’s key performance indicators, both
financial and non-financial, whilst delivering
sustainable shareholder value.
Aims of our Remuneration Policy:
• To promote the long term sustainable
success of the Company and be fully
aligned with the performance and
strategic objectives of the Group in order
to enhance shareholder value.
• To 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.
• To take account of pay and employment
conditions of employees across the
Group whilst reflecting the interests and
expectations of shareholders and other
stakeholders.
• To reward the delivery of profit, margin
improvement, 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.
• To ensure that there is no reward for
failure and that termination payments
(if any) are limited to those that the
Executive Director (or member of Senior
Management) is legally entitled to.
• To ensure that 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.
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Remuneration report
Overview for FY19
97
The summary below outlines the remuneration outcomes for Executive Directors for the year under review, together with the minimum, on-
target and maximum opportunities, targets set for variable remuneration and our performance against them. Full details can be found in the
Annual report on remuneration on pages 104 to 117. Details of Executive Directors’ shareholding requirements and whether they have been
met are given in Table 25 on page 114.
Executive Director remuneration policy scenarios for FY20 and FY19 single figure outcomes
4,378
3,613
0
0
0
£
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2,296
971
0
0
0
£
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1,838
790
3,485
2,919
0
0
0
£
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2,400
1,240
1,203*
501
Policy
Minimum
Policy
On-target
Policy
Maximum
Single
Figure FY19
Chief Executive
Policy
Minimum
Policy
On-target
Policy
Maximum
Single
Figure FY19
Policy
Minimum
Policy
On-target
Policy
Maximum
Single
Figure FY19
Deputy Chief Executive
Chief Financial Officer
Salary
Pension
Benefits
Other
Annual Bonus
LTPP
Share price growth
* See footnote 1 on
page 111
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Notes: For the FY20 policy scenarios, salary levels (which are the base on which other elements of the package are calculated) are based on those applying at 1 July 2019. The value of
taxable benefits is the cost of providing those benefits in the year ended 30 June 2019. Minimum pay is fixed pay only (i.e. salary + benefits + pension). On-target pay includes fixed pay, 50%
of the maximum bonus (equal to 75% of salary) for all Executive Directors) and 50% vesting of the LTPP awards (with grant levels of 200% of salary for all Executive Directors). Maximum pay
includes fixed pay and assumes 100% vesting of both the annual bonus and the LTPP awards, and illustrating 50% share price increase on LTPP shares over the vesting period. All amounts
have been rounded to the nearest £1,000. The Executive Directors are also permitted to participate in HMRC tax advantaged all-employee share plans, on the same terms as other eligible
employees, but they have been excluded from the above minimum, on-target and maximum bars for simplicity. FY19 single figure is based on the values shown in Table 15 on page 108.
FY19 Performance pay outcomes
Annual bonus outturn
Further details, including progress against personal objectives, are set out on pages 109 and 110 in the Annual report on remuneration
Target
PBT
Threshold
£835m
Actual £909.8m
Target
£850m
Maximum
£900m
Weighting Outcome achieved
55%
55%
Quality and Service improvement
Strategic objectives:
Regional margin improvement
Trading outlets
Number of divisions out of 27 to achieve SHE audit score of 94%
and customer recommend score of 90% or above
Actual SHE: 27 divisions; Customer Service: 26 divisions
15%
14.45%
25.8%
26.1%
26.5%
15%
15%
Actual 26.7%
154
Actual 163 outlets
158
161
5%
5%
Personal objectives
Detailed on page 110
LTPP Vesting outturn
Further details are set out on page 111 of the Annual report on remuneration
10%
David Thomas: 6.75%
Steven Boyes and Jessica White: 10%
Percentage of award vesting (%) for each performance condition
David Thomas
Steven Boyes
Jessica White
Shares awarded
292,370
231,387
16,596
EPS
33.3
33.3
50.0
ROCE
33.3
33.3
50.0
TSR
26.2
26.2
n/a
Total
92.8
92.8
100.0
Shares vesting
271,319
214,727
16,596
Value (£000)
1,598
1,265
98
Alignment of incentive performance measures with strategy
Strategic Priorities
Customer first
Anticipate our customers’ evolving
needs by continuously improving the
homes and places we build
Great places
Secure good value land
and planning consents where
people aspire to live
Leading construction
Deliver highest quality homes,
focus on excellence, embrace new
methods of construction
Investing in our people
Attract and retain the
best people, invest in their
development
How our incentive structures are aligned to delivering the strategic priorities
Annual
bonus
LTPP
Quality and Service
TSR
PBT
Trading outlets
ROCE
PBT Margin improvement
Quality and Service
PBT
Quality and Service
ROCE EPS
EPS
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Remuneration report
Directors’ Remuneration Policy – Summary
The Company’s current Directors’ Remuneration Policy (the ‘Policy’), was approved by shareholders at the 2017 AGM on 15 November 2017.
We are proposing no changes to the Policy for FY20, however we will be undertaking a full review of the Policy during the current financial
year and will submit this for shareholder approval at the AGM in October 2020. The Remuneration Committee will discuss any proposed
revisions with shareholders and their views will be sought in advance of the 2020 AGM.
Policy table
The full version of the Policy can be found on pages 80 to 89 of the 2017 Annual Report and Accounts which is available on our website
www.barrattdevelopments.co.uk/investors. A summary statement of the Policy is shown below.
A description of how the Company implemented the Policy in FY19 can be found on pages 108 to 117 and details of how the Policy will be
applied for FY20 are set out on pages 106 to 108.
Element of pay
How operated in practice
Additional information
Base salary
To help promote the
long term success of
the Company, to attract
and retain high-calibre
Executive Directors,
to deliver the Group’s
strategy and to reflect the
roles and responsibilities
of each of the Executive
Directors.
Benefits (taxable)
To support the health and
wellbeing of Executive
Directors whilst they
undertake their roles.
Pension
To assist Executive
Directors plan for
retirement.
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
any increases usually effective from 1 July.
See page 106 for Executive Directors’ salaries with effect
from 1 July 2019.
Benefits normally include:
• company car;
• private medical insurance;
• some telephone costs; and
• contributions towards obtaining independent
financial advice.
Other benefits offered to the wider workforce
will also be offered to Executive Directors on the
same basis.
The Committee does have the discretion to offer other
benefits 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 to an insured
lump sum of up to five times pensionable salary
on death in service.
The Committee retains the discretion to honour the
pension contribution for those individuals who are
internally promoted to Executive Director.
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 114.
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Element of pay
How operated in practice
Maximum opportunity
Annual bonus
To motivate and reward
Executive Directors
for the achievement of
demanding financial and
non-financial objectives
and key strategic
measures over the
financial year.
DBP
To encourage long term
focus and to further
align interests with those
of shareholders and
discourage excessive risk
taking.
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 to align their
interests with those of
our shareholders.
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 DBP.
When setting bonus targets, the Committee considers
the effect of corporate performance on ESG 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 against FY19 targets is shown on pages 109
and 110.
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No performance conditions apply to the vesting of awards
other than the continued employment condition.
Any annual bonus earned in excess of 100% of
salary is deferred into shares and held in this
plan for a period of three years and is subject
to a continued employment condition.
Deferred shares will normally accrue dividend
equivalents during the deferral period. Dividend
equivalents may be paid in cash or shares on the
vesting of the award.
Malus and Clawback may apply in the event
of material misconduct and/or material
misstatement or error of financial results. For full
details see page 101.
Executive Directors are eligible to participate in the
Company’s LTPP.
LTPP awards are usually granted following the final results
announcement in September of each year.
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.
Malus and Clawback may apply in the event of
material misconduct and/or material misstatement
or error of financial results. For full details see
page 101.
Following approval at the 2017 AGM, LTPP Awards
granted on or after 15 November 2017 will attract
dividend equivalents which may be paid in cash or
shares on the vesting of the award.
The Committee sets performance targets for each award
and ensures that the targets, whilst stretching, are:
realistic and attainable; for the long term benefit of the
Group; and do not encourage inappropriate business
risks. Overall, the Committee must be satisfied that the
underlying financial and non-financial performance of
the Group over the performance period warrants the level
of vesting as determined by applying the above targets.
If the Committee is not of this view, then it is empowered to
reduce the level of vesting (potentially to nil).
Performance against the targets for the awards made in
2016, 2017 and 2018 can be found on pages 111 to 113.
Details of the awards due to be granted in 2019 are set out
on page 107.
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Remuneration report
Directors’ Remuneration Policy – Summary continued
Element of pay
How operated in practice
Maximum opportunity
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 employees.
Under the standard terms, employees must have
completed the requisite length of service as at the
invitation date to be eligible to participate in the
Sharesave.
Employees can elect to save between a minimum
of £5 and the maximum monthly savings limit as
approved by the Committee and the Board within
the limits prescribed by legislation and HMRC,
for a period of three or five years.
At the end of the savings period the employee has
six months in which to exercise their option.
Non-Executive Directors’ fees (including the Chairman)
The five-year Sharesave granted in 2014 and the three-year
Sharesave granted in 2016 matured on 1 July 2019.
During the year, Steven Boyes exercised his options
following the vesting of his 2015 Sharesave scheme in
accordance with the rules and elected to retain his shares.
Further details of options held by Executive Directors under
the Sharesave Scheme can be found in Table 25 (page 114).
To attract and retain high
quality and experienced
Non-Executive Directors
(including the Chairman).
The Chairman and the Non-Executive
Directors’ fees are reviewed annually and are
normally set by reference to the level of fees paid
to the Chairs and Non-Executive Directors serving
on boards of similarly sized, UK-listed companies,
taking into account the size, responsibility and time
commitment required of the role.
The Chairman’s and Non-Executive Directors’ fees
are paid in cash, monthly in arrears.
No additional fees are payable for membership of
Board Committees; however, additional fees are
paid to the Chairs of the Audit, the Remuneration
and the SHE Committees and to the Senior
Independent Director.
Additional fees may be paid where, in exceptional
circumstances, the normal time commitment
is significantly exceeded.
The Remuneration of the Non-Executive Directors is set
by the Board on the recommendation of a Committee
comprising the Chairman and the Executive Directors.
The Board sets the remuneration of the Chairman.
Neither the Chairman nor the Non-Executive Directors
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.
Expenses incurred by the Chairman and the Non-Executive
Directors in the performance of their duties for the
Company (including taxable travel and accommodation
benefits in connection with travelling to a permanent
workplace) may be reimbursed or paid for directly by the
Company, as appropriate.
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101
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.
During the year, the Committee agreed that
awards granted on or after May 2019 may also
be subject to clawback in other exceptional
circumstances, such as when the relevant
performance conditions are assessed on the
basis of inaccurate or misleading information,
a material loss to the Group as a result of
the participant’s reckless, negligent or wilful
conduct or inappropriate values or behaviours,
a material breach of health and safety
regulations or failure of risk management by,
or material reputational damage to, a Group
member or corporate failure.
Executive Directors’ policy on
payment on loss of office
There are no specific provisions for
compensation on early termination (except
for payment in lieu of holidays accrued but
not taken) or loss of office due to a change of
ownership of the Company. Further details of
the full policy, including where the Company
reserves the right to make additional
payments, the application of mitigation
against contractual obligations, and how the
Committee takes into account the rules of
the annual bonus and LTPP schemes can be
found on pages 87 and 88 of the 2017 Annual
Report.
Guidelines on responsible
investment disclosure
In line with the IA’s Guidelines on
Responsible Investment Disclosure, the
Committee is satisfied that the incentive
structure and targets for Executive Directors
do not raise any ESG 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.
Remuneration Committee discretion
The areas of the Policy over which the
Committee has discretion are included in
the policy table set out on pages 80 to 85
of the 2017 Annual Report and Accounts.
However, we have summarised the key
discretions below:
• amendment of salary or the award
of higher increases in exceptional
circumstances;
• vary benefits offered to secure new
appointments;
• honour pension contributions for internal
promotions;
• whether or not to make a bonus award
and whether payment should be made to
anyone who has handed in their notice to
leave the business;
• what performance conditions should
be attached to annual bonus and LTPP
awards and the weighting of each to be
applied;
• determining the timing of grants of
awards and/or payments;
• determining the quantum of awards and/
or payments (within the limits set out in
the policy table on pages 80-85 of the
2017 Annual Report and Accounts);
• determining the application of dividend
equivalents, whether they be issued in
shares or cash and retaining the ability to
adjust the amount paid;
• determining the extent of vesting based
on the assessment of performance;
• making the appropriate adjustments
required in certain circumstances
(e.g. change of control, rights issues,
corporate restructuring events, and
special dividends); and
• determining ‘good leaver’ status for
incentive plan purposes and applying the
appropriate treatment.
If an event occurs which results in the
annual bonus plan or LTPP performance
conditions and/or targets being deemed
no longer appropriate (e.g. a material
acquisition or divestment) the Committee
will have the ability, in limited circumstances,
to adjust appropriately the measures and/
or targets, to alter the weighting of the
measures, and to reduce any annual bonus
or LTPP awards (potentially to nil) in the
event that the underlying financial and non-
financial performance of the Group does not
warrant the level of vesting.
Malus and Clawback
Both the annual bonus (including any
deferred bonus) and the LTPP are subject
to the Malus and Clawback provisions
contained in the plan rules for a period
of two years following vesting. Malus and
Clawback is applicable in respect of any
annual bonus paid or deferred and to any
share awards granted under the LTPP,
subject in the case of HMRC-approved
options, to such approval.
Clawback can be invoked if:
• the Company has to restate its Financial
Statements due to ‘prior period errors’
as defined by International Accounting
Standard 8 and such errors resulted in
that Award vesting to a greater degree
than would have been the case had that
error not occurred;
• the Committee forms the view that
in assessing the extent to which any
performance condition and/or any
other condition imposed on the Award
was satisfied such assessment was
based on a material error and that such
error resulted in that Award vesting to
a materially greater degree than would
have been the case had that error not
been made; or
• the relevant individual ceases to be a
director or employee of a member of
the Group as a result of their summary
dismissal because of their gross
misconduct which has caused loss
or damage to a member of the Group.
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Remuneration report
Directors’ Remuneration Policy – Summary continued
contribution (or cash supplement)
available varies between 10% and 30%.
Any new Executive Directors appointed
on or after 1 July 2019 will receive a
maximum contribution of 10% of salary in
line with the average pension contribution
available to our workforce;
• Executive Directors are able to participate
in the LTPP. A number of select employees
at Senior Management level may be
invited to participate in the LTPP at the
Committee’s discretion; and
•
in each of the last two years, employees
below Senior Management have been
awarded a smaller number of shares
under an employee long term incentive
plan. This award was not made available
to Executive Directors.
In general, these differences arise from the
development of remuneration arrangements
that are market competitive for the
various categories of individuals. They
also reflect the greater emphasis placed
on performance-related pay for Executive
Directors.
Executive Directors’ service contracts
Details of the Executive Directors’ service
contracts are included in Table 10 below
and their emoluments are shown in Table
15 on page 108. 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
normally entitle Executive Directors to the
provision of a company car, annual medical
screening, permanent health insurance,
private medical insurance, some telephone
costs, contributions to the cost of obtaining
independent financial and tax advice and
payment of legal fees on cessation of
employment. The Committee regularly
reviews 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 AGM.
Differences between Executive
Directors’ and employees’
remuneration
The following differences exist between the
Company’s Policy for the remuneration of
Executive Directors as set out in the Policy
table on pages 80 to 85 of the 2017 Annual
Report and Accounts and its approach to
the payment of employees generally:
• a lower level of maximum annual bonus
opportunity may apply to employees
other than the Executive Directors. All
employees, including Executive Directors,
are subject to similar performance
targets; however, the weightings against
the various targets may vary;
• Executive Directors and some members
of Senior Management may earn an
annual bonus in excess of 100% of salary.
Any bonus earned in excess of 100% of
base salary is deferred into shares for a
period of three years;
• Executive Directors and some members
of Senior Management may opt to receive
a cash supplement in lieu of being
auto-enrolled or contributing to the
defined contribution section of the Barratt
Group Pension and Life Assurance
Scheme. The cash supplement or
employer’s contribution rate for existing
Executive Directors does not exceed 25%
of base salary. For all other employees,
the maximum rate of employer’s
Table 10 – Executive Directors’ service contracts
Executive Director
David Thomas
Steven Boyes
Jessica White
Service contract date
16 January 2013
21 February 2013
21 June 2017
Date of appointment
21 July 2009
1 July 2001
22 June 2017
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.
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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. 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 effect on
the Director’s ability to perform their duties
to the Company.
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 11.
103
Table 11 – Non-Executive Directors’ letters of appointment as at 30 June 2019
Non-Executive
Director
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White
Date elected/re-
elected at AGM
17 October 2018
17 October 2018
17 October 2018
17 October 2018
17 October 2018
Date first appointed to
the Board
1 August 2014
2 April 2012
3 December 2012
1 July 2016
1 January 2018
Date last re-appointed
to the Board
1 August 2017
1 April 2018
3 December 2018
1 July 2019
N/A
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Statement of consideration
of shareholder views
Each year we normally update our major
shareholders upon the Committee’s
application of the Policy and our performance,
following the release of the July Trading
Update and in advance of the publication
of our Annual Report and Accounts. The
Committee takes into account shareholder
feedback received from this exercise and
any additional feedback received during any
meetings from time to time, as part of the
Company’s annual review of the Policy. In
addition, the Committee will seek to engage
directly with major shareholders and their
representative bodies should any material
changes be proposed to the Policy. Details of
the votes cast for and against the resolution
to approve last year’s Remuneration report
can be found on page 117.
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 or are
available on the Company’s website:
www.barrattdevelopments.co.uk/investors.
Statement of consideration of pay and
employment conditions elsewhere
across the Group
The level for all employees’ salaries is
determined with reference to the rate of
inflation, salaries for similar positions
throughout the industry and general themes
and trends in respect of remunerating
employees.
When reviewing Executive Directors’
remuneration, including increase in
base salary, the Committee takes into
consideration the pay and employment
conditions of all employees across the
Group. The Company does not directly
consult with employees when setting
Executive Directors’ remuneration; however,
given that the Company operates the
Sharesave in which all employees can
participate and become shareholders in the
Company, they can comment on the Group’s
Remuneration Policy in the same way as
all of our other shareholders. In addition,
the Group provides a number of ways in
which employees can ask questions on such
matters should they so wish. This includes
the Employee Communications mailbox,
personal development reviews and the
Workforce Forum, details of which are given
in the Stakeholder engagement section of
the Strategic Report on page 24.
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Remuneration report
Annual report on remuneration
In this section, we provide an overview of the Committee and its advisers as well as how the Directors’ Remuneration Policy will be applied
in FY20 and how it has been implemented throughout FY19 together with the resulting payments to Directors. The Annual report on
remuneration will be subject to an advisory vote at the 2019 AGM.
Membership and attendance at Committee meetings
Membership of the Committee and attendance at each of its scheduled meetings during the year is set out in Table 12. The Company
Secretary acts as Secretary to the Committee.
Table 12 – Remuneration Committee membership and attendance for FY19
Member
Richard Akers
John Allan
Nina Bibby
Jock Lennox
Sharon White
Role
Chairman
Member
Member
Member
Member
Number of meetings attended
4/4
4/4
4/4
4/4
4/4
Note:
X/ Number of meetings attended whilst a Director.
/X Number of meetings held whilst a Director.
Advisers to the Committee
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. 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. The last such tender took place in
2017, resulting in PwC being appointed as
the advisers to the Remuneration Committee
with effect from 1 January 2018.
In addition to remuneration advice, PwC also
provides taxation, consultancy and internal
audit services to the Group. PwC has no
other connections with the Company.
The Committee also receives input into its
decision making from the Chief Executive
(David Thomas), the Company Secretary
(Tina Bains) and the Group Human
Resources Director (Rob Tansey), none of
whom were present at any time when their
own remuneration was being considered.
During the year, the Committee has taken
advice from PwC on general remuneration
policy and practice, implementation of its
decisions and remuneration benchmarking.
The Chairman of the Committee also
sought advice from PwC independent of
management on various matters to be
discussed at Committee meetings. The fees
payable to PwC are based on an annual fixed
fee for a specified service with anything
outside this scope being charged on a time
and disbursement basis. PwC fees for
services provided to the Committee during
the year under review were £73,300.
PwC is a signatory to the Remuneration
Consultants Group’s Code of Conduct. As
part of the annual review and re-appointment
process, the Remuneration Committee
satisfied itself that PwC remained objective
and independent during the year.
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Remuneration Committee activity FY19
105
Main activities undertaken during FY19
The Committee’s role is to determine and agree the Remuneration Policy for Executive Directors and Senior Management whilst taking into
account the remuneration of the wider workforce. It follows an annual work programme which was fully completed during the year. The
Committee’s responsibilities, as delegated by the Board, are formally set out in its written terms of reference which are available from our
website at www.barrattdevelopments.co.uk/investors/corporate-governance.
Executive Directors’ and Senior
Management remuneration
• Reviewed annual performance of the
Executive Directors for FY19.
• Reviewed fixed and variable remuneration
and the relative balance for Executive
Directors and Senior Management.
• Considered and approved FY20 salary
increases for Executive Directors (page 106)
and Senior Management.
• Undertook commercial discussions
around potential pension contributions for
Executive Directors going forward.
Committee effectiveness
• Reviewed and made progress against all
matters arising from the FY18 annual
evaluation.
• Participated in the external evaluation of
its performance and discussed and agreed
an action plan to address issues identified
(page 77 and 78).
• Assessed the effectiveness of the
Committee’s remuneration consultants
during FY19 (page 104).
Annual bonus
• Reviewed forecast bonus outcomes
for FY19 (pages 109 to 110).
• Reviewed and approved proposals
for the FY20 annual bonus scheme.
• Considered and approved bonus
targets for FY20 (page 106).
The Remuneration
Committee
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Governance
• Considered and approved the
Remuneration report for FY18.
• Reviewed the Remuneration Policy and
annual agenda against the New Code and
against evolving best practice to determine
what, if any, changes may be required.
• Commenced consideration and discussion
of possible changes to Policy for FY20.
• Considered remuneration disclosure
requirements and disclosures for the
Remuneration report for FY19.
• Reviewed and approved its annual agenda
and terms of reference.
• Reviewed and approved the gender pay gap
disclosure for issue on our website.
Long term incentives
• Received updates on the potential levels
of vesting of outstanding LTPP awards.
• Considered and finalised the structure,
performance metrics and targets,
participants and level of awards for 2019.
• Reviewed and updated malus and
clawback provisions.
Shareholder consultation
• Updated and consulted with shareholders
on the implementation of the Remuneration
Policy and on remuneration outcomes for
FY18, indicative outcomes for FY19 and the
proposed remuneration for FY20.
• Considered feedback received from the
consultation process in finalising the
targets proposed for FY19.
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Statement of implementation of the Policy for FY20
Executive Directors’ remuneration for FY20 will be based on the Group’s Remuneration Policy as approved by shareholders in 2017 and set out
on pages 80 to 89 in the 2017 Annual Report and Accounts.
Base salary
The Committee reviewed the salaries of the Executive Directors in June 2019. 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 increase awarded
to other employees throughout the organisation (on average 2.8%); and the multiplier effect of an increase in base salary on the package as
a whole. On this basis the Committee agreed to increase the salaries of each of the Executive Directors by 2.5%, slightly below the average
increase given to other employees across the organisation. The salaries of the Executive Directors with effect from 1 July 2019 will therefore be:
Table 13 – Executive Directors’ salary increases
Executive Director
David Thomas
Steven Boyes
Jessica White
Salary with
effect from
1 July 2019
£000
757
599
422
Salary with
effect from
1 July 2018
£000
739
585
412
Following these increases each of the salaries of the Executive Directors remain within the range for the housebuilding sector and the wider
population of similar-sized companies.
Pension
In FY17 the Committee agreed that any new Executive Director would be given a pension equivalent to that of Managing Directors, currently
15% of salary. Accordingly, during FY20, Jessica White will continue to receive a cash supplement of 15% of salary and David Thomas
and Steven Boyes (both appointed prior to 2017) will both receive a cash supplement of 25% of salary. Any new Executive Director (or
other employee) joining the Group on or after 1 July 2019 will receive a pension contribution (or cash supplement) of 10% of base salary.
Consideration is being given to the ongoing level of pension contributions paid to existing Executive Directors and the practicalities of bringing
them in line with those of the wider workforce.
Annual bonus
Executive Directors and Senior Management will participate in the Group’s annual bonus scheme in accordance with the Policy. The Company
is of the view that the individual annual bonus performance targets are commercially sensitive in terms of the Group Strategy; therefore,
these targets will not be disclosed in this report. We will, as always, disclose the annual bonus targets and performance against them in next
year’s Remuneration report.
The performance measures, their reasons for selection and the maximum bonus payment against each of them expressed as a percentage of
salary for FY20 will be:
Performance measure
Financial/
non-financial Reason for selecting
Weighting (% of
salary maximum)
Profit before tax
Financial
Rewards outperformance against stretching targets and is a
key measure of our performance.
Capital employed
Financial
To ensure efficient use of available capital.
Quality and service with a health
and safety underpin
Non-Financial Ensures a focus on quality and service to our customers
without compromising the safety of our people.
Strategic objectives relating to:
regional margin improvement
trading outlets
Financial &
Non-Financial
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 % of salary
82.5
15.0
22.5
30.0
150.01
1 Any bonus earned in aggregate in excess of 100% will continue to be deferred into shares and held in the DBP. Dividend equivalents will accrue against any shares
deferred into the DBP
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The Committee understands the importance of simplifying Executive Directors’ remuneration whilst aligning it to that of Senior Management,
and where possible, the wider workforce. Accordingly, the Committee agreed to:
i) introduce capital employed as a performance measure for the Executive Directors’ annual bonus for FY20. This metric already forms part of
the annual bonus for Senior Management; and
ii) remove personal objectives from the Executive Directors’ annual bonus scheme to increase focus on the metrics required to drive the
strategy of the business and the return of value to shareholders.
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 FY20 will be subject to the new Malus and Clawback provisions set out on page 101.
LTPP
The Committee has agreed to grant an LTPP award to Executive Directors in FY20 (2019/20 LTPP) 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 the interests of shareholders. Accordingly, the Committee has agreed that three
independent performance conditions: TSR, EPS and Underlying ROCE, will apply to the 2019/20 LTPP and will be measured as follows:
Performance condition
TSR against a 50+/50-
comparator group.
TSR against a
housebuilder index1.
Reason selected
To ensure that the comparator group remains
current and relevant whilst factoring in the
continued movement in the Company’s market
capitalisation.
To ensure rewards are linked to outperformance
of our peers.
Absolute EPS for the
financial year ending
30 June 2022.
Underlying ROCE for
the financial year ending
30 June 2022.
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)
20%
Below
threshold
(0% vesting)
Below
median
Threshold
(25% vesting)
Median
Maximum
(100% vesting)
Upper
quartile
20%
20%
40%
Below
index
average of
peer group
below
76 pence
below
19%
Index
average of
peer group
76 pence
Index
average
+8%
per annum
85 pence
19%
22%
1 The housebuilder index will comprise: Bellway, Berkeley Group, Bovis Homes Group, Countryside Properties, Crest Nicholson, Galliford Try, Persimmon, Redrow and
Taylor Wimpey.
Vesting will be on a straight-line basis between threshold and maximum. In addition, all LTPP awards are subject to overriding Committee
discretion, as set out in the Policy table on page 99.
The 2019/20 LTPP will also be subject to the new Malus and Clawback provisions set out on page 101 and a two-year holding period.
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Non-Executive Directors’ fees
Given that all Non-Executive Directors sit on the Committee, a sub-committee comprising the Chairman and the three Executive Directors
was established to review Non-Executive Directors’ fees and to make any recommendations to the Board. It was concluded that in order to
ensure that the base fees remain competitive in the market, they should be increased by 2.5% to £332,561 per annum for the Chairman and
£63,345 per annum for each of the Non-Executive Directors with effect from 1 July 2019. The additional fees for the Chairs of the Committees
and the Senior Independent Director remain unchanged. Accordingly, the annual fees payable to the Non-Executive Chairman and Non-
Executive Directors with effect from 1 July 2019 are as follows:
Table 14 – Non-Executive Directors’ fees
Role
Chairman (2.5% increase)
Non-Executive Director base fee (2.5% increase)
Chairman of Audit Committee (no increase)
Chairman of Remuneration Committee (no increase)
Chairman of Safety, Health and Environmental Committee (no increase)
Senior Independent Director (no increase)
Fee as at
1 July 2019
£000
333
63
12
12
6
8
Fee as at
1 July 2018
£000
325
62
12
12
6
8
Directors’ remuneration outcomes for the year ended 30 June 2019
Single figure of remuneration
The total remuneration for each of the Directors for the financial year ended 30 June 2019 is as set out in Tables 15 and 16 below:
Table 15 – Executive Directors’ single figure of remuneration (Audited)
Salary
£000
Benefits1
(taxable)
£000
Pension benefits
£000
Total fixed pay
£000
Annual bonus2
£000
LTPP
£000
Sharesave
scheme
£000
Total variable
pay
£000
2019
Total
£000
2018
Total
£000
2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/193 2017/184 2018/195 2017/186 2018/19 2017/18
David
Thomas
Steven
Boyes
Jessica
White
Total
739
717
585
568
412
400
1,736 1,685
25
41
16
82
26
40
20
86
185
179
949
922 1,066
992 1,598
806
146
142
772
750
872
828 1,265
638
62
393
60
490
615
60
381 2,211 2,152 2,553 2,403 2,961 1,504
583
480
98
–
10
–
10
– 2,664 1,798 3,613 2,720
6 2,147 1,472 2,919 2,222
6
713
649 1,203 1,129
12 5,524 3,919 7,735 6,071
1 Benefits (taxable) include the provision of a company car or car allowance, private medical insurance, some telephone costs and contributions towards obtaining
independent financial advice.
2 Annual bonus includes amounts deferred for David Thomas, Steven Boyes and Jessica White (see Table 19 on page 110).
3 Performance conditions for the LTPP were tested after 30 June 2019. 92.8% of the award granted to David Thomas and Steven Boyes and 100% of the award granted
to Jessica White is due to vest in October 2019 (see note 1 of Table 20 on page 111 for further details). The market price of the shares has been calculated based on an
average market value over the three months to 30 June 2019 (£5.89 per share).
4
In accordance with regulatory requirements, the values in this column have been re-calculated using a share price of £4.97 per share being the market value of the
shares on the vesting date, 19 October 2018, as opposed to the market price of £5.53 per share calculated based on an average market value over the three months to
30 June 2018 as disclosed in last year’s Remuneration report.
5 The Sharesave Scheme granted in April 2015 which matured on 1 July 2018 was subject to no performance measures other than a continued employment condition and
completion of a savings contract. The value is calculated using a share price of £5.15 being the mid-market close price of a share on the date of maturity.
6 The Sharesave Scheme granted in April 2014 which matured on 1 July 2017 was subject to no performance measures other than a continued employment condition and
completion of a savings contract. The value is calculated using a share price of £5.64 being the mid-market close price of a share on the date of maturity.
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Table 16 – Non-Executive Directors’ single figure of remuneration (Audited)
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White1
Total
Fees
£000
Benefits (taxable)
£000
2019 Total
£000
2018 Total
£000
2018/19
325
88
62
74
62
611
2017/18
315
80
60
70
35
560
2018/192
2
–
–
–
–
2
2017/183
–
1
–
–
–
1
327
88
62
74
62
613
315
81
60
70
35
561
1 Sharon White joined the Board on 1 January 2018. Sharon White’s fees are paid directly to Ofcom on a monthly basis.
2 Benefits (taxable) for 2018/19 include expenses incurred in attending the Company’s main corporate office and for 2018/19 are £2,114 for John Allan, £393 for Richard
Akers, £17 for Nina Bibby and £179 for Sharon White.
3 Benefits (taxable) for 2017/18 include expenses incurred in attending the Company’s main corporate office and for 2017/18 are £372 for John Allan, £769 for Richard Akers
and £74 for Jock Lennox.
