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LEADING THE FUTURE
OF HOUSEBUILDING BY
PUTTING CUSTOMERS
AT THE HEART OF
EVERYTHING WE DO
Annual Report and Accounts 2020
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Our purpose is to lead the
future of housebuilding by
putting customers at the
heart of everything we do.
We are very proud to lead the industry in both build
quality and customer service. We are building homes
Britain needs, creating jobs and supporting economic
growth whilst delivering for our shareholders and
other stakeholders.
Read more on our purpose, strategic priorities, principles and culture on pages 32 to 35
Our second integrated report
We are committed to being a sustainable and responsible business.
We believe that integrating this approach into every aspect of our activities
enables us to deliver long term value for our stakeholders, whilst doing
the right thing. This integrated Annual Report demonstrates our focus on
the connection between economic, environmental, social and governance
matters and how this creates and preserves value for our stakeholders.
For a detailed description of our approach to integrated reporting, go to the Appendix on page 241
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 79 and the Directors’ Report contained on
pages 80 to 155. 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 79 inclusive, and the Non-financial information statement on page 1, comprise the Strategic Report,
and pages 80 to 155 inclusive comprise the Directors’ Report, both of which have been drawn up and presented
in accordance with, and in reliance on, 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. Nothing
contained in this Annual Report or on the Group’s website should be construed as a profit forecast or an
invitation to deal in the securities of the Company.
Alternative performance measures
In addition to the Group using a variety of statutory performance measures it also measures performance
using alternative performance measures (APMs). Definitions of the APMs and reconciliations to the equivalent
statutory measures are detailed on pages 237 and 238. The definition of net cash is included in Note 5.1 of the
Financial Statements.
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What you will find inside
36-37
Sustainability
focus areas
More information on how we are
connecting social, environmental
and economic value across our
business.
Impact of COVID-19
Throughout the Annual Report
and Accounts we have discussed
how COVID-19 has impacted our
business.
30-31
Our business
model
More information on how our
business model enables us to
create long term value for our
stakeholders.
39-49
Stakeholder
engagement
More information on how engaging
with our stakeholders helps us make
better long term decisions.
Non-financial information statement
The table below, and the information it refers to, is intended to help stakeholders understand
our position on these key non-financial matters. We have considered these non-financial
matters and disclosed in the relevant sections, when determining what information should be
included in the Annual Report and Accounts, the information needs of different stakeholders
and their relative importance as well as the relevant time horizons in each matter. 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 summary
Our business model
Social matters
Market review
Our sustainability focus areas
Affordability
Employees
Development and training
Diversity
Wellbeing
Employee engagement
Gender pay gap
Board diversity
Human rights
Human rights
Third parties
Anti-bribery and corruption
Anti-bribery and corruption
Anti-bribery and corruption working
with suppliers
Environmental matters
Waste
Safeguarding the environment
Greenhouse gas emissions
disclosure
Policy, due diligence
and outcomes
Risk management
Principal risks
Long term viability statement
Audit Committee Report
61
65
56
68
234
71
72
79
109
Our policies
All of our public policies, codes and
standards are available on
www.barrattdevelopments.co.uk
02
30
28
36
51
58
60
60
60
61
102
61
65
Contents
Strategic Report
Our business in summary
Key performance indicators
Chairman’s statement
Chief Executive’s statement
Chief Financial Officer's review
Marketplace
Business model
Aligning our purpose, strategic
priorities, principles and culture
How our strategic priorities and principles
support our purpose and culture
Sustainability focus areas
Section 172 (1) statement
Stakeholder engagement
Our priorities and principles
Risk management
Principal risks
Viability statement
02
04
08
12
20
28
30
32
34
36
38
39
50
71
72
79
Governance
Board of Directors
Executive Committee
Regional Managing Directors
Corporate governance report
Nomination Committee report
Audit Committee report
Safety, Health and
120
Environment Committee report
123
Remuneration report
152
Other statutory disclosures
Statement of Directors’ Responsibilities 155
80
83
84
86
100
109
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
156
157
166
167
168
169
170
171
173
Other Information
Greenhouse gas emissions disclosure 234
Five year record and alternative
performance measures
Glossary
Integrated reporting approach
Group advisers and
Company information
237
239
241
242
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020
Our business in summary
Our home completions (including JVs)
Developing homes across Britain where people want to live
Scotland
1,340
(2019: 1,862)
Northern
2,240
(2019: 3,156)
East
2,582
(2019: 3,755)
London and
Southern
2,822
(2019: 3,937)
Central
2,240
(2019: 3,130)
West
1,380
(2019: 2,016)
Our brands
We have three housebuilding brands – Barratt Homes,
David Wilson Homes and Barratt London. Commercial
developments are delivered by Wilson Bowden Developments.
12,604
Total home completions¹
(2019: 17,856)
366
Average active sales outlets2
(2019: 379)
27
Housebuilding divisions
(2019: 27)
80,324
Owned and controlled
land bank plots
(2019: 80,022)
Employees3
6,655
(2019: 6,504)
1
2
3
Total home completions, including JVs, were
12,604 (2019: 17,856) for the year. Private home
completions were 9,568 (2019: 13,533). Affordable
home completions were 2,466 (2019: 3,578) and
JV home completions in which the Group has an
interest were 570 (2019: 745).
Including JVs.
Employee numbers, excluding sub-contractors,
taken at 30 June.
02
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Barratt Developments PLCwww.barrattdevelopments.co.uk Our homes
Our customers
We are committed to building high quality homes and have been
awarded 92 NHBC Pride in the Job Awards on our sites in 2020, more
than any other housebuilder for 16 consecutive years.
We put our customers first and have a long standing commitment
to quality and service.
Completions by unit type
2020
2019
Completions by deal type
2020
2019
1 and 2 bedroom
homes
12% 13%
3 bedroom
homes
4 bedroom
homes
35% 35%
34% 30%
5 and 6 bedroom
homes
3%
4%
Help to Buy
35% 36%
Part-exchange
11% 11%
Other private
30% 27%
Investor
4%
5%
Flats London
5%
5%
Affordable
20% 21%
Northern
2,240
(2019: 3,156)
Flats non-
London
11% 13%
Investment proposition
We have clear differentiators that underpin our investment proposition:
• We operate a fast build and sell model and
are proud to lead the industry in both build
quality and customer service. Over the
medium term, we aim to run one of the
shortest land banks in the industry.
• Quality and customer service are
fundamental to our business operations.
We are the only major housebuilder to be
awarded a HBF 5 Star rating for customer
satisfaction for 11 consecutive years.
• We maintain a resilient balance sheet,
• We operate across Britain diversifying our
with a clearly defined and embedded
operating framework, and a clear focus on
cash generation.
• We have a strong and experienced
workforce who deliver quality homes.
business, managing risk.
• We aim to be the leading national
sustainable housebuilder with ambitious
targets set around safeguarding the
environment, leading construction and
investing in our people.
These differentiators drive delivery for our
shareholders and our wider stakeholders.
Following the significant disruption to our
business created by COVID-19, our focus is
to rebuild completion volumes towards our
medium term target of 20,000 wholly owned
completions. This, combined with disciplined
land acquisition and optimising our
performance across build and sales will drive
margin improvement and, over the medium
term, a minimum 25% ROCE.
Shorter
owned land
bank
Strong
balance sheet
and cash
generation
Highly
experienced
build and sales
teams
Quality and
service
Nationally
diversified
Leading
sustainability
Rebuilding volumes
Disciplined growth in wholly owned
completions towards 20,000 over the
medium term
Delivering margin improvement
Land acquisition at a minimum 23% gross
margin and optimising performance
Attractive returns
2.5 times dividend cover
Rebuilding to achieve a targeted minimum ROCE of 25%
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Key performance indicators
We had a strong first half performance and started our second half well.
COVID-19, however, has had a significant impact on our KPIs and operating
framework for the year ended 30 June 2020.
Operational targets
Financial
Measure
Target
Status
Progress
Definition
Why we
measure
Further
information
Total home
completions
Growing
volumes
Gross margin
(%)
3–5% growth
per annum
in wholly
owned home
completions
over the
medium term
Present
business
capacity of
20,000 per
annum
New land
acquisitions
at minimum
23% gross
margin
Operating
profit (£m)
Driving further
improvements
Delivering
margin
improvement
Operating
margin (%)
Driving further
improvements
Profit before
tax
In line with
consensus at
the start of the
financial year
04
29.7%
decline in
wholly owned
completions
to 12,034 with
total home
completions
at 12,604
Homes
18,000
1
7
,
3
1
9
1
7
,
3
9
5
16,000
14,000
12,000
10,000
1
7
,
5
7
9
1
7
,
8
5
6
1
2
,
6
0
4
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Total home
completions are
legally completed
homes during the
year including
100% of JV homes
legally completed
in which the Group
has an interest
Reflects
activity and
growth.
Method by
which business
capacity is
monitored
See pages
12 to 19
Adjusted
gross margin
of 18.5%
(2019: 22.8%).
Gross margin
of 18.0%
(2019: 22.8%)
%
25
20
15
10
5
0
£m
1,000
800
600
400
200
0
Adjusted
profit from
operations
of £507.3m
(2019:
£904.3m).
Operating
profit of
£493.4m
(2019:
£901.1m)
20.0 20.7
18.9
22.8
18.0
Gross profit divided
by total revenue,
expressed as a
percentage
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
862.6 901.1
799.2
668.4
493.4
Profit from
operations
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Adjusted
operating
margin of
14.8% (2019:
19.0%).
Operating
margin of
14.4% (2019:
18.9%)
%
20
15
10
5
0
17.2 17.7 18.9
15.8
14.4
Profit from
operations divided
by total revenue,
expressed as a
percentage
6
1
0
2
6
1
0
2
7
1
0
2
7
1
0
2
8
1
0
2
8
1
0
2
9
1
0
2
9
1
0
2
0
2
0
2
0
2
0
2
£m
1000
800
600
400
200
0
Consensus
profit before
tax at the
start of the
year was
£898m. Profit
before tax
for FY20 of
£491.8m
909.8
835.5
765.1
682.3
491.8
The Group’s profit
before tax including
its share of profits
from JVs and
associates
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
See pages
20 to 27
See pages
20 to 27
See pages
20 to 27
See pages
20 to 27
Key internal
metric for
assessing site
profitability.
Enables
consistent
comparison
of land
acquisitions
Demonstrates
profitability
before finance
costs, share
of profits
from JVs and
associates and
tax. Assesses
the efficiency
of our
operations
Demonstrates
profitability
before finance
costs, share
of profits
from JVs and
associates and
tax. Assesses
the efficiency
of our
operations
Shows the
profitability
of the Group
relative
to market
expectations.
Key metric
for assessing
performance
for Executive
Directors’
remuneration
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Barratt Developments PLCwww.barrattdevelopments.co.uk Measure
Target
Status
Progress
Definition
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Why we
measure
Further
information
ROCE (%)
Minimum 25%
ROCE of
15.6% for 12
months to 30
June 2020
(2019: 29.7%
for the 12
months to 30
June 2019)
%
30
20
10
0
29.8 29.6 29.7
27.1
15.6
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Delivering
ROCE
Earnings per
share (pence)
In line with
consensus at
the start of the
financial year
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Consensus
earnings
per share
at the start
of the year
was 72.7p.
Earnings per
share for
FY20 of 39.4p
73.2
61.3 66.5
39.4
pence
80
55.1
70
60
40
20
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Attractive cash
returns
Total
shareholder
return
TSR FTSE
(50+/50-)
Threshold
-12.2%
Maximum 25.8%
19.35% of a
potential 40%
of the 2017/18
LTPP award
vesting
6.1%
TSR
Housebuilders
Threshold 4.8%
Maximum 30.8%
for the three years
ended 30 June 2020
(2019: 36.8% for the
three years ended 30
June 2019)
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
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
See pages
20 to 27
Ensures
efficient and
effective use of
capital.
Key metric
for assessing
performance
for Executive
Directors’
remuneration
See pages
20 to 27
See page
145
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
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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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Key performance indicators CONTINUED
Operational targets
Non-financial
Measure
Target
94%
Health
and safety
(SHE audit
compliance)
Land
approvals
(plots)
Customer
service
Status
Definition
Why we
measure
96%
(2019: 96%)
The percentage of
internal inspections
which are compliant
with SHE guidelines
18,000–22,000 plots
approved for purchase 9,441
The number of plots
approved for purchase
(2019: 18,448)
HBF 5 Star customer
satisfaction
Demonstrates
compliance with safety
standards on our
sites. Lead indicator
highlighting areas of SHE
focus. Key metric for
assessing performance
for Executive Directors’
remuneration
Monitors whether the
Group is approving
enough land for
purchase to support
future business activity.
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.
Key metric for assessing
performance for
Executive Directors’
remuneration
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
Further
information
See pages
62 and 63
See pages
52 and 53
See pages
50 and 51
See pages
58 to 61
See pages
54 to 57
The percentage of
homebuyers who
would recommend us
to family and friends
taken from the HBF
Homebuilder Survey
The percentage level
of satisfaction of our
people measured
using an annual
independently
conducted survey
Tonnes of waste
generated from above
ground construction
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
Environmental impact of
our business activities.
See pages
68 to 70
Tonnes of greenhouse
gas emissions
associated with
our scope 1 and 2
emissions, which
includes energy and
fuel use on our sites
and in our offices, for
every 100 sq.m. of
legally completed build
area
Upper quartile
engagement
Employee
engagement
score
84.2%
6
1
0
2
(2019: 84.5%)
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Tonnes per 100 sq.m.
8
7.11
6.18 6.06
6.53
7.70
6
1
0
2
6
1
0
2
7
1
0
2
7
1
0
2
8
1
0
2
8
1
0
2
9
1
0
2
9
1
0
2
0
2
0
2
0
2
0
2
Tonnes per 100 sq.m.
2.5
2.1
2.04
1.82 1.75
1.92
6
4
2
0
2.0
1.5
1.0
0.5
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Waste
intensity
Reduce construction
waste intensity (tonnes
per 100 sq.m. of legally
completed build area) to
5.67 by 2025
Reduce greenhouse gas
intensity per 100 sq.m. of
legally completed build
area for scope 1 and 2
greenhouse gas emissions.
We have set a target to
reduce absolute scope
1 and 2 greenhouse gas
emissions by 29% by 2025
from 2018 levels
Carbon
intensity
06
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Barratt Developments PLCwww.barrattdevelopments.co.uk Operating framework
Measure
Target
Progress
Definition
Why we
measure
Land bank
Owned and
controlled land
bank (years)
c. 3.5 years
owned / c. 1.0
year controlled
Land creditors Land creditors
as a percentage
of owned land
bank
Reduce usage
to
15–25% of the
land bank over
medium term
6
4
2
0
%
40
30
20
10
0
Years
8
6.7
4.5
4.5
4.8
4.7
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
The number of years
supply of owned
and controlled land.
Land bank years are
calculated as the
number of plots in our
land bank divided by the
last 12 months of home
completions
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
20 to 27
38
37
34
31
25
Calculated as land
creditors as a
percentage of owned
land bank
Shows the
indebtedness related
to the owned land bank
See pages
20 to 27
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Net cash
To be cash
positive,
on average,
throughout the
financial year
Modest average
net cash over
the financial
year
Average net cash of
£348.3m
(2019: £298.3m)
Calculated as the sum
of the daily borrowings,
deposits and current
account balances
divided by the number
of days in the financial
year
Shows the Group’s
liquidity. Helps assess
our ability to fund our
ongoing operational
commitments
See pages
20 to 27
Year end
net cash
Year end
net cash
791.3 765.7
723.7
Calculated as cash and
cash equivalents, less
total borrowings being
total drawn debt, plus
prepaid fees
Shows the Group’s
liquidity. Helps assess
our ability to fund our
ongoing operational
commitments
308.2
See pages
20 to 27
£m
800
600
592.0
400
200
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Total
indebtedness
The total of net
cash/(debt) and
land creditors
Minimal year
end total
indebtedness
in the medium
term
2020: total
indebtedness of
£483.7m (2019: total
indebtedness of
£195.0m)
Calculated as net
cash/(debt) less land
creditors at the year end
Treasury
Level and
duration of
committed
financing
facilities
Appropriate
financing
facilities
£700.0m RCF
expiring in 2024
£200.0m USPP notes
expiring in 2027
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
See pages
20 to 27
See pages
20 to 27
Shows the Group’s
liquidity. Helps assess
our ability to fund our
ongoing operational
commitments
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
Dividend
policy
Ordinary
dividend is 2.5
times cover
2.5x dividend
cover
(at the
appropriate
time)
No dividend
payments proposed
in respect of
FY20 (2019: 46.4p
representing 2.5x
cover and special
return)
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.
Shows the income a
shareholder receives
in relation to the
Group’s profit or loss
See pages
20 to 27
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chairman’s statement
Before the COVID-19 pandemic, we were delivering
strong progress against our medium term targets.