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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 and is subject to a continued employment
condition. All targets, Group and personal, were agreed towards the beginning of the financial year and no Committee discretion has been
exercised in relation to the bonus outcome. The Group performance targets and performance against them for FY19 were as follows:
Table 17 – Annual bonus (Audited)
Bonus target
Profit before tax
Strategic objective
Support profitability
Quality and service
improvement1,2
To create a quality product
that customers recommend
in a safe way for our
employees and stakeholders
Targets
Threshold: £835.0m
Target: £850.0m
Maximum: £900.0m
Divisions to achieve SHE Audit
of 94% and customer service
recommend score of 90%.
Target assessed by number of
divisions meeting both targets.
Strategic objective – margin
improvement
Strategic objective – trading
outlets
Personal objectives
To deliver an improvement
in regional trading margin
to support the profitability of
our business
To deliver the optimum
number of trading outlets to
ensure growth and delivery of
our business plan
To focus individuals on
achieving the Group’s
strategic objectives
Threshold: 25.8%
Target: 26.1%
Maximum: 26.5%
Threshold: 154
Target: 158
Maximum: 161
See Table 18
Potential
bonus
weighting
% of salary
16.50%
41.25%
82.50%
22.5%
7%
11.25%
22.5%
3.0%
3.75%
7.5%
3.0%
7.5%
15.0%
Actual
performance
achievement
£909.8m
Bonus
achieved
% of salary
82.5%
21.67%
SHE 27/27
divisions
Customer
service 26/27
divisions
26.7%
22.5%
163 outlets
7.5%
See
Table 18
See
Table 18
1
In the case of a material breach of SHE policy or procedures, the SHE Committee retains discretion to recommend the withholding of all or part of the bonus depending
on the nature of the breach.
2 Quality and service metric is pro-rated based on the number of divisions achieving the required standard.
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Executive Directors’ personal objectives
The FY19 personal objectives for Executive Directors were set to focus on the achievement of the Group’s medium term targets of improving
margin and increasing volume whilst maintaining the Group’s focus on high standards of quality and customer service. The individual
objectives and the performance against each is as follows:
Table 18 – Executive Directors’ personal objectives – Audited
Executive
Director
Personal objectives
David Thomas Completion volumes
a. To reduce the proportion of completions that
occur in December and June.
Proportion of completions excluding December
and June:
Threshold: 63%; Target: 64%; Maximum: 65%
b. To produce a plan to improve the completion profile
by FY21, including specific actions and timescales
for delivery, by May 2019.
Low selling sites
a. Improve the sales rate on low selling sites in
each half year.
Target (ratio of low selling to top selling sites):
H1: 4.2 (based on FY18 H1 performance);
H2: 3.7 (based on FY18 H2 performance)
b. To produce a plan to address the number of low
selling sites by May 2019, including specific actions
and timescales.
Assessment/outcome
Good progress being made with
63.4% of completions (excluding
bulk sales) delivered outside of
December and June.
Potential bonus
weighting
% of salary
Bonus
achieved
% of salary
3.75%
0.75%
Plan completed.
3.75%
3.75%
Steps have been taken to drive sales
on low selling sites during the year.
The ratio was achieved in H1 but not
in H2 due to improved top selling
site performance.
Plan completed.
3.75%
1.875%
3.75%
3.75%
7.5%
7.5%
7.5%
7.5%
Steven Boyes
Timber frame strategy
a. Lead discussions on timber frame supply
and potential acquisitions.
Achieved, culminating in the
acquisition of Oregon.
b. Secure supply arrangements with other
Achieved.
suppliers as necessary.
Jessica White Improve balance sheet resilience
Ratio of total indebtedness (net debt/cash plus land
creditors) to tangible net assets.
Threshold: 25.5%; Target: 20.5%; Maximum: 18.5%
Improve ROCE
Threshold: 25%; Target: 26.5%; Maximum: 28%
Achieved ratio of total indebtedness
to tangible net assets of 15.4%.
7.5%
7.5%
ROCE is at 29.7%.
7.5%
7.5%
Executive Directors’ deferred bonus
Details of the amount of bonus deferred for each of the Executive Directors are set out in Table 19 below. The number of shares that will be awarded
in respect of the FY19 deferred bonus will be calculated based on the average closing share price for the first five dealing days following the date on
which the Group publishes its FY19 annual results, and will be announced via a Regulatory Information Service when the shares are awarded.
Table 19 – Executive Directors’ deferred bonus
FY19 deferred bonus
FY18 deferred bonus
Annual bonus
for 2018/19
£000
1,066
872
615
% of salary
payable
144.3
149.2
149.2
% of salary
in cash
100
100
100
% of salary
deferred1
44.3
49.2
49.2
Amount
deferred
£000
327
287
203
% of
salary
deferred1
38.3
45.8
45.8
Amount
deferred
£000
275
260
183
Number of
shares2,3
49,445
46,787
32,973
David Thomas
Steven Boyes
Jessica White
1 The Executive Directors earned between 144.3% and 149.2% of base salary for FY19 and between 138.3% and 145.8% of base salary for FY18. The bonus earned in excess
of 100% of base salary will be deferred into shares.
2 Shares are held in the DBP 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 granted during the year were calculated at a share price of £5.56 being the average of the closing middle-market quotations, as derived from
the daily official list of the Stock Exchange, for the first five dealing days following the date of the final results announcement of the Company for the financial year
ended 30 June 2018.
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Long Term Performance Plans
Vesting of 2016/17 LTPP (included in 2019/20 single figure of remuneration) (Audited)
The 2016/17 LTPP award granted on 14 December 2016 was based on performance to the year ended 30 June 2019. As the grant of this award
was delayed due to the uncertainties surrounding the timing of the UK’s departure from the EU, the Committee has agreed that this award
will vest in October 2019, being the date it would vest under normal circumstances. The performance conditions for this award, each of which
has equal weighting, and the resulting vesting levels are as follows:
Table 20 - Vesting of 2016/17 LTPP
Metric
EPS
Performance condition
Absolute EPS growth for the financial year ended 30 June 2019.
Threshold Maximum
70p
58p
ROCE
TSR
To increase ROCE.
TSR against the 50 companies above and below the Company in
the FTSE index. 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.
25%
Median
ranking of
46.5 (TSR
of 19.2%)
28%
Upper
quartile
ranking of
23.75 (TSR
of 44.2%)
Portion
of award
vesting for
DT and SB
33.3%
Portion of
award
vesting
for JW1
50%
33.3%
26.2%
50%
N/A
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Basic
EPS
72.6p²
29.7%
Rank of
30.3 (TSR
of 36.8%)
Total level of award vesting
92.8%
100%
1
In line with other participants below Board and Executive Committee level, on 14 December 2016 Jessica White was awarded an incentive award under the LTPP
equivalent to 50% of her base salary as at 1 July 2016. The performance of this award was based on two performance conditions, EPS and ROCE. The performance period
and the targets were the same as those set for the Board and Executive Committee level except there was no TSR vesting condition.
2 The actual EPS of 73.2 pence has been re-based using the corporation tax rate applicable at the date on which the 2016/17 LTPP targets were set, as the subsequent
reduction to the rate of corporation tax was not performance related. The actual EPS has also been re-based using the same number of shares in issue as used in the
16/17 LTPP targets. The re-based EPS used for the purpose of determining vesting, which is directly comparable to the 2016/17 LTPP targets, was 72.6 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 2016/17 LTPP was justified. No Committee discretion was exercised in relation to the
LTPP vesting outcome, the gross number of shares to be released to each of the Executive Directors is as follows:
Table 21 - 2016/17 LTPP Vesting outcomes
Executive Director
David Thomas
Steven Boyes
Jessica White
Number of
shares at
grant
292,370
231,387
16,596
Number of
shares to
vest1
271,319
214,727
16,596
Number of
shares to
lapse
21,051
16,660
–
Estimated
value2
(£000)
1,598
1,265
98
Total
271,319
214,727
16,596
1 The relevant number of shares will be released to each participant as soon as is practicable following the vesting date. For David Thomas and Steven Boyes, the awards
are subject to a two-year holding period commencing 1 July 2019.
2 The estimated value of the vested shares is based on the average share price during the three months to 30 June 2019 (£5.89 per share).
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LTPP granted during the year (2018/19 LTPP) (Audited)
On 22 October 2018, the following 2018/19 LTPP awards were granted to Executive Directors:
Table 22 - LTPP granted during the year
Executive
Director
David Thomas
Steven Boyes
Jessica White
Type of
award
Conditional
award
Conditional
award
Conditional
award
Basis of
award granted
200% of salary
£738,685
200% of salary
£584,607
200% of salary
£412,000
Share price
at date
of grant1
(pence)
542.3
Number of
shares over
which award
was granted
272,426
Face value of
award
(£000)
1,477
% of face
value that
would vest
at threshold
performance
25
Vesting determined
by performance over
542.3
215,602
1,169
542.3
151,945
824
25
25
Three financial
years to
30 June 2021
1 Based on the average of the closing prices, as derived from the London Stock Exchange daily official list, for each of the dealing days in the period of three months ending
on 21 October 2018, of £5.42.
The 2018/19 LTPP for Executive Directors is subject to three performance conditions, 40% TSR (half of which is measured against a 50+ / 50-
comparator group and the other half against a housebuilder index), 20% EPS and 40% ROCE. The levels of vesting against TSR are measured
over a three-year period commencing 1 July 2018, and against EPS and ROCE for the financial year ending 30 June 2021. On completion of
the performance period, assuming that shares vest, they will be subject to a further two-year holding period. The Committee agreed that the
2018/19 LTPP will accrue dividend equivalents in accordance with the rules of the scheme. The amount of dividend equivalent to be paid, in
cash, on vesting will be pro-rated in line with the number of shares that actually vest.
The following tables show the targets set on grant for each of the current LTPP awards together with performance to date.
Table 23 – 2017/18 Award performance against targets
The table below shows the potential level of vesting if performance was measured over a two-year period to 30 June 2019:
Performance target
TSR FTSE1
TSR Housebuilder2
EPS
Underlying ROCE
Total
Below Threshold
(0% vesting)
Below median
Below unweighted
index average
<66 pence
<19.0%
Threshold
(25% vesting)
Median
Unweighted
index average
66 pence
19.0%
Maximum
(100% vesting)
Upper quartile
Unweighted index
average +8% p.a.
74 pence
22.0%
Performance as
at 30 June 2019
Above median
Above unweighted
index average
72.6 pence
22.7%
Level of vesting had
the award vested as
at 30 June 2019
14.9%
16.9%
17.4%
40.0%
89.2%
1 The comparator group for TSR FTSE is each of the members ranking 50 above and 50 below the Company in the FTSE Index.
2 The housebuilder Index comprises: Bellway, Berkeley Homes, Bovis Homes Group, Countryside Properties, Crest Nicholson, Galliford Try, Persimmon, Redrow and Taylor Wimpey.
The 2017/18 LTPP will also accrue dividend equivalents in line with that set out above for the 2018/19 LTPP.
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Table 24 – 2018/19 Award performance against targets
Outlined below is the potential level of vesting for the 2018/19 LTPP, had the performance period been for one year to 30 June 2019:
Performance target
TSR FTSE1
TSR Housebuilder2
EPS
Underlying ROCE
Total
Below Threshold
(0 % vesting)
Below median
Below unweighted
index average
<75 pence
<19.0%
Threshold
(25% vesting)
Median
Unweighted
index average
75 pence
19.0%
Maximum
(100% vesting)
Upper quartile
Unweighted index
average +8% p.a.
84 pence
22.0%
Performance as
at 30 June 2019
Upper quartile
Above unweighted
index average +8% p.a.
72.6 pence
22.7%
Level of vesting had
the award vested as
at 30 June 2019
20.0%
20.0%
1.0%
40.0%
81.0%
1 The comparator group for TSR FTSE is each of the members ranking 50 above and 50 below the Company in the FTSE Index.
2 The housebuilder Index comprises: Bellway, Berkeley Homes, Bovis Homes Group, Countryside Properties, Crest Nicholson, Galliford Try, Persimmon, Redrow and Taylor
the percentage holding required by the Chief
Executive and the other Executive Directors
depending on market conditions and best
practice guidance.
At 30 June 2019, both David Thomas and
Steven Boyes have met the shareholding
requirement. Jessica White has until 21 June
2022 to meet the shareholding requirement.
To be classified as a ‘good leaver’ in the
event they decide to leave the Company, the
Chief Executive and other Executive Directors
will be required to commit to retaining a total
holding in the Company’s shares of 100%
and 75% (respectively) of the value of their
final salaries for two years after they leave.
It is the Committee’s intention during FY20 to
review its policy on shareholding guidelines
for Executive Directors leaving the Company,
taking into consideration recent changes to
market practice and investor guidelines.
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 25. On 1 July 2019,
4,297 of David Thomas’ Sharesave options
vested, and on 22 July 2019 the Company
was notified that David Thomas exercised his
option over these shares and retained all of
them. On 30 July 2019, David Thomas sold
500,000 shares. No other notification has
been received of any change in the interests
shown during the period 30 June 2019 to
2 September 2019 inclusive.
Wimpey.
Statement of Directors’ shareholding
and share interests (Audited)
For the financial year ended 30 June 2019
Executive Directors were required to hold
shares in the Company equivalent in value
to 200% of salary. The Executive Directors
are expected to meet this requirement no
later than the fifth anniversary of joining the
Board, with progress being made towards
its achievement throughout the period.
The share price used for the purposes of
determining the value of the shares is that
prevailing on 30 June of the given year.
Participants who have not built up the
required level of shareholding by the fifth
anniversary of joining the Board, will not be
eligible for inclusion in future share-based
incentive schemes. In addition, they will
not be allowed to sell any of the net of tax
shares released from incentive schemes
until they reach the levels specified, unless
exceptional circumstances exist in the
opinion of the Committee. The Committee
retains discretion to adjust the length
of time in which the required amount of
shareholding needs to be accrued in order to
adjust for events out of the Director’s control.
The Committee reserves the right to amend
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Remuneration report
Annual report on remuneration continued
Table 25 – Directors’ interests in shares as at 30 June 2019 (Audited)
Other shares held
Options
Shareholding requirements
Interests
subject to
performance
conditions
(LTPP)
Interests not
subject to
performance
conditions
(DBP)
Beneficially
owned
Interests in
Sharesave
options1
Shareholding
requirement
% salary
Current
shareholding
% salary4
Shareholding
requirement
met?
1,318,891
752,352
59,041
791,103
626,092
294,763
167,129
139,924
33,731
10,299
3,943
6,465
200%
200%
200%
1,153%
875%
129%
Y
Y
N5
76,705
60,000
8,500
10,000
–
The Chairman and Non-Executive Directors are not awarded incentive shares and
are not subject to a shareholding requirement
Executive Directors
David Thomas2
Steven Boyes3
Jessica White
Non-Executive Directors
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White
1 All of these options were unvested at 30 June 2019. On 1 July 2019, 4,297 of David Thomas’ Sharesave options vested. Details of his subsequent exercise of these options
are provided on page 113.
2 David Thomas was granted 2,890 Sharesave options during the year. The option price of the award was £5.19, representing an approximate 15% discount on the average
share price for the five business days immediately before the invitation to participate in the award (£6.11). The number of shares granted was based on the option price
and the total savings amount forecast at the end of the five-year savings period. The face value of the options based on the average share price above was £17,658. There
are no performance targets associated with this award. The shares are exercisable between 1 July 2024 and 31 December 2024.
3 On 30 July 2018, Steven Boyes exercised his option to purchase 2,013 Sharesave shares, all of which he retained. The exercise price was £4.47 and the price on the date of
exercise was £5.29, giving an aggregate gain of £1,651.
4 The share price used for the purposes of determining the value of the shares is £5.73, being the mid market closing price on 30 June 2019.
5 Jessica White was appointed to the Board on 22 June 2017 and has five years from this date to meet the shareholding requirement.
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, including to nil, as it deems appropriate.
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. On 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 Executive Director has opted to receive
a cash supplement in lieu of pension. For
FY19, David Thomas and Steven Boyes
received an amount equal to 25% of base
salary in line with market practice at the
time of their appointment. Jessica White
received an amount equal to 15% of base
salary in line with Remuneration Policy for
new Executive Directors at the date of her
appointment. Only the base salary element
of a Director’s remuneration is pensionable.
As part of the upcoming policy review,
the Committee will consider pension
contributions (or cash supplements) for
existing Executive Directors.
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 2019.
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. His entitlement was based on
a 1/60 accrual rate and a normal retirement
age of 65. This benefit became deferred on
30 June 2009 and it will be revalued over
the period from that date to retirement in
line with the Scheme Rules. Steven Boyes’
accrued pension as at 30 June 2019 was
£61,982 per annum. Steven Boyes may take
early retirement from age 55, subject to him
meeting certain legislative restrictions, but
the accrued pension will be reduced to take
account of its early repayment.
Since 1 July 2009, Steven Boyes has been
entitled to receive a cash supplement which
is currently equal to 25% of his base salary
per annum.
The previous full actuarial valuation of the
Scheme as at 30 November 2016 showed a
deficit of £69.3m calculated on the basis of
the Scheme’s technical provisions. In order
to address the deficit, the Board agreed to
increase its annual contribution from £9.5m
to £14.5m for a period of three years from
1 April 2017. Thereafter contributions of
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£10.0m per annum are to be made until the
Scheme is fully funded. An additional one-
off contribution of £4.5m was made by the
Company on 22 January 2019. The valuation
for the Financial Statements was updated as
at 30 June 2019 by a qualified independent
actuary and a surplus of £62.6m (2018:
surplus of £58.7m) 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 on death in service in
accordance with their terms of employment.
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
(Audited)
No payments were made to any former
Directors during the year ended 30 June
2019 (30 June 2018: £nil).
Payments for loss of office (Audited)
No payments were made in respect of loss
of office during the year ended 30 June 2019
(30 June 2018: £nil).
Chief Executive’s relative pay
Table 26 sets out: (i) the total pay, calculated in line with the single figure methodology; (ii) the annual bonus payout as a percentage
of maximum; and (iii) LTI vesting level for the Chief Executive over a ten-year period (David Thomas for FY16 to FY19 and Mark Clare for
FY10 to FY15):
Table 26 – Chief Executive’s pay (Audited)
Chief Executive’s total pay (£000)
Bonus outturn (as a percentage
of maximum opportunity)
LTI vesting (as a percentage
of maximum award)
2010
1,417
2011
1,220
2012
2,099
2013
4,310
2014
6,430
2015
7,363
2016
3,155
2017
3,331
Ten years to 30 June 2019
90.2
36.6
99.2
100.0
100.0
93.2
97.4
97.5
0.0
0.0
32.8
73.9
95.8
100.0
100.0
100.0
2018
2,720
92.2
76.4
2019
3,613
96.2
92.8
TSR performance graph
The graph below, prepared in accordance with the regulations, shows the TSR performance over the last ten years against the FTSE 100 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 regulations.
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Total Shareholder Return (value of £100 invested on 30 June 2009)
£900
£800
£700
£600
£500
£400
£300
£200
£100
0
June 2009
June 2010
June 2011
June 2012
June 2013
June 2014
June 2015
June 2016
June 2017
June 2018
June 2019
Index of currently listed housebuilders
FTSE 100
Barratt Developments
Source: Datastream by Refinitiv.
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Remuneration report
Annual report on remuneration continued
Percentage change in remuneration of Chief Executive
compared to employees
Table 27 shows the percentage change in salary, benefits and annual
bonus earned by the Director undertaking the role of Chief Executive
on 30 June 2018 and 30 June 2019, compared to that of the average
pay of all employees of the Group.
Table 27 – Percentage change in remuneration
Salary
% change
3.1
Benefits
% change
-3.8
Annual
bonus
% change
7.5
2.9
7.4
2.9
Chief Executive
Average pay of all
employees
Chief Executive pay ratio
Table 28 below compares the 2019 single total figure of remuneration
for the Chief Executive with that of the Group employees who are paid
at the 25th percentile (lower quartile), 50th percentile (median) and
75th percentile (upper quartile) of its UK employee population.
Table 28 – Chief Executive pay ratio
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
2019
Option B
123:1
88:1
59:1
The remuneration figures for the employee at each quartile were
determined with reference to 30 June 2019.
Under Option B of The Companies (Miscellaneous Reporting)
Regulations 2018, the latest available gender pay gap data (i.e. from
April 2019) was used to identify the best equivalent for three Group
UK employees whose hourly rates of pay were at the 25th, 50th and
75th percentiles for the Group. A full-time equivalent total pay and
benefits figure for the 2018/19 financial year was then calculated
for each of those employees. This was also sense checked against
a sample of employees with hourly pay rates either side of the
identified individuals to ensure that the appropriate representative
employee had been selected. The pay ratios outlined above were then
calculated as the ratio of the Chief Executive’s single figure to the
total pay and benefits of each of these employees.
As explained above, a small group of employees either side of the
quartile points identified from the gender pay gap data were also
considered to ensure that the identified employees reflect the best
equivalents for each quartile. Each employee’s pay and benefits were
calculated using each element of employee remuneration on a full-time
basis, consistent with the Chief Executive. No adjustments (other
than the approximate up-rating of pay elements to achieve full-time
equivalent rates) were made and no components of pay have been
omitted.
The table below sets out the salary and total pay and benefits for the
three identified quartile point employees:
Salary
Total pay and benefits
25th percentile
(P25)
£27,125
£29,345
Median
(P50)
£34,490
£40,887
75th percentile
(P75)
£52,165
£60,881
The Committee considers that the median Chief Executive pay
ratio is consistent with the relative roles and responsibilities of the
Chief Executive and the identified employee. Base salaries of all
employees, including our Executive Directors, are set with reference
to a range of factors, including market practice, experience and
performance in role. The Chief Executive’s remuneration package is
weighted towards variable pay (including the annual bonus and LTPP)
due to the nature of the role, and this means the ratio is likely to
fluctuate depending on the outcomes of incentive plans in each year.
The Committee also recognises that, due to the nature of the Group’s
business and the ways in which we employ individuals, the flexibility
permitted within the regulations for identifying and calculating
the total pay and benefits for employees, as well as differences in
employment and remuneration models between companies, the
ratios reported above may not be comparable to those reported by
other companies.
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Relative importance of spend on pay
The following table shows the Group’s actual spend on pay (for all
employees) relative to dividends and profit from operations:
Table 29 – Relative importance of spend on pay
Statement of shareholding vote at AGM
The latest resolution to approve the Directors’ Remuneration Policy
(binding vote to remain in place for three years following its approval
by shareholders) was proposed to shareholders at the 2017 AGM and
the following votes were received:
Staff costs (including
Executive Directors)1
Profit from operations2
Total capital return3
2019
£m
427.1
901.1
469.23
2018
£m
390.5
862.6
442.2
%
change
9.4
4.5
6.1
1 See note 6.1 to the Financial Statements.
2 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.
3
Includes interim dividend of 9.6 pence per share paid on 7 May 2019 to those
shareholders on the register as at the close of business on 12 April 2019 and
a final dividend of 19.5 pence per share and a special dividend of 17.3 pence
per share, the value of which has been calculated on the number of shares in
issue as at 30 June 2019. The final dividend and special dividend, if approved
by shareholders at the 2019 AGM, will be paid on 5 November 2019 to those
shareholders on the register at the close of business on 11 October 2019.
Non-executive directorships
Details of the Group’s policy on non-executive directorships held
by Executive Directors is given in the summary of Directors’
Remuneration Policy on page 103. Neither Steven Boyes nor Jessica
White held any non-executive directorships with other companies
during the year. David Thomas joined the board of the HBF as a
non-executive director on 26 April 2018 for which he does not receive
a fee.
Table 30 – Vote on Remuneration Policy - 2017 AGM
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of votes % votes cast
98.78
1.22
100.00
–
687,989,418
8,526,959
696,516,377
2,232,003
At the 2018 AGM, a resolution was proposed to shareholders to
approve the Annual report on remuneration (advisory vote) for the
year ended 30 June 2018 (Table 31) for which the following votes
were received:
Table 31 – Vote on Remuneration report - 2018 AGM
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of votes % votes cast
98.64
1.36
100.00
–
665,895,729
9,199,633
675,095,362
210,125
This Remuneration report was approved by the Board on
3 September 2019 and signed on its behalf by:
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Non-Executive Director
3 September 2019
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Other statutory disclosures
Directors’ Report
The Directors’ Report for the financial year
ended 30 June 2019 comprises pages 66
to 122 inclusive, together with the sections
incorporated by reference. Any matters on
which the Directors are required to report
annually, but which do not appear in any other
section of this report, are detailed, below.
Both the final dividend and the special
dividend will, subject to shareholder approval
at the 2019 AGM, be paid on 5 November
2019 to those shareholders on the register
at the close of business on 11 October 2019.
If approved, the total dividend (including the
special dividend) for FY19 is 46.4 pence per
share (2018: 43.8 pence per share).
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. Taking into account current market
and shareholder expectations, our dividend
policy is to pay a full year dividend covered 2.5
times by earnings as well as special returns
when the financial position of the Company
justifies the payment, subject to shareholder
approval. The special returns can be made
through share buybacks, special dividends,
or a combination of both. The Board may pay
interim dividends, and also any fixed rate
dividends, whenever the financial position
of the Company justifies 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 (as defined in the Articles) 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.
Results and dividends
The profit from continuing activities for
the year ended 30 June 2019 was £739.4m
(2018: £671.5m).
An interim dividend of 9.6 pence per share
was paid on 7 May 2019 to those shareholders
on the register as at close of business on
12 April 2019 (2018: 8.6 pence per share).
The Directors recommend the payment
of a final dividend of 19.5 pence per share
(2018: 17.9 pence per share) in respect of the
financial year ended 30 June 2019.
The Directors also recommend the payment
of a special dividend of 17.3 pence per share
(2018: 17.3 pence per share) under the Capital
Return Plan (see pages 18 and 19 for further
details).
Strategic Report
The Group’s Strategic Report is set out on
pages 1 to 65 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 (pages 52 and
53); our approach to diversity and details
of diversity within the Group together with
the application of employment policies
to disabled persons (pages 44 and 45);
involvement of and engagement with our
employees (pages 24 to 26); an indication
of likely future developments in the Group
including in the field of research and
development (pages 38 and 41) and the
Group’s Risk management and Principal
risks (pages 57 to 64).
The Company has also published its
statement in line with the UK Modern
Slavery Act 2015, detailing the steps the
Group is taking to mitigate the risk of
modern slavery occurring in its supply
chain and business operations. Bespoke
training has been delivered to key teams
and supply chain partners in order to build
awareness and strengthen due diligence
processes, including participation in the
Supply Chain Sustainability School’s special
interest group on the Modern Slavery
Act 2015. This statement can be found at
www.barrattdevelopments.co.uk/
sustainability/our-policies.
The Company has also published its
second Gender Pay Gap Report in line
with the Equality Act 2010 (Gender
Pay Gap Information) Regulations
2017. The full report can be found at
www.barrattdevelopments.co.uk/
sustainability/our-publications and a
summary is provided in the Strategic Report
on page 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 ESG matters are
contained throughout the Strategic Report on
pages 2 to 65, in addition to being found in the
sustainability section of the Company’s website.
The Group’s financial assets and financial
liabilities are detailed in note 5.3 to the
Financial Statements. Details of the Group’s
liquidity, market price, credit and cash flow
risks are set out in note 5.4 to the Financial
Statements.
Annual General Meeting
The 2019 AGM will be held at The Royal
College of Physicians, 11 St Andrews
Place, Regent’s Park, London NW1 4LE
on Wednesday, 16 October 2019 at 12 noon.
The notice convening the 2019 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 ended 30 June 2019
and as at the date of this report can be found
on pages 68 and 69.
The beneficial interests of the Directors and
their 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 2019, and as at the date of this
report are disclosed in the Remuneration
report in Table 25 on page 114.
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.
Appointment and removal
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
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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 page 82.
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
which are or were in place during the
financial year, 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.
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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 Group did not enter into
any transaction which, for the purposes of
IAS 24, is considered to be a ‘related party
transaction’.
No 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
Our policy is that the Group will not make
donations to any political party. However,
the definition of political donations under
the Companies Act 2006 is very broad.
During FY19, it was agreed that the Chief
Executive would present to the Conservative
Councillors’ Association annual conference
about the Group and issues facing the
housing industry. The Company paid £7,000
to sponsor the dinner attended by around 200
people at which this presentation took place.
Offices
The Group had 27 offices (excluding non-
housebuilding divisions and those offices
undertaking an administrative function
only) located throughout Britain at the
end of the financial year. The Group also
has representative offices 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 on page 179. 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 17 October 2018,
the Directors were given authority to allot
shares up to a nominal value of £33,796,799
(representing one-third of the nominal value
of the Company’s issued share capital as
at 7 September 2018), such authority to
remain valid until the end of the 2020 AGM
or, if earlier, until the close of business on
17 January 2021. A resolution to renew this
authority will be proposed at the 2019 AGM.
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Other statutory disclosures
continued
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.
Details of restrictions of voting rights are
provided in the Notice of AGM.
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.
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 17 October
2018, shareholders gave authority to the
Company to buy back up to an aggregate of
101,390,390 ordinary shares (representing
10% of the Company’s issued share capital).
This authority is valid until the end of the
2019 AGM or, if earlier, until the close of
business on 17 January 2020. 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 2019 AGM.
Shareholder arrangements to
waive dividends
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 on page 179.
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. This waiver does not
apply to any shares held under an award to
which dividend equivalents apply.
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.
Relations with other capital providers
The Board recognises the contribution made
by other providers of capital to the Group
and welcomes the views of such providers in
relation to the Group’s approach to corporate
governance. Further information is provided
in the Stakeholder engagement section of
the Strategic Report on page 29.
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 111 to 114.
Articles of Association
The Company’s 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 HMRC and has regular dialogue with
its representatives to discuss both
developments in the business and the
ongoing tax position. In accordance with
UK legislation, we have published details
of our tax strategy and this can be found
at www.barrattdevelopments.co.uk.
The Chief Financial Officer retains overall
responsibility for oversight of the tax affairs
of the Group. Jessica White, Chief Financial
Officer, was Senior Accounting Officer
throughout the year ended 30 June 2019.
The Senior Accounting Officer receives
regular updates on tax matters. In addition,
taxation is discussed by the Audit Committee
at least annually.
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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 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.
In addition, the Company’s share plans
contain provisions relating to a change of
control. Outstanding awards and options
would normally vest and become exercisable
on a change of control subject to the
satisfaction of any performance conditions
at that time.
There are no other significant agreements
that take effect upon a change of control.
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 in note 1.3 to the
Financial Statements.) 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
3 September 2019
Significant agreements with change
of control provisions
The following significant agreements as at
30 June 2019 contained provisions entitling
the counterparties to exercise termination
or other rights in the event of a change of
control of the Company:
• The RCF agreement dated 14 May 2013
(as amended in December 2014, June
and December 2016 and November
2018) made between, amongst others,
the Company, Lloyds Bank plc (as the
facility agent) and the banks and financial
institutions named therein as lenders (the
‘RCF 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
RCF Agreement and declare all amounts
outstanding in respect of such lender
under the RCF Agreement immediately
due and payable. The RCF 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.
• The note purchase agreement dated
22 August 2017 in respect of the Group’s
£200m privately placed notes contains a
change of control prepayment provision.
Such control provision provides that
promptly after the Company becomes
aware that a change of control has
occurred, (and in any event not later
than ten business days thereafter) 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 (principle 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
less than 30 nor more than 60 days after
the Company notified the noteholders
of the change of control. For these
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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 IAS Regulation to prepare the Group
Financial Statements under IFRS as adopted
by the European Union 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 company law,
the Directors must not approve the Financial
Statements unless they are satisfied that
they give a true and fair view of the state of
affairs of the Company and the Group and
of the profit or loss of the Company and the
Group for that period.
International Accounting Standard 1 requires
that Financial Statements present fairly
for each financial year the relevant entity’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;
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 68 and 69.
By order of the Board
David Thomas
Chief Executive
3 September 2019
Jessica White
Chief Financial
Officer
3 September 2019
The Directors’ Report from pages 66 to
122 inclusive was approved by the Board
on 3 September 2019 and is signed on
its behalf by:
Tina Bains
Company Secretary
• 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
• make an assessment of the Company’s
and the Group’s (as the case may be)
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
and the Group’s transactions on an individual
and consolidated basis and disclose with
reasonable accuracy at any time the financial
position of the Company and the Group 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
the Group 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.
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 and the Group’s
position, performance, business model and
strategy.
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Financial Statements
Independent Auditor’s Report
Primary Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Statement of Changes in Shareholders’ Equity – Group
Statement of Changes in Shareholders’ Equity – Company
Balance Sheets
Cash Flow Statements
Notes to the Financial Statements
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 changes in accounting policies
1.6 Impact of standards and interpretations in issue but
not yet effective
2 Results for the year and utilisation of profits
2.1 Revenue
2.2 Segmental analysis
2.3 Profit from operations
2.4 Earnings per share
2.5 Dividends
2.6 Tax
3 Working capital
3.1 Inventories
3.2 Trade and other receivables
3.3 Trade and other payables
3.4 Secured loans
4 Business combinations and other
investing activities
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
138
138
138
139
141
143
144
145
146
148
149
149
153
154
155
156
157
160
163
168
169
123
124
131
132
133
134
135
136
170
171
172
175
179
180
181
185
191
192
193
194
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5 Capital structure and financing
5.1 Net cash
5.2 Net finance costs
5.3 Financial instruments
5.4 Financial risk management
5.5 Share capital
6 Directors and employees
6.1 Key management and employees
6.2 Retirement benefit obligations
6.3 Share-based payments
7 Commitments, contingencies, related parties
and subsidiaries
7.1 Operating lease obligations
7.2 Contingent liabilities
7.3 Related party transactions
7.4 Group subsidiary undertakings
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
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Independent Auditor’s Report
to the members of Barratt Developments PLC
Report on the audit of the Financial Statements
Opinion
In our opinion:
• the Financial Statements of Barratt Developments PLC (the ‘Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 30 June 2019 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 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.
We have audited the Financial Statements which comprise:
• the Consolidated Income Statement;
• the Consolidated Statement of Comprehensive Income;
• the Consolidated and Company Statements of Changes in Equity;
• the Consolidated and Company Balance Sheets;
• the Consolidated and Company Cash Flow Statements; 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 Company Financial Statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for the audit of the Financial Statements section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the Financial
Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services
prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was:
• margin recognition
Materiality
Scoping
The materiality that we used for the Group Financial Statements was £44.0m, which was determined on the basis of
5% of statutory profit before tax.
Our scoping focused on the audit work of the three components, being housebuilding, commercial developments and
joint ventures (JVs). All audit work was completed directly by the Group audit team. This is broadly consistent with the
prior year.
Significant changes
in our approach
We have refined our key audit matter from last year to focus on margin recognition where there is greater risk. Our
prior year key audit matter included the valuation of inventory however due to the Group’s strong performance and
forecast profitability we do not consider there to be the same level of risk relating to the valuation of the inventory.
In the current year we have identified JVs as a separate component.
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Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the Directors’ statement in note 1.3 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 and Company’s ability to continue to do so over
a period of at least twelve months from the date of approval of the Financial Statements.
We considered as part of our risk assessment the nature of the Group, its business model and related
risks including where relevant the impact of Brexit, the requirements of the applicable financial reporting
framework and the system of internal control. We evaluated the Directors’ assessment of the Group’s
ability to continue as a going concern, including challenging the underlying data and key assumptions
used to make the assessment, and evaluated the Directors’ plans for future actions in relation to their
going concern assessment.
We are required to state whether we have anything material to add or draw attention to in relation to that
statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with
our knowledge obtained in the audit.
Going concern is the basis of
preparation of the Financial
Statements that assumes an
entity will remain in operation
for a period of 12 months
from the start of the Financial
Statements.
We confirm that we have nothing
material to report, add or draw
attention to in respect of these
matters.
Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of
the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we
are required to state whether we have anything material to add or draw attention to in relation to:
Viability means the ability of
the Company to continue over
the time horizon considered
appropriate by the Directors.
• the disclosures on pages 59 to 64 that describe the principal risks and explain how they are being
managed or mitigated;
• the Directors' confirmation on page 57 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; or
• the Directors’ explanation on page 65 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 are also required to report whether the Directors’ statement relating to the prospects of the Group
required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
We confirm that we have nothing
material to report, add or draw
attention to in respect of the
Directors’ disclosure of principal
risks and viability.
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Independent Auditor’s Report
to the members of Barratt Developments PLC
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and
directing the efforts of the engagement team.
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.
Margin recognition
Key audit matter
description
How the scope of
our audit responded
to the key audit
matter
The Group’s valuation and cost allocation framework determines the total profit forecast for each site. This allows the
land and build costs of a development to be allocated to each individual unit, ensuring the forecast margin per unit
is equalised across a development. This cost allocation framework drives the recognition of costs, and hence profit,
as each unit is sold which is the key judgement in the income statement and is where fraud could potentially occur.
Accordingly, we consider the recognition of cost per unit and therefore the appropriate margin to be a key audit matter.
For each development there is judgement in:
• Estimating the inputs included within a site budget, including future revenues and cost to complete, in order to
determine the level of profit that each unit of the development will deliver;
• Appropriately allocating costs such as shared infrastructure relating to a development so that the gross profit
margin (in percentage terms) achieved on each individual unit is equal;
• Recognising site contingencies and their impact on margin; and
• Recording the variation when a deviation from the initial budget occurs and ensuring such variations are
appropriately recognised.
These judgements impact the profit recognised on each unit sold and reported margin is a key metric for the Group.
Refer to page 88 (Audit Committee Report) and note 2.3 (Financial Statement disclosures including the related critical
accounting judgements and key sources of estimation uncertainty).
Our work included the following:
• Tested the controls governing site valuations, specifically those relating to the valuation of sites and margin
review;
• Used bespoke analytics to analyse the cost to complete on all sites within plot financials. This enabled us to
analyse disaggregated elements of cost to complete on all the sites and compare against budgeted positions
and Group averages. We performed inquiries and obtained corroborative evidence from divisions for exceptions
identified;
• Attended a number of valuation meetings in all regions across the business to observe and validate the
effectiveness of this critical control and verify that the margin in the Financial Statements is equivalent to the site
valuation;
• Made enquiries of Management to support their assumptions and seek external corroboration including from our
internal real estate specialists, regarding forecast sales prices and costs to complete;
• Assessed the appropriateness and completeness of land equalisation adjustments, including assessing changes
to assumptions from prior periods. Such changes may include contingencies and overage;
• Analysed completions in the period for a sample of sites and compared the achieved margin to the equalised
margin determined within the original budget and the prior year. We also evaluated and assessed significant
variances with Management;
• Analysed journal postings and additions made to the inventories balance to highlight any items, which potentially
should have been recorded as an expense. We also tested the valuation of these additions by agreeing to
supporting invoices; and
• Assessed a sample of cost busts and savings, where there has been significant variances to the original budgeted
site costs, identified and understood the nature of them.
Key observations
Based on the procedures performed, we concluded that the Group’s cost allocation framework appears reasonable
for the intended purpose of recognising appropriate margins on unit completion. The accounting for cost allocation,
both at site start and on an ongoing basis is in line with this framework.
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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.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Group Financial Statements
Company Financial Statements
Materiality
£44.0m (2018: £41.7m)
£39.6m (2018: £35.1m)
Basis for determining
materiality
5% of statutory profit before tax in both the current
and prior year.
Rationale for the benchmark
applied
Statutory profit before tax was used as this is a key
performance indicator for the Group’s stakeholders
and is consistent with the benchmark used for
comparable companies.
Our basis for materiality was determined based
upon 3% of the Company's net assets capped at
90% of Group materiality.
Net assets was used as the benchmark because
it provides a stable basis and there are volatile
earnings between periods.
PBT
£909.8m
PBT
Group materiality
Group materiality
£44.0m
Component materiality range
£17.6m to £43.5m
Audit Committee reporting threshold
£2.2m
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Some of the tests in our audit are based on a sampling approach. Given that it is possible there may be undetected errors in the population
not sampled, we set performance materiality at a lower level to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the Financial Statements as a whole. Group performance materiality was set at 70% of Group
materiality for the 2019 audit (2018: 70%). In determining performance materiality, we consider factors including:
• our risk assessment, including our assessment of the Group’s overall control environment and that we consider it appropriate to rely on
controls over a number of business processes; and
• our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior periods.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £2.2m (2018: £2.1m), 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.
Controls are common across the Group and there are three identified components, being housebuilding, commercial developments and joint
ventures, which takes into consideration all of the Group’s divisions, as well as the head office consolidation. Consistent with prior years, we
choose to visit a selection of the Group’s divisions, which included the Group’s London housebuilding divisions as well as a sample of non-
London housebuilding divisions across each of the Group’s regions, selected on a rotational and risk basis and with reference to their size and
complexity. In the current year we visited six divisions (2018: eight).
We test the internal controls over significant risks, including the key audit matter of margin recognition. We also obtain an understanding
of other key controls which we would expect to find in a housebuilder group, namely those over land and work in progress and those over
subcontractor and other expenses; we test each of these every other year, and this year we tested those relating to land and work in progress.
Our IT specialists test the internal controls over the three key IT systems and gain an understanding over other supporting systems.
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Independent Auditor’s Report
to the members of Barratt Developments PLC
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the Annual Report and Accounts, other than the Financial Statements and our auditor’s
report thereon.
Our opinion on the Financial Statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the Financial Statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
• Fair, balanced and understandable – the statement given by the Directors that they consider the annual
report and Financial Statements taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s position and performance, business
model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit Committee reporting – the section describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’
statement required under the Listing Rules relating to the Company’s compliance with the UK
Corporate Governance Code containing provisions specified for review by the auditor in accordance
with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK
Corporate Governance Code
We have nothing to report in
respect of these matters.
In reaching this conclusion, we
tied in the financial and a sample
of non-financial information
to supporting documentation,
considered the completeness
of the principal risks and
uncertainties compared to the
audit risks we identified during
the audit and the Group’s risk
register and reviewed board
papers where the Board set
out their rationale as to why
the other information was fair,
balanced and understandable.
Responsibilities of Directors
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, and for such internal control as the Directors determine is necessary to
enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these Financial Statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out below.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, and then design and
perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for
our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, our procedures included assessing the following:
• the nature of the housing and commercial property development sectors, the control environment and business performance including the
design of the Company’s remuneration policies;
• the Company’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
• results of enquiring of management, Internal Audit, the Group’s in-house legal counsel and the Audit Committee, about their own
identification and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
- identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
- detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
- the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;
• the matters discussed among the engagement team and involving relevant internal specialists, including tax, valuations, pensions, and IT
specialists regarding how and where fraud might occur in the Financial Statements and any potential indicators of fraud.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on those laws and regulations
that had a direct effect on the Financial Statements (which included the UK Companies Act; Listing Rules; pensions legislation; and tax
legislation). In addition, we considered laws or regulations that had a fundamental effect on the operations of the Group (which included
compliance with planning law, health and safety law and environmental law).
Audit response to risks identified
As a result of performing the above, we identified margin recognition as a key audit matter. The key audit matters section of our report explains
the matter in more detail and also describes the specific procedures we performed in response to key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and
regulations described above as having a direct effect on the Financial Statements;
• enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due
to fraud;
• reading minutes of meetings of those charged with governance, reviewing Internal Audit reports; and
•
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual or outside the normal course of business, such as the disposals
of the share in the Aldgate joint venture, Barratt Residential Asset Management Ltd and the acquisition of Oregon Timber Frame Ltd that
occurred during the year.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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130
Independent Auditor’s Report
to the members of Barratt Developments PLC
Report on other legal and regulatory requirements
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
• 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; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Company and their environment obtained in the course of the audit, we
have not identified any material misstatements in the Strategic Report or the Directors’ Report.
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
We have nothing to report in
respect of these matters.
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Company Financial Statements are not in agreement with the accounting records and returns.
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 in
respect of these matters.
Other matters
Auditor tenure
Following the recommendation of the Audit Committee and the Board we were appointed at the AGM in 2007 to audit the Financial
Statements for the year ending 30 June 2008 and subsequent financial periods. Following a competitive tender process, we were reappointed
as auditor for the period ending 30 June 2018 and subsequent financial periods. The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is twelve years, covering the years ending 30 June 2008 to 30 June 2019.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
Use of our report
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.
Claire Faulkner (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London
United Kingdom
3 September 2019
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Report on other legal and regulatory requirements
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
• 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; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Company and their environment obtained in the course of the audit, we
have not identified any material misstatements in the Strategic Report or the Directors’ Report.
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
We have nothing to report in
respect of these matters.
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Company Financial Statements are not in agreement with the accounting records and returns.
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’
We have nothing to report in
remuneration have not been made or the part of the Directors’ Remuneration Report to be audited is not in
respect of these matters.
agreement with the accounting records and returns.
Directors’ remuneration
Other matters
Auditor tenure
Following the recommendation of the Audit Committee and the Board we were appointed at the AGM in 2007 to audit the Financial
Statements for the year ending 30 June 2008 and subsequent financial periods. Following a competitive tender process, we were reappointed
as auditor for the period ending 30 June 2018 and subsequent financial periods. The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is twelve years, covering the years ending 30 June 2008 to 30 June 2019.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
Use of our report
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.
Claire Faulkner (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London
United Kingdom
3 September 2019
Consolidated Income Statement
Year ended 30 June 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Analysed as:
Adjusted gross profit
Cost associated with legacy properties
Administrative expenses
Profit from operations
Analysed as:
Adjusted operating profit
Cost associated with legacy properties
Finance income
Finance costs
Net finance costs
Share of post-tax profit from joint ventures
Analysed as:
Adjusted share of post-tax profit from joint ventures
Cost associated with legacy properties
Loss on disposal of joint ventures
Share of post-tax loss from associates
Profit before tax
Analysed as:
Adjusted profit before tax
Cost associated with legacy properties
Tax
Profit for the year
Profit for the year attributable to the owners of the Company
Loss for the year attributable to non-controlling interests
Earnings per share from continuing operations
Basic
Diluted
131
20181
£m
4,874.8
(3,865.9)
1,008.9
1,015.9
(7.0)
(146.3)
862.6
869.6
(7.0)
3.5
(48.6)
(45.1)
18.6
18.6
–
–
(0.6)
835.5
842.5
(7.0)
(164.0)
671.5
671.7
(0.2)
66.5p
65.9p
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Notes
2.1, 2.2
2.2
2.3
2.3
2.2
5.2
5.2
5.2
4.3
4.3
4.3
4.1.3
4.3
2.2
2.6
4.1.2
2.4
2.4
2019
£m
4,763.1
(3,678.9)
1,084.2
1,087.4
(3.2)
(183.1)
901.1
904.3
(3.2)
7.1
(35.9)
(28.8)
39.2
46.2
(7.0)
(1.7)
–
909.8
920.0
(10.2)
(170.4)
739.4
740.0
(0.6)
73.2p
72.3p
1 The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
The notes on pages 138 to 201 form an integral part of these Financial Statements.
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132
Consolidated Statement of Comprehensive Income
Year ended 30 June 2019
Profit for the year
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Actuarial (loss)/gain on defined benefit pension scheme
Tax credit/(charge) 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
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 expense recognised for the year attributable to
non-controlling interests
Notes
6.2.2
5.2
5.2
2019
£m
739.4
(15.4)
2.9
(12.5)
–
–
–
726.9
727.5
4.1.2
(0.6)
20181
£m
671.5
29.2
(5.5)
23.7
0.8
(0.8)
–
695.2
695.4
(0.2)
1 The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
The notes on pages 138 to 201 form an integral part of these Financial Statements.
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Total
equity
£m
4,322.2
671.5
0.8
(0.8)
29.2
(5.5)
695.2
(436.3)
8.4
11.0
(3.3)
0.1
0.4
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Statement of Changes in Shareholders’ Equity – Group
Merger
reserve
(note
4.1.1)
£m
1,109.0
–
Hedging
reserve
(note
5.3.4)
£m
–
–
Own
shares
(note
5.5.2)
£m
(1.3)
–
Share-
based
payments
(note 6.3)
£m
22.9
–
Share
premium
£m
224.7
–
Group
retained
earnings
due to
share-
holders
of the
Company
£m
2,857.0
671.7
Total
Group
retained
earnings
due to
share-
holders
of the
Company
£m
2,878.6
671.7
Non-
controlling
interests
(note
4.1.2)
£m
9.1
(0.2)
Share
capital
(note
5.5.1)
£m
100.8
–
At 1 July 2017
Profit/(loss) 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 gains on pension
scheme
Tax on items above taken
directly to equity
Total comprehensive
income/(expense)
recognised for the year
ended 30 June 2018
Dividend payments
Issue of shares
Share-based payments
Purchase of own shares
Transfers in respect of
share options
Tax on share-based
payments
At 30 June 2018 as
previously reported
Effect of changes in
accounting policies1
At 1 July 2018 as adjusted
for changes in accounting
policies
Profit/(loss) for the year
Actuarial loss on pension
scheme
Tax on items above taken
directly to equity
Total comprehensive
income/(expense)
recognised for the year
ended 30 June 2019
Dividend payments
Issue of shares
Share-based payments
Purchase of own shares
Transfers in respect of
share options
Tax on share-based
payments
At 30 June 2019
–
–
–
–
–
–
0.5
–
–
–
–
–
–
–
–
–
–
7.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
101.3
232.6
1,109.0
–
–
–
101.3
–
232.6
–
1,109.0
–
–
–
–
–
0.4
–
–
–
–
–
–
–
6.7
–
–
–
–
–
–
–
–
–
–
–
–
101.7
–
239.3
–
1,109.0
0.8
(0.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.3)
3.4
–
–
–
–
–
–
–
–
–
29.2
29.2
(5.5)
(5.5)
–
–
–
11.0
–
(13.6)
(2.3)
695.4
(434.9)
–
–
–
10.3
2.7
695.4
(434.9)
–
11.0
(3.3)
0.1
0.4
–
–
–
–
(0.2)
(1.4)
–
–
–
–
–
(1.2)
18.0
3,130.5
3,147.3
7.5
4,597.7
–
–
(4.5)
(4.5)
–
(4.5)
(1.2)
–
18.0
–
3,126.0
740.0
3,142.8
740.0
7.5
(0.6)
4,593.2
739.4
–
–
–
–
–
–
(21.7)
–
–
–
–
–
14.1
–
7.8
(12.4)
(15.4)
(15.4)
2.9
2.9
–
–
(15.4)
2.9
727.5
(452.3)
–
–
–
4.7
727.5
(452.3)
–
14.1
(21.7)
0.1
(0.6)
–
–
–
–
–
726.9
(452.3)
7.1
14.1
(21.7)
0.1
–
(15.1)
1.2
20.9
0.4
3,406.3
1.6
3,412.1
–
6.9
1.6
4,869.0
1 The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
The notes on pages 138 to 201 form an integral part of these Financial Statements.
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Statement of Changes in Shareholders’ Equity – Company
Share
capital
(note
5.5.1)
£m
100.8
–
Share
premium
£m
224.7
–
Merger
reserve
(note
4.1.1)
£m
1,109.0
–
Hedging
reserve
(note
5.3.4)
£m
–
–
Own
shares
(note
5.5.2)
£m
(1.3)
–
Share-
based
payments
(note 6.3)
£m
20.9
–
Retained
earnings
£m
1,809.3
536.5
Total
retained
earnings
£m
1,828.9
536.5
At 1 July 2017
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 gains on pension
scheme
Tax on items above taken
directly to equity
Total comprehensive income
recognised for the year ended
30 June 2018
Dividend payments
Issue of shares
Share-based payments
Purchase of own shares
Transfers in respect of share
options
Tax on share-based payments
At 30 June 2018
Profit for the year
Actuarial loss on pension
scheme
Tax on items above taken
directly to equity
Total comprehensive income
recognised for the year ended
30 June 2019
Dividend payments
Issue of shares
Share-based payments
Purchase of own shares
Transfers in respect of share
options
Tax on share-based payments
At 30 June 2019
–
–
–
–
–
–
0.5
–
–
–
–
101.3
–
–
–
–
–
0.4
–
–
–
–
–
–
–
–
7.9
–
–
–
–
232.6
–
–
–
–
–
6.7
–
–
–
–
–
–
–
–
–
–
–
–
–
1,109.0
–
–
–
–
–
–
–
–
–
–
101.7
–
–
239.3
–
–
1,109.0
0.8
(0.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.3)
3.4
–
(1.2)
–
–
–
–
–
–
–
(21.7)
7.8
–
(15.1)
Total
equity
£m
3,263.4
536.5
0.8
(0.8)
–
–
–
–
29.2
29.2
29.2
(5.5)
(5.5)
(5.5)
560.2
(434.9)
–
–
–
0.9
2.5
1,938.0
576.9
560.2
(434.9)
–
11.0
(3.3)
(9.3)
2.5
1,955.1
576.9
560.2
(434.9)
8.4
11.0
(3.3)
(9.3)
2.5
3,398.0
576.9
(15.4)
(15.4)
(15.4)
2.9
2.9
2.9
564.4
(452.3)
–
–
–
564.4
(452.3)
–
14.1
(21.7)
564.4
(452.3)
7.1
14.1
(21.7)
–
–
–
–
–
–
–
11.0
–
(13.6)
–
18.3
–
–
–
–
–
–
14.1
–
(12.4)
0.4
20.4
2.7
–
2,052.8
(1.9)
0.4
2,058.1
(1.9)
0.4
3,508.1
The notes on pages 138 to 201 form an integral part of these Financial Statements.
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Statement of Changes in Shareholders’ Equity – Company
Balance Sheets
At 30 June 2019
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
Secured loans
Trade and other receivables
Current assets
Inventories
Secured loans
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Loans and borrowings
Trade and other payables
Deferred tax liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Current tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Retained earnings
Equity attributable to the owners of the Company
Non-controlling interests
Total equity
135
Notes
2019
£m
Group
20181
£m
2019
£m
Company
2018
£m
4.2.2
4.2.1
4.5
4.1.5
4.3
6.2.2
3.4
3.2
3.1
3.4
3.2
5.1
5.1
3.3
2.6.3
5.1
3.3
5.5.1
4.1.1
4.1.2
102.3
805.9
17.4
–
189.0
62.6
1.4
1.5
1,180.1
4,824.3
1.2
223.6
958.3
6,007.4
7,187.5
(200.0)
(413.5)
(17.6)
(631.1)
–
(1,587.9)
(99.5)
(1,687.4)
(2,318.5)
4,869.0
101.7
239.3
1,109.0
3,412.1
4,862.1
6.9
4,869.0
100.0
792.2
11.6
–
234.1
58.7
3.1
3.1
1,202.8
4,516.7
0.3
226.8
982.4
5,726.2
6,929.0
(191.1)
(566.7)
(25.3)
(783.1)
–
(1,462.4)
(85.8)
(1,548.2)
(2,331.3)
4,597.7
101.3
232.6
1,109.0
3,147.3
4,590.2
7.5
4,597.7
–
–
7.7
3,085.9
–
62.6
–
–
3,156.2
–
–
87.2
886.6
973.8
4,130.0
(200.0)
–
(7.8)
(207.8)
(49.9)
(364.2)
–
(414.1)
(621.9)
3,508.1
101.7
239.3
1,109.0
2,058.1
3,508.1
–
3,508.1
–
–
5.4
3,085.3
–
58.7
–
–
3,149.4
–
–
86.0
867.4
953.4
4,102.8
(191.1)
–
(8.6)
(199.7)
(71.1)
(434.0)
–
(505.1)
(704.8)
3,398.0
101.3
232.6
1,109.0
1,955.1
3,398.0
–
3,398.0
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
¹ The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
The notes on pages 138 to 201 form an integral part of these Financial Statements.
The Financial Statements of Barratt Developments PLC (registered number 00604574) were approved by the Board and authorised for issue
on 3 September 2019.
Signed on behalf of the Board:
David Thomas
Chief Executive
Jessica White
Chief Financial Officer
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 £576.9m (2018: £536.5m).
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136
Cash Flow Statements
Year ended 30 June 2019
Net cash inflow/(outflow) from operating activities (page 137)
Investing activities:
Purchase of property, plant and equipment
Consideration, net of cash acquired, paid on acquisition of
subsidiaries
Proceeds, net of cash disposed of, from the disposal of
subsidiaries
Increase in amounts invested in entities accounted for using the
equity method
Repayment of amounts invested in entities accounted for using
the equity method
Dividends received from investments accounted for using the
equity method
Proceeds from the disposal of investments accounted for using
the equity method
Dividends received from subsidiaries
Interest received
Net cash inflow/(outflow) from investing activities
Financing activities:
Dividends paid to equity holders of the Company
Distribution made to non-controlling partner
Purchase of own shares
Proceeds from disposal of own shares
Proceeds from issue of share capital
Loan repayments
Drawdown of loans including issue of sterling US private
placement notes
Cancellation of swaps
Net cash outflow from financing activities
Net (decrease)/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
Notes
4.5
4.1.4
4.3
4.3
4.3
4.1.3
2.5
4.1.2
5.1
Group
2018¹
£m
514.3
2019
£m
(85.4)
Company
2018
£m
(124.2)
(7.5)
(4.1)
(3.7)
2019
£m
361.3
(7.2)
(15.8)
4.6
–
–
(51.0)
(58.6)
66.9
60.3
18.6
–
5.1
81.5
(452.3)
–
(21.7)
–
7.1
–
–
–
(466.9)
(24.1)
982.4
958.3
11.7
41.8
–
–
2.9
(9.7)
(434.9)
(1.4)
(3.3)
0.1
8.4
(69.6)
200.0
(5.9)
(306.6)
198.0
784.4
982.4
–
–
–
–
–
–
593.6
3.2
592.7
(452.3)
–
(21.7)
–
7.1
(21.2)
–
–
(488.1)
19.2
867.4
886.6
–
–
–
–
–
–
560.0
3.5
559.8
(434.9)
–
(3.3)
0.1
8.4
(48.2)
211.8
(5.9)
(272.0)
163.6
703.8
867.4
¹ The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
The notes on pages 138 to 201 form an integral part of these Financial Statements.
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Reconciliation of operating profit/(loss) to cash flow from
operating activities
Notes
Operating activities:
Profit/(loss) from operations
Depreciation
Profit on disposal of subsidiary undertaking
(Reversal of impairment)/impairment of inventories
Profit on redemption of secured loans
Impairment of investment in entities accounted for using the
equity method
Share-based payments charge
Imputed interest on deferred term payables²
Amortisation of facility fees
Finance income related to employee benefits
Total non-cash items
Increase in inventories
Increase in trade and other receivables
Decrease in trade and other payables
Decrease in secured loans
Total movements in working capital
Interest paid
Tax paid
Net cash inflow/(outflow) from operating activities
4.5
4.1.3
3.1
4.3
6.3
5.2
5.2
5.2
2019
£m
901.1
4.3
(0.6)
(14.8)
(1.2)
–
14.1
(21.5)
(2.8)
2.0
(20.5)
(291.9)
(4.3)
(53.3)
2.0
(347.5)
(11.6)
(160.2)
361.3
Group
2018¹
£m
862.6
5.4
–
3.3
(1.9)
2.1
11.0
(34.3)
(2.1)
0.6
(15.9)
(44.6)
(39.4)
(102.3)
2.4
(183.9)
(11.8)
(136.7)
514.3
137
Company
2018
£m
(6.5)
3.2
–
–
–
–
6.3
–
(2.1)
0.6
8.0
–
(6.7)
(105.8)
–
(112.5)
(13.2)
–
(124.2)
2019
£m
(10.1)
1.8
–
–
–
–
6.3
–
(2.8)
2.0
7.3
–
(13.4)
(55.3)
–
(68.7)
(13.9)
–
(85.4)
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
¹ The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
² The Balance Sheet movements in land 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 138 to 201 form an integral part of these Financial Statements.
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138
Notes to the Financial Statements
Year ended 30 June 2019
1 Basis of preparation
1.1 Introduction
These Financial Statements have been prepared in accordance with IFRS as issued by the IASB, IFRIC interpretations and SIC interpretations
as adopted and endorsed by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The
Financial Statements therefore 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 secured loans and share-based payments.
Group accounting policies
The significant Group accounting policies are included within the relevant notes to the Financial Statements on pages 138 to 201.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS 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 critical accounting 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:
• Margin recognition – see note 2.3
• Impairment of goodwill and indefinite life brands – see note 4.2.3
1.2 Basis of consolidation
The Group Financial Statements include the results of Barratt Developments PLC (the Company), a public company limited by shares and
incorporated in the United Kingdom, and all of its subsidiary undertakings, made up to 30 June. The Financial Statements of subsidiary
undertakings are consolidated from the date that control passes to the Group using the acquisition 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 and
Company 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 65. 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 59 to 64 and financial risks
including liquidity risk, market risk, credit risk and capital risk are outlined in note 5.4 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 and Principal risks sections on pages 57 to 64, factors that particularly affect the performance of the Group include
changes in the UK and European macroeconomic environments, including but not limited to, the impact of the UK’s forthcoming exit from
the EU and any change or removal of the Government’s Help to Buy scheme, flat or negative economic growth, inflation, interest rates, buyer
confidence, mortgage availability, competitor pricing and falls in house prices or land values. In forming their conclusion, the Directors have
considered all currently available information about the potential future outcomes of events and changes in conditions that are reasonably
possible at the time of making this statement. In doing this they have concluded that no material uncertainties exist.
At 30 June 2019 the Group had total committed facilities and private placement notes of £900.0m. The £700.0m RCF matures in November
2023 and the £200.0m sterling USPP notes mature in August 2027. The RCF and USPP notes provide appropriate headroom above our current
forecast debt requirements.
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.
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139
1.4 Adoption of new and revised standards
During the year ended 30 June 2019 the Group has adopted the following new and revised standards:
• IFRS 15 ‘Revenue from Contracts with Customers’:
This standard became effective for accounting periods beginning on or after 1 January 2018 and was applicable to the Group from 1 July 2018,
replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction contracts’ and related interpretations. The standard sets out requirements for revenue
recognition from contracts with customers. The standard requires that revenue to which the Group expects to be entitled from a contract with
a customer is allocated to each performance obligation within that contract and then recognised as that obligation is satisfied.
The Group has applied IFRS 15 using the cumulative effect method and therefore comparative information has not been restated.
The Group’s revenue derives principally from the sale of the homes we build and from the sale of commercial property. Revenue is normally
recognised at legal completion. For certain contracts with registered providers, or other customers, revenue is recognised over time. The
point of recognition of the main revenue streams is unchanged following adoption of the new standard; however, the recognition of a number
of associated income streams has been adjusted.
Warranty
The Group previously offered a five-year warranty on sales of private homes. Under previous standards, no adjustment was made to revenue
to reflect this warranty when the property was sold, although an allowance for future costs associated with the warranty was held within the
Balance Sheet. An element of this warranty represents a separate performance obligation. On transition to IFRS 15, an element of the sales
price of homes previously sold with this warranty has been deferred and will be recognised over the warranty period in the Income Statement,
with the majority of this revenue and cost of sales recognised by the end of FY20. Opening reserves have been reduced by £3.4m on transition
as a result of this adjustment, and an additional £10.0m of revenue offset by £8.0m cost of sales has been recognised in the year.
Part-exchange transactions
The standard has also required presentational changes to our Income Statement to include part-exchange income and expenses below gross
margin. Previously, the income and costs were recognised on a net basis within cost of sales since part-exchange transactions were treated
as linked with the sale of new builds. Under IFRS 15 this is a separate transaction, but is not considered to be a principal activity of the Group
and is therefore reclassified to sundry income, within administrative expenses, rather than revenue. Gross profit in the year has been reduced
by £3.2m as a result of this adjustment.
Introductory and contract management fees
Under the new standard, introductory and other fees payable to customers in exchange for services are recognised in cost of sales. Previously
these were deducted from revenue. Management fees on commercial projects are recognised in revenue rather than other income within
administrative expenses. As a result, an extra £2.7m of revenue has been recognised in the year, offset in cost of sales and administrative
expenses.
The impact of these changes on revenue and profit is shown below, and a summary of the impact of the adoption of IFRS 15 on the Financial
Statements is included in note 1.5.