The onset of COVID-19 and the subsequent lockdown
has caused significant disruption to our business
and had a substantial impact on our financial
performance. Nevertheless, our business has
demonstrated its resilience and operational strength
delivering 12,604 high quality new homes (including
JVs) across Britain in FY20 (FY19: 17,856 homes).
Handling the COVID-19 crisis
The health and safety of all individuals
who work for or with us is of fundamental
importance to the Board. Prior to the Prime
Minister’s lockdown announcement on 23
March 2020 to try to control the spread of
COVID-19, the Board, together with the
Senior Management team, acted quickly
and decisively to commence the temporary
closure of all of our construction sites, sales
centres and offices. This was completed by
27 March 2020. Throughout the lockdown
period, the Board worked closely with
the Senior Management team and held
a number of additional virtual Board
meetings to ensure that key decisions such
as those relating to furloughing, payment
of dividends, workforce remuneration and
our liquidity were made in a timely manner.
Further details of the decisions made to
manage the Group’s cost base and cash
flows and ensure resilience can be found
on page 12.
As the lockdown restrictions eased, the
Board monitored the phased reopening
of our construction sites in England and
Wales from 11 May 2020 and in Scotland
from 1 June 2020. By 30 June 2020, all of
our construction sites were operational and
our employees, other than those shielding,
had returned to work.
To safeguard the jobs of the c. 85% of
employees that we furloughed, we initially
participated in the Government's CJRS.
However, given that our financial position
has remained resilient, the Board made the
decision in July 2020 to return the CJRS
funds received of £26.0m.
I would like to take this opportunity to thank
the Senior Management team for their
tireless commitment to address all of the
challenges relating to COVID-19 and the
way in which they led the business through
this difficult period. It is a testament to their
leadership and resilience that our business
has emerged in good shape.
Our employees
It is our employees that deliver our
success, and our performance is due to
the dedication and ability of our skilled
and experienced team. I am especially
proud of the way in which our entire
workforce adapted to changes in working
arrangements as we temporarily closed
our construction sites, sales centres and
offices, through the lockdown period and
their subsequent reopening. All of our
employees have risen to the challenges
brought by COVID-19 and pulled together
to get our business back up and running. I
would like to take this opportunity to thank
them for the support and commitment that
they have shown to our business.
The views of our employees are important
to the Board and they are at the heart of
our operations. Our Workforce Forum has
played a vital role in our engagement with
our employees during FY20, and continues
to inform our actions and decisions. David
Thomas, our Chief Executive, sent out
weekly updates throughout the lockdown
period to all employees to keep them
informed on matters such as the reopening
of construction sites, sales centres and
offices, pay, holiday policy, and health and
wellbeing. In addition, our intranet was
regularly updated with information on
corporate and government policy, and a
dedicated COVID-19 email address was
established to enable employees (including
those on furlough) to ask questions or send
“ Our Senior Management
team has shown tireless
commitment towards
addressing all of the
challenges relating to
COVID-19 and to the way in
which they led the business
through this difficult
period. It is a testament
to their leadership
and resilience that the
business has emerged in
good shape.”
John Allan
Chairman
For more information, go to the
Corporate Governance Report
on pages 86 to 99
08
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Barratt Developments PLCwww.barrattdevelopments.co.uk in comments or suggestions relating to the
impact of COVID-19 on our business. We
also undertook a pulse survey following
the return to work by all employees, other
than those shielding, which showed that
employees were very positive about the
way in which management had dealt with
COVID-19 related matters, particularly in
respect of pay and communication.
Safety, Health and Environment
Our SHE team played a vital role
throughout the whole lockdown period.
They ensured the safe temporary closure
of our construction sites, sales centres
and offices, and continued to regularly
check that our closed construction sites
remained safe throughout lockdown. They
were also instrumental in the reopening of
our construction sites, helping us establish
and implement extensive COVID-19 working
practices and protocols to enable those
returning to site to do so safely and in
compliance with the Government’s social
distancing measures. Further details can
be found on page 62.
Sustainability
We believe that at the core of quality
housebuilding is a commitment to create
a positive environmental, social and
economic legacy for future generations.
This is embedded in our business
through our purpose to lead the future of
housebuilding by putting our customers at
the heart of everything we do.
By doing business sustainably we create
value for our stakeholders.
Good governance of these activities and
connecting social, environmental and
economic value across our business leads
to better long term decisions. Consequently,
in January 2020, we published our science-
based targets to show our commitment to
reducing carbon emissions, both our direct
emissions (scope 1 and 2 by 29% from
2018 levels by 2025) and indirect emissions
(scope 3 by 11% from 2018 levels by 2030).
We also commenced work during FY20 on
our programme to achieve compliance with
the recommendations of the TCFD.
I am also pleased to report that we
performed well in the key indices
FTSE4Good, NextGeneration and in CDP
surveys.
To further strengthen the capability of our
Group Sustainability team we appointed
an experienced Group Sustainability
Director who is working with the Executive
Committee to determine how we can
enhance, both operationally and through
increased reporting, our position as the
country’s leading sustainable national
housebuilder. Engagement with our
stakeholders will play a key role in the
development of our strategy in this area.
Quality and service
In FY20 we continued to demonstrate
our industry leading credentials for
quality and service. Through our Leading
construction priority, we are committed to
excellence in all aspects of our construction
operations, and to building the highest
quality homes. We achieved a 5 Star rating
in the HBF customer satisfaction survey
for the 11th 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.
↓ David Wilson Homes at Grange
View, Hugglescote, Leicestershire.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chairman’s statement CONTINUED
↑ Enhanced COVID-19 working
practices and protocols are
in place across all of our
construction sites.
“ All of our employees have
risen to the challenges
brought by COVID-19 and
pulled together to get
our business back up and
running”
John Allan
Chairman
10
In addition, our site managers achieved
92 NHBC Pride in the Job Awards for
excellence in site management this year,
more than any other housebuilder for the
16th year in a row, and our highest number
of awards for seven years.
Winning these awards underlines the high
standard of work that our site managers
and their teams deliver on a daily basis.
It also highlights our high standards and
quality to our customers.
Political and economic environment
COVID-19 and the global response to it
has damaged the UK economy, and it
is likely that there will be an increase in
unemployment in the coming months as
businesses continue to be impacted. The full
extent of the economic impact being caused
by COVID-19 is yet to become fully clear,
and there remains uncertainty regarding
the outcome of the ongoing negotiations
regarding the UK leaving the EU.
However, the underlying drivers of the
UK housing market remain strong. 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 there remains a good
level of underlying demand. The industry
has seen encouraging levels of interest
and sales as lockdown was eased and
sales centres reopened, and we believe
that the long term impact of the pandemic
on people’s choices and priorities will be
an increase in demand for the high quality
homes that we provide as consumers look
for more space both indoors and outdoors.
The Government recognises the importance
of housebuilding in achieving their ‘levelling
up’ agenda. The Stamp Duty holiday is an
important intervention that will save many
of our customers thousands of pounds
which they can put towards the deposit for
their new home. The proposed reforms
to the planning system demonstrate a
commitment to speeding up the planning
process, offering transparency and certainty
to local communities and ensuring we can
build the homes the country needs. We
also need the planning system to ensure
that quality, design and sustainability are
at the heart of new development. We hope
the forthcoming Future Homes Standard
will give the industry the certainty required
to invest in building the low carbon homes
needed to combat climate change.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Looking forward
We 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.
The last few months of FY20 were
unprecedented but our employees have
shown great strength and commitment
to getting our business restarted. We
start FY21 with a continued focus on our
operational and financial performance
including our medium term targets.
On behalf of the Board, I thank you for
the confidence that you have shown in
the business during FY20, especially
throughout the lockdown period and for
your continued support.
John Allan
Chairman
1 September 2020
5 Star
HBF customer satisfaction
survey for the 11th year in
a row
(2019: 5 Star)
Low interest rates continue to keep
mortgages at historically affordable levels.
However, there has been a reduction in
the high LTV lending that many people
require to get onto the housing ladder. This
has arisen post COVID-19 and reflects a
response to a perceived increase in risk
and high levels of demand. The restriction
and removal of Help to Buy will exacerbate
this. It is important that lenders and the
Government consider what further options
are available to help potential first time
buyers who want to purchase their own
home.
Culture
In order to remain successful, it is
important that we create and embed a
positive culture throughout our business.
The Board is mindful of the need to set the
tone from the top. A review of the culture
of our business was undertaken during
FY20. Our business has a strong culture
of ‘doing the right thing’ and taking pride
in the work that we do whilst remaining
focused on the needs of our customers
and other stakeholders. We will continue
to develop the culture of our business and
make further improvements where there is
scope to do so. Details of the work that we
have undertaken on culture and how we will
look to monitor and measure culture going
forward can be found on pages 92 to 95.
The New Code
Last year I highlighted that we had
early adopted a number of provisions of
the New Code and Guidance on Board
Effectiveness issued by the FRC in July
2018. These related to Section 172 of the
Act: Duty to promote the long term success
of the Company (page 38); Stakeholder
engagement (pages 39 to 49); Chief
Executive pay ratio (page 150); malus
and clawback (page 132) and pension
contributions (page 124). This year we have
further developed these disclosures in light
of evolving best practice and guidance from
our advisers.
I am pleased to confirm that we have fully
complied with all of the provisions of the
New Code. The requirements of the Code
are described throughout the Governance
Report on pages 80 to 155, together with
explanations as to how we have complied
with these requirements and the various
provisions.
Board appointments,
succession and evaluation
The Nomination Committee continues
to oversee Board appointments and
succession of Board members, and
assesses the composition of the Board
and its Committees annually. No new
appointments were made to the Board or
any of the Committees during the year.
The Board effectiveness review, which was
this year facilitated internally with support
from Lintstock (see page 107 for more
details), confirmed that the Board currently
comprises the appropriate skills and
experience to drive our strategy forward.
We will continue to assess the composition
of the Board and focus on identifying any
skills, knowledge or experience that will
further strengthen the Board’s capabilities.
Dividend
Going forward, the Board believes that it is
in the best interests of shareholders to have
a long term predictable dividend income
stream and this is best achieved through an
ordinary dividend policy with a defined level
of ordinary dividend cover. In addition, it
believes that the Company should continue
to maintain its disciplined approach both
growing completion volumes and investing
in attractive land opportunities that meet
our hurdle rates whilst reducing gearing.
When the Board believes the time is right it
will implement a dividend policy based on a
dividend cover of 2.5 times.
The Board has previously announced that
given the uncertainties caused by the
impact of COVID-19, the interim dividend of
9.8 pence per share, equating to c. £100m,
would be cancelled, and that it would not
propose an ordinary dividend in respect of
FY20 or the intended special dividend of
£175m in respect of FY20.
The Board continues to recognise
the importance of dividends to all its
shareholders. The Board however, also
feels that given the unprecedented impact
of COVID-19 and the importance of a
resilient balance sheet, it will no longer
propose the FY21 special dividend of
£175m which would have been payable in
November 2021.
AGM
Our 2020 AGM will be held on Wednesday
14 October 2020. We are closely monitoring
the ongoing impact of COVID-19, and
developments in UK regulation in relation
to how AGMs may be held during this
period. Further details about the AGM will
be provided in the Notice of AGM.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chief Executive’s statement
“ We have delivered a
resilient operational and
financial performance
this year against the
unprecedented impact of
the COVID-19 pandemic,
and the resulting lockdown,
on our operations. We
enter FY21 focused
on rebuilding both our
completion volumes and
our financial performance
towards our unchanged
medium term targets.”
David Thomas
Chief Executive
We acted quickly at the outset of the pandemic and, in
line with our commitment to health and safety, took the
decision to temporarily close all of our construction
sites, sales centres and offices by 27 March 2020.
In response to COVID-19, the Board also
implemented immediate measures to
manage the Group's cost base and cash
flows to ensure resilience, including:
• Suspending all land buying activity;
• Ceasing all recruitment activity;
• Postponing non-essential capital
expenditure;
• Actively managing cash flows while
ensuring that we continued to pay our
suppliers and sub-contractors on time;
• Cancelling the interim dividend, which
was due to be paid on 11 May 2020;
• Furloughing a proportion of our
employees at their normal pay; and
• A voluntary 20% reduction in base
salary and fees for the Board, the
wider Executive and the Regional
Managing Director team for the period
our sites were closed. In addition, they
also agreed to waive any salary or fee
increase for FY21.
In addition, in May 2020, the Remuneration
Committee agreed with the recommendation
of the Executive Directors that there would
be no payments to any Director or employee
under the FY20 annual bonus scheme.
Following our establishment of extensive
COVID-19 working practices and protocols,
we gradually restarted our site operations
from 11 May 2020 in England and Wales
and from 1 June 2020 in Scotland. As a
result, all of our construction sites were
operational at the end of the financial
year and our employees, other than those
shielding, had returned to the business.
Through the temporary closure of the
business, where around 85% of our
employees were placed on furlough, we used
the Government’s CJRS. Our employees,
other than those shielding, had returned
from furlough by 1 July 2020. We are
grateful for the support that the Government
provided to UK businesses through the
CJRS, which allowed us to safeguard the
jobs of our c. 6,700 employees during
the height of the pandemic. Our financial
position remained resilient through year
end and accordingly, in early July, the Board
decided to repay all furlough funds received.
We have delivered a resilient operational
and financial performance this year against
the unprecedented impact of the COVID-19
pandemic, and the resulting lockdown on
our operations. Prior to the pandemic we
were delivering strong progress against our
medium term targets, with an operating
margin of 18.9% in 2019 (2018: 17.7%) and
a ROCE for the 12 months to 31 December
2019 of 29.3% (2018: 29.5%). However, the
lockdown period had a significant impact
on our financial performance this year.
Our business model is resilient, with both
operational and financial strength, and we
remain dedicated to the delivery of the high
quality homes the country needs.
Housing market fundamentals
The Government has a target of 300,000
homes to be built per year by the mid-2020s
to meet existing demand. Updates to the
NPPF, to ensure that local authorities plan
positively for housing and are accountable
for under-delivery, provide further support to
housing growth. We welcome too the latest
White Paper on planning reform and we
will play an active part in the consultation
process over the coming months.
The lending environment, positive up until
the pandemic, has become less certain.
Whilst mortgage rates remain attractive,
reflecting greater competition in the
mortgage market and a broad spread of
lenders supporting homebuyers, there
has been a material change in LTV
lending criteria.
Prior to the pandemic the availability of
both 95% LTV lending and the Government’s
Help to Buy scheme provided invaluable
help for those seeking to get onto the
housing ladder. Today there are no
mainstream mortgage lenders providing
mortgages at 95% LTV for new build
homebuyers, increasing the current
reliance of purchasers on Help to Buy.
The Government has confirmed that Help
to Buy will only continue in its current form
until March 2021. Thereafter a new scheme
will be in place for two further years,
limited to first time buyers with regional
price caps. We have been planning for the
changes to the Help to Buy scheme in our
land acquisition since the new scheme
was announced.
12
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Barratt Developments PLCwww.barrattdevelopments.co.uk safety costs, non-productive site costs and
site-based employee costs and £29.1m
related to the expected increase in site
durations due to COVID-19. After charging
this £74.3m, we made an adjusted profit
from operations of £507.3m (2019: £904.3m)
at an adjusted operating margin of 14.8%
(2019: 19.0%).
In total, we incurred net adjusted items
of £13.9m comprising £26.0m of CJRS
grant income, which we have repaid since
the year end, offset by, as previously
announced, £39.9m of costs associated with
legacy properties, including Citiscape and
the associated review, and developments
12,604
Total home completions
(2019: 17,856)
↓ David Thomas, Chief Executive, visited Filwood
Park where he met Hilary Jones, a volunteer
at Victoria Park Baptist Church Foodbank,
following our £1,000 Community Fund
donation. Pictured with Russell Glimstead,
Managing Director, Barratt Bristol.
Up to March 2020, 272,852 homes had been
bought using the scheme, 82% of these by
first time buyers, (source: MHCLG, Help to
Buy (equity loan scheme) statistics: April
2013 to March 2020). Although Help to Buy
continues for first time buyers through
to 31 March 2023, the regional price caps
will prove restrictive for many, particularly
those looking to purchase new homes in
parts of the North and the Midlands where
the price caps create significant limitations
on the choice of new housing available
within the new scheme. During FY20, 46%
of our purchasers who used Help to Buy
would not qualify for the new Help to Buy
scheme, but they would qualify for other
mortgage products or be able to use our
part-exchange schemes.
Performance overview
Our purpose is to lead the future of
housebuilding by putting customers at the
heart of everything we do. We are very proud
to lead the industry in both build quality
and customer service. We are committed to
playing our part in addressing the housing
shortage and helping to rebuild Britain’s
economic activity after the disruption
created by COVID-19.