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
Impact on Consolidated Income Statement:
Revenue
Cost of sales
Gross profit
Part-exchange income
Part-exchange expenses
Administrative expenses (excluding part-exchange)
Administrative expenses
Profit from operations
Adjustments
in respect
of warranty
arrangements
£m
10.0
(8.0)
2.0
–
–
–
–
2.0
Adjustments
in respect
of part-
exchange
transactions
£m
–
(3.2)
(3.2)
341.1
(337.9)
–
3.2
–
Adjustments
in respect of
introductory
fees
£m
0.5
(0.5)
–
–
–
–
–
–
Adjustments
in respect
of contract
management
fees
£m
2.2
(0.5)
1.7
–
–
(1.7)
(1.7)
–
Group
Total
adjustments
in respect of
the adoption
of IFRS 15
£m
12.7
(12.2)
0.5
341.1
(337.9)
(1.7)
1.5
2.0
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140
Notes to the Financial Statements continued
Year ended 30 June 2019
1.4 Adoption of new and revised standards continued
• IFRS 9 ‘Financial Instruments’:
This standard became effective for accounting periods beginning on or after 1 January 2018 and was applicable to the Group from 1 July
2018 replacing IAS 39 ‘Financial Instruments: Recognition and Measurement’. IFRS 9 introduced new requirements for the classification and
measurement of financial instruments, impairment of financial assets and hedge accounting.
The changes resulting from the adoption of IFRS 9 are discussed below, and the impact on the Financial Statements, which is not material,
is summarised in note 1.5.
Classification and measurement of financial assets
Under IFRS 9 the Group’s remaining secured loans, previously classified as available for sale assets under IAS 39, were reclassified as
Fair Value through Profit and Loss and as a result future changes in fair value will be posted to the Income Statement rather than in other
comprehensive income. No adjustments were required in respect of amounts previously dealt with in other comprehensive income, since
following the sale of the majority of the Group’s available for sale assets in February 2016, fair value adjustments previously held in equity
were realised and transferred to the Income Statement.
Impairment of financial assets
The impairment requirements of IFRS 9 have required the Group to consider the expected credit losses for financial assets held at the
reporting date. The Directors have reviewed the Group’s financial assets and assessed the credit risk of each category of asset and concluded
that there is no material impact on the Group’s financial statements. The main financial assets of the Group are cash and cash equivalents
which are placed on deposit with a number of financial institutions, as described in note 5.4.3, and are assessed to have a low credit risk.
Trade and other receivables include amounts due from Homes England in respect of the Help to Buy scheme (note 5.4.3) which are also
assessed as low risk, together with other receivables. Impairments of financial assets by category are disclosed in note 3.2.
Classification and measurement of financial liabilities
All of the Group’s financial liabilities are held at amortised cost. Under IFRS 9 a renegotiated land creditor arrangement has been deemed a
modification resulting in a reduction in opening reserves of £1.1m and a reduction in finance costs of £0.2m in the current year.
Hedge accounting
The Group currently has no qualifying hedge relationships under IFRS 9 or IAS 39.
There has been no impact on the Financial Statements as a result of:
• Amendments to IFRS 2 ‘Classification and Measurement of Share-based Payment Transactions’;
• Amendments to IAS 40 ‘Transfers of Investment Property’;
• IFRIC Interpretation 22 ‘Foreign Currency Transactions and Advance Consideration’; and
• Annual Improvements to IFRS Standards 2014-2016 Cycle.
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141
1.5 Impact of changes in accounting policies
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15
or IFRS 9. The tables below and on pages 142 and 143 summarise the impact of the changes in accounting policies on the Income Statement,
Balance Sheet and Cash Flow Statement of the Group.
Impact on Consolidated Income Statement:
Revenue
Cost of sales
Gross profit
Part-exchange income
Part-exchange expenses
Administrative expenses (excluding part-exchange)
Administrative expenses
Profit from operations
Finance income
Finance costs
Net finance costs
Share of post-tax profit from joint ventures
Loss on disposal of joint ventures
Profit before tax
Tax
Profit for the year
Earnings per share from continuing operations
Basic
Diluted
Year ended
30 June 2019
as reported
£m
4,763.1
(3,678.9)
1,084.2
341.1
(337.9)
(186.3)
(183.1)
901.1
7.1
(35.9)
(28.8)
39.2
(1.7)
909.8
(170.4)
739.4
Adjustments
in respect of
the adoption of
IFRS 15
£m
12.7
(12.2)
0.5
341.1
(337.9)
(1.7)
1.5
2.0
–
–
–
–
–
2.0
(0.4)
1.6
Adjustments
in respect of
the adoption of
IFRS 9
£m
–
–
–
–
–
–
–
–
–
0.2
0.2
–
–
0.2
–
0.2
Group
Year ended 30
June 2019 before
adjustments for
the adoption of
new accounting
policies
£m
4,750.4
(3,666.7)
1,083.7
–
–
(184.6)
(184.6)
899.1
7.1
(36.1)
(29.0)
39.2
(1.7)
907.6
(170.0)
737.6
73.2p
72.3p
0.1p
0.2p
–
–
73.1p
72.1p
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
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Notes to the Financial Statements continued
Year ended 30 June 2019
1.5 Impact of changes in accounting policies continued
Impact on Balance Sheet:
Assets
Non-current assets
Non-current assets per balance sheet
Prepayments
Current assets
Trade and other receivables
Other current assets
Total assets
Liabilities
Non-current liabilities
Trade and other payables
Other non-current liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Total liabilities
Net assets
Equity
Retained earnings
Other reserves and capital
Non-controlling interests
Total equity
As at
30 June 2019
as reported
£m
Adjustments
in respect of
the adoption of
IFRS 15
£m
Adjustments
in respect of
the adoption of
IFRS 9
£m
Group
As at 30 June 2019
before adjustments for
the adoption of new
accounting policies
£m
1,180.1
–
1,180.1
223.6
5,783.8
6,007.4
7,187.5
(413.5)
(217.6)
(631.1)
(1,587.9)
(99.5)
(1,687.4)
(2,318.5)
4,869.0
3,412.1
1,450.0
6.9
4,869.0
–
–
–
–
–
–
–
–
–
–
(1.4)
(0.4)
(1.8)
(1.8)
(1.8)
(1.8)
–
–
(1.8)
–
(0.9)
(0.9)
(0.3)
–
(0.3)
(1.2)
0.4
–
0.4
–
–
–
0.4
(0.8)
(0.8)
–
–
(0.8)
1,180.1
0.9
1,181.0
223.9
5,783.8
6,007.7
7,188.7
(413.9)
(217.6)
(631.5)
(1,586.5)
(99.1)
(1,685.6)
(2,317.1)
4,871.6
3,414.7
1,450.0
6.9
4,871.6
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1.5 Impact of changes in accounting policies continued
Impact on Cash Flow Statement:
Profit from operations
Imputed interest on deferred term payables
Other non-cash items
Total non-cash items
Increase in inventories
Increase in trade and other receivables
Decrease in trade and other payables
Decrease in secured loans
Total movements in working capital
Interest paid
Tax paid
Net cash inflow from operating activities
Net cash inflow from investing activities
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Adjustments
in respect of
the adoption of
IFRS 15
£m
2.0
–
–
–
–
–
(2.0)
–
(2.0)
–
–
–
Adjustments
in respect of
the adoption of
IFRS 9
£m
–
0.2
–
0.2
–
(0.2)
–
–
(0.2)
–
–
–
Group
Year ended
30 June 2019
before adjustments for
the adoption of new
accounting policies
£m
899.1
(21.7)
1.0
(20.7)
(291.9)
(4.1)
(51.3)
2.0
(345.3)
(11.6)
(160.2)
361.3
–
–
–
–
–
–
–
–
–
–
81.5
(466.9)
(24.1)
982.4
958.3
Year ended
30 June 2019
as reported
£m
901.1
(21.5)
1.0
(20.5)
(291.9)
(4.3)
(53.3)
2.0
(347.5)
(11.6)
(160.2)
361.3
81.5
(466.9)
(24.1)
982.4
958.3
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
1.6 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 2019 and later periods. The Group has
not early-adopted any standard, amendment or interpretation.
The following new standard in particular is expected to have an impact upon the Group:
• IFRS 16 ‘Leases’ was issued in January 2016 and is effective for the Group for the period beginning on 1 July 2019. The standard specifies
how leases are recognised, measured and disclosed. The standard requires the recognition of a right-of-use asset and a corresponding
lease liability on the Balance Sheet. In the Income Statement, the existing IAS 17 operating lease charge, the majority of which is currently
recognised within operating profit, will be replaced by a depreciation charge in respect of the right-of-use asset and there will be an
interest cost in relation to the lease liability which will be recognised within finance costs. The majority of the Group’s lease commitments
will be brought onto the Balance Sheet together with corresponding right-of-use assets. This will impact the timing of the recognition of
lease costs within the Income Statement, although it will not affect the Group’s cash flows.
The Group has elected to adopt IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is
recognised in retained earnings at 1 July 2019. Comparative information will therefore not be restated. Right-of-use assets of between £50m
and £55m and liabilities in respect of lease commitments of between £50m and £55m will be brought onto the Balance Sheet at 1 July 2019.
Based on an analysis of lease commitments held by the Group during the year to 30 June 2019, and utilising discount rates calculated in that
year, the net impact of the standard on the year to 30 June 2019 would be an increase in operating profit of £0.4m, but a decrease in profit
before tax of £1.2m.
The composition of the Group’s lease commitments will change over time and the discount rates applied are required to be updated to
reflect the prevailing economic environment.
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Notes to the Financial Statements continued
Year ended 30 June 2019
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.
Revenue from the sale of residential and commercial properties
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.
Revenue on contracts recognised over time
Where the outcome of a contract on which revenue is recognised over time can be estimated reliably, 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.
Variations to, and claims arising in respect of such contracts are included in revenue to the extent that they have been agreed with the
customer. Where the outcome of a contract on which revenue is recognised over time cannot be estimated reliably, revenue is recognised
to the extent of contract costs incurred. When it is probable that the total costs on a contract will exceed total contract revenue, the
expected loss is immediately recognised as an expense in the Income Statement.
Other revenue
Revenue from separate contracts related to the development of homes is recognised on completion of the performance obligation to which
it relates and included in other revenue. Revenue from warranties is recognised on a straight-line basis over the warranty period.
Revenue from commercial contract management fees is recognised in the period in which it becomes receivable and included within
commercial revenue.
An analysis of the Group’s continuing revenue is as follows:
Housebuilding revenue:
Private sales
Affordable sales
Other housebuilding revenue
Total housebuilding segment revenue
Total commercial developments segment revenue
2019
£m
2018¹
£m
4,222.6
473.1
36.3
4,732.0
31.1
4,763.1
4,418.8
401.0
7.2
4,827.0
47.8
4,874.8
1
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
Included within Group revenue is £76.8m (2018: £31.6m) of revenue from construction contracts on which revenue is recognised over time by
reference to the stage of completion of the contracts. Of this amount, £3.3m (2018: £0.2m) was included in the contract liability balance at the
beginning of the year. Further revenue of £272.5m (2018: £337.3m) is expected to be recognised in future years in respect of these contracts,
of which 98.3% (2018: 75.0%) is expected to be recognised within five years.
Housebuilding revenue includes £521.4m (2018: £480.8m) of revenue generated where the sale has been achieved using part-exchange
incentives. Proceeds received on the disposal of part-exchange properties are not included in revenue on the basis that they are incidental to
the main revenue-generating activities of the Group (note 1.4).
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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.
Adjusted items
Items that are material in size or unusual or infrequent in nature are presented as adjusted items in the Income Statement. The Directors
are of the opinion that the separate presentation of adjusted items provides helpful information about the Group’s underlying business
performance. Examples of events that may give rise to the classification of items as adjusted are charges or credits in respect of legacy
properties, the restructuring of existing and newly acquired businesses, refinancing costs, gains or losses on the disposal of businesses or
individual assets, and asset impairments, including land, work in progress, goodwill and investments.
Residential completions²
Consolidated Income Statement
Revenue
Cost of sales
(Costs)/credits associated with legacy
properties3
Gross profit
Administrative expenses
Profit from operations
Share of post-tax profit/(loss) and loss on
disposal from joint ventures and associates
Costs associated with JV legacy properties3
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
House-
building
number
17,111
£m
4,732.0
(3,657.0)
(6.9)
1,068.1
(177.7)
890.4
45.3
(7.0)
928.7
Commercial
developments
number
–
£m
31.1
(18.7)
3.7
16.1
(5.4)
10.7
(0.8)
–
9.9
House-
building
number
16,680
Commercial
developments
number
–
£m
4,827.0
(3,821.6)
(4.0)
1,001.4
(143.8)
857.6
18.5
–
876.1
£m
47.8
(37.3)
(3.0)
7.5
(2.5)
5.0
(0.5)
–
4.5
2019
Total
number
17,111
£m
4,763.1
(3,675.7)
(3.2)
1,084.2
(183.1)
901.1
44.5
(7.0)
938.6
7.1
(35.9)
909.8
(170.4)
739.4
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
2018¹
Total
number
16,680
£m
4,874.8
(3,858.9)
(7.0)
1,008.9
(146.3)
862.6
18.0
–
880.6
3.5
(48.6)
835.5
(164.0)
671.5
1
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
2 Residential completions exclude JV completions of 745 (2018: 899) in which the Group has an interest.
3 During the year charges of £6.9m were recognised in respect of costs associated with legacy properties (2018: £4.0m). An amount of £3.7m was released following the
disposal of a legacy commercial asset (2018: £3.0m provided in respect of costs associated with legacy commercial assets). During the year a charge of £7.0m (2018:
£nil) was recognised in respect of costs associated with legacy JV properties. These amounts have been separately disclosed in the Income Statement.
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Notes to the Financial Statements continued
Year ended 30 June 2019
2.2 Segmental analysis continued
Balance Sheet
Segment assets
Elimination of intercompany balances
Cash and cash equivalents
Consolidated total assets
Segment liabilities
Elimination of intercompany balances
Loans and borrowings
Deferred tax liabilities
Current tax liabilities
Consolidated total liabilities
House-
building
£m
6,246.7
Commercial
developments
£m
11.8
(1,976.6)
(54.1)
House-
building
£m
5,959.9
Commercial
developments
£m
16.9
(1,995.8)
(63.5)
2019
Total
£m
6,258.5
(29.3)
6,229.2
958.3
7,187.5
(2,030.7)
29.3
(2,001.4)
(200.0)
(17.6)
(99.5)
(2,318.5)
1
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
Other information
Capital additions
Capital additions – acquired with subsidiary
Depreciation
House-
building
£m
7.2
2.9
4.3
Commercial
developments
£m
–
–
–
2019
Total
£m
7.2
2.9
4.3
House-
building
£m
7.5
–
5.4
Commercial
developments
£m
–
–
–
20181
Total
£m
5,976.8
(30.2)
5,946.6
982.4
6,929.0
(2,059.3)
30.2
(2,029.1)
(191.1)
(25.3)
(85.8)
(2,331.3)
2018
Total
£m
7.5
–
5.4
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 JVs and associates and tax.
Margin recognition
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 homes built in the current year and in future years. It also has to estimate costs to complete on
such developments and make estimates relating to future sales price margins on those developments and homes. 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.
Management have performed a sensitivity analysis to assess the impact of a change in estimated costs for developments on which sales
were recognised in the year. A 1% increase in estimated costs recognised in the year, which is considered to be reasonably possible, would
reduce the Group’s gross margin by 60bps.
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2.3 Profit from operations continued
Lease charges
Operating lease rentals are charged to the Income Statement in equal instalments over the life of the lease.
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. Rental income from these operating leases is recognised in the Income Statement on a straight-line basis
over the term of the lease.
2.3.1 Profit from operations is stated after charging/(crediting):
Gain on disposal of subsidiary undertakings
Cost of inventories recognised as an expense in cost of sales
Employee costs (including Directors)
Depreciation of property, plant and equipment
Research and development tax credit
Lease income
Operating lease charges:
– hire of plant, machinery and vehicles
– other
Notes
4.1.3
6.1
4.5
7.1.2
2019
£m
(0.6)
3,502.7
427.1
4.3
(0.3)
(1.2)
35.5
14.5
2018
£m
–
3,619.7
390.5
5.4
(0.4)
(2.0)
36.9
20.0
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
Profit from operations is stated after charging the Directors’ emoluments disclosed in the Remuneration report on pages 108 to 109 and in
note 6.1.
The Group does not recognise income from supplier rebates until received from suppliers. During the year, £33.5m (2018: £27.8m) of supplier
rebate income was included within profit from operations.
2.3.2 Administrative expenses
Administrative expenses of £183.1m (2018: £146.3m) include sundry income of £29.5m (2018: £55.0m) which principally comprises
management fees receivable from joint ventures, property management income, the sale of freehold reversions, ground rent receivable and,
in the current year, the net proceeds on the sale of part-exchange properties as explained in note 1.4.
Operating expenses
Part-exchange income
Part-exchange costs
Other sundry income
Sundry income
Administrative expenses
2019
£m
2018¹
£m
(212.6)
(201.3)
341.1
(337.9)
26.3
29.5
–
–
55.0
55.0
(183.1)
(146.3)
¹
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
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Notes to the Financial Statements continued
Year ended 30 June 2019
2.3 Profit from operations continued
2.3.3 Auditor’s remuneration
The remuneration paid to Deloitte LLP, the Group’s principal auditor, is disclosed below:
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
Other services²
Total fees for other services
Total fees related to the Company and its subsidiaries
1 Audit-related assurance services comprise the review of the interim report.
2019
£000
2018
£000
148
253
401
28
30
58
459
98
267
365
25
22
47
412
2 Other services comprise work in relation to provision of planning related information required in the sale of a subsidiary and in the previous year 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 90 to 91.
No services were provided under 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 JVs in which the Group participates:
The audit of the Group’s JVs pursuant to legislation
Other audit-related services¹
Total fees related to joint ventures
1 Other audit-related services comprise reporting to the auditors of our JV partners.
2.4 Earnings per share
The earnings per share from continuing operations were as follows:
Basic earnings per share
Diluted earnings per share
2019
£000
145
10
155
2018
£000
136
6
142
2019
pence
73.2
72.3
2018¹
pence
66.5
65.9
¹
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders of the Parent Company by the
weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Benefit Trust that do not attract
dividend equivalents which are treated as cancelled.
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2.4 Earnings per share continued
Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders of the Parent Company 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.
Profit attributable to ordinary shareholders of the Parent Company (£m)
Weighted average number of shares in issue (million)
Weighted average number of shares in EBT (million)
Weighted average number of shares for basic earnings per share (million)
Weighted average number of shares in issue (million)
Adjustment to assume conversion of all potentially dilutive shares (million)
Weighted average number of shares for diluted earnings per share (million)
2019
740.0
1,014.2
(3.8)
1,010.4
1,014.2
10.0
1,024.2
¹
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
2.5 Dividends
Amounts recognised as distributions to equity shareholders in the year:
Final dividend for the year ended 30 June 2018 of 17.9p (2017: 17.1p) per share
Special dividend for the year ended 30 June 2018 of 17.3p (2017: 17.3p) per share
Interim dividend for the year ended 30 June 2019 of 9.6p (2018: 8.6p) per share
Total dividends distributed to equity shareholders in the year
Proposed final dividend for the year ended 30 June 2019 of 19.5p (2018: 17.9p) per share
Proposed special dividend for the year ended 30 June 2019 of 17.3p (2018: 17.3p) per share
2019
£m
180.6
174.6
97.1
452.3
2019
£m
197.1
175.0
2018¹
671.7
1,011.7
(1.0)
1,010.7
1,011.7
8.3
1,020.0
2018
£m
172.9
175.0
87.0
434.9
2018
£m
181.1
175.0
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
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 eligible issued share capital at 30 June 2019 and has not been included as a liability at 30 June 2019.
2.6 Tax
All profits of the Group are subject to UK corporation tax.
The current year tax charge has been provided for, by the Group and Company, at a standard effective rate of 19.0% (2018: 19.0%) and the
closing deferred tax assets and liabilities have been provided in these Financial Statements at a rate of between 17.0% and 19.0%
(2018: between 17.0% and 19.0%) of the temporary differences giving rise to these assets and liabilities, dependent upon when they are
expected to reverse.
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 at the balance sheet date.
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Notes to the Financial Statements continued
Year ended 30 June 2019
2.6 Tax continued
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.
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 JVs, 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.
2.6.1 Tax recognised in the Income Statement
The tax expense represents the sum of the tax currently payable and deferred tax.
Analysis of the tax charge for the year
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
Notes
2.6.3
2019
£m
176.3
(1.7)
174.6
(5.0)
0.2
0.6
(4.2)
170.4
2018
£m
161.0
(6.5)
154.5
(1.4)
10.9
–
9.5
164.0
Factors affecting the tax charge for the year
The tax rate assessed for the year is lower (2018: higher) than the standard effective rate of corporation tax in the UK of 19.0% (2018: 19.0%).
The differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax of 19.0% (2018: 19.0%)
Effects of:
Other items including non-deductible expenses
Additional tax relief for land remediation costs
Adjustment in respect of previous years
Adjustment for post-tax profits of certain JVs included in Group profit before tax
Impact of change in tax rate on deferred tax liability
Tax charge for the year
Barratt Developments PLC Annual Report and Accounts 2019
2019
£m
909.8
172.9
0.5
(2.0)
(1.5)
(0.1)
0.6
170.4
2018
£m
835.5
158.7
3.3
(2.1)
4.4
(0.3)
–
164.0
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2.6 Tax continued
2.6.2 Tax recognised in equity
In addition to the amount charged to the Consolidated Income Statement, a net current and deferred tax credit of £4.5m (2018: £5.1m charge)
was recognised directly in equity.
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.
The Group recognised a net deferred tax liability with the following movements in the year:
At 1 July 2017
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2018
Comprising:
Deferred tax assets
Deferred tax liabilities
Year ended 30 June 2019
Income Statement (charge)/credit
Acquired with subsidiary
undertakings
Amounts taken directly to equity
At 30 June 2019
Comprising:
Deferred tax assets
Deferred tax liabilities
Pension
scheme
£m
(2.6)
(3.0)
(5.5)
(11.1)
Share
options
£m
6.0
(0.8)
(2.3)
2.9
Tax
losses
£m
0.1
(0.1)
–
–
Indefinite
life brands
£m
(17.0)
–
–
(17.0)
Accelerated
capital
allowances
£m
1.0
0.2
–
1.2
–
(11.1)
(3.4)
–
2.9
(11.6)
–
(11.6)
2.9
–
1.2
–
1.2
5.3
5.3
–
–
–
–
–
–
–
–
–
–
(17.0)
–
–
–
(17.0)
–
(17.0)
1.2
–
–
(0.1)
–
1.1
1.1
–
Other
(net)
£m
4.5
(5.8)
–
(1.3)
3.4
(4.7)
6.4
(0.5)
–
4.6
5.9
(1.3)
Group
Total
£m
(8.0)
(9.5)
(7.8)
(25.3)
7.5
(32.8)
4.2
(0.6)
4.1
(17.6)
12.3
(29.9)
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
The deferred tax liability in respect of indefinite life brands represents the amount of tax that would become due if the brands were sold at
their book value. There is no intention to sell the indefinite life brands in the foreseeable future and, therefore, 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. The deferred tax asset in respect
of share schemes represents an estimate of the future tax deduction available on the exercise or vesting of awards under those schemes.
While 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 addition to the deferred tax liability shown above, the Group has not recognised a deferred tax asset of £2.0m (2018: £2.0m) in respect of
capital and other losses amounting to £11.6m (2018: £11.5m) because these are not considered recoverable in the foreseeable future.
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Notes to the Financial Statements continued
Year ended 30 June 2019
2.6 Tax continued
2.6.3 Deferred tax continued
The Company recognised a net deferred tax liability with the following movements in the year:
At 1 July 2017
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2018
Comprising:
Deferred tax assets
Deferred tax liabilities
Year ended 30 June 2019
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2019
Comprising:
Deferred tax assets
Deferred tax liabilities
Pension
scheme
£m
(2.6)
(3.0)
(5.5)
(11.1)
–
(11.1)
(3.4)
2.9
(11.6)
–
(11.6)
Share
options
£m
1.1
0.4
–
1.5
Accelerated
capital
allowances
£m
0.5
0.2
–
0.7
1.5
–
0.8
0.4
2.7
2.7
–
0.7
–
(0.1)
–
0.6
0.6
–
Company
Total
£m
(0.5)
(2.6)
(5.5)
(8.6)
2.5
(11.1)
(2.5)
3.3
(7.8)
3.8
(11.6)
Other
(net)
£m
0.5
(0.2)
–
0.3
0.3
–
0.2
–
0.5
0.5
–
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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 homes 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.
Land held for development
Construction work in progress
Part-exchange properties and other inventories
The Company has no inventories.
2019
£m
3,071.6
1,632.8
119.9
4,824.3
Group
2018
£m
2,963.4
1,463.1
90.2
4,516.7
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
Nature and carrying value of inventories
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 2019 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 the Group
has impaired the land and work in progress value.
During the year, due to performance variations, changes in assumptions and changes to viability on individual sites, there were gross
impairment charges of £5.5m (2018: £13.2m) and gross impairment reversals of £20.3m (2018: £9.9m), resulting in a net impairment reversal
of £14.8m (2018: £3.3m charge) included within profit from operations.
The key estimates in these reviews are those used to estimate the realisable value of a site, which is determined by forecast sales rates,
expected sales prices and estimated costs to complete.
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.
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Notes to the Financial Statements continued
Year ended 30 June 2019
3.2 Trade and other receivables
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. Amounts recoverable on certain construction contracts where revenue is recognised over time are included in trade
receivables and stated at cost plus attributable profit less any foreseeable losses. Payments received on account for these construction
contracts are deducted from amounts recoverable on these contracts.
Trade and other receivables are measured at amortised cost less a loss allowance for expected credit losses which are assessed on the
basis of an average weighting of the risk of default. Any impairment is recognised immediately in the Income Statement.
For this purpose, a default is determined to have occurred if the Group becomes aware of evidence that it will not receive all contractual
cash flows that are due or if payment has not been received within 60 days of the due date. After this time, it is probable that contractual
cash flows will not be fully recovered.
The Group does not hold any collateral over these balances.
Trade receivables are receivables and contract assets arising from the Group’s contracts with customers. The loss allowance is equal to
the lifetime expected credit loss, assessed on an individual basis.
The loss allowances for other receivables and amounts due from subsidiary undertakings are equal to 12-month expected credit losses
unless there has been a significant increase in credit risk since the date of initial recognition, in which case the loss allowance is equal to
the lifetime expected credit loss. A significant increase in credit risk is judged to have occurred if a review of available information indicates
an increased probability of default, or if contractual payments are more than 30 days past due.
Where amounts due from subsidiary undertakings can be satisfied by the subsidiaries through the recovery of a debt from fellow
subsidiaries with strong capacity to meet that debt, the amount is considered to have low credit risk at the reporting date and it is therefore
assumed that the credit risk has not significantly increased.
Trade and other receivables that are more than two years overdue are deemed to have no reasonable expectation of recovery and are
therefore written off in the Financial Statements, but are still subject to enforcement activity. Subsequent recoveries of amounts previously
written off are credited to the Income Statement.
Non-current assets
Other receivables
Current assets
Trade receivables
Amounts due from subsidiary undertakings
Other receivables
Prepayments and accrued income
2019
£m
1.5
1.5
152.1
–
55.5
16.0
223.6
Group
2018¹
£m
3.1
3.1
141.4
–
76.1
9.3
226.8
2019
£m
–
–
–
76.3
1.0
9.9
87.2
Company
2018
£m
–
–
–
83.0
0.6
2.4
86.0
¹
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
Included within trade and other receivables are amounts due from contract customers of £1.1m (2018: £2.8m) in relation to contracts where
revenue is recognised over time.
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3.2 Trade and other receivables continued
The carrying values of trade and other receivables are stated after allowance for doubtful receivables. The movements in the loss allowances
for the period were as follows:
Trade receivables
Lifetime expected credit
losses (individually
assessed)
Company
£m
–
–
–
–
–
Group
£m
4.3
6.9
(0.1)
(5.0)
6.1
Notes
5.3.5
5.3.5
Other receivables
12 month
expected credit
losses
Company
£m
–
–
–
–
–
Group
£m
1.0
0.6
–
–
1.6
Amounts due
from subsidiary
undertakings
12 month
expected credit
losses
Company
£m
–
–
–
–
–
Allowance for doubtful receivables
Loss allowance at 1 July 2018
Charge for the year
Amounts written off
Recoveries of amounts previously written off
Loss allowance at 30 June 2019
Movements in loss allowances are principally a result of the derecognition and origination of financial assets in the period. The loss
allowances written off are equal to the gross carrying amounts of the assets written off in the year. 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.
3.3 Trade and other payables
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.
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
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
2019
£m
385.6
27.9
413.5
353.6
575.1
–
533.4
13.9
111.9
1,587.9
Group
2018¹
£m
520.0
46.7
566.7
361.1
476.7
–
511.6
14.1
98.9
1,462.4
2019
£m
–
–
–
2.2
–
334.3
26.9
–
0.8
364.2
Company
2018
£m
–
–
–
1.4
–
409.5
22.1
–
1.0
434.0
¹
The Group has applied IFRS 15 using the cumulative effect method. Comparatives have not been restated in respect of the adoption of IFRS 15 or IFRS 9.
Further information on the initial application of these standards can be found in notes 1.4 and 1.5.
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Notes to the Financial Statements continued
Year ended 30 June 2019
3.3 Trade and other payables continued
Included in trade and other payables are payments on account received from customers in excess of amounts recoverable on contracts on
which revenue is recognised over time of £22.8m (2018: £7.1m).
Accruals and deferred income includes a £4.7m (2018: £2.7m) social security accrual relating to share-based payments (note 6.3). Other
payables classified as current liabilities principally comprise payments received on account. Other payables classified as non-current
liabilities at 30 June 2019 principally comprise payments and deposits received in advance.
The Group has £486.4m (2018: £529.2m) of payables secured by legal charges on certain assets and £43.5m (2018: £79.4m) 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.
3.4 Secured loans
Secured loans principally comprise interest free loans that were 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).
Under IFRS 9 the Group’s remaining secured loans, previously classified as ‘available for sale assets’ under IAS 39 ‘Financial Instruments:
Recognition and Measurement’, were reclassified as ‘fair value through profit and loss’. No adjustments were required in respect of amounts
previously dealt with in other comprehensive income since following the sale of the majority of the Group’s available for sale assets in
February 2016 fair value adjustments previously held in equity were realised and transferred to the Income Statement.
Secured loans
Secured loans are classified under IFRS 9 as fair value through profit and loss and are held at fair value calculated as the present value
of expected future cash flows, calculated on a loan by loan basis, taking into account the estimated market value of the property and the
estimated time of repayment. Gains and losses arising from changes in fair value, changes in future cash flows and interest calculated
using the ‘effective interest rate’ method in accordance with IFRS 9, are recognised directly in the Income Statement.
For secured loans a significant or prolonged decline in the value of the property underpinning the value of the loan or an increased
risk of default are considered to be objective evidence of impairment. Increases in the fair value of secured loans 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.
Secured loans
At 1 July
Disposals (at cost)
Other provision movements
At 30 June
Balance at 30 June analysed as:
Current
Non-current
Further disclosures relating to financial assets are set out in note 5.3.
2019
£m
3.4
(1.9)
1.1
2.6
1.2
1.4
Group
2018
£m
3.9
(2.4)
1.9
3.4
0.3
3.1
Notes
5.3.1
5.3.1
Barratt Developments PLC Annual Report and Accounts 2019
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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, as defined in
IFRS 3, using the acquisition method of accounting 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 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.
4.1.2 Non-controlling interests
Movement in non-controlling interest share of net assets recognised in the Consolidated Balance Sheet
At 1 July
Distribution of profits to non-controlling partner
Share of loss for the year recognised in the Consolidated Income Statement
At 30 June
2019
£m
7.5
–
(0.6)
6.9
Group
2018
£m
9.1
(1.4)
(0.2)
7.5
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.
4.1.3 Disposal of Group subsidiary undertakings
On 16 March 2019 the Group disposed of the entire share capital of its wholly owned subsidiary Barratt Residential Asset Management
Limited (‘BRAM’) for a total consideration, received in cash, of £5.25m. The gain recognised by the Group on disposal and included within
administrative expenses was £0.6m.