Prior to the lockdown, we were delivering
strong progress against our medium term
targets including increasing completion
volumes while maintaining our industry
leading quality and service. As at 22 March
2020, we had delivered 10,364 total home
completions including 484 joint venture
completions, up 9.8% on the prior year
equivalent period (2019: 9,437 homes). The
lockdown halted construction activity and
meant the closure of our sales centres until
21 May 2020 in England, 11 June 2020 in
Scotland and 25 June 2020 in Wales. As a
result, wholly owned completions declined
29.7% to 12,034 homes in the year ended
30 June 2020 (2019: 17,111 homes). In
addition, we delivered 570 homes through
our joint ventures in the year (2019: 745
homes). Total home completions including
JVs for the year were therefore 12,604
homes (2019: 17,856 homes).
The significant progress on our gross
margin targets and resulting profitability,
as demonstrated by our half year results,
was, understandably, severely impacted by
the COVID-19 pandemic. At the half year,
we had delivered a profit from operations
of £421.7m (H1 FY19: £409.7m) and a profit
before tax of £423.0m (H1 FY19: £408.0m).
As well as causing the significant
reduction in completion volumes with
the associated impact on our profitability
this year, COVID-19 has resulted in
significant additional costs. During the
lockdown period and in preparation for site
recommencement we incurred £45.2m of
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chief Executive’s statement CONTINUED
6.1%
Total shareholder return
for the three years ended
30 June 2020
(2019: 36.8% for the three years ended
30 June 2019)
92
NHBC Pride in the
Jobs Awards
(2019: 84)
where cladding has needed to be removed
and replaced. After these adjusted items
we delivered a profit from operations for
the year of £493.4m (2019: £901.1m) at an
operating margin of 14.4% (2019: 18.9%).
As a result, we experienced a decline in
profit before tax for the year to £491.8m
(2019: £909.8m).
The closure of all of our construction
sites by 27 March 2020 came at our peak
point for work in progress. Prior to the
pandemic we had been expecting to achieve
completions ahead of the 17,856 homes we
achieved last year, and had been investing
in work in progress to deliver a substantial
number of homes in our fourth quarter.
As a result of this and the decrease in our
profit for the year, our ROCE, which had
grown from 23.9% in FY15 to 29.7% in FY19,
reduced to 15.6% in FY20.
Our balance sheet remains strong, with year
end net cash of £308.2m (2019: £765.7m),
land creditors of £791.9m (2019: £960.7m)
and therefore a modest total gearing
(including land creditors) of 12.3% (2019:
4.9%). At 30 June 2020 our net tangible
assets were £3,933.3m (2019: £3,960.8m).
Throughout the year we have maintained
a disciplined approach across our
operations and this combined with our
strong balance sheet will enable us to
keep investing in our business as market
conditions become clearer.
The health and safety of our employees,
sub-contractors and customers remains
a fundamental priority. We have continued
to rebuild productivity levels and have seen
our production levels continue to improve,
benefiting from the return of additional
sub-contractors, extended operating hours
on many of our sites and with delayed
new sites commencing construction. As
we continue to build our capacity this
will provide the foundation for increasing
volumes following the COVID-19 disruption,
whilst maintaining our industry leading
quality.
Whilst land buying was temporarily
suspended, we remained active in the
land market, negotiating attractive fully
conditional options. We have now re-
entered the market selectively, maintaining
our disciplined approach, where we see
attractive opportunities.
Our operating framework and appropriate
capital structure have served us well
over the last three years. The resilience
they have created was demonstrated in
FY20 given the unprecedented impact
of COVID-19. Reflecting the changed
economic and trading backdrop we
have adjusted our operating framework
to reflect our dividend policy, include a
new target range for land creditor usage
and introduced a target for minimal total
indebtedness in the medium term.
We enter FY21 focused on rebuilding both
our completion volumes and our financial
performance towards our unchanged
medium term targets.
FY20
Areas of focus for FY21
Medium term targets
Wholly
owned
completions
12,034
homes
• Driving site based construction
activity
• Maximising sales for customers who
will not qualify under the new Help to
Buy scheme
• Wholly owned home completion
growth to 14,500 - 15,000 homes in
FY21
Disciplined growth in
wholly owned home
completions
Gross
margin
18.0% • Rebuilding site based construction
activity to improve fixed cost recovery
• Controlling materials and labour
cost inflation
ROCE
15.6% • Tight control of working capital with
build release aligned with home
completion cash generation
• Focus on cash with selective
land spend beyond land creditor
settlements
Land acquisition at a
minimum 23% gross
margin and optimising
performance
Minimum of 25%
delivered through
improving margin and
return to operating
framework
14
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Barratt Developments PLCwww.barrattdevelopments.co.uk Sustainability
We are committed to creating a positive
environmental, social and economic legacy
for future generations. This goes to the core
of quality housebuilding – creating high
quality homes and communities in great
places, and ensuring we provide a positive
legacy that helps local communities thrive.
Providing confidence to our customers that
their homes are designed and built to meet
the challenges of the future is vital, and
underpins our business.
The protection and enhancement of the
resources on which our business relies,
our people, the communities in which
we operate, our partners and the planet
require that we do business sustainably
and create value for our stakeholders.
Good governance of these activities and
connecting social, environmental and
economic value across our business leads
to better long term decisions.
From keeping people safe and healthy
to ensuring sustainable and responsible
sourcing, our Sustainability Framework
2020+ ensures we continually progress the
sustainability focus areas that matter most
to our stakeholders. Each of these areas
has set targets and KPIs, with a member of
the Board accountable for specific actions
to ensure delivery.
We have also put in place new sector
leading targets:
• Earlier this year we became the first
national housebuilder to publish
science-based targets for reducing
carbon emissions, and the new net
zero goal extends this sustainability
roadmap further;
• Commitment to purchase 100% of our
operational electricity from renewable
sources by 2025;
• Committed to delivering low carbon
homes for customers, we set a target to
ensure new standard housetypes will be
net zero carbon in use from 2030; and
• By 2040 we will become a net zero
greenhouse gas emissions business
across all of our direct operations.
Sustainability is embedded in our business
through our purpose to lead the future of
housebuilding by putting our customers
at the heart of everything we do. This is
delivered through our strategic priorities
of customer first, great places, leading
construction and investing in our people,
and our principles of keeping people safe,
being a trusted partner, building strong
community relationships, safeguarding the
environment and ensuring the financial
health of our business.
Customer first: Leadership in
quality and service
We have a long term commitment to quality
and customer service and we believe
our industry leadership in these areas is
fundamental to maintaining the strength and
resilience of our business. This enduring
commitment to quality and customer
service has been evidenced through external
benchmarking. We are the only major
housebuilder to be awarded the maximum
5 Star rating by our customers in the HBF
customer satisfaction survey for 11 years in
a row and our customer satisfaction rating is
consistently above 90%.
↑ Barratt Homes at The Spires, St Ives, Cambridgeshire.
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Great places: We remain committed to
building more high quality homes
support all of our employees throughout our
period of hibernation on their normal pay.
We remain committed to playing our part
in addressing the housing shortage. We
design attractive developments that meet
our high quality standards and through
effective place making, will enhance local
communities for years to come. 93 of our
sites received Built for Life accreditations,
23 of which were rated outstanding.
Leading construction: Construction
excellence and modern methods of
construction
We seek to achieve excellence across all
aspects of construction. Our people take
pride in what they do and this helps us
put customers first by delivering industry
leading quality homes. This commitment
has once again been recognised through
the NHBC Pride in the Job Awards where
in June 2020 our site managers were
awarded 92 awards, more than any other
housebuilder for the 16th consecutive year.
We are also 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. In 2020
we constructed 2,652 homes (21% of our
home completions) using MMC including
timber frame, large format block and offsite
manufactured ground floor solutions and
roof cassettes. Our target is to use MMC
in the construction of 25% of our homes
by 2025.
Timber frame construction is a sustainable,
low energy method of build and is
assembled in factories to high standards.
Over the last three years, we have
built 6,035 homes using timber frame,
the majority in Scotland. We are also
increasing its use across England and
Wales. Last year, we acquired Oregon, a UK
manufacturer of timber frames. Oregon,
which was already one of our key timber
frame suppliers providing high quality
products and excellent customer service,
has continued to expand and has opened
an additional factory as we look to expand
further our use of timber frame.
Investing in our people
Our employees have reacted in a resilient
and adaptable way during the challenges
posed by COVID-19, both those who worked
hard to get us ready to restart on site, and
those who were not able to work during the
period of temporary closure, many of whom
were inspirational as volunteers in their
local communities. I would like to take this
opportunity to thank them for the support
and commitment that they have shown to
our business. We were pleased to be able to
16
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.
We are investing for the future and
continue to develop award winning
schemes including those for graduates,
apprentices and former Armed Forces
personnel, alongside our own Degree
Apprenticeship in Residential Development
and Construction run in conjunction with
Sheffield Hallam University.
We also continue to collaborate with the
wider housebuilding industry. We actively
participate in the Home Building Skills
Partnership, which aims to attract new
entrants to the industry, provide the skills
for today and the future, and support the
supply chain in developing the skills they
need to support our industry.
We seek to create a great place to work
founded on an open and honest culture.
We engage with our employees on a
regular basis so we can understand their
issues and concerns and address them.
We carry out an annual engagement
survey, further surveys throughout the
year and consult with our Workforce
Forum. The feedback received is used to
drive continual improvements. Employee
engagement remains a key measure of
our success and we are pleased to have
maintained UK upper quartile performance
in our engagement survey for the seventh
consecutive year.
We value everyone for who they are and the
unique contribution they bring. We seek
to represent the communities in which we
operate and we know that a diverse team
means a stronger business, is better for our
customers and makes us a more attractive
employer. Through our Diversity and
Inclusion strategy we remain committed
to creating an inclusive environment for
everyone. We have identified targets for
gender and ethnicity representation, our
leaders have completed Diversity and
Inclusion training and all of our employees
complete mandatory diversity e-learning as
part of their induction. We have expanded
our career development program for female
leaders and are committed to supporting
underrepresented groups, to ensure
everyone reaches their potential.
We are now an accredited Living Wage
Employer, making us one of the first major
housebuilders to receive the accreditation.
The real Living Wage is different to the
Government’s National Minimum and
Living Wage, as it is an independently
calculated higher hourly rate of pay that is
based on the actual cost of living. Receiving
this accreditation demonstrates our
commitment to our employees as well as
our suppliers and sub-contractors.
Keeping people safe
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.
Prior to COVID-19, increased activity
levels across the industry in terms of
site openings and production volumes
combined with shortages of skilled
employees and sub-contractors to
contribute to an increased risk of accidents
on sites.
Following the outbreak of COVID-19 the
risk profile of our sites was fundamentally
reassessed, particularly around the
demands for social distancing. Our
sites are operating safely with COVID-19
working practices and protocols that
have been established in line with the
latest guidance from Government, Public
Health Authorities and the Construction
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Barratt Developments PLCwww.barrattdevelopments.co.uk ← Steven Luemba who purchased a Barratt
London apartment at New Mill Quarter,
Hackbridge Road, Wallington, London.
“ We are committed
to creating a positive
environmental, social
and economic legacy for
future generations. This
goes to the core of quality
housebuilding – creating
high quality homes and
communities in great
places, and ensuring
we provide a positive
legacy that helps local
communities thrive. ”
David Thomas
Chief Executive
Leadership Council. This includes changes
to signage, site welfare facilities and
compounds, site access and walkways.
We have also enhanced our induction,
training and support for our employees and
sub-contractors in response to COVID-19.
We have received an Assurance Statement
from the British Safety Council certifying
that our COVID-19 workplace safety, health
and environmental arrangements are in
accordance with current guidance and best
practice, demonstrating our commitment to
providing a safe and healthy workplace.
We have stringent standards and a
continuous focus on health and safety
throughout our business. In line with the
industry we are seeing pressures in this
area but we continue to seek to reduce
the number of injuries occurring. We are
committed to improving our processes
and procedures and challenging unsafe
behaviours. We also continue to focus on
ensuring workers do not suffer long term
issues associated with their work activities
and are looking at ways we can further
improve standards. In the year ended
30 June 2020, our reportable injury incidence
rate was 256 (2019: 297) per 100,000 workers
and our Health and Safety SHE audit
compliance rate was 96% (2019: 96%).
Safeguarding the environment
Reducing carbon emissions
We recognise the contribution we can
make to the UK’s reduction of carbon
emissions and in May 2019 we signed a
letter alongside 127 other businesses,
investors and business networks calling for
the Government to accept the Committee
on Climate Change’s proposed target and
make Britain net zero carbon by 2050.
In January 2020 the Board approved our
own new challenging science-based carbon
reduction targets. In our own operations
we will aim to reduce carbon emissions by
29% from FY18 to FY25, through measures
like reducing diesel used by generators
on site, amending our vehicle policies
and implementing energy efficiency
opportunities across our offices, sites,
sales centres and show homes. During
the year our carbon intensity measure
increased by 9.7% mainly as a result of
delays between our construction activities
and home completions.
In addition, we are focused on the
measurable steps that we can take to
reduce both the embodied carbon in our
supply chain and in-use carbon from
our homes, including increasing the use
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of timber frame in home construction,
which is a sustainable technology. We
have set a target to reduce indirect carbon
emissions by 11% from our supply chain
and our homes by 2030. Partnerships
with our suppliers and sub-contractors
are key to the delivery of our goals and we
continue to engage with them in respect
of this. In July this year we launched a
Sustainability Capability Matrix with our
suppliers, enabling our category managers
to work with our suppliers and together
drive progress against our sustainability
priorities.
We are working with Innovate UK on
AIMCH, a research project to compare
issues such as embodied carbon in homes
and the generation of waste between offsite
and traditional build methods. We are
actively looking at how we can meet the
Future Homes Standard and design homes
which are not connected to the gas grid.
Biodiversity and water
We are aiming to create a net positive
impact for ecology and biodiversity across
all developments we are progressing
through planning from 2020. We hold a
strategic partnership with the RSPB and
released wildlife friendly show home garden
guidance in July 2019. This mandates newly
designed show home gardens to reach at
least ‘Bronze Level’ standard against RSPB
criteria.
We have also published our 'Approach to
Water', which explains the ways in which
the business is mitigating the risks from
flooding and freshwater scarcity both to our
business and to the communities in which
we operate.
Waste
We continue to focus on waste and resource
efficiencies and take practical steps in our
operations to reduce waste.
We have disappointingly seen a further rise
in waste intensity of 18% in FY20 (FY19:
8% increase). This is an 8.6% increase
compared to the baseline in FY15 and puts
our longer term target for waste reduction
at risk. We have undertaken a review and
identified that onsite segregation can be
improved. We commenced a back to basics
campaign in order to reinforce monitoring
and tracking of waste reduction actions
across our sites.
As part of our efforts to analyse and
understand the root causes of waste, we
also conducted a survey of 72 suppliers to
investigate the extent and types of single
use plastic packaging on site, identifying
opportunities to reduce it through further
collaboration.
18
↑ Chloe Fitzgibbon, a sales adviser at our Wychwood Park, Haywards Heath, West Sussex.
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
both locally and nationally and we actively
promote charitable giving and volunteering
amongst our employees. In FY20 we raised
and donated £4.4m (FY19: £2.9m) for
charitable causes.
COVID-19 has made it all the more
important to do what we can to support our
communities. We have donated £100,000
to the NHS Charities Together directly and
an additional £50,000 to NHS Charities
Together through The Sun’s Who Cares Wins
campaign, as well as, £25,000 to The Big
Issue to support vendors who were unable to
sell the magazine during the lockdown.
In the early stages of the pandemic, we also
donated 5,000 medical standard facemasks
to the NHS and all 400 of our defibrillators
to St John Ambulance and St Andrew’s First
Aid. This is in addition to our Big Barratt
NHS Thank You, under which we provide a
deposit contribution to NHS workers trying
to get onto the property ladder. To date the
NHS Thank You has funded over £10.0m of
deposit contributions.
The Group has also entered into new
partnerships with a number of charities
this year. In September 2019, we signed up
to a three year £1m partnership agreement
with Outward Bound Trust. The Trust uses
outdoor adventure programmes to help
young people access nature and build
resilience and self-belief. Our partnership
will help around 2,400 children, while 82 of
our employees will get the opportunity to
act as mentors on Outward Bound
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Barratt Developments PLCwww.barrattdevelopments.co.uk courses. We also entered into a three year
partnership with HighGround to help fund
horticultural therapy services for injured
service personnel and became the official
sponsors of the Whizz Kidz Kidz Board, a
group of young wheelchair users who meet
to discuss and develop recommendations
around the issues facing disabled young
people. These partnerships build on our
existing partnerships with St Mungo’s, a
homelessness charity, The Royal British
Legion Industries (RBLI) helping build
a Centenary Village for ex-servicemen
and women, as well as 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
‘Being a trusted partner’ and ‘Building
strong community relationships’ 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. Through
the Barratt & David Wilson Community
Fund this year we have supported a range
of different causes, from new equipment
for a local sports club to playgroups at
a children’s hospice, and from support
groups for cancer sufferers to library
buses for local schools. A number of our
divisions also supported the fight against
COVID-19, donating to Meals for the NHS
and St John Ambulance.