On 29 June 2019 the Group disposed of its subsidiary Barratt London Investments Limited (‘BLIL’) including the Group’s 50% interests in
Aldgate Place (GP) Limited, The Aldgate Place Limited Partnership, Aldgate Land One Limited and Aldgate Land Two Limited which were held
by that company. The Group received cash consideration of £18.6m for the net assets of BLIL (being its investments in its JVs), recognising a
£1.7m loss on disposal.
Financial information relating to these subsidiaries for the period from 1 July 2018 to their disposal, which is consolidated within these
Financial Statements, is set out below:
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
Net operating expense
Operating loss
Net finance costs
Group share of loss from JVs
Loss before taxation
BRAM
£m
(0.6)
(0.6)
–
–
(0.6)
BLIL and its
JVs
£m
–
–
–
(0.2)
(0.2)
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Notes to the Financial Statements continued
Year ended 30 June 2019
4.1 Business combinations continued
4.1.4 Group acquisition of subsidiary undertakings
On 27 June 2019 the Group acquired 100% of the share capital of Oregon Timber Frame Limited, which owns 100% of the share capital
of Oregon Contract Management Limited. Oregon was established in 1998 and is one of the UK’s largest timber frame manufacturers. It
specialises in the manufacture and erection of high quality timber frame superstructures. Further details on the strategic rationale for the
acquisition are included in the Strategic Report on page 11.
Details of the purchase consideration, net assets acquired and the resulting goodwill are as follows:
Cash paid
Deferred consideration
Total purchase consideration
Net assets and liabilities recognised as a result of the acquisition:
Intangible assets
Tangible assets
Inventories
Trade and other receivables
Cash
Trade and other payables
Provisions
Net identifiable assets acquired
Goodwill
Net assets acquired
2019
£m
18.7
4.1
22.8
Fair value
£m
2.3
2.9
0.9
4.7
2.9
(4.0)
(0.6)
9.1
13.7
22.8
The assets and liabilities acquired have been recognised at their acquisition-date fair values. The fair value of trade and other receivables is
equal to the gross contractual amounts receivable.
Goodwill arises as a result of operational synergies between Oregon and the Group’s existing housebuilding segment.
No revenue or profit contribution is recognised in the Consolidated Income Statement in respect of Oregon. If the acquisition had occurred
on 1 July 2018, consolidated pro-forma revenue and profit for the year ended 30 June 2019, based on Oregon’s results for the year adjusted
for intercompany transactions and differences in accounting policies, would have been £4,788.8m and £740.5m respectively. Acquisition
costs of £0.9m are included in administrative expenses in the Consolidated Income Statement and in operating cash flows in the Cash Flow
Statement.
The Group’s cash outflow in respect of the acquisition is as follows:
Cash consideration
Balances acquired:
Cash
Net outflow of cash – investing activities
There were no acquisitions in the year ended 30 June 2018.
Barratt Developments PLC Annual Report and Accounts 2019
2019
£m
(18.7)
2.9
(15.8)
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4.1 Business combinations continued
4.1.5 Company investments in subsidiary undertakings
Company investments
The Company’s interests in subsidiary undertakings are accounted for at cost less accumulated provision for impairment.
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/(decrease) in investment in subsidiaries related to share-based payments
At 30 June
Impairment
At 1 July
Impairment charged in the year
At 30 June
Net book value
At 1 July
At 30 June
2019
£m
3,172.9
0.6
3,173.5
87.6
–
87.6
Company
2018
£m
3,177.6
(4.7)
3,172.9
79.2
8.4
87.6
3,085.3
3,085.9
3,098.4
3,085.3
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
During the prior year, the Company’s investment in one of its subsidiaries, Barratt Commercial Limited, was impaired by £8.4m following a
review of the value-in-use of that company.
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Notes to the Financial Statements continued
Year ended 30 June 2019
4.2 Goodwill and other intangible assets
4.2.1 Goodwill
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.
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. 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.
Cost
At 1 July
Arising on acquisition during the year
At 30 June
Accumulated impairment losses
At 30 June
Carrying amount
At 30 June
2019
£m
816.7
13.7
830.4
24.5
Group
2018
£m
816.7
–
816.7
24.5
805.9
792.2
During the year the Group acquired all of the share capital of Oregon Timber Frame Limited (note 4.1.4). Goodwill arising on the acquisition of
£13.7m has been capitalised and allocated to the Group's housebuilding segment.
The Group’s goodwill relating to the acquisition of Wilson Bowden Limited in 2007 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.
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4.2 Goodwill and other intangible assets continued
4.2.2 Other intangible assets – Brands
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).
Customer contract relationships
The Group has capitalised, as intangible assets, acquired customer contract relationships. Customer contract relationships are valued at
the present value of future cash flows and are amortised on a straight line basis in line with contract relationships at the acquisition date.
Internally generated customer contract relationships are not capitalised.
Cost
At 1 July
Acquired during the year through business
combinations
At 30 June
Amortisation
At 30 June
Carrying amount
At 30 June
2019
£m
107.0
0.9
107.9
7.0
Brands
2018
£m
107.0
–
107.0
7.0
100.9
100.0
Customer
contract
relationships
2018
£m
–
–
–
–
–
2019
£m
–
1.4
1.4
–
1.4
Group
Total
2018
£m
107.0
–
107.0
7.0
2019
£m
107.0
2.3
109.3
7.0
102.3
100.0
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.
During the year the Group acquired brands valued at £0.9m and customer contract relationships valued at £1.4m (note 4.1.4). These assets
will be amortised on a straight line basis in line with the contract relationships at the acquisition date.
The brand of Wilson Bowden Developments (valued at £7.0m prior to amortisation) was previously 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.
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
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Notes to the Financial Statements continued
Year ended 30 June 2019
4.2 Goodwill and other intangible assets continued
4.2.3 Impairment of goodwill and indefinite life brands
The Group conducts an annual impairment review of goodwill and its indefinite life brand together for the housebuilding segment.
Impairment of goodwill and indefinite life 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 target capital structure,
current market assessments of the time value of money and risks appropriate to the Group’s housebuilding business. Changes in
these may impact on the Group’s discount rate in future periods. The sensitivity of the valuation of goodwill and brands to changes in
expectations is set out in this note.
An impairment review was performed at 30 June 2019 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 two years of cash
flows were determined using the Group’s approved detailed site-by-site business plan. The cash flows for the third to the fifth years were
determined using Group level internal forecast 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 1%, which was based upon the historical long term growth rate of the UK economy.
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 15.2% (2018: 14.5%) 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.
• Expected changes in selling prices for completed houses and the related impact on operating margin: these are determined on a
site-by-site basis for the first two years dependent upon local market conditions and product type. For years three to five, these have been
estimated at a Group level based upon past experience and expectations of future changes in the market, taking into account external
market forecasts.
• Sales volumes: these are determined on a site-by-site basis for the first two years dependent upon local market conditions, land
availability and planning permissions. For years three to five, these have been estimated at a Group level based on past experience and
expectations of future changes in the market, taking into account external market forecasts.
• Expected changes in site costs to complete: these are determined on a site-by-site basis for the first two years dependent upon the
expected costs of completing all aspects of each individual development. For years three to five, these have been estimated at a Group
level based on past experience and expectations of future changes in the market, taking into account external market forecasts.
The result of the value-in-use exercise concluded that the recoverable value of goodwill and intangible assets exceeded its carrying value
by £2,095.6m (2018: £1,731.4m) and there has been no impairment.
Management have performed a sensitivity analysis in assessing recoverable amounts of goodwill, based on changes in key assumptions
considered to be possible. A 5% fall in sales volumes would reduce the headroom over carrying value by £408.7m and no impairment
would arise.
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4.3 Investments in jointly controlled entities and associated entities
4.3.1 Joint ventures
A jointly controlled entity (JV) 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 JV.
Jointly controlled and associated entities
JVs and associated entities are accounted for using the equity method of accounting.
JVs and associates
At 1 July
Increase in amounts invested in JVs
Repayment of investments in JVs
Equity accounted investment disposed of in the year
Impairment of investments in JVs
Dividends received from JVs
Share of post-tax profit for the year from JVs
Share of post-tax (loss)/profit for the year from associates
At 30 June
2019
£m
234.1
51.0
(66.9)
(8.1)
–
(60.3)
39.2
–
189.0
Group
2018
£m
213.1
58.6
(11.7)
–
(2.1)
(41.8)
18.6
(0.6)
234.1
2019
£m
–
–
–
–
–
–
–
–
–
Company
2018
£m
–
–
–
–
–
–
–
–
–
There are no losses in any of the Group’s JVs or associates which have not been recognised by the Group.
During the year, the Group entered into a new JV arrangement, Blackhorse Road Properties LLP, and disposed of its interests in Aldgate
Place (GP) Limited, The Aldgate Place Limited Partnership, Aldgate Land One Limited and Aldgate Land Two Limited (note 4.1.3).
At 30 June 2019 the Group has interests in the following jointly controlled entities:
JV
51 College Road
LLP
Alie Street LLP2
Barratt
Metropolitan LLP1
Barratt Osborne
Bexley LLP
Barratt Osborne
Worthing LLP
Barratt Wates (East
Grinstead) Limited
Barratt Wates (East
Grinstead) No.2
Limited2
Registered
office
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Fonteyn House, 47-49 London Road,
Reigate, Surrey RH2 9PY
Fonteyn House, 47-49 London Road,
Reigate, Surrey RH2 9PY
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Percentage
owned
50.0%
Voting
rights
controlled
50.0%
Country of
registration
England
and Wales
Principal
place
of
business
UK
Principal
activity
Housebuilding
Financial
year
end date
31 March*
50.0%
50.0%
75.0%
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
UK
UK
UK
UK
UK
UK
Housebuilding
31 March*
Housebuilding
30 June
Dormant
30 September*
Dormant
30 April*
Holding
company
30 June
Housebuilding
30 June
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
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Notes to the Financial Statements continued
Year ended 30 June 2019
4.3 Investments in jointly controlled entities and associated entities continued
4.3.1 Joint ventures continued
JV
Barratt Wates (Horley)
Limited1
Barratt Wates
(Lindfield) Limited
Barratt Wates
(Worthing) Limited
BDWZest
Developments LLP2
BDWZest LLP
BK Scotswood LLP
Blackhorse Road
Properties LLP1
Brooklands Milton
Keynes LLP
DWH/Wates (Thame)
Limited
Enderby Wharf LLP
Fulham Wharf LLP2
Fulham Wharf One
Limited2
Fulham Wharf Two
Limited2
Harrow View
LLP
Infinity Park
Derby LLP
Nine Elms LLP2
Nine Elms One
Limited2
Nine Elms Two
Limited2
Registered
office
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, The Watermark,
Gateshead NE11 9SZ
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Here East, 13 East Bay Lane,
3rd Floor Press Centre, Queen
Elizabeth Park, London E15 2GW
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Percentage
owned
78.5%
Voting
rights
controlled
50.0%
Country of
registration
England
and Wales
Principal
place
of
business
UK
Principal
activity
Housebuilding
Financial
year
end date
30 June
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
51.0%
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
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Housebuilding
30 June
Housebuilding
30 June
Holding
company
Holding
company
31 March*
31 March*
Holding
company
Housebuilding
31 December*
30 April*
Housebuilding
30 June
Housebuilding
30 June
Housebuilding
30 June
Housebuilding
31 March*
Dormant
31 March*
Dormant
31 March*
Housebuilding
31 March*
Commercial
development
30 June
Housebuilding
31 March*
Dormant
31 March*
Dormant
31 March*
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165
4.3 Investments in jointly controlled entities and associated entities continued
4.3.1 Joint ventures continued
JV
Old Sarum Park
Properties Limited
Queensland Road
LLP2
Ravenscraig Limited1
Ravenscraig Town
Centre LLP
Rose Shared Equity
LLP
Sovereign BDW
(Hutton Close) LLP
Sovereign BDW
(Newbury) LLP
Wichelstowe
LLP
ZestBDW LLP
Registered
office
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
15 Atholl Crescent,
Edinburgh EH3 8HA
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Woodlands, 90 Bartholomew Street,
Newbury, West Berkshire RG14 5EE
Woodlands, 90 Bartholomew Street,
Newbury, West Berkshire RG14 5EE
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Barratt House, Cartwright Way,
Forest Business Park, Bardon Hill,
Coalville, Leicestershire LE67 1UF
Percentage
owned
50.0%
Voting
rights
controlled
50.0%
50.0%
50.0%
Country of
registration
England
and Wales
England
and Wales
33.3%
33.3%
Scotland
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
Principal
place
of
business
UK
Principal
activity
Dormant
Financial
year
end date
30 June
UK
UK
UK
UK
UK
UK
UK
UK
Housebuilding
31 March*
Commercial
development
Dormant
31 December*
30 June
Investment
entity
30 June
Dormant
30 June
Housebuilding
30 June
Housebuilding
31 March*
Holding
company
31 March*
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
* JV prepares financial statements which are non-coterminous with the Group in order to comply with the terms of their JV agreements and to align with the year ends and
requirements of our JV partners.
Judgements applied in determining the classification of joint arrangements
1
The Group holds three JV investments (Barratt Wates (Horley) Limited, Barratt Metropolitan LLP and Blackhorse Road Properties LLP not in equal share, and one
(Ravenscraig Limited) with more than one other party. However, in each case, 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 JVs.
2
The Group’s interests in a number of the entities classified as JVs are held indirectly.
• Barratt Wates (East Grinstead) No. 2 Limited is a wholly owned subsidiary of the Group’s JV, Barratt Wates (East Grinstead) Limited, and is therefore classified as a
JV 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 JVs of the Group. Nine Elms One Limited and Nine Elms Two Limited are wholly
owned subsidiaries of Nine Elms LLP, and Fulham Wharf One Limited and Fulham Wharf Two Limited are wholly owned subsidiaries of Fulham Wharf LLP. All of
these entities are therefore classified as JVs of the Group.
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Notes to the Financial Statements continued
Year ended 30 June 2019
4.3 Investments in jointly controlled entities and associated entities continued
4.3.1 Joint ventures continued
Summarised financial information relating to these JVs is as follows:
Income
Adjusted Expenditure
Costs associated with legacy properties
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 JVs in the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities) of JVs
Group share of net assets/
(liabilities) recognised in the
Consolidated Balance Sheet at 30 June
Harrow View LLP
2019
2018
£m
£m
17.0
5.8
(14.1)
(5.5)
–
–
2.9
0.3
–
–
Fulham Wharf LLP
2018
£m
11.9
(36.1)
–
(24.2)
–
2019
£m
105.5
(98.2)
–
7.3
–
Nine Elms LLP
2018
£m
111.0
(99.8)
–
11.2
–
2019
£m
116.0
(94.9)
–
21.1
–
Enderby Wharf LLP
2018
£m
78.6
(62.9)
–
15.7
–
2019
£m
1.2
8.1
–
9.3
–
2.9
0.3
7.3
(24.2)
21.1
11.2
9.3
15.7
1.5
–
115.0
–
(35.4)
–
79.6
0.2
–
93.9
–
(2.3)
–
91.6
3.6
–
29.7
–
(3.4)
–
26.3
(12.1)
–
85.0
–
(3.9)
–
81.1
10.6
13.0
134.2
–
(17.1)
–
117.1
5.6
–
173.4
–
(28.8)
(9.0)
135.6
4.6
7.0
9.0
–
(4.9)
–
4.1
7.9
23.0
19.5
–
(10.7)
–
8.8
39.8
45.8
13.2
40.6
58.5
67.8
2.1
4.4
(0.5)
10.0
10.5
(33.6)
124.6
145.5
Barratt Metropolitan LLP
The Aldgate Place
Limited Partnership
Brooklands
Milton Keynes LLP
Other JVs
Group Total
2019
£m
52.9
(49.9)
3.0
–
–
3.0
2.2
12.8
72.9
–
–
2018
£m
45.2
(38.4)
6.8
–
–
6.8
5.1
–
–
–
73.9
(0.8)
13.3
(0.4)
(14.3)
(0.4)
(14.3)
2019
£m
(0.4)
(0.2)
–
–
–
–
–
–
–
–
–
–
2018
£m
2.1
(16.4)
–
–
(7.2)
37.5
–
–
(5.9)
(15.0)
16.6
8.3
2019
£m
82.6
(55.3)
27.3
–
–
27.3
13.7
14.8
31.8
–
–
2.0
1.0
2018
£m
83.0
(56.5)
26.5
–
–
26.5
13.3
16.5
42.8
–
–
4.3
2.2
(73.7)
(60.6)
(29.8)
(38.5)
2019
£m
105.6
(92.7)
(7.0)
5.9
(0.5)
5.4
3.2
12.7
101.0
13.7
(49.3)
(43.9)
21.5
2018
£m
65.4
(52.0)
–
13.4
(1.1)
12.3
5.8
2.3
128.5
14.3
(106.8)
(108.6)
(72.6)
2019
£m
480.8
(397.4)
(7.0)
76.4
(0.5)
75.9
39.2
60.3
493.6
13.7
(213.6)
(43.9)
249.8
2018
£m
403.0
(367.6)
–
35.4
(1.1)
34.3
18.6
41.8
654.5
14.3
(257.5)
(132.6)
278.7
During the year, the Group entered into a number of transactions with its JVs 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 7.3.3. The Group and Company have a number of contingent liabilities relating to their JVs. Further details
on these are provided in note 7.2.2.
The Group has made loans of £79.2m (2018: £104.9m) to its JVs, which are included within Group investments accounted for using the equity
method. Included within the Group’s share of net assets of JVs is a proportion of the loans to the JVs calculated using the Group’s ownership
share of £78.3m (2018: £97.0m).
During the prior year the Group impaired its investment in BK Scotswood LLP by £2.1m following a review of the net realisable value of
its assets.
The transfer of funds from the Group’s JVs to the Group is determined by the terms of the JV agreements, which specify how available funds
should be applied in repaying loans and capital, and distributing profits to the partners.
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Barratt Metropolitan LLP
2018
£m
45.2
(38.4)
–
6.8
–
2019
£m
52.9
(49.9)
–
3.0
–
The Aldgate Place
Limited Partnership
2019
2018
£m
£m
–
2.1
(0.4)
(16.4)
–
–
(0.4)
(14.3)
–
–
Brooklands
Milton Keynes LLP
2019
2018
£m
£m
82.6
83.0
(55.3)
(56.5)
–
–
27.3
26.5
–
–
2019
£m
105.6
(92.7)
(7.0)
5.9
(0.5)
Other JVs
2018
£m
65.4
(52.0)
–
13.4
(1.1)
Group Total
2018
£m
403.0
(367.6)
–
35.4
(1.1)
2019
£m
480.8
(397.4)
(7.0)
76.4
(0.5)
3.0
6.8
(0.4)
(14.3)
27.3
26.5
5.4
12.3
75.9
34.3
2.2
12.8
72.9
–
(73.7)
–
(0.8)
5.1
–
73.9
–
(60.6)
–
13.3
(0.2)
–
–
–
–
–
–
(7.2)
–
37.5
–
(5.9)
(15.0)
16.6
13.7
14.8
31.8
–
(29.8)
–
2.0
13.3
16.5
42.8
–
(38.5)
–
4.3
3.2
12.7
101.0
13.7
(49.3)
(43.9)
21.5
5.8
2.3
128.5
14.3
(106.8)
(108.6)
(72.6)
39.2
60.3
493.6
13.7
(213.6)
(43.9)
249.8
18.6
41.8
654.5
14.3
(257.5)
(132.6)
278.7
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Consolidated Balance Sheet at 30 June
39.8
45.8
13.2
40.6
58.5
67.8
(0.5)
10.0
–
8.3
1.0
2.2
10.5
(33.6)
124.6
145.5
4.3 Investments in jointly controlled entities and associated entities continued
4.3.1 Joint ventures continued
Summarised financial information relating to these JVs is as follows:
Harrow View LLP
Fulham Wharf LLP
Nine Elms LLP
Enderby Wharf LLP
Income
Adjusted Expenditure
Costs associated with legacy properties
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 JVs in the year
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities) of JVs
Group share of net assets/
(liabilities) recognised in the
2019
£m
17.0
(14.1)
2018
£m
5.8
(5.5)
2.9
–
–
2.9
1.5
–
–
–
0.3
–
–
0.3
0.2
–
–
–
2019
£m
105.5
(98.2)
7.3
–
–
7.3
–
–
–
2018
£m
11.9
(36.1)
2019
£m
116.0
(94.9)
(24.2)
21.1
(24.2)
21.1
–
–
–
–
10.6
13.0
134.2
–
–
–
–
–
3.6
(12.1)
115.0
93.9
29.7
85.0
79.6
91.6
26.3
81.1
117.1
2018
£m
111.0
(99.8)
11.2
–
–
11.2
5.6
–
–
173.4
(28.8)
(9.0)
135.6
2019
£m
1.2
8.1
9.3
–
–
9.3
4.6
7.0
9.0
–
–
4.1
2.1
2018
£m
78.6
(62.9)
15.7
–
–
15.7
7.9
23.0
19.5
–
–
8.8
4.4
(35.4)
(2.3)
(3.4)
(3.9)
(17.1)
(4.9)
(10.7)
4.3.2 Associated entities
The Group has a significant interest in the following associated entity:
Associate
New Tyne West Development Company LLP
Percentage owned Country of registration
25.0%
England and Wales
Principal activity
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.
During the prior year New Tyne West Development Company LLP impaired its assets by £0.6m following a review of their net realisable value.
In relation to the Group’s interests in associates, the Group’s share of assets and liabilities of its associate at 30 June 2018 and 30 June 2019
is £nil. The Group’s share of the associate’s result during the year was £nil (2018: £0.6m loss).
The Group has made loans of £nil (2018: £nil) to its associate. Further details of transactions between the Group and its associate are
provided in note 7.3.4.
The Group has no contingent liabilities relating to its associated entity.
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Notes to the Financial Statements continued
Year ended 30 June 2019
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 Company has no
jointly controlled operations (2018: none).
The Group has significant interests in the following jointly controlled operations:
Joint operation
Chapel Hill
Share of profits and assets consolidated
50.0%¹
Principal place of business
UK
Principal activity
Housebuilding
¹ 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.
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 Group Balance Sheet, are shown below:
Group share:
Income
Expenses
Share of profit from joint operations
Current assets
Current liabilities
Share of net assets of joint operations
2019
£m
17.2
(16.2)
1.0
11.0
(1.0)
10.0
Group
2018
£m
12.0
(10.3)
1.7
11.9
(2.9)
9.0
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4.5 Property, plant and equipment
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 2017
Additions
Disposals
At 30 June 2018
Additions
Acquired at fair value (note 4.1.4)
Disposals
At 30 June 2019
Depreciation
At 1 July 2017
Charge for the year
Disposals
At 30 June 2018
Charge for the year
Disposals
At 30 June 2019
Net book value
At 30 June 2018
At 30 June 2019
Group
Property
£m
Plant and
equipment
£m
Total
£m
Property
£m
Plant and
equipment
£m
Company
Total
£m
3.5
–
–
3.5
0.5
2.3
–
6.3
2.8
0.1
–
2.9
0.4
–
3.3
0.6
3.0
29.5
7.5
(0.3)
36.7
6.7
0.6
(0.3)
43.7
20.7
5.3
(0.3)
25.7
3.9
(0.3)
29.3
11.0
14.4
33.0
7.5
(0.3)
40.2
7.2
2.9
(0.3)
50.0
23.5
5.4
(0.3)
28.6
4.3
(0.3)
32.6
11.6
17.4
0.2
–
–
0.2
–
–
–
0.2
0.2
–
–
0.2
–
–
0.2
–
–
14.4
3.7
–
18.1
4.1
–
–
22.2
9.5
3.2
–
12.7
1.8
–
14.5
5.4
7.7
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14.6
3.7
–
18.3
4.1
–
–
22.4
9.7
3.2
–
12.9
1.8
–
14.7
5.4
7.7
Authorised future capital expenditure that was contracted but not provided for in these Financial Statements amounted to £1.3m (2018: £1.5m).
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Notes to the Financial Statements continued
Year ended 30 June 2019
5 Capital structure and financing
5.1 Net cash
Net cash is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings, prepaid fees and foreign exchange swaps.
Net cash at 30 June is shown below:
Cash and cash equivalents
Drawn debt
Borrowings
Sterling US private placement notes
Bank overdrafts
Prepaid fees¹
Total borrowings being total drawn debt
Prepaid fees¹
Net cash
Total borrowings at 30 June are analysed as:
Non-current borrowings
Current borrowings
Total borrowings being total drawn debt
Notes
5.1.1
2019
£m
958.3
(200.0)
–
–
(200.0)
7.4
765.7
(200.0)
–
(200.0)
Group
2018
£m
982.4
(200.0)
–
8.9
(191.1)
–
791.3
(191.1)
–
(191.1)
2019
£m
886.6
(200.0)
(49.9)
–
(249.9)
7.4
644.1
(200.0)
(49.9)
(249.9)
Company
2018
£m
867.4
(200.0)
(71.1)
8.9
(262.2)
–
605.2
(191.1)
(71.1)
(262.2)
¹
Prepaid fees included in net cash were presented within total borrowings in prior periods. In the current period these are included in the Balance Sheet within
prepayments. Prior year balances have not been restated for this presentational change.
Movement in net cash, including a reconciliation of liabilities arising from financing activities, is analysed as follows:
Net (decrease)/increase in cash and cash equivalents
Repayment/(drawdown) of borrowings including issue of sterling US private
placement notes:
Loan drawdowns
Loan repayments
Repayment of US Dollar private placement notes
Issue of sterling US private placement notes
Other movements in borrowings:
Movement in prepaid fees
Foreign exchange loss on US Dollar private placement notes
Foreign exchange gain on swaps
Movement in net cash in the year
Opening net cash
Closing net cash
2019
£m
(24.1)
–
–
–
–
(1.5)
–
–
(25.6)
791.3
765.7
Group
2018
£m
198.0
–
21.4
48.4
(200.0)
(0.2)
(0.8)
0.8
67.6
723.7
791.3
2019
£m
19.2
–
21.2
–
–
(1.5)
–
–
38.9
605.2
644.1
Company
2018
£m
163.6
(11.8)
–
48.4
(200.0)
(0.2)
(0.8)
0.8
–
605.2
605.2
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5.1 Net cash continued
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 as the proceeds received plus accrued interest applied to the account less any
repayments made. 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.
All debt facilities at 30 June 2019 are unsecured.
The principal features of the Group’s debt facilities at 30 June 2019 and 30 June 2018 were as follows:
Committed facilities
RCF
Fixed rate sterling USPP notes
Facility
30 June 2019
Amount drawn
30 June 2018
Maturity
£700.0m
£200.0m
–
£200.0m
–
£200.0m
22 November 2023¹
22 August 2027
¹ On 22 November the Group’s £700.0m revolving credit facility was amended and extended from December 2022 to November 2023.
The Group also uses various bank overdrafts and uncommitted borrowing facilities that are subject to floating interest rates linked to the UK
bank rate, LIBOR and money market rates as applicable.
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Weighted average interest rates are disclosed in note 5.2.
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:
Finance income
Finance income on short term bank deposits
Finance income related to employee benefits
Other interest receivable
Finance costs
Interest on loans and borrowings
Imputed interest on deferred term payables
Amounts reclassified to the Income Statement in respect of hedged cash flows
Foreign exchange losses on US Dollar debt
Amortisation of facility fees
Other interest payable
Net finance costs
Notes
6.2.2
2019
£m
(2.8)
(2.0)
(2.3)
(7.1)
9.7
21.5
–
–
2.8
1.9
35.9
28.8
2018
£m
(1.1)
(0.6)
(1.8)
(3.5)
9.8
34.3
(0.8)
0.8
2.1
2.4
48.6
45.1
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Notes to the Financial Statements continued
Year ended 30 June 2019
5.2 Net finance costs continued
Recognised in equity:
Amounts deferred in respect of effective cash flow hedges
Total fair value movement on cash flow swaps included in equity
Amounts reclassified to the Income Statement in respect of hedged cash flows
Total fair value movement on cash flow swaps transferred from equity
The weighted average interest rates, excluding fees, paid in the year were as follows:
Government loans
USPP notes
5.3 Financial instruments
Recognition
2019
£m
–
–
–
–
2019
%
–
2.8
2018
£m
(0.8)
(0.8)
0.8
0.8
Company
2018
%
–
3.0
2019
%
–
2.8
Group
2018
%
1.7
3.0
Financial assets and financial liabilities are recognised on the Balance Sheet in accordance with IFRS 9 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.
Classification and measurement
Non-derivative financial assets are classified in accordance with IFRS 9 as either ‘fair value through profit and loss’ or ‘subsequently
measured at amortised cost’. The classification depends on the business model for managing the financial assets and the contractual
cash flow characteristics of the financial asset.
All non-derivative financial liabilities are classified as ‘subsequently measured at amortised cost’.
Financial assets and liabilities subsequently measured at amortised cost are initially recognised at fair value determined based on
discounted cash flow analysis using current market rates for similar instruments. They are subsequently measured at amortised cost
using the ‘effective interest rate’ method. Financial assets are also measured after recognition of any impairment.
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.
Impairment
A loss allowance is recognised for expected credit losses on financial assets as described in notes 3.2 and 3.4. Any impairment is
recognised immediately in the Income Statement.
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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
2019
Carrying
value
£m
Notes
Group
2018
Carrying
value
£m
Fair
value
£m
Fair
value
£m
2019
Carrying
value
£m
Company
2018
Carrying
value
£m
Fair
value
£m
5.1
958.3
958.3
982.4
982.4
886.6
886.6
867.4
867.4
3.2
3.4
3.4
177.9
–
177.9
–
188.3
–
188.3
–
0.2
76.3
0.2
76.3
–
83.0
–
83.0
1.4
1.4
3.1
3.1
–
–
1.2
1,138.8
1.2
1,138.8
0.3
1,174.1
0.3
1,174.1
–
963.1
–
963.1
–
–
950.4
–
–
950.4
Cash and cash
equivalents
Measured at
amortised cost
Trade and other
receivables¹
Intercompany loans
Fair value through
profit and loss
Non-current secured
loans
Current secured
loans
Total financial assets
¹ Excludes amounts recoverable on contracts, prepayments and accrued income, 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:
Notes
5.1
3.3
5.1
Measured at
amortised cost
Bank overdrafts
Trade and other
payables¹
Intercompany
payables
Loans and borrowings
Total financial
liabilities
Fair
value
£m
2019
Carrying
value
£m
Group
2018
Carrying
value
£m
Fair
value
£m
–
–
–
–
1,628.7
1,631.1
1,682.7
1,692.2
–
196.8
–
200.0
–
192.8
–
200.0
Fair
value
£m
49.9
13.5
334.3
196.8
2019
Carrying
value
£m
49.9
13.5
334.3
200.0
1,825.5
1,831.1
1,875.5
1,892.2
594.5
597.7
Company
2018
Carrying
value
£m
71.1
10.0
409.5
200.0
690.6
Fair
value
£m
71.1
10.0
409.5
192.8
683.4
¹ 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.
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Notes to the Financial Statements continued
Year ended 30 June 2019
5.3 Financial instruments continued
5.3.3 Financial assets and liabilities measured subsequent to initial recognition at fair value
The following tables provide an analysis of financial assets 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.
Financial assets measured subsequent to initial recognition at fair value are as follows:
Secured loans
Non-current secured loans
Current secured loans
Total
Notes
Level 1
£m
Level 2
£m
Level 3
£m
3.4
3.4
–
–
–
–
–
–
1.4
1.2
2.6
2019
Total
£m
1.4
1.2
2.6
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
3.1
0.3
3.4
Group
2018
Total
£m
3.1
0.3
3.4
The Group had no derivative financial instruments at 30 June 2019 or 30 June 2018 and no financial liabilities were measured at fair value. In
previous years the Group 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 5.4. Neither the Group nor the Company enters into
any derivatives for speculative purposes.
5.3.4 Hedge accounting and hedging reserve
Hedge accounting
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 costs 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 costs 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 Group and Company, where the hedged cash flows are still expected to occur. As at 30 June
2019, the Group has no derivative financial instruments.
Movements on the hedging reserve in equity are detailed in the Statements of Changes in Shareholders’ Equity.
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5.3.5 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:
Financial assets measured at amortised cost
Trade receivables - loss allowance charge
Recoveries of doubtful receivables
Fair value through profit and loss
Net profit transferred on sale of secured loans
Net impairment of secured loans
Financial liabilities
Foreign exchange losses on US Dollar debt
Transfers from hedged items
Transfer from equity on currency cash flow hedges
Notes
3.2
5.2
2019
£m
7.5
(5.0)
(1.2)
–
–
–
175
2018
£m
7.1
(4.7)
(2.1)
0.2
0.8
(0.8)
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5.4 Financial risk management
The Group’s approach to risk management and the principal operational risks of the business are detailed on pages 57 to 64. The Group’s
financial assets and financial liabilities are detailed in note 5.3.
The Group’s operations and financing arrangements expose it to a variety of financial risks, of which the most material are: credit risk,
liquidity risk, interest rates and the availability of funding at reasonable margins. There is a regular, detailed system for the reporting and
forecasting of cash flows from operations to Senior Management including Executive Directors to ensure that liquidity risks are promptly
identified and appropriate mitigating actions are 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.
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.
5.4.1 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 to May, and October to 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
on its regular, detailed system for the reporting and forecasting of cash flows from its operations. The Group’s drawn debt, excluding fees,
represented 22.2% (2018: 22.2%) of available committed facilities at 30 June 2019. In addition, the Group had £958.3m (2018: £982.4m) of cash
and cash equivalents.
The Group was in compliance with its financial covenants at 30 June 2019. 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 a minimum of two years with a target of two to three years. At 30 June 2019, the average maturity of
the Group’s facilities was 5.2 years (2018: 5.5 years).
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Notes to the Financial Statements continued
Year ended 30 June 2019
5.4 Financial risk management continued
5.4.1 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:
Expiry date
In more than two years but not more than five years
2019
£m
700.0
Group
2018
£m
700.0
2019
£m
700.0
Company
2018
£m
700.0
In addition, the Group had £95.0m (2018: £81.2m) of undrawn uncommitted facilities available at 30 June 2019.
The expected undiscounted cash flows of the Group and Company financial liabilities, by remaining contractual maturity at the balance sheet
date were as follows:
Group
2019
Loans and borrowings (including
bank overdrafts)
Trade and other payables2
2018
Loans and borrowings (including
bank overdrafts)
Trade and other payables2
Company
2019
Loans and borrowings (including
bank overdrafts)
Trade and other payables2
Intercompany payables
2018
Loans and borrowings (including
bank overdrafts)
Trade and other payables2
Intercompany payables
Notes
5.3.2
5.3.2
5.3.2
5.3.2
Notes
5.3.2
5.3.2
5.3.2
5.3.2
5.3.2
5.3.2
Carrying
amount
£m
Contractual
cash flow¹
£m
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
200.0
1,631.1
1,831.1
200.0
1,692.2
1,892.2
307.1
1,668.6
1,975.7
323.5
1,737.8
2,061.3
19.5
1,249.2
1,268.7
21.3
1,158.7
1,180.0
19.5
248.9
268.4
21.3
373.5
394.8
50.5
165.2
215.7
56.0
198.1
254.1
Carrying
amount
£m
Contractual
cash flow ¹
£m
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
249.9
13.5
334.3
597.7
271.1
10.0
409.5
690.6
357.0
13.5
334.3
704.8
394.6
10.0
409.5
814.1
69.5
13.5
334.3
417.3
92.4
10.0
409.5
511.9
19.5
–
–
19.5
21.3
–
–
21.3
50.5
–
–
50.5
56.0
–
–
56.0
Over
5 years
£m
217.6
5.3
222.9
224.9
7.5
232.4
Over
5 years
£m
217.5
–
–
217.5
224.9
–
–
224.9
1
2
Includes interest calculated on the basis that the Group’s £700.0m RCF is fully drawn down. At 30 June 2019 none of this facility was drawn.
Excludes deferred income, payments received in excess of amounts recoverable on contracts, tax and social security and other non-financial liabilities.
The Group had no derivative financial instruments at 30 June 2019 or 30 June 2018.
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177
5.4 Financial risk management continued
5.4.2 Market risk (price risk)
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 set using fixed rate debt instruments.
The Group’s interest cover ratio is above 15 times and therefore the current policy is to hedge a proportion of the forecast RCF drawings based
on the Group’s three-year plan. Under this policy, no interest rate hedges are currently required.
The exposure of the Group’s financial liabilities to interest rate risk is as follows:
Group
2019
Financial liability exposure to interest rate risk
2018
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
–
–
200.0
1,631.1
1,831.1
200.0
1,692.2
1,892.2
The exposure of the Company’s financial liabilities to interest rate risk is as follows:
Company
2019
Financial liability exposure to interest rate risk
2018
Financial liability exposure to interest rate risk
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
Non-interest
bearing
financial
liabilities
£m
384.2
200.0
480.6
200.0
13.5
10.0
Total
£m
597.7
690.6
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 2019 was 2.0% (2018: 1.6%).
Sterling USPP notes of £200.0m were issued on 22 August 2017 with a fixed coupon of 2.77% and a ten year maturity. These fixed rate notes
expose the Group to fair value interest rate risk.
Sensitivity analysis:
In the year ended 30 June 2019, if UK interest rates had been 0.5% higher/lower (considered to be a reasonably possible change) and all other
variables were held constant, the Group’s pre-tax profit would increase/decrease by £2.2m (2018: £1.6m), the Group’s post-tax profit would
increase/decrease by £1.8m (2018: £1.3m) and the Group’s equity would increase/decrease by £1.8m (2018: £1.3m).
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Notes to the Financial Statements continued
Year ended 30 June 2019
5.4 Financial risk management continued
5.4.3 Credit risk
In the majority of cases, the Group receives cash on legal completion for private sales and receives advance stage payments from registered
providers for affordable housing. Included within trade and other receivables is £77.6m (2018: £83.5m) due from Homes England 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. In addition the Group has £958.3m (2018: £982.4m) on deposit with nine financial institutions. 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.
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.
The maximum exposure to any counterparty at 30 June 2019 was £158.3m (2018: £152.3m) 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 2019, the Company was exposed to £76.3m (2018: £83.0m) of credit risk in relation to intercompany loans which are considered
to be fully recoverable, as well as financial guarantees, performance bonds and the bank borrowings of subsidiary undertakings. Further
details are provided in notes 7.2 and 7.3.
5.4.4 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 while 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 5.3.2. The Group
is subject to the prevailing conditions of the UK economy and the quantum of the Group’s earnings is 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 Group’s approach to the management of the principal operational risks of the
business are detailed on pages 57 to 64.
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.
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5.5 Share capital
Equity instruments
Ordinary share capital is recorded at the proceeds received, net of direct issue costs and is classified as equity.
5.5.1 Ordinary share capital
Allotted and issued ordinary shares
10p each fully paid: 1,016,985,862 (2018: 1,012,722,682) ordinary shares
Options over the Company’s shares granted during the year
LTPP
Sharesave
DBP
ELTIP
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 DBP
Issued to the EBT to satisfy future exercises
At 30 June
179
2019
£m
101.7
2019
Number
2,940,565
1,673,444
644,386
1,221,120
6,479,515
2018
£m
101.3
2018
Number
2,223,717
2,755,257
567,557
–
5,546,531
2019
Number
2018
Number
1,012,722,682 1,007,899,274
50,846
2,567,996
1,711,888
477,912
14,766
1,016,985,862 1,012,722,682
39,090
1,524,090
–
–
2,700,000
s
t
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i
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5.5.2 Own shares reserve
The own shares reserve represents the cost of shares in Barratt Developments PLC purchased in the market or issued by the Company and
held by the EBT. The shares are held on behalf of the Company in order to satisfy options and awards that have been granted by it. Other than
shares in the EBT allocated to share schemes which attract dividend equivalents, these ordinary shares do not rank for dividend.
Ordinary shares in the Company held in the EBT (number)
Cost of shares held in the EBT
Market value of shares held in the EBT at 572.6p (2018: 515.4p) per share
2019
6,172,255
£15.1m
£35.3m
2018
931,605
£1.2m
£4.8m
During the year the EBT purchased 4,000,000 (2018: 483,379) shares in the market and disposed of 58,801 (2018: 736,773) shares in
settlement of exercises under the SMSOP 2009/10 and the SMIS; and 1,400,549 (2018: 2,189,800) were used to satisfy the vesting of the 2015
LTPP and the 2015 DBP. 2,700,000 shares (2018: 2,204,566) shares were issued to the EBT at par.
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Notes to the Financial Statements continued
Year ended 30 June 2019
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
within the Remuneration report on pages 94 to 117.
A summary of key management remuneration is as follows:
Salaries and fees (including pension compensation
Social security costs1
Performance bonus
Benefits
Share-based payments2
2019
£m
2.8
0.9
2.6
0.1
2.1
8.5
2018
£m
2.7
1.3
2.4
0.1
2.4
8.9
1 Excluded from the Executive Directors' and Non-Executive Directors' single figure of remuneration tables on pages 108 and 109.
2
IFRS 2 ‘Share-Based Payment’ charge attributable to key management.
Total employee numbers and costs are as follows:
Average employee numbers (excluding sub-contractors, including Directors):
Housebuilding
Commercial developments
Total average employee numbers
2019
Number
6,400
19
6,419
The majority of the costs of the Company’s employees are charged to other Group companies.
Employee costs (including Directors):
Wages and salaries including bonuses
Redundancy costs
Social security costs
Other pension costs
Share-based payments
Total employee costs
Notes
6.2
6.3
2.3
2019
£m
357.4
1.3
41.1
13.2
14.1
427.1
Group
2018
Number
6,293
22
6,315
Group
2018
£m
328.8
0.6
40.7
9.4
11.0
390.5
2019
Number
Company
2018
Number
353
–
353
2019
£m
36.5
0.2
5.2
2.7
6.3
50.9
342
–
342
Company
2018
£m
32.7
0.1
6.2
1.0
6.3
46.3
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181
6.2 Retirement benefit obligations
The Group operates defined contribution and defined benefit pension schemes.
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.
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 Statement of Comprehensive Income. Net interest is calculated by applying a discount rate to the net defined
benefit liability or asset.
The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as reduced
by the fair value of the scheme assets.
The Directors engage a qualified independent actuary to calculate the Group’s liability/asset in respect of its defined benefit pension
scheme. In calculating this liability/asset, it is necessary for actuarial assumptions to be made, which include estimations of discount
rates, salary and pension increases, price inflation, the long term rate of return on scheme assets and mortality. As actual rates of
increase and mortality may differ from those assumed, the pension liability/asset may differ from that included in these Financial
Statements.
The sensitivities regarding the principal assumptions used to measure the Scheme liabilities are set out in note 6.2.2.
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.
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Contributions during the year
Group defined contribution schemes' Consolidated Income Statement charge
2019
£m
11.5
2018
£m
9.4
At the balance sheet date, there were outstanding contributions of £2.0m (2018: £1.6m), 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 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 most recent full actuarial valuation of the Scheme was carried out at 30 November 2016. The results of this valuation have been updated
to 30 June 2019 by a qualified independent actuary. The Group agreed with the Trustees of the Scheme to make contributions to the Scheme
of £14.5m per annum from 1 July 2017 until 31 March 2020 (with the increase backdated to 1 April 2017 paid in July 2017) to address the
Scheme’s actuarial deficit. In addition, during the year ended 30 June 2019 a sum of £4.5m (2018: £nil) was paid to the Trustees in respect of
GMP equalisation. 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 £1.2m (2018: £1.2m).
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Notes to the Financial Statements continued
Year ended 30 June 2019
6.2 Retirement benefit obligations continued
6.2.2 Defined benefit scheme continued
The Scheme exposes the Group to a number of risks, the most significant being:
Risk
Volatile asset
returns
Changes in bond
yields
Inflation risk
Life expectancy
Description
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 a
decrease in the defined benefit asset recorded on the Balance Sheet. The allocation to growth assets is monitored to
ensure it remains appropriate given the Scheme’s long term objectives.
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.
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.
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:
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
2019
2018
2.31%
3.38%
2.91%
3.30%
2.91%
3.30%
2.60%
3.21%
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 1954 (life expectancy at age 65)
Non-retired member born in 1974 (life expectancy at age 65)
Male
23.0 years
24.4 years
Female
24.9 years
26.4 years
The base mortality assumptions are based on the SAPS (S2PA) (2018: S2PA) mortality tables with an adjustment to allow for the Scheme
members being treated as if they are 1.5 years younger than the population of the S2PA mortality tables. Allowance for future increases in life
expectancy is made in line with the CMI 2018 projections with a long term trend of 1.25% per annum (2018: CMI 2017 projections with a long
term trend of 1.25% per annum).
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6.2 Retirement benefit obligations continued
6.2.2 Defined benefit scheme continued
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
183
Increase in
Scheme
liabilities
£m
8.2
3.3
18.1
Increase in
Scheme
liabilities
%
2.1
0.8
3.6
The changes in the actuarial assumptions used in the calculation of sensitivities were selected on the basis that they are considered
reasonably possible changes, and they are the same as those used in the prior year.
The amounts recognised in the Consolidated Income Statement were as follows:
Past service cost
Interest cost
Interest income
Total pension income recognised in net finance costs in the Consolidated Income Statement (note 5.2)
Total pension income recognised in the Consolidated Income Statement
The amounts recognised in the Group and Company Statements of Comprehensive Income were as follows:
Expected return less actual return on Scheme assets
Loss/(gain) arising from changes in the assumptions underlying the present value of benefit obligations
Total pension remeasurements recognised in the Group and Company Statements of Comprehensive
Income
2019
£m
1.7
10.1
(12.1)
(2.0)
(0.3)
2019
£m
(28.8)
44.2
15.4
The amount included in the Group and Company Balance Sheets arising from obligations in respect of the Scheme is as follows:
Net asset for defined benefit obligations at 1 July
Contributions paid to the Scheme
Income recognised in the Consolidated Income Statement
Amounts recognised in the Group and Company Statements of Comprehensive Income
Surplus for funded Scheme/net asset recognised in the Group and Company Balance Sheets at 30 June
Analysed as:
Present value of funded obligations
Fair value of Scheme assets
A deferred tax liability of £11.6m (2018: £11.1m) has been recognised in the Group and Company Balance Sheets in relation to the pension
asset (note 2.6.3).
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2018
£m
–
9.9
(10.5)
(0.6)
(0.6)
2018
£m
(11.1)
(18.1)
(29.2)
2018
£m
(13.6)
(15.3)
(0.6)
(29.2)
(58.7)
2019
£m
(58.7)
(19.0)
(0.3)
15.4
(62.6)
393.9
(456.5)
357.3
(416.0)
184
Notes to the Financial Statements continued
Year ended 30 June 2019
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:
Present value of defined benefit obligations at 1 July
Past service cost
Interest cost
Actuarial loss/(gain)
Benefits paid from Scheme
Present value of defined 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
2019
£m
357.3
1.7
10.1
44.2
(19.4)
393.9
2019
£m
416.0
12.1
28.8
19.0
(19.4)
456.5
£m
61.2
349.2
5.6
416.0
£m
67.4
380.7
8.4
456.5
2019
%
14.8
83.4
1.8
100.0
The fair values of the Scheme assets in the above table are measured in accordance with level 1 as defined in note 5.3.3.
The actual return on Scheme assets was as follows:
Actual return on Scheme assets
The expected employer contribution to the Scheme in the year ending 30 June 2020 is £13.4m.
2019
£m
40.9
2018
£m
397.2
–
9.9
(18.1)
(31.7)
357.3
2018
£m
410.8
10.5
11.1
15.3
(31.7)
416.0
2018
%
14.7
83.9
1.4
100.0
2018
£m
21.6
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.
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185
6.3 Share-based payments
The Group issues equity-settled share-based payments to certain employees.
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:
LTPP
Sharesave
SMIS
DBP
ELTIP
2019
£m
4.1
1.6
3.7
2.9
1.8
14.1
As at 30 June 2019, an accrual of £4.7m (2018: £2.7m) was recognised in respect of social security liabilities on share-based payments.
2018
£m
4.8
1.1
2.8
2.3
–
11.0
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i
F
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.
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Notes to the Financial Statements continued
Year ended 30 June 2019
6.3 Share-based payments continued
6.3.2 Outstanding equity-settled share-based payments
At 30 June 2019, the following options were outstanding:
Date of grant
SMSOP
10 December 2009 (approved¹)
10 December 2009 (unapproved¹)
Total SMSOP options
Sharesave
30 April 2014 – 5-year plan
29 April 2015 – 5-year plan
27 April 2016 – 3-year plan
27 April 2016 – 5-year plan
24 April 2017 – 3-year plan
24 April 2017 – 5-year plan
20 April 2018 – 3-year plan
20 April 2018 – 5-year plan
9 April 2019 – 3-year plan
9 April 2019 – 5-year plan
Total Sharesave options
LTPP
14 December 2016 – Executive
24 November 2017 – Executive
22 October 2018 – Executive
14 December 2016 – Senior Management
24 November 2017 and 1 April 2018 – Senior Management
22 October 2018 – Senior Management
Total LTPP awards
DBP
17 October 2016
17 October 2017
22 October 2018
Total DBP awards
ELTIP
20 July 2018 - 60th Anniversary Award
Total ELTIP awards
Total
Option price
pence
2019
number
Not exercisable after
118
121
349
447
482
482
464
464
449
449
519
519
–
–
–
–
–
–
–
–
–
–
53,570
58,281
111,851
272,778
157,480
9 December 2019
9 December 2019
31 December 2019
31 December 2020
1,013,959
31 December 2019
91,211
31 December 2021
1,784,173
31 December 2020
214,389
31 December 2022
2,127,937
31 December 2021
226,164
31 December 2023
1,462,770
31 December 2022
195,001
31 December 2024
7,545,862
1,404,671
1,233,928
1,562,932
765,977
851,493
1,291,633
7,110,634
463,241
532,114
644,386
1,639,741
1,024,259
1,024,259
17,432,347
–
–
–
–
–
–
–
–
–
–
1
The SMSOP is 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.
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6.3 Share-based payments continued
6.3.2 Outstanding equity-settled share-based payments
At 30 June 2019, the following options were outstanding:
Date of grant
SMSOP
10 December 2009 (approved¹)
10 December 2009 (unapproved¹)
Total SMSOP options
Sharesave
30 April 2014 – 5-year plan
29 April 2015 – 5-year plan
27 April 2016 – 3-year plan
27 April 2016 – 5-year plan
24 April 2017 – 3-year plan
24 April 2017 – 5-year plan
20 April 2018 – 3-year plan
20 April 2018 – 5-year plan
9 April 2019 – 3-year plan
9 April 2019 – 5-year plan
Total Sharesave options
LTPP
14 December 2016 – Executive
24 November 2017 – Executive
22 October 2018 – Executive
Total LTPP awards
DBP
17 October 2016
17 October 2017
22 October 2018
Total DBP awards
ELTIP
Total ELTIP awards
Total
20 July 2018 - 60th Anniversary Award
14 December 2016 – Senior Management
24 November 2017 and 1 April 2018 – Senior Management
22 October 2018 – Senior Management
Option price
pence
2019
number
Not exercisable after
9 December 2019
9 December 2019
53,570
58,281
111,851
272,778
157,480
31 December 2019
31 December 2020
1,013,959
31 December 2019
91,211
31 December 2021
1,784,173
31 December 2020
214,389
31 December 2022
2,127,937
31 December 2021
226,164
31 December 2023
1,462,770
31 December 2022
195,001
31 December 2024
118
121
349
447
482
482
464
464
449
449
519
519
–
–
–
–
–
–
–
–
–
–
7,545,862
1,404,671
1,233,928
1,562,932
765,977
851,493
1,291,633
7,110,634
463,241
532,114
644,386
1,639,741
1,024,259
1,024,259
17,432,347
–
–
–
–
–
–
–
–
–
–
1
The SMSOP is 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.
187
6.3 Share-based payments continued
6.3.3 Further information relating to the share-based payment schemes
LTPP and the 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
including TSR, EPS and ROCE. Further details can be found in the Remuneration report on pages 111 to 113.
DBP
Deferred shares are held in accordance with the DBP as approved by the shareholders at the 2015 AGM. The DBP is currently utilised to hold
shares awarded in respect of any bonus earned in excess of 100% of base salary. Further details can be found on page 110.
Sharesave
Under the Sharesave, participants are required to make monthly contributions to an 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.
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.
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
TSR condition, granted in the same financial year.
ELTIP
The Board approved the 60th Anniversary Award under the ELTIP. The Award was made to all eligible employees employed as at 19 July
2018, and entitles participants to receive shares in the Company when the Award vests on 1 July 2020. Senior Management are not eligible
to participate in the ELTIP. The Award is not subject to the satisfaction of any performance condition other than that participants remain
employed by the Group and have not resigned before the end of the vesting period.
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:
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i
F
LTPP
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
–
–
–
–
–
–
2019
Number of
award units
5,889,141
(522,298)
(1,196,774)
2,940,565
7,110,634
–
Weighted average
exercise price in
pence
–
–
–
–
–
–
2018
Number of
award units
5,609,544
(232,232)
(1,711,888)
2,223,717
5,889,141
–
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Notes to the Financial Statements continued
Year ended 30 June 2019
6.3 Share-based payments continued
6.3.4 Number and weighted average exercise price of outstanding share-based payments continued
ESOS
Outstanding at 1 July
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
SMSOP
Outstanding at 1 July
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
Sharesave
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
DBP
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
2019
Weighted average
exercise price in
pence
Number of
award units
Weighted average
exercise price in
pence
–
–
–
–
–
–
–
–
2019
121
121
–
–
2018
Number of
award units
216,406
(216,406)
–
–
2018
Weighted average
exercise price in
pence
Number of
award units
Weighted average
exercise price in
pence
Number of
award units
119
118
120
120
Weighted average
exercise price in
pence
452
459
437
519
470
–
Weighted average
exercise price in
pence
–
–
–
–
–
–
163,685
(51,834)
111,851
111,851
2019
Number of
award units
8,320,222
(884,624)
(1,563,180)
1,673,444
7,545,862
–
2019
Number of
award units
1,206,915
–
(211,560)
644,386
1,639,741
–
119
118
119
119
Weighted average
exercise price in
pence
412
459
311
449
452
205
Weighted average
exercise price in
pence
–
–
–
–
–
–
225,005
(61,320)
163,685
163,685
2018
Number of
award units
8,948,114
(764,307)
(2,618,842)
2,755,257
8,320,222
62,746
2018
Number of
award units
1,224,914
(93,566)
(491,990)
567,557
1,206,915
–
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6.3 Share-based payments continued
6.3.4 Number and weighted average exercise price of outstanding share-based payments continued
189
2018
Number of
award units
533,473
(45,553)
(487,920)
–
–
2018
2019
Weighted average
exercise price in
pence
Number of
award units
Weighted average
exercise price in
pence
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Weighted average
exercise price in
pence
–
–
–
–
2019
Number of
award units
(196,861)
1,221,120
1,024,259
–
Weighted average
exercise price in
pence
Number of
award units
–
–
–
–
–
–
–
–
s
t
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e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
SMIS
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
ELTIP
Forfeited during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
The weighted average share price, at the date of exercise, of share options exercised during the year was 499.0p (2018: 635.7p).
The weighted average life for all schemes outstanding at the end of the year was 1.7 years (2018: 1.9 years).
6.3.5 Fair value of options and awards granted in the year
Sharesave
LTPP
DBP
ELTIP
Weighted average fair value
of options granted
2019
pence
86.6
495.0
495.0
453.0
2018
pence
87.1
632.8
679.0
–
Valuation model
Black-Scholes model
Black-Scholes model
Black-Scholes model
Black-Scholes model
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Notes to the Financial Statements continued
Year ended 30 June 2019
6.3 Share-based payments continued
6.3.5 Fair value of options and awards granted in the year continued
Inputs used to determine fair value of options
The weighted average inputs to the Black-Scholes models were as follows:
Average share price
Average exercise price
Expected volatility
Expected life
Risk free interest rate
Expected dividends
ELTIP
532p
–
29.1%
2.0 years
0.77%
7.93%
Sharesave
605p
519p
29.1%
3.2 years
0.73%
7.40%
LTPP
496p
–
29.1%
3.0 years
0.80%
–
Grants
2019
DBP
496p
–
29.1%
3.0 years
0.80%
–
Sharesave
560p
449p
29.2%
3.0 years
0.90%
8.13%
LTPP
634p
–
29.2%
3.0 years
0.50%
–
Grants
2018
DBP
680p
–
29.2%
3.0 years
0.53%
–
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.
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7 Commitments, contingencies, related parties and subsidiaries
7.1 Operating lease obligations
7.1.1 The Group as lessee
At 30 June 2019, the Group and Company had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Land and
buildings
£m
10.0
22.4
12.6
45.0
2019
Other
£m
6.3
7.0
–
13.3
Land and
buildings
£m
13.1
26.1
18.6
57.8
Group
2018
Other
£m
5.2
6.1
–
11.3
Land and
buildings
£m
0.6
2.6
1.8
5.0
2019
Other
£m
0.4
0.4
–
0.8
Land and
buildings
£m
0.5
2.6
2.5
5.6
Company
2018
Other
£m
0.5
0.4
–
0.9
Within one year
More than one year
and no later than
five years
In five years or
more
Operating lease commitments principally represent rentals payable for certain office properties and motor vehicles.
Group motor vehicle leases have an average term of 2.6 years (2018: 2.4 years) to expiry. Group property leases have an average term of 7.4
years (2018: 6.3 years) to expiry.
Company motor vehicle leases have an average term of 2.3 years (2018: 2.1 years) to expiry. Company property leases have an average term of
7.8 years (2018: 8.8 years) to expiry.
7.1.2 The Group as lessor
The Group has lease agreements with third parties for certain residential and 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
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.
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Property rental income
Carrying value of leased assets
Rent receivable during remaining lease period
Within one year
More than one year and no later than five years
In five years or more
Average lease term
Notes
2.3
2019
£m
1.2
1.1
1.1
3.0
4.3
8.4
2019
Years
8.3
Group
2018
£m
2.0
1.1
1.3
2.3
2.2
5.8
2018
Years
8.7
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Notes to the Financial Statements continued
Year ended 30 June 2019
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 £444.8m (2018: £452.7m), and confirm that at the date of these Financial
Statements the possibility of cash outflow is considered minimal and no provision is required.
As previously disclosed in the Group’s Financial Statements, following correspondence with an industry-wide final salary pension scheme,
there is a risk of an obligation arising in respect of pension scheme funding, pursuant to section 75 of the Pensions Act 1995, for employees of
a subsidiary who left the Group following disposal of its business and assets.
The Group received notification in January 2018 that no liability exists in respect of certain employees under the scheme, however previous
correspondence received in November 2017 stated that the scheme actuary was not in a position to calculate any remaining section 75 debts
due to the complexities of applying the relevant legislation to the scheme. In July 2018, the Trustees issued their consultation response
confirming a proposed methodology for calculating the section 75 obligation and that debt notices would be issued by June 2019. In June
2019, the Group received an estimate of the section 75 obligation. The Group is in the process of taking appropriate actuarial and legal advice
on the section 75 obligation. An extension until mid-September 2019 has been agreed with the pension scheme whilst this is completed. No
debt notices have been issued at the time of issuing this report. Disclosure on this matter is therefore made in accordance with note 7.2.3.
The Directors consider that while it is increasingly probable that a liability could result in the future, at present there remain uncertainties in
the estimate of the section 75 obligation calculation. Following communication with the Trustees a provision was recognised in relation to this
matter during the year ended 30 June 2018 and year ended 30 June 2019.
Following the Grenfell Tower tragedy, amendments to the Building Regulations have been approved to implement a ban on the use of
combustible materials in the external wall systems of buildings. The ban applies to new high-rise residential buildings 18 metres or more
in height and includes material alterations such as the replacement of cladding. The regulations came into force on 21 December 2018.
The Government has issued revised guidelines to Building Owners and those deemed the Responsible Person (normally the Management
Company) to consider, as part of their fire risk assessments, the ability of any cladding system to prevent the spread of fire. The result has
been that there has been more scrutiny of all materials used on building façades. The Group has undertaken a review of all of its current
and legacy buildings where it has used cladding solutions. Approved Inspectors signed off all of our buildings, including the cladding used,
as compliant with the relevant Building Regulations. During the year we have incurred and accrued an additional £13.9m (including JVs) of
costs for the work involved in removing and replacing cladding in line with our commitment to put our customers first. We recognise that the
retrospective review of building materials continues to evolve. The Financial Statements have been prepared based on currently available
information; however, the costs of the removal and replacement of cladding and other works identified during the removal and replacement
may change as building works progress; and future changes to Building Regulations and Fire Safety Regulations may occur as a result of the
Government’s consultation on reforming the building safety regulatory system following recommendations from the Independent Review of
Building Regulations and Fire Safety, the impact of which is currently unknown.
7.2.2 Contingent liabilities related to JVs and associates
The Group has given counter-indemnities in respect of performance bonds and financial guarantees to its JVs totalling £12.5m
at 30 June 2019 (2018: £33.2m). During the current and prior years the Group has also provided principal guarantees and cost and interest
overrun guarantees in relation to the borrowings of a number of the Group’s London JVs. At 30 June 2019 no principal guarantees were
outstanding (2018: £9.0m) and no cost or interest overruns had been incurred (2018: £nil). The Group’s maximum exposure under these
cost and interest overrun guarantees is £nil as at 30 June 2019 (2018: £18.8m).
At 30 June 2019, the Group has an obligation to repay £0.9m (2018: £0.9m) of grant monies received by a JV upon certain future disposals of
land.
The Group has also given a number of performance guarantees in respect of the obligations of its JVs, requiring the Group to complete
development agreement contractual obligations in the event that the JVs do not perform as required under the terms of the related contracts.
There are no contingent liabilities in relation to associates at 30 June 2019 or 30 June 2018.
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.
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7.3 Related party transactions
7.3.1 Directors of Barratt Developments PLC and remuneration of key personnel
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.
Disclosures related to the remuneration of key personnel as defined in IAS 24 ‘Related Party Disclosures’ are given in note 6.1.
There have been no related party transactions as defined in Listing Rule 11.1.5R for the year ended 30 June 2019.
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 their utilisation of these services.
Transactions between the Company and its subsidiaries during the year:
Charges in respect of management and other services provided to subsidiaries
Net interest paid by the Company on net loans from subsidiaries
Dividends received from subsidiary undertakings
Balances at 30 June:
Amounts due to the Company from subsidiary undertakings
2019
£m
82.7
4.1
593.6
76.3
Company
2018
£m
75.8
1.9
560.0
83.0
The Company and its subsidiaries 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 JVs
The Group has entered into transactions with its JVs as follows:
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Transactions between the Group and its JVs during the year:
Charges in respect of development management and other services provided to JVs
Interest charges in respect of funding provided to JVs
Purchase of land and part-exchange properties from JVs
Dividends received from JVs
Balances at 30 June:
Funding loans and interest due from JVs
Other amounts due from JVs
Loans and other amounts due to JVs
2019
£m
8.4
2.2
–
60.3
79.2
19.8
(1.8)
Group
2018
£m
16.0
1.6
2.0
41.8
104.9
29.5
(2.2)
In addition, one of the Group’s subsidiaries, BDW Trading Limited, contracts with a number of the Group’s JVs to provide construction
services.
The Group’s contingent liabilities relating to its JVs are disclosed in note 7.2.2.
7.3.4 Transactions between the Group and its associate
The amount of outstanding loans due to the Group from its associate at 30 June 2019 was £nil (2018: £nil). There were no other amounts
outstanding between the Group and its associate as at 30 June 2019.
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Notes to the Financial Statements continued
Year ended 30 June 2019
7.4 Group subsidiary undertakings
The entities listed below, and on the following pages, are subsidiaries of the Company or Group. All are registered in England and Wales or
Scotland with the exception of SQ Holdings Limited which is registered in Guernsey. Unless otherwise stated, the results of these entities are
consolidated within these Financial Statements.