Dividend policy
We recognise the importance of dividends
to our shareholders. Going forward, we
believe that it is in the best interests
of shareholders to have a long term
predictable dividend income stream,
through an ordinary dividend policy with
a defined level of ordinary dividend cover.
When the Board believes the time is right it
will implement a dividend policy based on a
dividend cover of 2.5 times.
Current trading and outlook
We are focused on rebuilding our
completion volumes to our medium term
target and capacity of 20,000 homes.
We have acquired land in recent years
at a minimum 23% gross margin, and
through our continued focus on operating
efficiencies and the rebuilding of
completion volumes, we continue to target
a minimum 25% ROCE in the medium term.
The sales performance across all regions
in the new financial year to date has been
encouraging, with net private reservations
per average week of 314 (FY20: 250),
resulting in net private reservations
per active outlet per average week of
0.94 (FY20: 0.68). We have also seen a
substantial increase in home completion
volumes in the eight weeks to 23 August
2020, which were up 62.4% compared to
the prior period at 1,439 homes including
JVs (25 August 2019: 886 homes including
JVs). The increased activity levels are being
stimulated by a combination of pent-up
demand, the Stamp Duty holiday and an
understanding that Help to Buy will only be
available to first time buyers and regional
home price caps will exist from April 2021.
Our total forward sales, including JVs as at
23 August 2020 stood at 15,660 homes (25
August 2019: 13,064 homes) at a value of
£3,706.5m (25 August 2019: £3,037.5m).
We are pleased that since the start of
the new financial year we have seen our
production increase, constructing the
equivalent of 347 homes in the week ending
23 August 2020 and we are on track to
deliver our planned output.
Based on current market conditions,
construction activity levels and assuming
no further lockdowns, we expect to grow
wholly owned completions to between
14,500 and 15,000 homes in FY21, and in
addition around 650 completions from our
joint ventures, whilst ensuring we maintain
our industry leading standards of quality
and service.
Whilst there continues to be economic
and political uncertainty, the Group is in a
strong position. 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. We have
therefore now re-entered the land market
selectively, maintaining our disciplined
approach, where we see attractive
opportunities.
Our experienced Board remains focused on
taking the actions necessary to safeguard
the operational and financial strength of the
business whilst our first priority remains
the health and safety of our employees,
sub-contractors and customers.
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
changes in the operating environment in
FY21 and beyond.
David Thomas
Chief Executive
Private
Affordable
Wholly owned
JV
Total
23 August 2020
£m
Homes
25 August 2019
£m
Homes
2,143.7
1,277.6
3,421.3
285.2
3,706.5
6,577
8,249
14,826
834
15,660
1,583.5
1,133.9
2,717.4
320.1
3,037.5
5,088
7,089
12,177
887
13,064
Variance %
1 September 2020
£m
35.4
12.7
25.9
(10.9)
22.0
Homes
29.3
16.4
21.8
(6.0)
19.9
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chief Financial Officer’s review
“ Our operating framework
and appropriate capital
structure has served us
well over the last three
years. The resilience
they have created was
demonstrated in FY20 given
the unprecedented impact
of COVID-19. ”
Jessica White
Chief Financial Officer
Our financial performance this year is substantially
lower than our expectations after our half year
performance due to the significant impact of
COVID-19. The strength of our balance sheet, the
resilience embedded in our business model and the
immediate actions taken by the Board positioned us
well for the challenges arising from COVID-19.
Results for the year ended 30 June 2020
Profitability
We delivered a resilient performance on home reservations in the year given that COVID-19
resulted in the physical closure of our sales centres from 23 March until 21 May in England,
11 June in Scotland and 25 June in Wales. Our overall net private reservation rate for the
year was 0.60 (2019: 0.70) per active outlet per average week.
We had three distinct periods for reservations in the year as follows:
Pre lockdown
38 Weeks
(1 July to
22 March)
Lockdown
8 Weeks
(23 March to
17 May)
Post lockdown
6 Weeks
(18 May to
30 June)
(0.10)
0.82
n/m
0.63
0.69
(8.7%)
Full Year
(1 July to
30 June)
0.60
0.70
(14.3%)
2020
2019*
Variance %
* 2019 is equivalent period.
0.73
0.68
7.4%
Prior to the COVID-19 pandemic, the
market was stable with a net reservation
rate of 0.73 per active outlet per average
week, 7.4% up on the 0.68 achieved in the
prior year equivalent period (‘PYEP’).
Whilst we kept our sales centres open
virtually throughout the pandemic, and
implemented new selling techniques
using technology, during the lockdown
period we experienced a lower level of
reservations as most customers prefer to
visit our sales centres before reserving. We
also experienced a relatively high level of
cancellations in this period, a reflection of
build-related delays to completion dates
and employment uncertainty for some
customers. This resulted in a net negative
reservation rate of 0.10 per active outlet per
average week. This period is normally the
height of the spring selling season with 0.82
net private reservations secured in the PYEP.
Following the reopening of our sales
centres and our controlled restart of
construction activities, we achieved a net
reservation rate of 0.63 per active outlet
per average week for the last six weeks
of our financial year. Whilst this was 8.7%
below the PYEP, this rate included all of our
active outlets in a period where our sales
centres gradually reopened. We also saw
our cancellation rate return to more normal
levels in this period.
During the year, we operated from an
average of 366 active outlets (2019: 379
outlets) including JVs. We launched 75
new outlets (2019: 163 outlets) including
JVs in the year with the lockdown severely
curtailing new outlet openings in the final
quarter. In FY21 we expect to operate
from a slightly lower number of active
outlets reflecting delays to new site
commencements created by the impact of
the period of lockdown on our operations.
We expect to legally complete a similar
proportion of affordable homes at c. 20% of
total home completions in FY21.
20
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Barratt Developments PLCwww.barrattdevelopments.co.uk Following the disruption to build from the site closure, lockdown and restart process, completion volumes substantially declined year on
year as follows:
Completions (homes)
Private
Affordable
JV
Total (including JVs)
FY20
9,568
2,466
570
12,604
FY19
13,533
3,578
745
17,856
Change
(29.3%)
(31.1%)
(23.5%)
(29.4%)
Selling prices have remained resilient
throughout the year, with no discernible
change in pricing levels post COVID-19.
Our total average selling price ('ASP')
was £280.3k (2019: £274.4k), with private
ASP at £310.6k (2019: £312.0k), reflecting
changes in mix with a lower proportion
of completions from London. Outside of
London, our private ASP increased by 2.2%
to £303.6k (2019: £297.2k), mainly driven by
geographical mix. Affordable ASP increased
by 23.3% to £163.0k (2019: £132.2k)
reflecting changes in mix, primarily the
proportion of completions from London.
The significant progress against our
medium term targets and our profitability
was severely impacted by the COVID-19
pandemic due to a material reduction
in completion volumes and substantial
additional costs.
Our adjusted gross margin in FY20 was
18.5% (2019: 22.8%), with the decline
primarily reflecting the reduction in
completion volumes coupled with additional
costs associated with expected extended
site durations. Adjusted gross margin also
includes 150 bps of non-recurring costs,
relating to non-productive site overheads
during lockdown (£45.2m, 130 bps impact)
and an inventory provision (£8.2m, 20 bps
impact). Including adjusted items from
legacy property costs and CJRS grant
income, gross margin was 18.0%
(2019: 22.8%).
This year, we delivered an adjusted
operating profit of £507.3m (2019: £904.3m)
at an adjusted operating margin of 14.8%
(2019: 19.0%). The decline reflected
the reduction in adjusted gross margin
partly offset by a significant reduction in
administrative expenses primarily due
to the effect of COVID-19 on incentive
schemes. Operating margin was 14.4%
(2019: 18.9%) again reflecting the costs
associated with legacy properties and CJRS
grant income.
The chart details the movements in
operating margin in FY20 with further detail
provided on page 22.
19.0%
18.0%
17.0%
16.0%
15.0%
14.0%
13.0%
Non-recurring items
40 bps
40 bps
Trading items
220 bps
Non-recurring items
190 bps
190 bps
50 bps
50 bps
18.9%
18.5%
90 bps
20 bps
120 bps
60 bps
130 bps
120 bps
80 bps
14.8%
FY19
Remove
non-
recurring
items
Increase
Decrease
FY19
subtotal
Volume
impact
Transition
to new
sites
Net
inflation
Site
extension
Mix &
other
Admin
expenses
Inventory
provision
charge
Non-
productive
site
overhead
impact
FY20
adjusted
Cost on
legacy
properties
Grant
income
in respect
of COVID-19
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14.4%
FY20
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020
Chief Financial Officer’s review CONTINUED
The decline in adjusted operating margin
reflects a number of factors:
• Completion volumes: the most
significant impact related to the decline
in wholly owned home completion
volumes. The 29.7% or 5,077 reduction
in wholly owned completions created a
190 bps negative impact.
• New sites: the benefit of the Group’s
minimum 23% gross margin on
incremental site openings as well as
the improved build cost performance of
our housing range generated a 50 bps
positive impact.
• Net impact of build costs relative to
selling prices: modest sales price
inflation across the year relative to
underlying build cost inflation produced
a 50 bps negative impact.
• Site extension costs: this arises from
an expected extension in site durations
due to COVID-19 of approximately
six months reflecting the recovery in
site efficiency through to year end.
In line with our accounting policy,
which requires an equal margin to be
recognised on all homes completed
in the financial year and future years,
there was a charge of £29.1m across
all ongoing sites in 2020 and a 90
bps negative impact on the adjusted
operating margin.
↓ Our New Lubbesthorpe development in
Leicestershire, winner of the RTPI national
award for Excellence in Planning to Deliver
Homes in Large Schemes.
• Mix and other items: changes in sales
mix and other smaller items combined
to create a 60 bps negative impact.
• Administrative expenses: following the
onset of COVID-19 we took a number
of actions to reduce costs, including
the cessation of all recruitment activity
and the decision to make no payments
under the FY20 annual bonus scheme,
which contributed to a significant
reduction in administrative expenses.
This added 120 bps to the adjusted
operating margin. In FY21, we expect
administrative expenses will revert to
previous levels at c. £195m.
•
Inventory provision charge: primarily
resulting from changes in the expected
commercial revenues following the
substantial deterioration in the retail
and restaurant sector, reduced the
viability of a mixed use site and, as a
result, there was a net charge of £8.2m
with a 20 bps reduction.
• Non-productive site overheads:
these costs, which would normally
be capitalised to WIP were instead
expensed due to the absence of activity
during the lockdown period and totalled
£45.2m. These costs related to safety
measures, non-productive site and
site-based employee costs and had a
130 bps negative impact on the adjusted
operating margin.
There were two adjusted items recognised
during the year, being costs associated
with legacy properties and grant income
received under the CJRS.
• Cost associated with legacy
properties: the Group incurred an
additional £39.9m (2019: £6.9m) of
costs in the year. Of this, £11.4m
related to legacy properties comprising
costs related to developments where
cladding has needed to be removed
and replaced. The remaining £28.5m
relates to Citiscape and the associated
review. As previously announced, in
July, in line with our commitment
to customers and recognising the
responsibility we have for the work
of our partners, we took the decision
to pay for required remedial action
on the reinforced concrete frame at
Citiscape, a development designed for
us in 2001 by a third-party structural
engineering firm, which would
otherwise fall on leaseholders. We
apologise unreservedly to affected
customers that the standards that we
set for ourselves and our partners were
not met at these developments. While
we have no legal liability to cover the
costs of this work, as a responsible
developer, we appointed independent
structural engineers to review the
other developments where reinforced
concrete frames were designed for us
by either the same original engineering
firm or by other companies within the
22
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Balance sheet
The Group’s net assets at 30 June 2020
totalled £4,840.3m (2019: £4,869.0m) after
the payment of dividends totalling £373.2m
(2019: £452.3m).
At 30 June 2020, the Group had net cash
balances of £308.2m (2019: £765.7m).
As at 30 June 2020 land creditors had
reduced to £791.9m (2019: £960.7m) and
equated to 25.4% (2019: 31.3%) of the
owned land bank, in line with our pre-
existing operating framework, but also
reflecting our suspension of land buying
activity from March through to August. Our
total gearing, including land creditors, has
increased to 12.3% at 30 June 2020 (2019:
4.9%) an increase of 740 bps. Whilst our
total gearing, including land creditors,
has reduced by 360 bps since 2016, we are
focused on reducing it from the current
level over the medium term.
In FY21, we expect average net cash of
c. £300m across our financial year, and
net cash balance of around £550m at
30 June 2021. Land creditors are expected
to further reduce, reflecting the suspension
of land buying in FY20 and the timing of
payments due to existing land creditors,
with £492.9m falling due for payment in
FY21. Land creditors due beyond FY21 total
£299.0m at 30 June 2020 (2019: £385.6m due
beyond FY20).
Net tangible assets were £3,933.3m (386
pence per share) at 30 June 2020 (2019:
£3,960.8m, 389 pence per share). Land,
net of land creditors, and work in progress
totalled £4,172.8m (410 pence per share) at
30 June 2020 (2019: £3,743.7m, 368 pence
per share).
group of companies which has since
acquired it. The preliminary reviews
of all of these developments have not
identified any issues as severe as those
present at Citiscape. Engineers are now
undertaking more detailed reviews to
see if any remediation of the concrete
frames is required and in line with our
commitment to put our customers first,
we will ensure that no costs associated
with these remedial works are borne
by leaseholders. The total costs for
the required remedial programme at
Citiscape, the structural engineering
reviews and remediation required at
other buildings, is estimated to be
around £70m, of which, based on the
Group’s liability for works at 30 June,
£22.1m was provided in H2 FY20. At
its meeting on 5 July 2020, the Board
committed to pay for other remedial
works including Citiscape, with a total
estimated cost of £48m, which will be
charged in FY21.
• CJRS grant income: through the period
of temporary closure of the business,
where around 85% of our employees
were placed on furlough, we used the
Government’s CJRS receiving £26.0m.
With our employees, other than those
shielding, having returned from
furlough at the start of July and our
financial position remaining resilient,
the Board decided on 5 July 2020 to
repay all furlough funds received. With
the decision to repay CJRS funds taken
after the year end, we have recognised
the total grant income received in FY20
as an adjusted item. In FY21 the return
of this grant income will be recognised
as an expense in adjusted items.
As a result, we delivered an operating profit
of £493.4m (2019: £901.1m).
Net finance charges were £29.9m (2019:
£28.8m). This £1.1m increase reflects the
cash phasing profile in the year, a £2.0m
finance charge on leased assets following
the adoption of the new accounting
standard offset by a £1.6m reduction in
the imputed interest on land creditors,
which as a proportion of our owned land
bank reduced in line with our operating
framework. In FY21, finance costs are
expected to be similar to FY20 at c. £30m,
of which c. £10m is cash and c. £20m is
non-cash.
Joint ventures delivered a reduced profit for
the year of £28.3m (2019: £37.5m) reflecting
reduced profit from land sales and the
impact of the COVID-19 lockdown on
both build activity and completions. In FY21,
we expect to deliver around 650 joint
venture completions.
As a result, profit before tax for the year
declined to £491.8m (2019: £909.8m). The
tax charge for the year was £89.1m (2019:
£170.4m) at an effective rate of 18.1%
(2019: 18.7%).
Basic earnings per share reduced to 39.4
pence per share (2019: 73.2 pence per
share).
With the substantial decline in Group
profitability in FY20, our ROCE, which had
improved from 23.9% in FY15 to 29.7% in
FY19 and was 29.3% in the 12 month period
to 31 December 2019, reduced to 15.6%
in FY20.
Cash flow
Net cash decreased to £308.2m at 30 June
2020 (2019: £765.7m). The decline in net
cash primarily reflected a £121.0m net cash
outflow from operating activities (2019:
£361.3m cash inflow), a net £41.0m cash
inflow from reduced investment in joint
ventures (2019: £15.9m cash inflow) and
£373.2m dividends paid to shareholders in
the year (2019: £452.3m).
The major drivers of the net cash outflow
from operating activities in the year to
30 June 2020 were:
• The reduced level of profit from
operations, which declined to £493.4m
(2019: £901.1m);
• A cash outflow in respect of working
capital and provisions of £428.1m (2019:
£347.5m); and
•
Interest and tax payments which
totalled £199.0m (2019: £171.8m).
The £428.1m outflow in respect of working
capital and provisions consisted of:
• A £211.8m increase in inventories
reflecting the additional construction
work in progress carried at the end
of the year following the disruption
to completions caused by COVID-19,
as well as a modest increase in land
investment;
• A £129.3m decrease in receivables
which reflected the lower level of
construction and sales activity in the
last quarter caused by COVID-19;
• A £373.8m decrease in respect of
payables. This consisted of a £168.8m
reduction in land creditors and a
£216.7m decrease in trade payables
reflecting payments made to our
suppliers and sub-contractors, which
were not replaced at the same level due
to the lower level of construction activity
due to the impact of COVID-19 in our
last quarter; and
• A £28.2m increase in provisions as a
result of additional costs associated
with legacy properties.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chief Financial Officer’s review CONTINUED
The key dimensions underpinning
delivery of our strategy
Land and planning
The land market prior to COVID-19 remained
stable allowing our operations to secure
plots on attractive terms at our minimum
23% gross margin and 25% ROCE hurdle
rates. We acted quickly and decisively in
response to COVID-19, and in line with
our established action plan for significant
unexpected events, suspended land
purchasing on 19 March 2020. As a result,
we approved the purchase of significantly
less land in FY20 than we had envisaged
earlier in the financial year with £368.1m
(2019: £859.8m) of operational land approved
for purchase, which we expect to equate to
9,441 plots (2019: 18,448 plots).