Subsidiary
Acre Developments Limited
Advance Housing Limited
Ambrose Builders Limited
Barratt Bristol Limited
Barratt Central Limited
Barratt Chester Limited
Barratt Commercial Limited
Barratt Construction (Southern)
Limited
Barratt Corporate Secretarial
Services Limited
Barratt Developments
(International) Limited
Barratt Dormant (Atlantic Quay)
Limited
Barratt Dormant (Blackpool)
Limited
Barratt Dormant (Capella)
Limited
Barratt Dormant (Cheadle
Hulme) Limited
Barratt Dormant (Harlow)
Limited
Barratt Dormant (Riverside
Exchange Sheffield C2) Limited
Barratt Dormant (Riverside
Exchange Sheffield L/M) Limited
Barratt Dormant (Riverside
Quarter) Limited
Barratt Dormant (Riverside
Sheffield Building C1) Limited
Barratt Dormant (Rugby)
Limited
Barratt Dormant (Southampton)
Limited
Barratt Dormant (Thetford)
Limited
Barratt Dormant (Tyers Bros.
Oakham) Limited
Barratt Dormant (Walton)
Limited
Barratt Dormant (WB
Construction) Limited
Barratt Dormant (WB
Developments) Limited
Barratt Dormant (WB
Properties Developments)
Limited
Barratt Dormant (WB
Properties Northern) Limited
Barratt East Anglia Limited
Barratt East Midlands Limited
Barratt East Scotland Limited
Barratt Eastern Counties
Limited
Barratt Edinburgh Limited
Barratt Evolution Limited
Barratt Falkirk Limited
Barratt Leeds Limited
Registered
office
2
Class of
share held
Ordinary
Notes
A
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
45
1
2
1
2
1
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
% of shares
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Subsidiary
Barratt London Limited
Barratt Manchester Limited
Barratt Newcastle Limited
Barratt North London Limited
Barratt Northampton Limited
Barratt Northern Limited
Barratt Norwich Limited
Barratt Pension Trustee Limited
Barratt Poppleton Limited
Barratt Preston Limited
Barratt Properties Limited
Barratt Scottish Holdings
Limited
Barratt South London Limited
Barratt South Wales Limited
Barratt South West Limited
Barratt Southern Counties
Limited
Barratt Southern Limited
Barratt Southern Properties
Limited
Barratt Special Projects Limited
Barratt St Mary’s Limited
Barratt St Paul’s Limited
Barratt Sutton Coldfield Limited
Barratt Trade And Property
Company Limited
Barratt Urban Construction
(East London) Limited
Barratt Urban Construction
(Northern) Limited
Barratt Urban Construction
(Scotland) Limited
Barratt West Midlands Limited
Barratt West Scotland Limited
100%
Barratt Woking Limited
Barratt York Limited
Bart 225 Limited
Base East Central Rochdale
LLP
Base Hattersley LLP
Base Regeneration LLP
Base Werneth Oldham LLP
Basildon Regeneration (Barratt
Wilson Bowden) Limited
BDW (F.R.) Limited
BDW (F.R. Commercial) Limited
BDW North Scotland Limited
BDW Trading Limited
BLLQ LLP
Bradgate Development Services
Limited
Broad Oak Homes Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Barratt Developments PLC Annual Report and Accounts 2019
Registered
office
1
Notes
Class of
share held
Ordinary
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
2
1
1
2
1
2
1
1
1
1
1
1
1
1
1
1
3
1
1
1
1
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
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
Ordinary
Ordinary
N/A
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
% of shares
owned
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%
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
N/A
100%
100%
Barratt Developments AR2019 Financials.indd 194
13/09/2019 17:02:15
7.4 Group subsidiary undertakings continued
Registered
office
1
Class of
share held
Ordinary
Notes
A
Subsidiary
Barratt London Limited
Barratt Manchester Limited
Barratt Newcastle Limited
Barratt North London Limited
Barratt Northampton Limited
Barratt Northern Limited
Barratt Norwich Limited
Barratt Pension Trustee Limited
Barratt Poppleton Limited
Barratt Preston Limited
Barratt Properties Limited
Barratt Scottish Holdings
Limited
Barratt South London Limited
Barratt South Wales Limited
Barratt South West Limited
Barratt Southern Counties
Limited
Barratt Southern Limited
Barratt Southern Properties
Limited
Barratt Special Projects Limited
Barratt St Mary’s Limited
Barratt St Paul’s Limited
Barratt Sutton Coldfield Limited
Barratt Trade And Property
Company Limited
Barratt Urban Construction
(East London) Limited
Barratt Urban Construction
(Northern) Limited
Barratt Urban Construction
(Scotland) Limited
Barratt West Midlands Limited
Barratt West Scotland Limited
Barratt Woking Limited
Barratt York Limited
Bart 225 Limited
Base East Central Rochdale
LLP
Base Hattersley LLP
Base Regeneration LLP
Base Werneth Oldham LLP
Basildon Regeneration (Barratt
Wilson Bowden) Limited
BDW (F.R.) Limited
BDW (F.R. Commercial) Limited
BDW North Scotland Limited
BDW Trading Limited
BLLQ LLP
Limited
Bradgate Development Services
Broad Oak Homes Limited
Registered
Class of
% of shares
office
Notes
share held
owned
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
2
1
1
2
1
2
1
1
1
1
1
1
1
1
1
1
3
1
1
1
1
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
N/A
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
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%
100%
100%
100%
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
N/A
100%
100%
Subsidiary
C V (Ward) Limited
Cameoplot Limited
CHOQS 429 Limited
Crossbourne Construction
Limited
David Wilson Estates Limited
David Wilson Homes (Anglia)
Limited
David Wilson Homes (East
Midlands) Limited
David Wilson Homes (Home
Counties) Limited
David Wilson Homes (North
Midlands) Limited
David Wilson Homes (Northern)
Limited
David Wilson Homes (South
Midlands) Limited
David Wilson Homes (Southern)
Limited
David Wilson Homes (Western)
Limited
David Wilson Homes Land
(No 9) Limited
David Wilson Homes Land
(No 10) Limited
David Wilson Homes Land
(No 11) Limited
David Wilson Homes Land
(No 12) Limited
David Wilson Homes Land
(No 13) Limited
David Wilson Homes Land
(No 14) Limited
David Wilson Homes Land
(No 15) Limited
David Wilson Homes Limited
David Wilson Homes Services
Limited
David Wilson Homes Yorkshire
Limited
Decorfresh Projects Limited
Dicconson Holdings Limited
E. Barker Limited
E. Geary & Son Limited
English Oak Homes Limited
Francis (Springmeadows)
Limited
Frenchay Developments Limited
G.D. Thorner (Construction)
Limited
G.D. Thorner (Holdings) Limited
Glasgow Trust Limited
Hartswood House Limited
Hawkstone (South West) Limited
Heartland Development
Company Limited
Idle Works Limited
J. G. Parker Limited
James Harrison (Contracts)
Limited
% of shares
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Subsidiary
Janellis (No.2) Limited
Kealoha 11 Limited
Kealoha Limited
Kingsoak Homes Limited
Knightsdale Homes Limited
Lindmere Construction Limited
Marple Development Company
Limited
Meridian Press Limited
Milton Park Homes Limited
Mountdale Homes Limited
Norfolk Garden Estates Limited
North West Land Developments
Limited
Oregon Contract Management
Limited
Oregon Timber Frame Limited
Redbourne Builders Limited
Roland Bardsley Homes Limited
Scothomes Limited
Scottish Homes Investment
Company, Limited
Skydream Property Co. Limited
100%
SQ Holdings Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
Squires Bridge Homes Limited
Squires Bridge Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
Swift Properties Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The French House Limited
The Tin Hat Regeneration
Partnership LLP
Tomnik Limited
Trencherwood Commercial
Limited
Trencherwood Construction
Limited
Trencherwood Developments
Limited
Trencherwood Estates Limited
Trencherwood Group Services
Limited
Trencherwood Homes
(Holdings) Limited
Trencherwood Homes
(Midlands) Limited
Trencherwood Homes (South
Western) Limited
Trencherwood Homes
(Southern) Limited
Trencherwood Homes Limited
Trencherwood Housing
Developments Limited
Trencherwood Investments
Limited
Trencherwood Land Holdings
Limited
Trencherwood Land Limited
Trencherwood Retirement
Homes Limited
Vizion (Milton Keynes) Limited
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
2
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
195
% of shares
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Registered
office
1
Class of
share held
Ordinary
Notes
A
1
1
1
1
1
1
1
1
1
1
1
3
3
1
1
2
2
1
4
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
www.barrattdevelopments.co.uk
Barratt Developments AR2019 Financials.indd 195
26708
6 September 2019 10:33 am
Proof Two
13/09/2019 17:02:15
196
Notes to the Financial Statements continued
Year ended 30 June 2019
7.4 Group subsidiary undertakings continued
Registered
office
1
Class of
share held
N/A
Notes
A
Subsidiary
Vizion (MK) Properties LLP
VSM (Bentley Priory 1) Limited
VSM (Bentley Priory 2) Limited
VSM (Bentley Priory 3) Limited
VSM (Bentley Priory 4) Limited
VSM (Bentley Priory 5) Limited
VSM (Bentley Priory 6) Limited
Ward (Showhomes) Limited
Ward Brothers (Gillingham)
Limited
Ward Holdings Limited
Ward Homes (London) Limited
Ward Homes (North Thames)
Limited
Ward Homes (South Eastern)
Limited
Ward Homes Group Limited
Ward Homes Limited
Ward Insurance Services
Limited
Wards Construction (Industrial)
Limited
Wards Construction
(Investments) Limited
Wards Country Houses Limited
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Waterton Tennis Centre Limited
29
WBD (Wokingham) Limited
Westcountry Land (Union
Corner) Limited
William Corah & Son Limited
William Corah Joinery Limited
Wilson Bowden (Atlantic Quay
Number 2) Limited
Wilson Bowden (Ravenscraig)
Limited
Wilson Bowden City Homes
Limited
Wilson Bowden Developments
Limited
Wilson Bowden Group Services
Limited
Wilson Bowden Limited
Yeovil Developments Limited
Abbey Gate Residents
Management Company Limited
Abbotts Meadow (Steventon)
Management Company Limited
Adderbury Fields Management
Company Limited
Aldhelm Court Management
Company Limited
Alexander Gate Management
Company Limited
Applegarth Manor (Oulton)
Management Company Limited
Artisan Place Residents
Management Company Limited
Ash Tree Court Management
Co. Ltd
Autumn Brook (Yate)
Management Company Limited
1
1
1
1
1
1
1
1
1
1
1
5
12
5
38
5
10
11
1
13
% of shares
owned
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%
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Subsidiary
Aylesham Village (Barratt)
Residents Management
Company Limited
B5 Central Residents
Management Company Limited
Baggeridge Village
Management Company Limited
Barley Fields Management
Company Limited
Barley Meadows (Southminster)
Management Company Limited
Beaufort Park (Wotton Bassett)
Management Limited
Beaufort Place (Crawley)
Management Company Limited
Belle Vue (Doncaster)
Management Company Limited
Bentley Fields Residents
Management Company Limited
Bexley College (Tower Hill)
Residents Management
Company Limited
Biddenham Vale Management
Company Limited
Bilberry Chase Residents
Management Company Limited
Bishop Fields (Hereford)
Management Company Limited
Bishop Park (Henfield)
Management Company Limited
Bishop’s Hill Residents
Management Company Limited
Blackwater Reach
(Southminster) Management
Company Limited
Blossomfields Residents
Management Company Limited
Bluebell Woods (Wyke)
Management Company Limited
Bodington Manor (Adel)
Management Company Limited
Braid Park (Tiverton)
Management Company Limited
Broadstone Mead Management
Company Ltd
Brook Gardens Barnham
Management Company Limited
Brooklands (Milton Keynes)
Management Company Limited
Broomhill Park Estates
Residents Association Limited
Brunel Gardens (Maidenhead)
Management Company Limited
Brunel Gardens (Wellesley)
Management Company Limited
Buckshaw Village Management
Company Limited
Bure Meadows (Aylsham)
Management Company Limited
Butterfly Mill (Horsford)
Management Company Limited
Canal Quarter Resident
Management Company Limited
Cane Hill Park (Coulsdon)
Management Company Limited
Registered
office
21
Class of
share held
N/A
Notes
A, B
23
5
10
14
19
17
6
23
21
15
5
20
17
23
14
5
10
9
40
13
9
15
1
16
17
8
14
14
16
17
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
A
Ordinary
A, B
A, B
N/A
N/A
A
Ordinary
A, B
A, B
A, B
A, B
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
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
N/A
50%
N/A
N/A
N/A
N/A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, D
A, B
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Barratt Developments PLC Annual Report and Accounts 2019
Barratt Developments AR2019 Financials.indd 196
13/09/2019 17:02:15
Registered
Class of
% of shares
office
Notes
share held
owned
N/A
Subsidiary
Aylesham Village (Barratt)
Residents Management
Company Limited
B5 Central Residents
Management Company Limited
Baggeridge Village
Management Company Limited
Barley Fields Management
Company Limited
Barley Meadows (Southminster)
Management Company Limited
Beaufort Park (Wotton Bassett)
Management Limited
Beaufort Place (Crawley)
Management Company Limited
Belle Vue (Doncaster)
Management Company Limited
Bentley Fields Residents
Management Company Limited
Bexley College (Tower Hill)
Residents Management
Company Limited
Biddenham Vale Management
Company Limited
Bilberry Chase Residents
Management Company Limited
Bishop Fields (Hereford)
Management Company Limited
Bishop Park (Henfield)
Management Company Limited
Bishop’s Hill Residents
Management Company Limited
Blackwater Reach
(Southminster) Management
Company Limited
Blossomfields Residents
Management Company Limited
Bluebell Woods (Wyke)
Management Company Limited
Bodington Manor (Adel)
Management Company Limited
Braid Park (Tiverton)
Management Company Limited
Broadstone Mead Management
Company Ltd
Brook Gardens Barnham
Management Company Limited
Brooklands (Milton Keynes)
Management Company Limited
Broomhill Park Estates
Residents Association Limited
Brunel Gardens (Maidenhead)
Management Company Limited
Brunel Gardens (Wellesley)
Management Company Limited
Buckshaw Village Management
Company Limited
Bure Meadows (Aylsham)
Management Company Limited
Butterfly Mill (Horsford)
Management Company Limited
Canal Quarter Resident
Management Company Limited
Cane Hill Park (Coulsdon)
Management Company Limited
21
23
5
10
14
19
17
6
23
21
15
5
20
17
23
14
10
5
9
40
13
9
15
1
16
17
8
14
14
16
17
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
A
Ordinary
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
87%
N/A
N/A
50%
N/A
N/A
N/A
N/A
7.4 Group subsidiary undertakings continued
Subsidiary
Cane Hill Park (Gateway)
Management Company Limited
Canes Meadow (Brixton)
Management Company Limited
Canford Paddock (Poole)
Management Company Limited
Canterbury Park (High Cross)
Management Company Limited
Carlton Green (Carlton)
Management Company Limited
Castlegate & Mowbray Park
Management Company Limited
Castle Hill (DWH1) Residents
Management Company Limited
Cedar Ridge Management
Company Limited
Central Area Heat Company
Limited
Centurion Fields (Adel)
Management Company Limited
Centurion Place (Milton Keynes)
Management Company Limited
Chalkers Rise (Peacehaven)
Management Company Limited
Chestnut Grange Residents
Management Company Limited
Clements Gate (Poringland 2)
Management Company Limited
Clipstone Park (Leighton
Buzzard) Management
Company Limited
Colliers Court (Speedwell)
Management Company Limited
Coppice Green Lane
Management Company Limited
Copsewood Management
Company Limited
Corinthian Place Management
Company Limited
Cricket Field Grove
(Crowthorne) Management
Company Limited
Croft Gardens (Phase 2)
Management Company Limited
Croft Gardens (Spencers Wood)
Management Company Limited
Cygnet Mews (Phase 2)
Management Company Limited
Daracombe Gardens
Management Company Limited
Darwin Green Management
Company Limited
De Cheney Gardens
Management Company Limited
De Havilland Place (Hatfield)
Management Company Limited
De Lacy Fields KM8
Management Company Limited
De Lacy Fields KM12
Management Company Limited
Deddington Grange
Management Company Limited
Dickens Gate (Staplehurst)
Management Company Limited
Doseley Park Residents
Management Company Limited
Registered
office
17
Class of
share held
N/A
Notes
A, B
40
7
8
9
6
41
10
12
6
15
17
5
15
15
13
5
5
14
17
12
12
15
33
15
38
22
5
5
5
8
5
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
% of shares
owned
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
Subsidiary
Drayton Meadows Management
Company Limited
Earls Park Management
Company Limited
East Beach Walk Management
Company Limited
Edwalton (Sharp Hill)
Management Company Limited
Elderwood (Bannerdale)
Management Company Limited
Embden Grange (Tavistock)
Management Company Limited
Elm Tree Park Management
Company (Beverley) Limited
Emmet's Reach (Birkenshaw)
Management Company Limited
Eton Green Management
Company Limited
Fairfield Croft Management
Company Limited
Fairfield (Stony Stratford)
Management Company Limited
Fallows Park Management
Company Limited
Fardon Fields (Fardon Road)
Management Company Limited
Filwood Park Management
Company Limited
Foxcote Mead Management
Company Limited
Freemen’s Meadow Residents
Management Company Limited
Garnett Wharf (Otley)
Management Company Limited
Gerway Management Limited
Gilden Park (Old Harlow)
Residents Management
Company Limited
Gillies Meadow (Basingstoke)
Management Company Limited
Grange Park (Hampsthwaite)
Management Company Limited
Great Denham Park (Phase 11)
Management Company Limited
Greenkeepers Mews (Phase 3)
Management Company Limited
Greylees Management Company
Limited
GWQ Management Limited
H2363 Limited
Hallam Park Residents
Management Company Limited
Hampton Water Management
Company Limited
Hanham Hall Community
Interest Company
Harlow Gateway Limited
Hartley Brook (Netherton)
Management Company Limited
Hawley Gardens Management
Company Limited
Hazelmere Management
Company Limited
Heathwood Park (Lindfield)
Management Company Limited
Registered
office
23
Class of
share held
N/A
Notes
A, B
197
% of shares
owned
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
A, B
A, B
A, B
A,B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
A, B
Ordinary
100%
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, D
A, B
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
38
31
48
28
40
25
28
16
6
15
6
15
13
1
26
9
40
8
12
10
15
15
8
24
19
23
15
13
35
9
36
1
17
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
Barratt Developments AR2019 Financials.indd 197
26708
6 September 2019 10:33 am
Proof Two
13/09/2019 17:02:16
www.barrattdevelopments.co.uk
198
Notes to the Financial Statements continued
Year ended 30 June 2019
7.4 Group subsidiary undertakings continued
Subsidiary
Helme Ridge (Meltham)
Management Company Limited
Henbrook Gardens Management
Company Limited
Hewenden Ridge (Cullingworth)
Management Company Limited
Highgrove Gardens (Romsey)
Management Company Limited
Hollygate Park (Cotgrave)
Management Company Limited
Impact and Willow Brook
Management Company Limited
Infinity Park Derby Management
Company Limited
Interlink Park Management
Company Limited
Keeper's Meadow Residents
Management Company Limited
Kennett Heath Management
Limited
Kingfisher Meadow (Horsford)
Management Company Limited
Kingfisher Meadows Residents
Management Company Limited
Kingley Gate (Littlehampton)
Management Company Limited
Kingsbourne (Nantwich)
Community Management
Company Limited
Kingsbrook Estate Management
Company Limited
Kings Chase Residents
Management Company Limited
Kingsdown Gate (Swindon)
Management Company Limited
Kings Lodge (Chilwell)
Management Company Limited
Knights Park (Watton)
Management Company Limited
KW (Site B) Management
Company Limited
Ladden Garden Village
Apartment Blocks BCD
Management Company Limited
Ladden Garden Village
Management Company Limited
Ladywell Park Management
Company Limited
Lakeside Walk (Hamworthy)
Management Company Limited
Langham Mews Management
Company Limited
Lay Wood (Devizes)
Management Company Limited
Leithfield Park (Godalming)
Management Company Limited
Letcombe Gardens (Grove)
Management Company Limited
Liberty Rise Phase 1 (Hertford)
Management Company Limited
Lock Keeper's Gate (Low
Barugh) Management Company
Limited
Locksbridge Park (Andover)
Management Company Limited
Lordswood Gardens Residents
Management Company Limited
Registered
office
28
Class of
share held
N/A
Notes
A, B
20
9
7
16
25
1
1
23
8
14
23
17
8
16
7
13
26
14
12
30
38
15
7
44
19
17
12
22
28
12
5
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
A, C
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
% of shares
owned
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
Subsidiary
Lucerne Fields (Ivybridge)
Management Company Limited
Luneside Mills Management
Company Limited
Madden Gardens Residents
Management Company Limited
Madgwick Park Management
Company Limited
Marham Park Management
Company Limited
Market Square Residents
Management Company Limited
Marston Fields (Marston
Moretaine) Management
Company Limited
Marston Park (Marston
Moretaine) Management
Company Limited
Martello Lakes (Barratt)
Resident Management
Company Limited
Martingale Chase (Newbury)
Management Company Limited
Mayflower Green
(Saxmundham) Residents
Company Limited
Meadowfields (Boroughbridge)
Management Company Limited
Meadow View Watchfield
Management Company Limited
Meridian Business Park
Extension Management
Company Limited
Mill Brook (Westbury)
Management Company Limited
Mill Springs (Whitchurch)
Management Company Limited
Monarchs Keep (Bursledon)
Management Company Limited
Montague Park (Buckhurst
Farm) Management Company
Limited
Montague Park (Wokingham)
Management Company Limited
Montague Park No2 (Buckhurst
Farm) Management Company
Limited
Montgomery Place Residents
Management Company Limited
Mortimer Park (Driffield)
Management Company Limited
Mulberry Park (Poringland)
Management Company Limited
Nexus Point Management
Company Limited
N.E. Horley Resident
Management Company Limited
Newbery Corner Management
Company Ltd
New Heritage (Bordon)
Management Company Limited
New Mill Quarter (BL) Residents
Management Company Limited
New Mill Quarter (DWH)
Resident Management
Company Limited
Registered
office
40
Class of
share held
N/A
Notes
A, B
8
11
7
18
21
15
15
8
8
15
9
13
1
19
39
46
12
17
12
5
9
14
1
25
13
46
8
8
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
A, C
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
A, C
Ordinary
A, B
A, B
A, B
A, B
A, B
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
N/A
N/A
N/A
N/A
N/A
N/A
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
Barratt Developments PLC Annual Report and Accounts 2019
Barratt Developments AR2019 Financials.indd 198
13/09/2019 17:02:16
Subsidiary
Lucerne Fields (Ivybridge)
Management Company Limited
Luneside Mills Management
Company Limited
Madden Gardens Residents
Management Company Limited
Madgwick Park Management
Company Limited
Marham Park Management
Company Limited
Market Square Residents
Management Company Limited
Marston Fields (Marston
Moretaine) Management
Company Limited
Marston Park (Marston
Moretaine) Management
Company Limited
Martello Lakes (Barratt)
Resident Management
Company Limited
Martingale Chase (Newbury)
Management Company Limited
Mayflower Green
(Saxmundham) Residents
Company Limited
Meadowfields (Boroughbridge)
Management Company Limited
Meadow View Watchfield
Management Company Limited
Meridian Business Park
Extension Management
Company Limited
Mill Brook (Westbury)
Management Company Limited
Mill Springs (Whitchurch)
Management Company Limited
Monarchs Keep (Bursledon)
Management Company Limited
Montague Park (Buckhurst
Farm) Management Company
Limited
Montague Park (Wokingham)
Management Company Limited
Montague Park No2 (Buckhurst
Farm) Management Company
Limited
Montgomery Place Residents
Management Company Limited
Mortimer Park (Driffield)
Management Company Limited
Mulberry Park (Poringland)
Management Company Limited
Nexus Point Management
Company Limited
N.E. Horley Resident
Management Company Limited
Newbery Corner Management
Company Ltd
New Heritage (Bordon)
Management Company Limited
New Mill Quarter (BL) Residents
Management Company Limited
New Mill Quarter (DWH)
Resident Management
Company Limited
Registered
Class of
% of shares
office
Notes
share held
owned
40
8
11
7
18
21
15
15
8
8
15
9
13
1
19
39
46
12
17
12
5
9
1
14
25
13
46
8
8
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, C
Ordinary
A, C
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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
7.4 Group subsidiary undertakings continued
Subsidiary
New Mill Quarter Estate
Resident Management
Company Limited
Northfield Park (Patchway)
Management Company Limited
Northstowe Residents
Management Company Limited
Northwalls Grange (Taunton)
Management Company Limited
Norton Farm Management
Company Limited
Nottingham Business Park
Management Company Limited
Nottingham Business Park
(Orchard Place) Management
Company Limited
Notton Wood View (Royston)
Management Company Limited
Oak Hill Mews Management
Company Limited
Oakfields Residential
Management Company Limited
Oakfield Village Estate
Management Company Limited
Oakhill Gardens (Swanmore)
Management Company Limited
Oaklands (Pontefract)
Management Company Limited
Oakhurst Place (Bexhill)
Management Company Limited
Oakwell Grange Management
Company Limited
Oatley Park Management
Company Limited
One Eight Zero (Bedhampton)
Management Company Limited
Optimus Point Management
Company Limited
Orchard Gate (Kingston
Bagpuize) Management
Company Limited
Orchid Fields (Phase 2)
Management Company Limited
Park Farm (Thornbury)
Community Interest Company
Patch Meadows (Somerton)
Management Company Limited
Pavilion Square (Phase 2)
Management Company Limited
Pavilion Square (Pocklington)
Management Company Limited
Peasedown Meadows
Management Company Limited
Pembridge Park (Phase 2)
Management Company Limited
Pembroke Park (Cirencester)
Management Company Limited
Penndrumm (Looe)
Management Company Limited
Perry Court (Faversham)
Management Company Limited
Phoenix And Scorseby Park
Management Company Limited
Phoenix Quarter – Apt –
Management Company Limited
Phoenix Quarter Estate
Management Company Limited
Registered
office
8
Class of
share held
N/A
Notes
A, B
32
15
38
20
1
1
28
20
5
16
7
9
17
16
50
7
1
12
15
38
38
6
6
38
26
38
40
8
6
21
21
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
A, C
Ordinary
A, C
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
A
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
% of shares
owned
N/A
N/A
N/A
N/A
N/A
2%
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Subsidiary
Pinn Brook Park (Monkerton)
Management Company Limited
PL2 Plymouth (2016) Limited
Poppey Fields (Cottingham)
Management Company Limited
Poppy Fields, Charing Residents
Management Company Limited
Portman Square West Village
Reading Management Company
Limited
Preston Grange Residents
Management Company Limited
Priory Fields (Pontefract)
Management Company Limited
Prospect Rise (Whitby)
Management Company Limited
Pye Green Management
Company Limited
Ravenhill Park Management
Company Limited
Redhayes Management
Company Limited
Redlodge (Suffolk) Management
Company Limited
Redwood Heights (Plymouth)
Management Company Limited
Regents Gate Phase 2
Management Company Limited
Ridgeway Residential
Management Company Limited
River Whitewater Management
Company (Hook) Limited
Riverdown Park (Salisbury)
Management Company Limited
Riverside Exchange
Management Company Limited
Romans Edge Godmanchester
Management Company Limited
Romulus Management
Company Limited
Ronkswood Residents
Management Company Limited
Rosewood Park Bexhill
Residents Management
Company Limited
Rosewood Park LH Residents
Management Company Limited
Runshaw Management
Company Limited
Salters Brook (Cudworth)
Management Company Limited
Sandbrook Park Management
Company Limited
Sandridge Place (Melksham)
Management Company Limited
Saunderson Gardens
Management Co Limited
Saxon Dean (Silsden)
Management Company Limited
Saxon Fields (Cullompton)
Management Company Limited
Saxon Gate (Leonard Stanley)
Management Company Limited
Saxon Gate (Stamford Bridge)
Management Company Limited
Saxon Mills (Hassocks)
Management Company Limited
Registered
office
40
Class of
share held
N/A
Notes
A, B
40
6
8
12
27
10
6
20
20
40
14
40
40
11
10
17
1
15
1
5
8
8
8
28
16
10
28
10
40
10
6
17
A, B
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
A, C
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, C
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Ordinary/
Preference
N/A
A, C
Ordinary
A, B
A, B
A, B
N/A
N/A
N/A
A
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
199
% of shares
owned
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
17%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
22.8%
N/A
4%
N/A
N/A
N/A
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Barratt Developments AR2019 Financials.indd 199
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Proof Two
13/09/2019 17:02:17
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200
Notes to the Financial Statements continued
Year ended 30 June 2019
7.4 Group subsidiary undertakings continued
Subsidiary
Saxon Rise (Brixworth)
Management Company Limited
Silkwood Gate (Wakefield)
Management Company Limited
Spinney Fields Residents
Management Company Limited
Spring Valley View (Clayton)
Management Company Limited
St. Andrews Place (Morley)
Management Co. Limited
St Andrews View (Morley)
Management Company Limited
St Giles Park (Tattenhoe)
Management Company Limited
St James Gardens (Wick)
Management Company Limited
St James Management
Company Limited
St. John’s Walk (Hoylandswaine)
Management Company Limited
St Laurence Meadows
Management Company Limited
St Margaret's View (Crick)
Management Company Limited
St. Mary’s Park (Hartley
Wintney) Management Company
Limited
St. Oswald's View (Methley)
Management Company Limited
St Wilfrids Walk Management
Company Limited
Stansted Road (Kingswood
Place Elsenham) Management
Company Limited
Stoneyfield Management
Limited
Swallows Field (Hemel
Hempstead) Management
Company Ltd
Swanbourne Park Management
Company Limited
Swan Mill (Newbury)
Management Company Limited
Swinbrook Park (Carterton)
Management Company Limited
Tarka Ridge (Yelland)
Management Company Limited
Templar's Chase (Wetherby)
Management Company Limited
The Belt Open Space
Management Co Limited
The Brackens (Brackley)
Management Company Limited
The Causeway Park (Petersfield)
Management Company Limited
The Chocolate Works
Management Company Limited
The Foundry (Wakefield)
Management Company Ltd
The Furlongs (Westergate)
Management Company Limited
The Glassworks (Catcliffe)
Management Company Limited
The Grange (Lightcliffe)
Management Company Limited
The Hedgerows (Thurcroft)
Management Company Limited
Registered
office
15
Class of
share held
N/A
Notes
A, B
9
5
28
28
42
15
29
9
28
20
15
25
9
6
18
1
22
9
12
12
40
9
6
15
34
37
9
39
28
28
9
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
A
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
% of shares
owned
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Subsidiary
The Meads (Frampton Cotterell)
Management Company Limited
The Mounts Residents
Management Company Limited
The Nurseries (Thrapston)
Management Company Limited
The Old Meadow Management
Company Limited
The Orchards Oakley
Management Company Limited
The Orchards (Roby)
Management Company Limited
The Orchards (Withington)
Residents Management
Company Limited
The Orchids (Sarisbury Green)
Management Company Limited
The Oysters (Hayling Island)
Management Company Limited
The Paddocks (Langford)
Management Company Limited
The Paddocks (Skelmanthorpe)
Management Company Limited
The Paddocks (Southmoor)
Management Company Limited
The Pastures (Knaresborough)
Management Company Limited
The Pavilions Management
Company (Southampton)
Limited
The Spires (Chesterfield)
Management Company Limited
The Spires (St Ives)
Management Company Limited
The Sycamores (Peterborough)
Management Company Limited
The Vineyards Management
Company Limited
The Zone (Temple Quay)
Management Company Limited
Tranby Fields Management
Company Limited
Trinity Square (NW9)
Management Company Limited
Trinity Village (Phase 1B)
Residents Company Limited
Trumpington (Phase 8 – 11)
Management Company Limited
Trumpington Vista Management
Company Limited
Union Park (Falmouth)
Management Company Limited
Victoria Walk Management
Company Limited
Walton Gate (Felixstowe)
Management Company Limited
Warren Grove (Storrington)
Management Company Limited
Waters Edge (Mossley)
Management Company Limited
Waterside (The Quays Barry)
Management Company Number
1 Limited
Waterside (The Quays Barry)
Management Company Number
2 Limited
Registered
office
13
Class of
share held
N/A
Notes
A, B
5
47
5
1
8
5
31
7
15
28
12
6
46
26
15
15
38
43
10
11
8
14
14
40
46
14
49
8
29
29
A, B
A, B
A, B
N/A
N/A
N/A
A
Ordinary
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
% of shares
owned
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
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
Barratt Developments PLC Annual Report and Accounts 2019
Barratt Developments AR2019 Financials.indd 200
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Subsidiary
The Meads (Frampton Cotterell)
Management Company Limited
The Mounts Residents
Management Company Limited
The Nurseries (Thrapston)
Management Company Limited
The Old Meadow Management
Company Limited
The Orchards Oakley
Management Company Limited
The Orchards (Roby)
Management Company Limited
The Orchards (Withington)
Residents Management
Company Limited
The Orchids (Sarisbury Green)
Management Company Limited
The Oysters (Hayling Island)
Management Company Limited
The Paddocks (Langford)
Management Company Limited
The Paddocks (Skelmanthorpe)
Management Company Limited
The Paddocks (Southmoor)
Management Company Limited
The Pastures (Knaresborough)
Management Company Limited
The Pavilions Management
Company (Southampton)
Limited
The Spires (Chesterfield)
Management Company Limited
The Spires (St Ives)
Management Company Limited
The Sycamores (Peterborough)
Management Company Limited
The Vineyards Management
Company Limited
The Zone (Temple Quay)
Management Company Limited
Tranby Fields Management
Company Limited
Trinity Square (NW9)
Management Company Limited
Trinity Village (Phase 1B)
Residents Company Limited
Trumpington (Phase 8 – 11)
Management Company Limited
Trumpington Vista Management
Company Limited
Union Park (Falmouth)
Management Company Limited
Victoria Walk Management
Company Limited
Walton Gate (Felixstowe)
Management Company Limited
Warren Grove (Storrington)
Management Company Limited
Waters Edge (Mossley)
Management Company Limited
Waterside (The Quays Barry)
Management Company Number
1 Limited
Waterside (The Quays Barry)
Management Company Number
2 Limited
Registered
Class of
% of shares
office
Notes
share held
owned
A
Ordinary
13
47
5
5
1
8
5
31
7
15
28
12
6
46
26
15
15
38
10
11
8
14
14
40
14
49
8
29
29
43
46
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
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
60%
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
201
Northallerton, North Yorkshire, DL6 2NJ
7 Tollbar House, Tollbar Way, Hedge End, Southampton, Hampshire, SO30 2UH
8 Rmg House, Essex Road, Hoddesdon, Hertfordshire, EN11 0DR
9 Gateway House, 10 Coopers Way, Southend on Sea, Essex, SS2 5TE
10 Vantage Point, 23 Mark Road, Hemel Hempstead, Hertfordshire, HP2 7DN
11 167 Turners Hill, Cheshunt, Waltham Cross, Hertfordshire, EN8 9BH
12 Norgate House, Tealgate, Charnham Park, Hungerford, Berkshire, RG17 0YT
13 Units 1, 2, & 3 Beech Court, Wokingham Road, Hurst, Reading, RG10 0RU
14 Barratt House, 7 Springfield Lyons Approach, Chelmsford, Essex, CM2 5EY
15 The Maltings, Hyde Hall Farm, Sandon, Hertfordshire, SG9 0RU
16 2 Hills Road, Cambridge, Cambridgeshire, CB2 1JP
17 Barratt House, Walnut Tree Close, Guildford, Surrey, GU1 4SW
18 Fisher House, 84 Fisherton Street, Salisbury, SP2 7QY
19 2nd Floor Aztec Centre, Aztec West, Bristol BS32 4TD
20 60 Whitehall Road, Halesowen, B63 3JS
21 Gem House, 1 Dunhams Lane, Letchworth Garden City, Hertfordshire SG6 1GL
22 Wellstones House, Wellstones, Watford, Hertfordshire, WD17 2AF
23 Remus 2, 2 Cranbook Way, Solihull Business Park, Solihull, West Midlands B90 4GT
24 Wallis House, Great West Road, Brentford, Middlesex, TW8 9BS
25 Firstport Property Services Limited, Marlborough House, Wigmore Place,
Wigmore Lane, Luton, LU2 9EX
26 Chiltern House, 72–74 King Edward Street, Macclesfield, Cheshire, SK10 1AT
27 Jarmans Solicitors, Bell House, Bell Road, Sittingbourne, Kent ME10 4DH
28 Raynham House, 2 Capitol Close, Morley, Leeds, West Yorkshire, LS27 0WH
29 Oak House, Village Way, Cardiff, CF15 7NE
30 Unit 2 Beech Court, Wokingham Road, Hurst, Twyford, Berkshire, RG10 0RQ
31 12-14 Carlton Place, Southampton, Hampshire, SO15 2EA
32 Barratt House, 710 Waterside Drive, Aztec West, Almondsbury, Bristol, BS32 4TD
33 Whittington Hall, Whittington Road, Worcester, WR5 2ZX
34 Building 4, Dares Farm Business Park, Farnham Road, Ewshot, Farnham,
Surrey GU10 5BB
35 Ranger House, Walnut Tree Close, Guildford, Surrey, GU1 4UL
36 4 Brindley Road, City Park, Manchester, M16 9HQ
37 Watson, Glendevon House, 4 Hawthorn Park, Coal Road, Leeds, West Yorkshire,
LS14 1PQ
38 Units 2 & 3 Beech Court, Wokingham Road, Hurst, Berkshire, RG10 0RQ
39 PO Box 648, Gateway House, Tollgate, Chandler’s Ford, Eastleigh,
Hampshire, SO50 0ND
40 Woodwater House, Pynes Hill, Exeter, Devon, EX2 5WR
41 2 Templeback East, Temple Quay, Bristol, BS1 6EG
42 Freemont Property Managers Ltd, 3 The Old School, The Square, Pennington,
Lymington, Hampshire, SO41 8GN
43 2 Westfield Park, Barns Ground, Kenn, Clevedon, Somerset, BS21 6UA
44 Unit 7 Hockliffe Business Park, Watling Street, Hockliffe, Leighton Buzzard,
Bedfordshire, LU7 9NB
45 Telford House, 3 Mid New Cultins, Edinburgh, Midlothian, EH11 4DH
46 128 Pyle Street, Granary Court, Newport, Isle of Wight, UK, PO30 1JW
47 A5 Optimum Business Park, Optimum Road, Swadlincote, Derbyshire, DE11 0WT
48 154-155 Great Charles Street Queensway, Birmingham, B3 3LP
49 Thamesbourne Lodge, Station Road, Bourne End, Buckinghamshire, SL8 5QH
50 1 West Point Court,Great Park Road, Bradley Stoke, Bristol, BS32 4PY
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
7.4 Group subsidiary undertakings continued
Subsidiary
Waterside (The Quays Barry)
Management Company Number
3 Limited
WBD Blenheim Management
Company Limited
WBD (Chalfont Park) Limited
WBD (Chesterfield
Management) Limited
WBD (Chesterfield) Plot
Management Company Limited
WBD (Kingsway Management)
Limited
WBD (Riverside Exchange
Sheffield B) Limited
WBD Riverside Sheffield
Building K Limited
Weavers Chase (Golcar)
Management Company Limited
Webheath (Redditch)
Management Company Limited
Wedgwood Residents
Management Company Limited
Westbridge Park (Auckley)
Management Company Limited
Weston Meadows, (Calne)
Management Company Limited
West Village Reading
Management Limited
Willow Farm Management
Company Limited
Willow Grove (Stopsley)
Management Company Limited
Willow Grove (Wixams)
Management Company Limited
Willowmead (Wiveliscombe)
Management Company Limited
Winnington Village Community
Management Company Limited
Withies Bridge Management
Company Ltd
Woodhall Grange Management
Company Limited
Woodlands Walk (Branton)
Management Company Limited
Wychwood Park (Haywards
Heath) Management Company
Limited
Registered
office
29
Class of
share held
N/A
Notes
A, B
1
1
1
1
1
1
1
9
33
5
26
50
12
1
8
15
50
26
30
6
6
17
A, C
Ordinary
A, C
A
Ordinary
Ordinary
A, C
Ordinary
A, B
N/A
A
A
A, B
A, B
A, B
A, B
A, B
A, D
Ordinary
Ordinary
N/A
N/A
N/A
N/A
N/A
N/A
A, C
Ordinary
A,B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
% of shares
owned
N/A
1%
–
25%
25%
N/A
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
1%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Notes
A Owned through another Group company.