The suspension of land buying activity both
protected our cash flows and enabled us to
assess the market and gain greater clarity
on the economic impact of the pandemic.
We have a strong land bank and have
therefore recommenced land buying
selectively, maintaining our disciplined
approach, where we see attractive
opportunities. Including the payment of
land creditors, we would expect to invest
c.£850m in land during FY21. (FY20: £780m
invested in land).
Our target remains to have 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. The aim
for a shorter than sector average land
bank reflects our focus on ROCE and
our fast build and sell model. Reflecting
our reduced completion volumes in FY20
due to COVID-19, at 30 June 2020 we are
above this target with 6.7 years land supply
comprising 5.7 years owned land and 1.0
year of controlled land, with the owned land
bank including land with both outline and
detailed planning consents.
Our land bank at 30 June comprised:
Our land bank
30 June 2020 30 June 2019
Owned and unconditional land bank (plots)
Conditionally contracted land bank (plots)
Total owned and controlled land bank (plots)
Number of years’ supply
JVs owned and controlled land bank (plots)
Strategic land (acres)
Land bank carrying value
At 30 June 2020, the ASP of plots in
our owned land bank was £276,000
(2019:£275,000).
During the year we delivered 2,929 (2019:
4,374) completions from strategically
sourced land, and we converted 3,137 plots
(2019: 7,915 plots) of strategic land into our
owned and controlled land bank. Around
20% of our strategic land is allocated or
included in draft local plans. We continue
to target 30% of completions from strategic
land in the medium term, which we believe
is an appropriate level for our business.
Following our success with planning over
the past 12 months we are well positioned,
with all of our expected FY21 completions
(2019: all of our FY20 completions)
Improving efficiency and reducing costs
Improving the efficiency of our operations
and controlling costs whilst maintaining our
focus on quality and customer satisfaction
remains a key focus for the Group, as both
will enhance our margin and improve
business resilience. Our new housetype
ranges maintain our high standards of
design whilst being faster to build, helping
us to reduce build cost and are more
suitable for MMC. We delivered 60% of our
completions, including JVs, outside London
from these ranges across the country in the
year (2019: 36%). Of our outlets, including
JVs, 79% (2019: 72%) now have the new
product ranges.
Over the next few years, we would expect
that c. 90% of our outlets would be suitable
for our new product ranges equating to
c. 85% of our completions. 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.
68,393
11,931
80,324
6.7
5,400
13,271
3,112.3
66,423
13,599
80,022
4.7
5,207
11,995
3,071.6
We continue to make further refinements
to our housing ranges in response to
the changing costs of certain trades and
materials, without affecting our quality or
design standards. As part of our continuous
review process, we have introduced hipped
roof designs to some of our standard
housetypes, which reduce the amount of
brickwork required, and optimised internal
floor plans to achieve more usable living
space from the same house footprint and
increase profitability.
We have a robust and carefully managed
supply chain with around 90% of the
housebuild materials sourced by our
centralised procurement function being
manufactured or assembled in the UK. We
are also 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 have fixed price agreements in place for
95% of these materials to December 2020
and 62% are fixed until June 2021.
We are currently seeing limited pressure
on skilled labour supply given the impact of
COVID-19 with any shortages being location
and trade specific. We are also improving
construction efficiency and reducing
demand on labour through the continued
roll-out of our new housetype ranges,
which are easier and quicker to build, and
through the use of MMC. We anticipate
inflation of between 1% and 2% for FY21
broadly in line with FY20.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Operating framework and
capital structure
Our operating framework and appropriate
capital structure has served us well
over the last three years. The resilience
they have created was demonstrated in
FY20 given the unprecedented impact of
COVID-19.
We will continue to maintain an appropriate
capital structure as part of our disciplined
operating framework. Shareholders’ funds
and land creditors fund the longer term
requirements of the business and term
loans and bank debt fund the shorter term
requirements for working capital.
Reflecting the changed economic and
trading backdrop we have adjusted our
operating framework to reflect our future
dividend policy, include a new target range
for land creditor usage and to introduce
a target of minimal total indebtedness in
the medium term. Our revised operating
framework is as follows:
Land bank
Land creditors
Net cash
↑ Lucy Hendricks and Ythan Rickards who purchased an apartment at Barratt Homes’ Wychwood Park
development in Haywards Heath, West Sussex, using their savings, the Government’s Help to Buy
scheme and Barratt’s own NHS Deposit Contribution Scheme.
New operating framework
Positions at 30 June 2020 and 2019
c. 3.5 years owned and c. 1.0 year
controlled
2020: 5.7 years owned and 1.0 year controlled
(2019: 3.9 years owned and 0.8 years controlled)
Reduce usage to 15 - 25% of the
land bank over medium term
Reduced to 25.4%
(2019: 31.3%)
Modest average net cash over the
financial year
Year end net cash
FY20 average net cash of £348.3m (2019: £298.3m)
2020: £308.2m
(2019: £765.7m)
Total indebtedness (net cash and land creditors)
Treasury
Dividend policy
Minimal year end total indebtedness
in the medium term
2020: total indebtedness of £483.7m
(2019: total indebtedness of £195.0m)
Appropriate financing facilities
£700m RCF extended to November 2024
£200m USPP maturing 2027
2.5× dividend cover
FY20 no dividend proposed
(at the appropriate time)
(2019: 46.4p per share)
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Chief Financial Officer’s review CONTINUED
Tax strategy
The Group 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 2020 was £89.1m (2019: £170.4m).
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. The rate for the
year ended 30 June 2020 was 18.1% (2019:
18.7%) which is marginally lower (2019:
lower) than the standard effective rate of
tax of 19.0% (2019: 19.0%).
In a strong financial
position entering FY21
During the year we have demonstrated
financial discipline across our operations,
showing the benefit of our clear, well
embedded operating framework. We closed
the year with a strong financial position
comprising a substantial net cash balance
and a well-capitalised balance sheet,
positioning us well for FY21.
Jessica White
1 September 2020
Our operating framework provides
the strong financial foundation for
our business:
• Land bank: our land bank framework
is unchanged. 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 reflecting our focus on ROCE and
our fast build and sell model. We are
above this framework level, reflecting
the decline in our completions. Through
our focus on rebuilding completion
volumes, we expect to gradually realign
with our operating framework.
• Land creditors: following the reduction
in land creditors to 25.4% of the land
bank in FY20, and in order to reduce
gearing and further strengthen our
balance sheet, we have revised the
targeted range of land creditor usage to
a 15 – 25% range.
• Net cash: in order to preserve a
resilient balance sheet, we continue to
seek to maintain a modest average net
cash position over the financial year.
• Total indebtedness: in order to
strengthen our balance sheet further,
in the medium term, we will target
achieving a minimal total indebtedness
at year end, where total indebtedness
is the combination of net cash and land
creditors.
• Treasury: we will continue to maintain
an appropriate capital structure as
part of our disciplined 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.
• Dividend policy: when the Board
believes the time is right it will
implement a dividend policy based on a
dividend cover of 2.5 times.
Pensions
The Group operates a funded defined
benefit pension 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 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.
Over the years, the defined benefit section
has been well funded due to the successful
working relationship between the Trustee
and the Company. During the course of
FY20, both parties worked together to
investigate options for insuring the defined
benefit members’ benefits with a UK-based
insurance company, with the objective of
ensuring the financial security of those
benefits for the long term. After a detailed
selection process, on 16 June 2020, the
Trustees entered into a ‘buy-in’ using a bulk
annuity insurance contract with an insurer
in respect of the liabilities of the defined
benefit scheme. The insurer will pay into
the Scheme cash matching the benefits due
to members.
The Company was supportive of the
Trustee’s investment decision as it reduces
the risks in the Scheme and provides
additional security for the benefits due to
members of the Scheme.
The buy-in has resulted in a
re-measurement of the Scheme’s assets,
with an acturial loss of £69.2m recognised
in the Group and Company Statement of
Comprehensive Income. Following the
buy-in there is a defined benefit asset of
£3.5m on the Balance Sheet reflecting the
remaining assets held by the Scheme.
Treasury
Relationships with banks and cash
management are coordinated centrally
as a Group function. This year our cash
balances and bank overdrafts have been
presented gross rather than net with no
change in our net cash. The Board sets
and 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk ↓ Barratt Homes at Saviours
Place, Stretton, Warrington.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Marketplace
The last financial year
has seen a great deal of
political and economic
upheaval.
213,859
New build completions in
England 2018–19
(2019: 195,294 New build completions in
England 2017–18)
Uncertainty at the start of the year reflected the lack of consensus regarding the
ongoing EU withdrawal negotiations, which resulted first in a new Prime Minister, and
subsequently in a General Election that returned the largest parliamentary majority in 15
years. Although the housing market and the wider economy began to gather momentum
in the early part of 2020, COVID-19 and the subsequent lockdown have since had an
enormous impact on both – the UK economy contracted by 19% in the three months
to May 20201. Government intervention in the economy, such as the furlough scheme
for employees, income support for the self-employed and forbearance measures on
household and corporate debt have insulated the UK against a more severe economic
shock, but the impact on the economy as these measures are withdrawn is unclear.
The UK housing market has rebounded well since lockdown restrictions were eased,
likely due to a release of pent-up demand and assisted by government support like the
Stamp Duty holiday. However, there has been a reduction in high LTV mortgage lending,
which will be exacerbated by the restriction of Help to Buy from April 2021. There is also
expected to be an increase in unemployment in the next 12 months.
Despite these headwinds, we believe that the underlying conditions for housebuilders
remain positive. The majority of people want to own their own home; there is a long term
undersupply of high quality new housing; and the Government has demonstrated its
support for the housebuilding industry.
Housing supply
The most accurate available data suggests
that in the year to March 2019, the number
of new homes built in England increased
by 9.5% to 213,859, part of 241,335 net
additions – the highest figure for 30 years.
Housebuilding output has increased by 80%
since 20132.
However, for a number of years, the country
has failed to build enough homes. Since
the economic crisis of 2008, it is estimated
England has generated a shortfall of over a
million new homes.
To respond to this undersupply, we
increased its build volumes by 60% in the
eight years to June 2019. Our completion
volumes have fallen this year, by virtue
of our decision to close our construction
sites, sales centres and offices to protect
our employees and the general public in
response to COVID-19. Strong financial
management, including during the
pandemic, and an optimised organisational
structure mean we are well placed to
regrow volumes, and we remain committed
to our medium term target of 20,000 wholly
owned completions per annum.
Government policies and the
planning system
The Government remains supportive of the
housebuilding industry, and has made it
clear that increasing housebuilding is an
important part of its overall policy agenda.
There is a good supply of homes coming
through the planning system, with the
annual number of permissions being
consistently above 350,000 for the last three
years. Permissions have also increased
by 95% since the introduction of the NPPF
in 20123, which has significantly boosted
development land supply. In August 2020
the Government unveiled a range of
proposed reforms with a view to speeding
up the approval process, and we would
cautiously welcome these proposals.
From April 2021, Help to Buy will be
restricted to first time buyers and subject
to regional price caps, before the scheme
is removed in 2023. We welcome the
Government’s extension of the build
complete deadline of December 2020,
which threatened to unfairly exclude
thousands of new home buyers. Help to Buy
is an important part of the housing market,
helping grow volumes and supporting home
ownership for over 250,000 families since it
was implemented in 20134. With the recent
withdrawal of high LTV mortgages, it is
especially important that the Government
considers further measures to support
home ownership, and we await the results
of the pilot First Homes.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Additions to housing stock, England
Savills UK Greenfield Development Land
Index versus English Planning Consents
300,000
250,000
200,000
150,000
100,000
50,000
0
7
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New Build
Second hand
New build dwellings
Net conversions/demolitions
Net additional dwellings
Government target
Savills UK Greenfield Development
Land Index
England-Planning consents (‘000’s)
85% LTV
90% LTV
95% LTV
In July 2021 the Government announced a
Stamp Duty holiday, raising the threshold
at which the tax becomes payable to
£500,000, which will support demand in the
coming months. The Government has also
recognised the role that the housebuilding
industry can play in helping the UK reach
its target of being net zero carbon by 2050.
We have responded to the Government’s
policies by engaging with policymakers at
each stage of their development to ensure
that the voices of the industry and of our
customers are heard. We have planned
for the forthcoming Help to Buy changes
through our forward land-buying decisions,
as well as changes to both product design
and to the mix of product on sites. We
are promoting the Stamp Duty holiday to
customers, so that they can take advantage
of the reduced moving costs.
We contributed to the Government’s
consultation on the Future Homes
Standard, and we have committed that all of
our new standard housetypes designs will
be net zero carbon from 2030, alongside
other ambitious targets. You can read
about our science-based targets for carbon
emission reduction on page 234 to 236.
The mortgage market
Mortgage approvals remained steady
during the early part of the financial year,
but demand increased after the general
election, to the point that in February 2020
annualised mortgage approvals reached
over 800,000 for the first time since
2017. COVID-19 then caused a significant
reduction, with approvals in May 2020 87%
lower than in May 2019. Since then, the
market has rebounded, with approvals for
the year to June of 653,5005.
Low interest rates continue to make
mortgage service costs relatively affordable
with some 28.2% of average disposable
earnings required to service a typical
mortgage, still usefully below the long term
average of 32.9%6.
However, mortgage qualification is
becoming more challenging as mainstream
mortgage lenders withdraw their higher
LTV products, particularly on new build
properties. None of the mainstream
mortgage lenders are currently offering
a mortgage of 95% LTV on a new build
property. In particular, this will affect
home movers looking to upsize who lack
significant equity in their existing home,
or first time buyers who are trying to buy
homes above the Help to Buy regional
price caps.
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We continually review and adapt our
product ranges to fit the requirements of
a changing market, and to ensure they
are available to a wide range of incomes
and lifestyles. The flexibility of our range
also means we are able to re-plan sites
according to market conditions and
consumer demand as the need arises. We
continue to work with building societies,
banks and other financial institutions
to both introduce more lenders to the
new build sector and to increase lender
understanding.
Sources
1.
ONS, GDP Monthly Estimate, https://www.ons.
gov.uk/economy/grossdomesticproductgdp/
bulletins/gdpmonthlyestimateuk/may2020,
July 2020.
2. MHCLG, Table 120: components of housing
supply; net additional dwellings, https://www.
gov.uk/government/statistical-data-sets/live-
tables-on-net-supply-of-housing,
November 2019.
3.
HBF and Glenigan, Housing pipeline report –
Q3 2019 report, https://www.hbf.co.uk/news/
housing-pipeline-report-q3-2019-report/,
February 2020.
4. MHCLG, Help to Buy equity loan statistics,
5.
6.
https://www.gov.uk/government/collections/
help-to-buy-equity-loan-and-newbuy-statistics,
July 2020.
Bank of England, A5.4 Approvals for
lending secured on dwellings, https://www.
bankofengland.co.uk/statistics/tables, July 2020.
“The mortgage payment 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.”
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020
Business model
Our purpose 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.
Financial health
• Financial capital
Construction and developments
• Building materials
Our people
• Employees and 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
Targeted land
buying and effective
planning
We purchase land in
targeted locations in
line with our hurdle
rates, which enables
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.
Outstanding design
We design outstanding
homes using
standardised house
designs. Through
customer research we
continually strive to
innovate and develop
these designs. We
design 'Great places'
that will stand the test
of time.
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
ensure efficient delivery
of our developments and
continue to work with
suppliers to develop and
test various forms of
MMC and reduce carbon
emissions, waste and
water use.
Competitive advantages
Commitment to quality and
customer service
We are the industry leaders in quality and
customer service. We have made a significant
investment over many years in our processes
and procedures to support this. Our quality and
service performance is key to the strength of
our business, our reputation and our licence to
operate in communities across the country.
Doing the right thing, customer
focus and pride in what we do
Our business is founded on a culture of
doing the right thing, customer focus
and pride in what we do. This culture is
ingrained and guides the actions of our
employees to ensure our commitment to
quality and customer service is delivered
across all areas of our business model.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Investment in the housebuilding value chain
Value for stakeholders
Long term value creation
This purpose defines the way we do business and is incorporated within our
business model, enabling us to deliver value, create sustainable returns for
shareholders and make a positive difference to stakeholders.
Customers
We are the only major national
housebuilder to achieve the maximum
5 Star HBF rating for customer
satisfaction for 11 consecutive years.
We provide our customers with a
positive home buying experience and
dedicated after-sales care.
Shareholders
Our revenue derives principally
from the sale of homes we build.
Maintaining a good level of sales
of our homes leads to revenues
and returns to shareholders. We
continually focus on improving
our operations and their efficiency
through our medium term targets,
which 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
Local investment in infrastructure
and regeneration.
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 create a positive legacy
that helps local communities to thrive.
Wider society
We are building the homes the
country needs, creating jobs and
supporting economic growth.
Financial health
Shareholder returns:
•
•
In total £1.6bn returned to
shareholders to November 2019.
COVID-19 created unprecedented
uncertainty, resulting in no dividend
payments in respect of FY20.
•
2.5 times dividend cover policy.
Construction and developments
•
High quality homes and
developments that socially
and environmentally enhance
communities, and leave a lasting
legacy for future generations.
Our people
•
Job creation and skills
enhancement, addressing the
industry’s skills shortage. Skilled
and engaged employees 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.
Taxation contribution.
Design and innovation.
Trusted reputation with sustainable
brand recognition.
Continual improvement and
innovative solutions developed in
collaboration with supply chain.
Land and environment
• Create a net positive impact for
ecology and biodiversity across
all new developments that we
progress through planning from
2020 onwards.
•
•
Reduction in energy consumption,
carbon emissions, waste
generation and water.
Increased use of timber frames,
renewable materials that use
less energy than conventional
construction methods.
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
sales.
Our strong, well
recognised brands
– Barratt Homes,
David Wilson Homes
and Barratt London –
have carefully defined
market positions.
Resilient, sustainable business
We are a resilient and adaptable business that
is built for long term growth while responding to
and embracing change across all areas of our
operations. This is what enables us to deliver
strong financial and operational performance
and create long term value for our stakeholders.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Aligning our purpose, strategic priorities,
principles and culture
Our purpose is to lead the future of
housebuilding by putting customers
at the heart of everything we do. This
defines our actions and the way we do
business. We believe that high quality
homes and excellent customer service
are fundamental to our ongoing success.
Our strategy is divided into four strategic
priorities: Customer first; Great places;
Leading construction; and Investing in
our people, with sustainability embedded
throughout our priorities. This helps us
to deliver our purpose. These strategic
priorities are supported by our principles,
which are embedded in our operations and
the way we work. Underpinning all of these
activities is a culture, which demonstrates
we do the right thing, we have a strong
customer focus, we are resilient and
adaptable and have pride in what we do.
Our purpose
Strategic priorities
To lead the future
of housebuilding
by putting
customers at
the heart of
everything we do
Customer first
The quality of our homes and our high
standards of customer service are key to
our ongoing success
Read more on pages 50 to 51
Great places
We secure good value land and planning
consents and design great places where
people aspire to live
Read more on pages 52 to 53
Read more on pages •• to ••
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Barratt Developments PLCwww.barrattdevelopments.co.uk Leading construction
We deliver the highest quality homes by
focusing on excellence across all
aspects of construction
Read more on pages 54 to 57
Our principles
Our culture
Keeping people safe
Read more on pages 62 to 63
Doing the
right thing
Being a trusted partner
Read more on pages 64 to 65
Customer
focus
Building strong
community relationships
Read more on pages 66 to 67
Resilience
and adaptability
Safeguarding the
environment
Read more on pages 68 to 70
Pride in
what we do
Investing in our people
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
Read more on pages 58 to 61
Ensuring the financial
health of the business
Read more on pages 16 to 21
Read more on pages 92 to 95
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 How our strategic priorities and principles
support our purpose and culture
Our priorities
Description
Progress in FY20
Customer first
The quality of our homes
and our high standards of
customer service are key to
supporting our purpose. Our
culture of customer focus
and doing the right thing help
us to continue to enhance
our customer first strategic
priority.
•
HBF 5 Star status for the 11th
consecutive year, the only major
national housebuilder to achieve
this record.
•
Delivered 2,466 affordable
homes.
• Launched an NHS and Armed
Forces Deposit Contribution
Scheme.
We secure high quality land
and planning consents.
Our people take pride in
what they do and design
our developments with
customers at the heart of
their decisions, making them
places where people aspire
to live.
Great places
Leading
construction
Investing in
our people
We seek to achieve
excellence across all aspects
of construction. Our people
take pride in what they
do and this helps us put
customers first by delivering
industry leading quality
homes.
Our people are our most
important asset. We aim to
attract and retain the best
people by investing in their
development and success.
This investment enables our
people to meet the needs of
our customers, taking pride
in what they do, and deliver
the highest quality homes
and developments.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
RTPI national award for
Excellence in Planning.
93 Built for Life accreditations,
23 of which are outstanding.
Land acquisition temporarily
suspended from March to August
2020 in response to COVID-19.
Owned and controlled land bank
of 6.7 years.
Biodiversity Net Gain good
practice guide for technical,
commercial and construction
teams to be developed.
Supreme Winner in the Large
Builder category for the 2019
NHBC Pride in the Job Awards.
92 Pride in the Job Awards, more
than any other housebuilder for
16 consecutive years.
Continue to focus on waste and
waste intensity as this important
area.
Upper quartile engagement
score of 84.2%.
4.1 training days on average per
employee.
Due to our ongoing efforts in this
area, and the uncertainty created
by COVID-19, we have seen a
decrease in employee turnover
of 6% to 10%.
7% of employees were from
BAME backgrounds, and 2.1% of
senior leadership positions held
by BAME employees.
Women in 14% of leadership
roles. See pages 60 and 61 for
information on diversity and
inclusion.
Health and wellbeing focus
recognised by being shortlisted
for the prestigious Personnel
Today Health and Wellbeing
Award.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Our principles
Description
Progress in FY20
•
•
•
•
•
•
•
•
•
•
We are committed to
achieving the highest
industry health and safety
standards. This allows us
to safely deliver high quality
homes for our customers.
We build long term
relationships that make us
the developer of choice for
our partners. Our partners
and supply chain support our
delivery of quality homes. We
are adapting and innovating
with our supply chain to
drive efficiency and meet our
customer needs.
We forge strong community
relationships to ensure
we build high quality
developments where people
aspire to live. We provide the
facilities people need and
ensure we create a positive
legacy that helps local
communities thrive.
We aim to be the leading
national sustainable
housebuilder, building a
resilient business ready for
the future. We seek to build
homes and places that are
adapted for climate change
and seek to enhance local
habitats and biodiversity.
96% SHE audit compliance.
14% reduction in IIR rate to 256
per 100,000 persons employed
(including sub-contractors).
Enhanced COVID-19 working
practices and protocols
implemented.
Continued engagement with
suppliers.
Science-based target set during
the year, including a target to
reduce carbon emissions from
our supply chain by 11% by 2030.
Good progress on our AIMCH
cross-stakeholder project with
six advanced closed panel
timber frame homes completed.
Less than 5% of the units we
build require planning appeal at
a local level.
£599m of local contributions and
physical works contributions.
£4.4m raised and donated to
charities during the year.
Due to the impact of COVID-19,
we saw an absolute 23%
reduction in greenhouse gas
emissions, but a 9.7% increase
in carbon intensity to 1.92
tonnes of CO2e per 100m2 of
legally completed build area
due to the resulting delay in
completions.
We maintain financial
discipline across all aspects
of our operations. This
enables us to deliver its
operational targets whilst
maintaining our industry
leading standards of
customer and build quality.
•
•
Net cash at 30 June 2020 of
£308.2m with average net cash
for FY20 of £348.3m.
Land creditors reduced to 25.4%
of owned land bank, in line with
our operating framework.
•
Appropriate financing facilities.
Keeping people
safe
Being a trusted
partner
Building strong
community
relationships
Safeguarding
the environment
Ensuring the
financial health
of our business
← Aimee Amos, a sales adviser at our Dickens
Gate development in Staplehurst Kent. Our
sales centres are operating with COVID-19
working practices and protocols.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Sustainability focus areas
We are committed to creating a positive
environmental, social and economic legacy
for future generations. This goes to the core
of quality housebuilding – creating great
places, homes, and communities, which
stand the test of time, with life at the centre
of it all.
Providing confidence to our customers
that their homes are designed and built
to meet the challenges of the future is
vital, and underpins the ability of our
business to thrive and grow. The protection
and enhancement of the resources on
which our business relies – our people,
the communities in which we operate,
our partners, the natural environment
and the planet – require that we do
business sustainably and create value
for our stakeholders. Good governance
of these activities and connecting social,
environmental and economic value
across our business leads to better long
term decisions.
Our purpose
To lead the future of housebuilding by putting customers at the heart of everything we do
Strategic priorities
Customer first
Great places
Leading construction
Investing in our people
The delivery and success of our strategic priorities depends on our principles being implemented effectively throughout our business
and operations. Our core principles guide our culture and support us becoming a more successful and sustainable business.
Our principles
Keeping people
safe
Being a trusted
partner
Building strong
community
relationships
Safeguarding the
environment
Ensuring the
financial health of
the business
Our principles are reflected in our sustainability focus areas. We identified key targets for each of our sustainability focus areas,
ensuring that we consistently drive forwards on the areas that matter most to our stakeholders.
Sustainability focus areas and key targets
Sustainable places
to live
Innovative, efficient
construction
Attracting,
retaining and
inspiring people
Keeping people
safe and healthy
Responsible
sourcing
25% of homes built with
MMC by 2025
7% workforce on training
programmes
Maintain 30% female
Board members
Maintain appropriate
level of employee
turnover
10% increase in BAME
employees by end of
2021
By 2040 Barratt will
become a net zero
greenhouse gas
emissions business
covering all of its direct
operations, with a 29%
reduction in direct
carbon emissions
targeted by 2025
100% of own electricity
renewable by 2025
20% less construction
waste by 2025
Maintain annual injury
incidence rate at below
2015 levels
100% of centrally
procured timber
sustainably sourced
Provide leading
health and wellbeing
programmes
11% reduction in indirect
emissions by 2030
50% of carbon intensive
trades to be Supply Chain
Sustainability School
members by end of 2021.
See page 65 for more
information
Target for new standard
housetype designs
to be net zero carbon
from 2030
Create a net positive
impact for ecology and
biodiversity across all
developments that
we progress through
planning from 2020
onwards
100% of completed
developments to be
silver standard or above
when assessed against
our own design initiative
Great Places which aligns
to Government endorsed
Building for Life
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Barratt Developments PLCwww.barrattdevelopments.co.uk From keeping people safe and healthy
to ensuring sustainable and responsible
sourcing, our Sustainability Framework
2020+ ensures we continually progress the
sustainability focus areas that matter most
to our stakeholders. Each of these has set
targets and KPIs, with a member of the
Board accountable for delivery.
As previously reported, to determine the
areas of focus, we held a full materiality
assessment in FY19.
Alongside our materiality assessment we
reviewed our strategy against the 17 United
Nations Sustainability Development Goals
(UN SDGs). We carefully considered each
one and its underlying indicators to discover
which are most relevant to our business and
where we can make the biggest contribution
to this global framework.
More detail on our progress against our
sustainability focus areas and targets can
be found within our strategic priorities and
principles.
Sustainability
focus area
Sustainable
development goals Material issues
Goal
Read more about
our progress
Risks
Sustainable
places to live
Innovative
efficient
construction
Attracting,
inspiring and
investing in
people
Keeping
people safe
Sustainable
and
responsible
sourcing
Meet the expectations
of customers and
communities by delivering
sustainable places to live
that satisfy the need for
further housing, whilst
also providing a positive
legacy.
Minimise our use of
materials and energy,
reduce waste generation
and maximise low carbon
opportunities in all
aspects of our business
through innovation and
development.
Read more about
Great places on pages
52 to 53
Read more about
Safeguarding the
environment on pages
68 to 70
Read more about
Leading construction
on pages 54 to 57
Read more about
Safeguarding the
environment
on pages 68 to 70
Continue to invest in and
develop our people, and
to identify new pools of
talent to help us deliver
ongoing growth.
Read more about
Investing in our people
on pages 58 to 61
The lifetime environmental
performance of our homes
and buildings we build
Affordability
Innovation (MMC)
Waste created by our
operations
The energy we use and
carbon emissions of our
operations
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
Our approach to health
and safety
Promoting the physical
and mental wellbeing
of our employees
Provide a safe and
healthy environment for
our employees, sub-
contractors, and people
living in the communities
where we build our homes
and operate our offices.
Read more about
Keeping people safe
on pages 62 to 63
Having an energy
efficient and low carbon
supply chain
Work in partnership with
our supply chain and sub-
contractors to operate
responsibly and use
resources efficiently.
Read more about
Great places on pages
52 to 53
Read more about
Trusted partner on
pages 64 to 65
A
B
C
J
C
D
E
F
H
J
G
H
J
G
H
J
C
F
G
J
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020
Section 172(1) statement
On the following pages
we have set out how the
Board has acted in a way
that promotes the success
of the Company for the
benefit of its members as a
whole, in accordance with
the requirements of the
Companies (Miscellaneous
Reporting) Regulations
2018, whilst having regard
to the following matters set
out in s.172(1) of the Act:
•
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.
This reporting requirement applies to
the Company for the first time this year.
However, we did include a comprehensive
section 172(1) statement and stakeholder
engagement disclosure in our Annual
Report and Accounts for FY19.
We understand that it is important for
the business at all levels, including the
Board, to engage with its shareholders and
wider stakeholder groups. By engaging
with our stakeholders we gain a better
understanding of what areas they are
interested in or concerned about and
also how our decisions have impacted
them. Healthy engagement with our
stakeholders underpins our governance
framework, which is embedded throughout
our business and helps to ensure we
maintain high standards of business
conduct. The Executive Directors update
the Board on a regular basis on stakeholder
engagement and wherever possible,
members of the Board will engage directly
with our stakeholders. Engagement with
shareholders and other stakeholders
supports the Board’s regard to the likely
consequences of any decision in the long
term, as explained further in the business
model on pages 30 to 31, Key activities of
the Board on pages 89 to 91, Sustainability
focus areas on pages 36 to 37, Safeguarding
our Environment pages 68 to 70 and
throughout our Strategic priorities and
principles on pages 50 to 70.
The Board appreciates that there may
be situations where conflicts will arise
between different stakeholder groups. In
such circumstances, the Board will seek to
understand the needs and priorities of each
stakeholder group during its discussions
and as part of its decision making process.
It will manage any such conflicts by
assessing shareholder and stakeholder
interests from the perspective of the long
term sustainable success of the business.
COVID-19, the associated lockdown and
subsequent business restart, required the
Board to act swiftly and decisively (see
pages 8 and 12 for more information). The
Board remained mindful of the implications
that their decisions would have on our
stakeholders. This highlighted the continual
need for regular clear and comprehensive
engagement with our stakeholders
throughout the decision making process.
The next few pages set out how we have
engaged with, and taken into consideration,
the interests and concerns of our
stakeholders who are material to the
long term success of the business. These
stakeholders continue to 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Stakeholder engagement
Stakeholder engagement
plays an important
part of our day to day
operations. The Board
is kept appraised of
the feedback received
and takes this into
account when making
decisions that may
impact our stakeholders
either collectively or
individually.
Shareholders
Employees
Read more on pages 40 to 41
Read more on pages 42 to 43
Customers
Read more on page 44
Sub-contractors and
supply chain
Read more on page 45
Local communities
Banks and analysts
Read more on page 46
Read more on page 47
Government and
regulators
Read more on pages 48 to 49
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Stakeholder engagement CONTINUED
Shareholders
How we engage
Board updates
Annual General Meeting
• Regular updates are provided to the Board by the Chief
• On the assumption that we are able to hold a physical AGM
Financial Officer, the Company's brokers and the investor
relations team on the Company’s investor relations activities
and analyst feedback, to ensure that all Directors are
aware of, and have a clear understanding of, the views of
major shareholders.
Investor meetings and consultations
• The Executive Directors and Investor Relations Team follow
a comprehensive programme of investor meetings and calls,
particularly following the release of annual and half year
results and trading updates.
•
In FY20, we engaged with our shareholders as follows:
− The Executive Directors, supported by Senior
Management, attended 135 investor meetings, (119
one-to-one meetings and 15 group meetings), along with
one site visit, engaging with around 30% of our current
shareholders (by shareholding value);
in 2020:
− the Chief Executive will update shareholders on the
Group’s performance and activities during the year
including how the business responded to the impact of
COVID-19;
− Shareholders will have the opportunity to meet Board
members and air any issues or queries they may have
about the business; and
− The Chairman and each Board Committee Chair will be
available throughout the AGM to answer any queries.
• 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, which is more representative
of shareholder voting intentions.
• Shareholders will be able to submit questions to the Board via
email or post prior to the AGM
− Investor roadshows were organised in London, Edinburgh,
Website
Birmingham, New York and Boston;
− The Remuneration Committee Chairman consulted with
major shareholders and proxy voting agencies on the
Group’s Remuneration Policy and remuneration outcomes;
and
− 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.