B 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.
C The Group is a minority shareholder but has voting control.
D The Group does not own any shares but has control via directors who are
employees of the Group.
Registered Office
1 Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville,
Leicestershire, LE67 1UF
2 7 Buchanan Gate, Cumbernauld Road, Stepps, Glasgow, G33 6FB
3 Blairton House, Old Aberdeen Road, Balmedie, Aberdeenshire, AB23 8SH
4 PO Box 119, Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB
5 One Eleven, Edmund Street, Birmingham, West Midlands, B3 2HJ
6 Unit 11, Omega Business Park, Omega Business Village, Thurston Road,
Barratt Developments AR2019 Financials.indd 201
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202
Greenhouse Gas Emissions Disclosure
2019
2018 (restated)5
Scope 1
Direct
5
Scope 2
Energy
indirect
3, 5
Scope 3
Other
indirect
5
Carbon
intensity
tCO2e
per
100m2
4
Total
Scope 1
Direct
5
Scope 2
Energy
indirect
3, 5
Scope 3
Other
indirect
5
Total
Carbon
intensity
tCO2e
per
100m2
4
22,224
3,420
291
25,935
1.52
22,170
4,526
423
27,119
1.57
27
35
483
545
0.03
18
13
344
375
0.02
2,381
1,447
7,107
10,935
0.64
2,534
1,910
7,143
11,587
0.67
200
114
15
329
0.02
244
145
13
402
0.02
24,832
5,016
7,896
37,744
2.21
24,966
6,594
7,923
39,483
2.28
24,832
3,411
7,896
36,139
2.12
24,966
4,992
7,923
37,881
2.19
Greenhouse gas emissions
(tonnes CO2e)
Notes
Building homes
Building other properties
Administrative activities
Share of joint ventures
Total location-based
Total market-based
5
5
5
5
3
3
1. Methodology
Greenhouse gas emissions are reported in line with the UK Government’s ‘Environmental Reporting Guidelines: including mandatory
greenhouse gas emissions reporting guidance’ (dated June 2013) and has used the greenhouse gas (‘GHG’) emission factors outlined in the
DECC ‘UK Government conversion factors for Company Reporting’, Version 1.01 June 2018 (2018: Version 1 June 2017). As the Group operates
in Great Britain only, the Group’s emissions stated above are amounts for both Global and UK and offshore emissions.
Where actual emissions for all of the individual periods that make up the financial year are not available by the reporting date, the Group
applies the use of estimates. Any such estimates are based on identifiable and measurable drivers in accordance with the Group’s corporate
sustainability policies and procedures.
2. Organisational boundary
The Group reports on sources of material emissions over which it has financial control. The Group has opted to apply this approach in order to
provide a view consistent with the Financial Statements. Emissions from subsidiaries are reported in full. Emissions from joint arrangements
are stated at the Group’s share of profits from the arrangements in the year, which, due to the complexity of funding arrangements, the Group
considers is best representative of the activities and emissions attributable to it, consistent with the Financial Statements. Emissions from
associates are excluded.
3. Greenhouse Gas Reporting Protocol
In line with the revised Greenhouse Gas Reporting Protocol, the Group is reporting Location-based and Market-based Scope 2 electricity
data. Market-based data is based on the emissions from energy purchased by the Group. Location-based refers to the average emissions
intensity of the UK National Grid. Purchased renewable sources of electricity used on sites and in offices is supported by Renewable Energy
Guarantees of Origin certificates.
4. Carbon intensity measure
Carbon intensity is measured as tonnes of CO2e per 100 square metres of homes and other properties legally completed in the year.
Barratt Developments PLC Annual Report and Accounts 2019
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Greenhouse gas emissions
(tonnes CO2e)
Notes
5
3, 5
5
Scope 2
Scope 3
Scope 1
Energy
Other
Direct
indirect
indirect
Total
Scope 2
Scope 3
Scope 1
Direct
Energy
indirect
Other
indirect
5
3, 5
5
Total
Carbon
intensity
tCO2e
per
100m2
4
Carbon
intensity
tCO2e
per
100m2
4
Building homes
22,224
3,420
291
25,935
1.52
22,170
4,526
423
27,119
1.57
Building other properties
27
35
483
545
0.03
18
13
344
375
0.02
Administrative activities
2,381
1,447
7,107
10,935
0.64
2,534
1,910
7,143
11,587
0.67
Share of joint ventures
200
114
15
329
0.02
244
145
13
402
0.02
Total location-based
24,832
5,016
7,896
37,744
2.21
24,966
6,594
7,923
39,483
2.28
Total market-based
24,832
3,411
7,896
36,139
2.12
24,966
4,992
7,923
37,881
2.19
5
5
5
5
3
3
2019
2018 (restated)5
5. Operational boundary
The Group reports on the sources of material greenhouse gas emissions from its main activities categorised as:
203
Activity
Source of emissions
Building homes
Building other
properties
Administrative
activities
Emissions from the
construction and sale
of homes on sites. Joint
operation sites are stated
at the Group’s share.
Emissions from the
construction and sale of
other properties on sites.
Emissions from operating
the Group’s owned and
controlled administrative
offices, including the BD
Living workshop.
Emissions from business
travel by employees.
Scope 1
Direct
Red diesel,
natural gas and
liquid petroleum
gas.
Red diesel,
natural gas and
liquid petroleum
gas.
Natural gas,
biomass fuel and
refrigerant losses.
Scope 2
Energy indirect
Purchased electricity.
Scope 3
Other indirect
Transmission and distribution losses from
purchased electricity.
Purchased electricity.
Purchased electricity
and purchased heat
and steam.
Transmission and distribution losses from
purchased electricity. Sub-contracted
site fuel emissions for Wilson Bowden
Developments Limited.
Transmission and distribution losses
from purchased electricity. Losses from
purchased heat and steam.
Share of joint
ventures
Emissions from the
construction and sale of
homes and other properties
on joint venture sites,
stated at the Group’s share.
Red diesel,
natural gas and
liquid petroleum
gas.
Purchased electricity.
Forecourt fuel
used in owned and
controlled vans.
N/A
Forecourt fuel and electricity used by
all other road vehicles. Emissions from
travel by rail and flights. Transmission
and distribution losses from purchased
electricity for charging battery electric cars.
Transmission and distribution losses from
purchased electricity.
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
Emissions related to peripheral activities, such as the sale of part-exchanged properties, property management and the letting of premises
to third parties, have been excluded on the basis of materiality and to provide readers with useful emissions information resulting from the
Group’s core activities as a housebuilder. Subcontracted (indirect) emissions are also excluded unless stated. Business travel for sundry
journeys by taxi, tram and London Underground have been excluded on the basis of materiality and that at present, data collection for these
transport types is impractical.
6. Restatement of the comparative year and base year
The Group seeks to provide comprehensive and useful reporting of emissions to the readers of its Annual Report and to evolve its reporting
practices within this emerging area. The Group’s approach was reviewed during the year and the comparative year and base year were
restated for the following:
i.
ii.
The Group reviewed the appropriateness of each of the emission factors applied to its emission sources. The factor applied to the Group’s
‘red’ diesel used by plant and machinery on construction sites was changed from mineral diesel oil to gas oil. The factors applied to the
Group’s business travel using flights were changed from factors without radiative forcing to factors with radiative forcing.
The Group expanded the collection of data for energy expended on its sites in 2019. This increased the scope of the data collected to
include: energy expended on sites that were active but had not yet completed the sale of any homes in the year; energy expended on
completed sites for infrastructure, such as street lighting, that had not yet been adopted by the local authority; and more details of the
suppliers of the Group’s electricity to its office facilities.
iii. The Group adopted the financial control approach to its consolidated greenhouse gas emissions reporting in the year in order to provide a
view consistent with the Financial Statements and to be a better reflection of the emissions that the Group is able to directly influence.
Under this approach, emissions from the Group’s joint arrangements for the comparative year have been restated at the Group’s share
of profits from these arrangements. Sub-contracted indirect emissions from Wilson Bowden Developments Limited (a wholly owned
subsidiary specialising in the project management of commercial property construction) were added to the Group’s consolidated
emissions. Emissions for business travel from the Group’s leased vans were reclassified from scope 3 (indirect) to scope 1 (direct)
emissions.
iv. The Group has restated its intensity metric from tonnes of CO2e per 1,000 square feet completed to tonnes of CO2e per 100 square metres
completed in order to improve consistency with the industry sector.
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204
Greenhouse Gas Emissions Disclosure
continued
The effect of these changes on the total greenhouse gas emissions for the comparative year was:
Greenhouse gas emissions
(tonnes CO2e)
Scope 1 emissions
Scope 2 emissions
Scope 3 emissions
Total
Carbon intensity as
applied in 2018
(tCO2e per 1,000 sq. ft)
Restated carbon intensity
(tCO2e per 100m2)
Location-based
Market-based
Location-based
Market-based
Location-based
Market-based
Location-based
Market-based
2018
As published
19,426
6,265
4,903
9,177
34,868
33,506
1.87
1.80
Review of the
emission
factors
applied
1,477
–
–
41
1,518
1,518
0.08
0.08
Increased the
scope of data
collected
2,639
450
177
42
3,131
2,858
0.17
0.16
Adoption of
the financial
control
approach
1,424
(121)
(88)
(1,337)
(34)
(1)
–
–
2.02
1.94
0.08
0.08
0.18
0.17
–
–
The effect of these changes on the total greenhouse gas emissions for the base year was:
2015
As published
18,224
11,843
9,150
39,217
2.36
Review of the
emission
factors
applied
1,073
–
94
1,167
0.07
Increased the
scope of data
collected
3,516
539
45
4,100
0.25
Adoption of
the financial
control
approach
1,206
(573)
(1,562)
(929)
(0.06)
Location-based
Location-based
Location-based
Location-based
2.54
0.08
0.27
(0.07)
2.82
Greenhouse gas emissions
(tonnes CO2e)
Scope 1 emissions
Scope 2 emissions
Scope 3 emissions
Total
Carbon intensity as
applied in 2015
(tCO2e per 1,000 sq. ft)
Restated carbon intensity
(tCO2e per 100m2)
2018
Restated
24,966
6,594
4,992
7,923
39,483
37,881
2.12
2.04
2.28
2.19
2015
Restated
24,019
11,809
7,727
43,555
2.62
Barratt Developments PLC Annual Report and Accounts 2019
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205
Glossary
Active outlet
AGM
AIMCH
Articles
ASP
Barratt
BBA
BEIS
BLIL
BRAM
Building for Life 12
Building Regulations
Capital employed
CBI
CCC
CDP
CIEEM
CIP
CIRIA
CITB
CMA
CMI
Connected persons
CRM
DBO
DBP
DCLG
DECC
DEFRA
DTRs
EBT
ELTIP
EPS
ESG
EU
FRC
FSC
FY
GDPR
GHG
GMP
GRI
HBF
HMRC
HR
IA
IAS
IASB
IEMA
IFRIC
IFRS
IIR
IIRC
IOSH
ISAE
ISDA
ISO
A site with at least one plot for sale
Annual General Meeting
Advanced Industrialised Methods for the Construction of Homes
The Company’s Articles of Association
Average selling price
Barratt Developments PLC and its subsidiary undertakings
British Board of Agrément
Department for Business, Energy and Industrial Strategy
Barratt London Investments Limited
Barratt Residential Asset Management Limited
This 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
The requirements relating to the erection and extension of buildings under UK Law
Average net assets adjusted for goodwill and intangibles, tax, cash, loans and borrowings, retirement benefit assets/
obligations and derivative financial instruments
Confederation of British Industry
Committee on Climate Change
Carbon Disclosure Project
Chartered Institute of Ecology and Environmental Management
Co-Investment Plan
Construction Industry Research and Information Association
Construction Industry Training Board
Competition and Markets Authority
The actuarial profession’s Continuous Mortality Investigation
As defined in the EU Market Abuse Regulation
Customer Relationship Management
Defined Benefit Obligation
Deferred Bonus Plan
Department for Communities and Local Government
Department of Energy and Climate Change
Department for Environment, Food and Rural Affairs
Disclosure Guidance and Transparency Rules
Barratt Developments Employee Benefit Trust
Employee Long Term Incentive Plan
Earnings per share
Environmental Social Governance
European Union
Financial Reporting Council
Forest Stewardship Council
Financial year ended 30 June
General Data Protection Regulation
Greenhouse Gas
Guaranteed Minimum Pension
Global Reporting Initiative
Home Builders Federation
HM Revenue & Customs
Human Resources
Investment Association
International Accounting Standards
International Accounting Standards Board
Institute of Environmental Management and Assessment
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
Injury incidence rate
International Integrated Reporting Council
Institution of Occupational Safety and Health
Integrated Report
International Standard on Assurance Engagements
International Swaps and Derivatives Association
International Organisation for Standardisation
www.barrattdevelopments.co.uk
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206
Glossary
continued
JVs
KPI
LIBOR
LTI
LTI lending
LTPP
LTV
MMC
MPC
Net cash
Net tangible assets
New Code
NHBC
NI
Non-recurring items
NPPF
Ofcom
OHSAS
ONS
Operating margin
Oregon
PBT
PEFC
PwC
RBLI
RCF
Regional Trading Margin Basic trading profit (revenue less land costs, build costs and site marketing and running costs) divided by revenue for the
Joint ventures
Key performance indicator
The London Interbank Offered Rate
Long term incentive
Loan to Incentive mortgage lending
Long Term Performance Plan
Loan to Value
Modern methods of construction
The Monetary Policy Committee
Cash and cash equivalents, bank overdrafts, interest bearing borrowings, prepaid fees and foreign exchange swaps
Group net assets less other intangible assets and goodwill
UK Corporate Governance Code issued in July 2018 (a copy of which is available from www.frc.org.uk)
National House Building Council
National Insurance
Costs associated with legacy properties and reversal of impairment/ impairment of inventories
The National Planning Policy Framework
The regulator and competition authority for the UK communications industries
Occupational Health and Safety Management Systems
Office of National Statistics
Profit from operations divided by revenue
Oregon Timber Frame Limited and its subsidiary Oregon Contract Management Limited
Profit before tax
The Programme for the Endorsement of Forest Certification
PricewaterhouseCoopers LLP
Royal British Legion Industries
Revolving Credit Facility
REGO
ROCE
RSPB
SAPS
SECR
Sharesave
SHE
SIC
Site ROCE
SMIS
SMSOP
SSP
TCFD
the Act
the Code
the Company
the Group
the Scheme
Total completions
Total gearing including
land creditors
TRADA
TSR
UKLA
Underlying ROCE
UN SDGs
USPP
WACC
WBD
WIP
regional business
Renewable Energy Guarantees of Origin
Return on capital employed calculated as described on pages 207 and 208
Royal Society for the Protection of Birds
Self-administered Pension Scheme
Streamlined Energy and Carbon Reporting
Savings-Related Share Option Scheme
Safety, Health and the Environment
Standing Interpretations Committee
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
Senior Manager Incentive Scheme
Senior Manager Share Option Plan
Single Sales Principle - Academy training programme
The Task Force for Climate-Related Financial Disclosure
The Companies Act 2006
UK Corporate Governance Code issued in April 2016 (copy available from www.frc.org.uk)
Barratt Developments PLC
Barratt Developments PLC and its subsidiary undertakings
the Barratt Group Pension & Life Assurance Scheme
Unless otherwise stated total completions quoted include JVs
Land creditors and net debt/cash divided by net tangible assets
Timber Research And Development Association
Total shareholder return
UK Listing Authority
ROCE as defined on pages 207 and 208, with net assets also adjusted for land creditors
United Nations' Sustainable Development Goals
US Private Placement
Weighted average cost of capital
Wilson Bowden Developments Limited
Work in progress
Barratt Developments PLC Annual Report and Accounts 2019
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Five year record and alternative performance measures
207
Five year record (Unaudited)
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)
2019
4,763.1
909.8
4,869.0
73.2
29.1
17.3
2018
4,874.8
835.5
4,597.7
66.5
26.5
17.3
2017
4,650.2
765.1
4,322.2
61.3
24.4
17.3
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
Definitions of alternative performance measures and reconciliation to IFRS
The Group uses a number of alternative performance measures which are not defined within IFRS. The Directors use these alternative
performance measures, along with IFRS measures, to assess the operational performance of the Group as detailed in the Strategic Report on
pages 4 to 6. Definitions and reconciliations of the financial alternative performance measures used to IFRS measures, are included below:
Gross margin is defined as gross profit divided by revenue:
Revenue per Consolidated Income Statement (£m)
Gross profit per Consolidated Income Statement (£m)
Gross margin
Operating margin is defined as profit from operations divided by revenue:
Revenue per Consolidated Income Statement (£m)
Profit from operations per Consolidated Income Statement (£m)
Operating margin
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2019
4,763.1
1,084.2
22.8%
2018
4,874.8
1,008.9
20.7%
2019
4,763.1
901.1
18.9%
2018
4,874.8
862.6
17.7%
Return on Capital Employed (‘ROCE’) is calculated as earnings before amortisation, interest, tax, operating charges relating to the defined
benefit pension scheme and operating adjusting or exceptional items for the year, divided by average net assets adjusted for goodwill and
intangibles, tax, net cash, retirement benefit assets/obligations and derivative financial instruments:
Profit from operations
Cost associated with legacy properties
Defined benefit past service cost
Share of post-tax profit from JVs and associates including loss on disposal of joint ventures
Earnings before amortisation, interest, tax, adjusted items and defined benefit scheme charges
2019
£m
901.1
3.2
1.7
37.5
943.5
2018
£m
862.6
7.0
–
18.0
887.6
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208
Five year record and alternative performance measures
continued
Definitions of alternative performance measures and reconciliation to IFRS continued
Return on Capital Employed (‘ROCE’) continued
Group net assets per Consolidated Balance Sheet
Less:
Other intangible assets per Consolidated Balance Sheet
Goodwill per Condensed Balance Sheet
Current tax liabilities
Deferred tax liabilities
Derivative financial instruments – swaps
Retirement benefit (assets)/obligations
Cash and cash equivalents
Loans and borrowings
Prepaid fees
Capital employed
Three point average capital employed
30 June
2019
£m
4,869.0
31 December
2018
£m
4,551.7
30 June
2018
£m
4,597.7
31 December
2017
£m
4,267.7
(102.3)
(805.9)
99.5
17.6
–
(62.6)
(958.3)
200.0
(7.4)
3,249.6
3,180.2
(100.0)
(792.2)
84.3
21.5
–
(53.1)
(579.1)
200.0
(8.6)
3,324.5
(100.0)
(792.2)
85.8
25.3
–
(58.7)
(982.4)
191.1
–
2,966.6
3,000.3
(100.0)
(792.2)
61.8
20.1
–
(34.8)
(378.0)
212.1
–
3,256.7
30 June
2017
£m
4,322.2
(100.0)
(792.2)
71.1
8.0
(7.4)
(13.6)
(784.4)
73.9
–
2,777.6
Total shareholder return (‘TSR’) is a measure of the performance of the Group’s share price over a period of three financial years.
It combines share price appreciation and dividends paid to show the total return to the shareholders expressed as a percentage.
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Five year record and alternative performance measures
Integrated reporting approach
continued
209
Reporting Approach
Our Integrated Report is primarily prepared
for our shareholders, however through our
activities we create value for a range of other
stakeholders.
Reporting Frameworks
Our integrated reporting is guided by various
codes and standards outlined in the table here.
Report scope and boundary
Our integrated report covers the
performance of Barratt Developments PLC
for the financial year ended June 2019.
The report extends beyond financial
reporting and includes non-financial
performance, opportunities and risks that
may have a significant influence on our
ability to create value.
Integrated Reporting Framework
The primary purpose of an integrated report
is to explain to providers of financial capital
how an organisation creates value over time.
An integrated report benefits all interested
stakeholders including employees,
customers, suppliers, business partners,
local communities, legislators, regulators
and policy-makers.
The IIRC’s vision is to align capital allocation
and corporate behaviour to wider goals
of financial stability and sustainable
development through the cycle of integrated
reporting and thinking.
Sustainability Frameworks
Frameworks
Purpose
The International
Integrated Reporting
Council’s Integrated
Reporting Framework
United Nations
Sustainable Development
Goals
Framework that is focused on articulating the value creation of an
entity over time.
Outward-looking framework that covers the areas of the UN’s 2030
Agenda focused on people, planet and prosperity.
The 17 UN SDGs define global sustainable development priorities
and aspirations for 2030 and seek to mobilise global efforts around a
common set of goals and targets.
The UN SDGs call for worldwide action among governments,
business and civil society to end poverty and create a life of dignity
and opportunity for all, within the boundaries of the planet. The UN
SDGs were launched in 2015 by the UN.
FTSE4Good
Responsible investment index that scores companies based on their
sustainability performance.
Task Force on Climate-
Related Financial
Disclosures (‘TCFD’)
Recommendations
We disclose information listed within the FTSE4Good criteria
throughout the pages of this integrated report, in the sustainability
and governance sections of our corporate website, and in our
Sustainability Framework. Further information can also be found
within our annual CDP Climate survey submission, and within our
CDP Forests survey to be submitted for the first time in 2019.
Recommendations for disclosing clear, comparable and consistent
information about the risks and opportunities presented by climate
change.
Our primary disclosures aligning with TCFD recommendations
are made through the CDP Climate survey, which we submit on an
annual basis. In 2018 the CDP Climate Survey format was aligned
to TCFD recommendations. Other TCFD related disclosures can
be found within the content of this integrated report, and on the
sustainability section of our corporate website.
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Approval by the
Board of Directors
This Annual Report is an Integrated
Report and has been prepared and
presented in accordance with the
International Integrated Reporting
Framework published by the IIRC in
December 2013.
The Board, which is responsible for the
integrity of this report, has considered
the preparation and presentation of this
report and concluded that it has been
prepared and presented in accordance
with the Framework.
Legal Requirements
Frameworks
Purpose
International Financial
Reporting Standards (‘IFRS’)
Global framework for how companies prepare and disclose their
financial statements
Companies Act 2006
Company law in the UK
UK Corporate Governance
Code
The standards of good practice for listed companies on board
composition and development, remuneration, shareholder relations,
accountability and audit
Streamline Energy and
Carbon Reporting (‘SECR’)
Disclosures required by the UK Government on a company’s energy
consumption and greenhouse gas emissions
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210
Group Advisers and Company Information
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300
Statutory auditor
Deloitte LLP
London
Solicitors
Slaughter and May
Brokers and investment bankers
Credit Suisse Securities (Europe) Limited
Deutsche Bank AG
Company information
Registered in England and Wales.
Company number 00604574
Registered office
Barratt Developments PLC
Barratt House
Cartwright Way
Forest Business Park
Bardon Hill
Coalville
Leicestershire
LE67 1UF
Tel: 01530 278 278
www.barrattdevelopments.co.uk
Corporate office
Barratt Developments PLC
Kent House
1st Floor
14–17 Market Place
London
W1W 8AJ
Tel: 020 7299 4898
Financial calendar
Announcement
2019 Annual General Meeting and Trading update
FY19 Final Dividend Payment
2020 Interim Results Announcement
Trading update
FY20 Interim Dividend Payment
Trading update
2020 Annual Results Announcement
16 October 2019
5 November 2019
5 February 2020
7 May 2020
May 2020
8 July 2020
2 September 2020
Barratt Developments PLC Annual Report and Accounts 2019
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This Annual Report has been printed
on Carbon Captured material which is
helping capture CO2 by planting new trees
in the UK through the Woodland Trust
This Annual Report is printed by an FSC®
(Forest Stewardship Council) certified printer
using vegetable-based inks.
This report has been printed on Magno silk,
a white coated paper and board using
100% EFC pulp
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