Regulatory announcements
During the financial year, in addition to our usual trading
updates in May, July and October and the half and full year
announcements, we updated shareholders and investors on
the impact of COVID-19 on the business and our response. This
included information relating to the temporary closure of our
construction sites, sales centres and offices, furlough of the
majority of employees, cancellation of the interim dividend and
the final ordinary and special dividends, voluntary salary/fee
reductions by the Board and Senior Management, application for
CCFF funding and CJRS funding, return of the CJRS funding and
the phased business restart.
• Our comprehensive investor website was updated and reviewed
quarterly to ensure that information relating to matters such
as sustainability, governance and our response to COVID-19
remains relevant.
Correspondence (email/letter/telephone/video conference)
• The Company Secretarial team, together with the Company’s
Registrars, engaged with our retail shareholders to deal
with enquiries relating to their shareholdings or information
requests.
• 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.
• We participated in indices and benchmarks such as
FTSE4Good and CDP surveys.
Lockdow n
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Barratt Developments PLCwww.barrattdevelopments.co.uk Shareholders
Interests and concerns
P r e - lockdown
• Medium term targets
(completion growth and
margin potential)
• Housetype
range
• Dilution of
shareholding
• Dividend
policy
• Land
market
• Business
response to
COVID-19
• Order book
resilience
• Housing market
• Cladding and
fire safety
• Land bank
• Economy
• Land buying
suspension
• Dividend
reinstatement
• Sales and
build levels
• ROCE
• Government
funding
• ESG
• Directors'
remuneration
• Health, safety
and wellbeing
• Cancellation rates
• Redundancies
• Liquidity
• Cash flow
• Resilience
• Productivity
• Cost
structure
• CCFF and
CJRS funding
Lockdow n
• Completion
volume recovery
Business res t a r t
Outcomes from engagement
• Shareholders kept fully informed of the performance of
the Group.
• Full understanding of the Board’s decisions as a
consequence of COVID-19 and the subsequent business
restart and how this impacts them.
• Reassurance that the Group continues to be in a strong
position and remains a good investment opportunity.
• Better understanding of shareholder expectations in
respect of ESG matters particularly climate change risks
and opportunities and how we relate to the UN SDGs.
Effect of engagement with shareholders
on Board decisions
• Return of CJRS grant income.
• Review of future office space requirements.
• Cancelled the interim dividend scheduled for payment in
May 2020.
• Decided to not recommend a final ordinary or special dividend
for FY20 in order to conserve cash.
• Committed to science-based carbon emission targets and
disclosures in line with the TCFD.
• Satisfied share schemes via market purchase rather than
new issue.
↑ Barratt Homes at The Long Shoot, Nuneaton, Warwickshire.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Stakeholder engagement CONTINUED
Employees
Employees
How we engage
Health, safety and wellbeing
Internal communication
• Briefings, e-learning modules, screensavers, webinars,
emails and videos explaining the new social distancing
measures, monitoring closed sites, reopening of sites, how
employees can protect themselves, what to do in the case
of a suspected case of COVID-19 and control measures for
completion of defect resolution works.
• Key SHE messages continue to be reiterated at the Workforce
Forum meetings, and opinion sought on how to improve the
safety, health and wellbeing of the workforce.
• Additional webinars and e-learning modules made available
to support employees physical and mental wellbeing whilst
working from home or on furlough.
• Views sought for development of an induction app and
improving our SHE Management system.
Engagement survey
• Annual employee engagement survey to gain insight into the
issues that matter most to our employees.
• Results shared with the teams and action plans developed to
maintain or enhance employee engagement levels.
• Additional support for those divisions/regions/functions that
scored low in the survey.
Culture
•
Information gathered to determine the culture of the business,
through, amongst other methods:
− Divisional and site visits by members of the Executive
Committee and the Board;
− Site visits by divisional teams;
− New starter interviews to capture their initial thoughts on
the culture and the induction process;
− Exit interviews completed internally and reasons for
leaving tracked via our HR system;
− Focus groups; and
− Engagement Survey.
More details on our culture can be found on pages 32 to 33 and
92 to 95.
•
Intranet, emails and newsletters used to keep employees
informed of developments and important issues.
• Senior Management conference held twice a year to discuss
Group performance and key areas of focus and to share ideas
and best practice. Key messages and actions are cascaded
throughout the organisation. Due to COVID-19 the meeting
scheduled for March 2020 was rescheduled and took place
virtually in July 2020.
• Weekly updates to all employees, including those on furlough,
issued by the Chief Executive to inform them of matters such
as pay and holiday policies, reopening of sites, FY20 bonus and
share schemes.
• Dedicated COVID-19 email established for employees to air any
queries, concerns, feedback or ideas. Each email was reviewed
by the Chief Executive, the Company Secretary and the relevant
member of the Executive team.
Interim Pulse surveys
• Undertaken on an ad-hoc basis to measure progress against
action plans as a result of the engagement survey and gain
feedback on our response to COVID-19.
Workforce Forum
• Met twice during the year. Meeting scheduled in April
cancelled due to COVID-19.
• Provided their views on the outcomes of the engagement
survey, restarting the business, pay and holiday policies and
how well the business has communicated throughout the
lockdown.
• Members remain engaged and asked for their term on the
forum to be increased from two to three years.
• Richard Akers, our Designated NED, now attends each
Workforce Forum meeting and has a dedicated email
address for members of the Workforce Forum to contact him
directly on any matters relating to the workplace, including
remuneration, on a confidential basis.
More information on the Workforce Forum can be found on page 60.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Employees
Employees
“ During FY20 I attended all of the
Workforce Forum meetings. I have been
very impressed by the professionalism
and commitment of both the Executive
team and the workforce representatives.
Discussions are open and very much
a two-way communication, with the
Workforce Forum providing numerous
ideas for the improvement of diversity and
inclusion, furthering our commitment to
the health and wellbeing of employees,
and sustainability. The end of the year was
dominated by the impact of COVID-19. The
Workforce Forum will be fundamental in
assessing the impact of COVID-19 on our
employees in FY21 and how we can better
adopt new ways of working.”
Richard Akers
Senior Independent Director
Outcomes of engagement
• Suggestions by the Workforce Forum on the uniforms for
our sales teams, reducing the amount employees have to
raise to receive match funding and the new intranet, have
all been adopted.
• All divisions/functions proactively agreed and delivered
‘action plans’ in response to the engagement survey.
• Held focused Divisional Leadership team sessions on:
− ownership of dysfunctional relationships where these
exist and take steps to address; and
− team collaboration.
• Agile and flexible working policies updated.
• Further enhanced our Health and Wellbeing Strategy.
• Employees returned to work following reassurance that
appropriate measures were in place to safeguard their
health and safety and that of their families.
• The response from the employee survey demonstrated
that 93% of respondents felt that the Company’s overall
response to the impact of COVID-19 was good or very good.
Interests and concerns
P r e - lockdown
• Career
progression
• Training and
development
• Succession
• Reward and
recognition
• Work/life balance
• Ongoing
relationship
• Agile
and flexible
working
• Physical and
mental wellbeing
• Prompt payment
• Reopening of
sites, sales
centres
and offices
• Holidays
• Job security
• Health and
safety
• Remuneration
(furloughed
employees)
• Impact of new
measures on ability to
carry out work
Lockdow n
Business res t a r t
Effect of engagement with employees
on Board decisions
• Continued commitment of the Board to our employees'
development, wellbeing and diversity and inclusion strategies.
• New flexible working policy introduced.
• Normal pay continued for all employees on furlough.
•
•
•
Introduced a temporary holiday policy, increasing the number
of days that employees could sell and carry forward to the
following year. Policy extended to weekly paid employees so
that they were not disadvantaged.
Introduced a mechanism to reward those who had continued
to work throughout the lockdown period.
Introduced new social distancing measures on site to
protect those employees returning to work including, but not
limited to, enhanced signage, handwashing facilities, acrylic
screens, PPE as well as social distancing marshals to ensure
compliance and updated SHE policies to reflect the new
measures.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Stakeholder engagement CONTINUED
Customers
How we engage
Customer satisfaction
• We place customers at the heart of everything we do and focus
on delivering excellent build quality, robust policies, industry
leading training and resolving any customer problems quickly
and efficiently.
• Our Customer Care team is available to answer queries
throughout the customer journey.
• Customers are encouraged to complete the HBF Homeowner
Survey and/or give us feedback through Trustpilot to help us
understand their customer experience.
• During the lockdown period, tailored email communications
were sent to prospective customers, those in the sales journey
and homeowners to inform them of our response to the
lockdown and how to contact members of the team.
• Customer Care continued to provide limited support to deal
with emergencies.
• Emails sent to all customers on the restart of the business
to confirm the schedule and safety precautions in place, to
safeguard them and our teams on site, in our sales centres and
our show homes.
• We regularly updated our websites to include the latest
COVID-19 guidance, to allow customers to book virtual
appointments and personalised virtual show home tours.
• Customers advised on the types of works our Customer
Care teams could undertake in accordance with Government
guidelines including the safety precautions needed to be taken
by both the customer and our customer care operative.
• We continued to communicate via social media both reactively
to deal with specific customer requests, and proactively
to update customers on safety procedures, reopening of
construction sites and sales centres and charitable donations.
Customer research
• During FY20, we worked with customers to understand their
perceptions and preferences related to sales incentives,
and to gain input to our planning for enhancing our smaller
product range.
Industry trends
• We contributed to an HBF consultation where customers, and
their elected officials, provided feedback about a lack of redress
for new build homeowners. The Government is keen to improve
this by developments to the Consumer Code and launching a
New Homes Ombudsman in 2021 which we fully support.
Interests and concerns
P r e - lockdown
• Choices
available
• Cost and
location of
property
• Energy
efficiency
• Defect
resolution
• Quality
• Affordability
• Mortgage
availability
• Customer
experience
• Help to Buy
• Health and
safety
• Build
delays
• Flexible
living
• Green
space
• Amenities
and location
• Completion
of purchase
• Ability
to move
home
Lockdow n
Business re s t a r t
Outcomes of engagement
•
Improved our sales reservation process to ensure all
milestone updates are consistent.
• Developed our new CRM system and customer portal to
ensure that customers have a single source of information
and a central repository.
• Updated our sales schemes and incentives and launched
deposit contribution schemes for the Armed Forces and
NHS staff.
• Updated the design and layout of our smaller product range.
Effect of engagement with customers
on Board decisions
• Defect resolution included as an element of the annual
bonus scheme for FY21 to increase focus on reducing the
number of outstanding defects.
• Supported a review into a smaller product range and
gaining further insight into future ways of living including
flexible use of internal space and more green space.
• Continue to take into account customer satisfaction when
making decisions that may impact our customers.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Sub-contractors and supply chain
How we engage
Annual supplier conference
• Conference rescheduled as a virtual meeting from March
2020 to July 2020, due to the restrictions in place as a result
of COVID-19. This gave us the opportunity to reassure our
suppliers of our continued relationship, understand their
issues and challenges and to set out our objectives for the
financial year ahead and their role in helping us achieve them.
Ongoing supplier relations
• We work closely with our MMC partners to ensure their
products meet our needs and standards and that there is a
smooth transition into our core business.
• We held a workshop around net zero carbon and electric
only heating. We invited 22 suppliers to allow them to better
understand each other’s drivers and challenges.
• We remain fully supportive and engaged with the SCSS
and retained our own Gold status. Our focus with key
suppliers is to move from “education” to “implementation” of
environmental initiatives. We have been working with SCSS
to develop a performance assessment approach that will
promote implementation of initiatives. This will be rolled out
to our supply chain in FY21.
• We undertook surveys to understand how we could support
our suppliers to reduce the use of plastic and ensure that the
timber that we utilise is sustainably sourced.
• We hold regular performance and business reviews, focusing
on our ongoing relationship and health and safety.
• Letters were sent to all sub-contractors and suppliers to
explain our approach to temporarily closing the business and
to reassure them of our continued support, particularly in
terms of paying them on time.
• We engaged with our sub-contractors and suppliers on the
plans and timetable to reopen our construction sites and sales
centres to ensure that they were able to restart their own
businesses safely and sustainably. We also notified them of the
new safe working protocols that they would need to comply with
in order to safeguard the health and safety of themselves, our
employees, customers and the general public.
• On site materials clearly explaining site safety procedures
were provided in a number of languages.
Interests and concerns
P r e - lockdown
• MMC
• Completion
of works to a
high standard
• Ensuring
adequate and
continuation of
supplies
• Ongoing
relationship
• Sustainability
• Carbon
reduction
• Own financial
resilience
• Prompt
payment
• Reopening of sites
and return to work
• SHE
• Meeting
demand
• Restarting their
own business
• Paying their
employees
• Complying with
new working
protocols
Lockdow n
Business re s t a r
t
Outcomes of engagement
•
Introduced the use of our innovative pre-cast insulated
concrete floor solution form NuSpan and Spantherm into our
core business after undergoing detailed investigation and
trialling over the years since 2016.
• A number of key actions relating to technology and innovation,
skills, training and research, from the net zero carbon
and electric only heating workshop have been fed into our
roadmap towards net zero carbon.
• Restarted on all of our sites with minimal disruption in the
availability of key supplies or on site labour in line with our
build requirements in a safe and secure manner.
• All on site employees aware of our safe working procedures.
• Received positive feedback about our engagement during
the COVID-19 pandemic, strengthening our reputation as a
trusted partner that does the right thing.
• Throughout the COVID-19 pandemic we leveraged our
investment in supplier relationship development to secure
supplies of PPE and other consumable material requirements
directly related to new COVID-19 operating protocols.
Effect of engagement with sub-contractors
and the supply chain on Board decisions
•
Instigated a review to ensure that the provision of key
materials were not reliant on sole providers.
• Created a sustainability supplier maturity matrix to support
our supply chain in building the capacity to address future
challenges.
• Agreed a science-based target to reduce scope 3 emissions
for the business, and consequently reduce the emissions of
our suppliers.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Stakeholder engagement CONTINUED
Local communities
How we engage
Open communication
• Views of the local community obtained prior to starting work
on any site. Plans are developed based on the feedback
received and members of the local community are kept fully
informed of progress throughout the construction of the site.
• We visited local schools to educate the children on the
construction process and the importance of health and safety
around construction sites.
• Our socio-economic footprint demonstrates the value our
developments create for local communities.
• We issued letters to local residents informing them of the
COVID-19 working practices and protocols that we had put in
place prior to the phased reopening of our construction sites
and sales centres.
• We updated our social media, corporate and brand websites
with videos and documents, which clearly and concisely
explained our new safe working procedures to help us restart
our business.
• We ensured that there was good levels of local and national
coverage of our response to COVID-19, in particular:
− Our charitable donations to the NHS, 5,000 masks to St
John Ambulance and St Andrew's First Aid, defibrillators
to hospitals and local fundraising by divisions;
− Return of CJRS funding; and
− David Thomas’ opinion article in Show House magazine.
• We enhanced our site signage to clearly explain our safe
working procedures.
• We briefed all of our site managers on how to address
concerns from members of the public.
• We arranged for our Customer Care teams to be provided
with scripts on how to appropriately address queries related
to COVID-19.
Environment
• Our social and environmental impact is an important concern
to the Board and we continue to find ways to protect the
environment through our operations. See Safeguarding the
Environment on pages 68 to 70, and Sustainability Focus Areas
on pages 36 to 37 for how we maintain and improve our social
and environmental value.
Charitable giving and volunteering
• We continued to support charities at a local and a national
level throughout the whole of FY20. During the lockdown
period, donations were made at a Group level to support a
number of charities that had been adversely impacted by
COVID-19. More details on our charitable donations can be
found on pages 66 to 67.
• We continued to encourage our employees to volunteer and
spend time out in the community. During the lockdown period
we actively encouraged our furloughed colleagues to volunteer
in their local communities.
46
Interests and concerns
P r e - lockdown
• Benefits for the
local area
• Infrastructure
• Investment in
the area
• Noise and air
pollution
• Sustainability
• Maintenance of
open spaces
• Charities - cause
awareness and
fundraising
• SHE measures
• Availability of
public/green
space
• Site security
• Regular
monitoring
of sites
• Charities - survival
without corporate
sponsors or donations
• Timetable for
reopening
of sites and
sales centres
Lockdow n
Business res t a r t
Outcomes of engagement
• Re-planning of sites to take into account needs of the
community such as communal spaces, parks and schools.
• Developed mature-friendly garden guidance with the RSPB.
• Low number of complaints from members of the public
about the way in which we implemented our temporary
closure and restart of the business.
• Strong media coverage helped generate positive public
perception of our response to COVID-19.
• Enhanced our relationship with the communities within
which we operate.
Effect of engagement with local communities
on Board decisions
• The Board has agreed seven UN SDGs through which
we can make the greatest contribution, as more local
authorities link their strategies to the SDGs.
• Renewed our commitment, and updated our Great Places
design, to include more elements of importance to
communities particularly health and wellbeing.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Business res t a r t
Banks and analysts
How we engage
Meetings and webcasts
• The Chief Financial Officer and Head of Treasury hold update
meetings or calls after the annual results with each of the
Banks in the RCF and the USPP investors. Additional calls
and meetings are held as appropriate throughout the year
including after our half year results.
• Half yearly events are held for the banks in the RCF and the
USPP investors to mix on a more informal basis with Senior
Management. Due to COVID-19, only one meeting took place
in FY20.
• We held a number of update calls with our banks, USPP
investors and analysts on the impact of COVID-19 on our
business, how we are mitigating against this and our plans
to gradually reopen construction sites and sales centres
together with information on the COVID-19 working practices
and protocols and measures that we would be putting in place
to safeguard those returning to site and sales centres.
Mortgage lender relations
• We continue to work with mortgage lenders to encourage
development of Green Mortgage products, which factor the
energy efficiency of our homes into mortgage assessment
processes.
• Engagement with RICS and main surveying companies, in
order to collaborate with them to allow safe visits to sites.
Outcomes of engagement
• Opportunity for the Group to discuss the market
environment and recent trends and for the banks to
discuss the Company’s latest results and broaden their
understanding of the Company.
•
In November 2019, we executed an extension on our RCF
by a year.
• Eligible to access CCFF funding if required.
• Open dialogue with lenders for alternatives to Help to Buy.
• Updated banks, analysts and lenders of the Group’s
continued resilience, strong balance sheet and liquidity
position.
•
Introduced a facility for customers to research mortgages
online with an independent specialist via a link from our
website.
• Contributed to broadening the spread of lenders with
New Build propositions so that customers have greater
choice. Our buyers applied to over 50 different lenders
during the year.
Interests and concerns
P r e - lockdown
• Help to Buy
• Margin
• Routes to
growth
• 'Green'
products
• Covenant
compliance
• Volume of
mortgage
enquiries
• Business and
financial
resilience
• Loss of customers
• Liquidity
• Cash position
• Completion
levels
• Sales
and build
position
Lockdow n
Business re s t a r t
Effect of engagement with banks and analysts
on Board decisions
• Decision to apply for the CCFF funding to strengthen the
Company's liquidity position.
• Agreed to extend the RCF for a further year.
• Discussed investor concerns around climate risk and
carbon mitigation, and our response to this.
• Committed to science-based carbon emission targets and
evolving risk and opportunity disclosures in line with TCFD.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Stakeholder engagement CONTINUED
Government and regulators
How we engage
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.
• Meetings with bodies such as the BEIS Recovery Taskforce,
DEFRA and MHLCG.
• Sponsorship of the Net Zero All-Party Parliamentary Group
and a signatory to the COP26 Business Leaders Group.
• Economic
recovery
Interests and concerns
P r e - l ockdown
• Completion
volume
• Build
quality
• Recession
• Building
regulations
• ESG
• Help to Buy
• Climate change
• Emails sent to all MPs, Council Leaders and Council Chief
Executives outlining our overall approach towards temporarily
closing our construction sites, sales centres, and offices.
Followed by information on our phased reopening of our
construction sites and sales centres and the COVID-19
working practices and protocols.
• We hosted MP site visits throughout the year.
• We attended a number of webinars and policy consultation
events to understand and provide feedback on Government’s
plans on matters such as zero carbon homes and the Build
Back Better scheme.
• We provided feedback on a variety of consultations such as the
Future Homes Standard and the First Homes Scheme.
• We maintain regular contact with officials in key departments:
Number 10, the Cabinet Office, the Treasury, MHCLG, BEIS,
Homes England, and the Department of Health.
• Social media updates, and videos about our safe-working
procedures shared by the official Number 10 Twitter account.
• We lobbied the Government to consider an extension to the
Help to Buy scheme in support of those customers whose
homes had been delayed beyond the build-complete deadline
of December 2020.
Regulators and local authorities
• The Board is committed to ensuring that it is open and
transparent with regulators and take their regulatory
responsibilities very seriously.
• We welcomed the British Safety Council’s request to undertake
a robust COVID-19 Assurance Assessment of the COVID-19
working practices and protocols that we had implemented in
order to restart our business.
• We work closely with local authorities to ensure that our
developments meet the relevant planning requirements and
enhance the facilities and housing within the local area.
• Kickstarting the
construction industry
safely to boost the
economy
• Health and safety
• First time
buyers
• Carbon
reduction
• Future Homes
Standard
Lockdow n
Business re s t a r t
Outcomes of engagement
• Help to Buy build complete deadline date extended enabling
thousands of purchasers to buy their new homes.
• Received a COVID-19 assurance statement certificate from
the British Safety Council. Protocols and associated control
arrangements considered to be in accordance with current UK
Government and sector specific guidelines and arrangements
for continual monitoring of their effectiveness are in place.
• Contributed to initiatives to define how the Environment Bill
could legislate successfully to create biodiversity net gain on
new developments.
• Contributed to discussions on how to drive forward net zero
homes and green growth.
• MPs saw first hand the working practices and protocols that
we had implemented and how we continue to monitor them.
• Reassurance provided to the Government and the regulators
that we are doing the right thing by:
− Our employees, by keeping them safe and on normal pay;
− Our customers, by ensuring they can complete their
purchases; and
− The general public, through our industry leading site
safety protocols and charitable contributions.
Effect of engagement with Government and
regulators on Board decisions
• Broad understanding of Government policy and regulation
and the environment in which we operate.
• Greater understanding of the key drivers for housing policy
at a national and local level and impact on the land bids.
• Better idea of the potential legislation around biodiversity
net gain, and the Future Home Standards to help plan
investment and set targets such as new standard
housetypes designs being net zero carbon in use from 2030.
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Barratt Developments PLCwww.barrattdevelopments.co.uk ↑ Boris Johnson, Prime Minister, Andrew Swindell, Regional Director East and Managing Director Northampton, Darren Price, Project Manager, and Matt
Quinn, bricklayer from our Northampton division at Willow Grove, Wixams, Bedfordshire. Image taken prior to the introduction of social distancing guidelines.
↑ Carl Sobolewski, Managing Director of our North East division, and Alex Cunningham, Labour MP for Stockton North – then Shadow Housing Minister at
our development Jubilee Gardens, Stockton–on-Tees. Image taken prior to the introduction of social distancing guidelines.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Customer first
Our priorities
Britain needs more homes to address its long term
housing shortage. While the industry needs to
increase volumes, it must also provide quality and
customer service.
Strategic priority
Customer satisfaction is 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. We anticipate our customers’ needs by
continuously improving the homes and places we build to meet changing lifestyles and tastes.
Our objectives
Short term
•
Design, implement and update
COVID-19 secure sales processes and
protocols.
•
•
•
Develop virtual show home tours.
Ensure adherence to revised process
and precautions for undertaking
remedial work within customer homes.
Plan and adapt our sales processes and
homes for the tapering and end of Help
to Buy.
Medium term
• Replace our CRM system and deliver an
online portal providing customers with
a repository for documentation through
the sales process and beyond, as well
as the ability to log any issues after
legal completion.
•
Develop content for customers to
access regulated mortgage help, direct
from our website.
Long term
•
Support the HBF with the launch of
the New Homes Ombudsman and
supporting Consumer Code.
↓ The Mahmoud family, customers at our
Westburn Gardens development in Aberdeen.
Value created for
stakeholders
Short term
• Support our customers at this
challenging time.
• Deliver homes to customers who are
in the sales journey to allow them to
complete safely.
• Adapt our sales process using
technology to support prospective
customers to purchase a new home.
• Address after care issues, prioritising
those issues which cause any
inconvenience for our customers.
Medium term
• Use insight gained from consumer
research to improve and adapt our
homes to suit the changing needs of
customers.
• Work with mortgage lenders,
distributors and third party providers to
ensure appropriate finance is available
for customers.
Long term
• Explore alternative tenures to improve
affordability, allowing access to home
ownership to as many customers as
possible.
• Continue to improve the energy
efficiency of our homes.
Progress
Customer service
Our purpose is to lead the future of
housebuilding by putting customers at
the heart of everything we do. We have
made a significant investment over many
years in our processes and procedures in
support of this. During the year, we were
awarded the maximum HBF 5 Star status
for the 11th consecutive year, the only
major national housebuilder to achieve this
record. We continue to drive improvements
to our customer journey and have adapted
our processes to protect and support our
customers as a result of COVID-19. In
March 2020, we decided to temporarily close
our construction sites, sales centres and
customer care operations, with the exception
of customer emergencies, in order to protect
our employees and our customers. We have
remained focused on the health and safety of
our employees and customers, throughout
this challenging time.
A range of safety measures have been
introduced to our sales centres, which
allowed them to commence a phased
reopening from 21 May in England, 11 June
in Scotland and 25 June in Wales. These
measures meet or exceed government,
industry and public health agency advice
and include protective acrylic screens,
retractable barriers, strict social distancing,
and where necessary PPE, plus intercom
systems and door locks to enable customers
to engage with sales teams before entering
offices. Visits to sales centres and physical
viewings are currently only by appointment
with one household visiting one property
at a time. We have also signed up to the
new government and industry Charter for
Safe Working Practice – COVID-19, which
supports best practice being adopted across
the industry. We are also able to complete
the sales process remotely through virtual
one-to-one show home tours where required
by our customers.
Since starting to reopen our construction
sites in mid-May, we have completed
homes to support our customers who were
already in the sales process before the
disruption caused by COVID-19. To do this,
we developed a full suite of procedures to
allow homes to be completed and handed
over to customers safely. Our Customer
Care teams have restarted after-sales
repairs with a phased and prioritised
approach, with enhanced precautions to
enable social distancing during the work.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Progress
Training and development
We are committed to acting on our
customers’ feedback and in particular
driving improvements to our training
and development to improve customer
experience. Our people are key to providing
an excellent customer service experience
and we are continuing to invest in training
and development programmes for our
Construction, Sales & Marketing and
Customer Care teams to ensure they
remain best in class.
Training has been provided to all our
sales employees throughout the year
including the latest measures for social
distancing, customer safety and remote
working. 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 all
sales employees have now completed. We
trained over 200 Customer Care employees
on new customer handling procedures
and writing skills to improve our written
correspondence.
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 our
website, which provides interactive site
plans across all device types. These enable
customers to see real time plot availability
across their chosen development.
We have continued to develop an online
portal to support home buyers during the
sales journey and after they have moved in.
In response to COVID-19 we have developed
personalised virtual show home tours using
mobile technology. We plan to use this
technology much more going forward to
support prospective customers.
Quality of our products
We deliver high quality, sustainable, energy-
efficient places to live that satisfy the
needs of customers and communities. We
address local housing needs by providing
quality housing in the right locations to
create communities that are right for our
customers.
Our new product ranges have been
consolidated and refined to ensure
consistency across the Group without
affecting our quality or design standards.
As part of our continuous review, we have
optimised internal floor plans to achieve
more usable living space for our customers.
We understand the importance of building
homes that are right for our customers
lifestyles. Those lifestyles can change
over time and our products should too.
We expect that the ability to work from
home will become more important for a
large number of our customers, so we are
looking at options to demonstrate how work
stations can be incorporated into those
housetypes within our core range that do
not currently include a separate work area.
Our commitment to design and placemaking
includes considering the wellbeing of our
customers. We expect access to private
external space, communal green spaces and
access to walking and cycling will be even
more desirable for customers going forward.
See our Great places section on pages 52
and 53 for more details.
We are continually striving to improve the
energy efficiency of our homes and are
adapting our home designs in response
to the Future Homes Standard and other
changes to Building Regulations. 99% of
our homes currently have an EPC rating of
A or B, and we are installing smart meters
on a number of our properties to help
our customers limit and understand their
energy and water usage.
Finance and mortgage –
affordability
Following the onset of COVID-19, the
prospects for the wider UK economy and
the medium term impact on the new
homes market remain uncertain. Key to
the health of the new homes market is
mortgage availability. Whilst there is a
reduced level of availability of higher LTV
mortgages, demand from first time buyers
looking to use Help to Buy in England has
been significant since the housing market
reopened in mid-May.
Most of our customers require advice
on mortgages and financial assistance,
which they can obtain through our
network of recommended independent
mortgage advisers. To provide a seamless
and efficient service we have an online
mortgage advice service via a regulated
third party to better inform our customers.
We are currently trialling a regulated
decision in principle functionality through
this medium to support customers further.
During the year, we were pleased to
announce a number of initiatives in
support of getting NHS and Armed Forces
employees onto the housing ladder. To
say thank you to all NHS employees
working hard to look after people during
the COVID-19 pandemic, in May 2020 we
launched a new NHS Deposit Contribution
Scheme giving a 5% deposit, (up to
£15,000), to help the country’s 1.5 million
NHS employees buy any new Barratt
or David Wilson home. We have also
announced a new and improved Armed
Forces Deposit Contribution Scheme to
help Armed Forces personnel climb the
housing ladder. The scheme is available to
all UK Armed Forces personnel who are
currently employed by the Army, Navy or
RAF, or who have left in the past 12 months,
and also offers a 5% deposit contribution,
(up to £15,000,) towards any new Barratt or
David Wilson home.
Key material issues
• Development and training of our
employees.
• Lifetime environmental
performance of our homes and the
buildings we build.
• Affordability.
KPIs
HBF
5 Star
(2019: HBF 5 Star)
Why we measure
• Customer satisfaction is
fundamental to our business. The
HBF Homebuilder Survey is an
industry-recognised, independently
measured indicator of our customer
service and build quality.
Risks
A
I
J K
L
Industry leading quality and customer
service are key to our brand and
reputation, and to demand for our
homes.
Changes in the economic environment
and our sales market could affect
customer confidence and the availability
of mortgages which could reduce sales
rates and volumes.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Great places
Our priorities
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.
Our objectives
Short term
•
Continue to promote our Great Places
principles to our customers.
•
•
Emphasise the wellbeing benefits of
placemaking to customers and other
stakeholders.
Create a net positive impact for
ecology and biodiversity across all
developments that we progress through
planning from 2020 onwards.
Medium term
• Amend and improve our housetypes as
necessary in order to meet changing
planning, regulatory and customer
requirements, through collaboration
between divisions and the Group’s
technical team.
Long term
• Ensure that the Group can respond to
customer needs in terms of affordable
places to live, which enhance wellbeing
and community connections as
customer preferences adjust to new
and very different needs.
Value created for
stakeholders
Short term
• The designs of our homes are very
important to our customers and lead
to long term satisfaction. We design
outstanding homes that suit our
customers’ lifestyles and needs, in
developments that enhance existing
local communities.
• Meeting the Group’s hurdle rates
reduces financial risk in the land
purchase process. Ensuring an
attractive margin protects investment
for future growth.
Medium term
• We engage actively with local
authorities in each of our 27 divisions,
as we believe this local knowledge
ensures we purchase the right land and
obtain effective planning permission for
our sites.
• Our planning teams build good
relationships with local planners to
understand their priorities and ensure
our developments maximise benefit for
local authorities.
• Considering environmental risks
and opportunities in land buying and
design ensures we retain a sustainable
housebuilder reputation and can avoid
adaptation and retrofit costs for our
business and our customers.
Long term
• We continue to invest in design
and placemaking to ensure all our
developments become communities
that are socially, environmentally and
economically viable and sustainable.
→
David Wilson Homes
at Gateford Park,
Worksop,
Nottinghamshire.
Progress
Land bank
Our priority is to build in locations where
people aspire to live. We purchase land in
targeted locations which at least meet our
hurdle rates. Land is our key component
and our land bank remains an important
driver of value as it enables us to build
the right product and create the right
communities, while supporting our volume
delivery. Ensuring our hurdle rates are
met based on current estimates of cost
and income is important for ensuring the
financial health of our business.
In FY20, we approved the purchase of 9,441
plots, the reduction from the prior year
reflecting a pause to our land buying activity
from March to August 2020 in response
to the COVID-19 pandemic. In FY20, 24%
(2019: 26%) of our home completions came
from strategic land and we continue to
target 30% of completions from strategic
land in the medium term.
Our land bank measures our supply of
land, being the number of plots in our
land bank divided by the last 12 months
of home completions. Home completions
reduced in the current year as a result of
the closure of our construction sites in
response to COVID-19. As a result, our land
bank years have increased to 6.7 years of
owned and controlled land (2019: 4.7 years).
This provides appropriate visibility for our
immediate operational needs.
Bringing land through the planning
system 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 despite the
challenges posed by COVID-19. During the
year we secured planning on 14,768 plots
(2019: 18,280 plots). We have detailed or
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Barratt Developments PLCwww.barrattdevelopments.co.uk Great places
Our priorities
Progress
outline planning permission on all of our
FY21 expected home completions and 98%
of FY22 expected home completions.
features that have a positive impact on
ecology, and we design our developments to
include these areas.
Building the right homes
We build homes in locations where our
customers want to live with good access
to open space and amenities, transport
connections, schools and workplaces. Our
highly specialised divisional land teams
have extensive local knowledge and strong
relationships with landowners. This,
combined with detailed research into local
market conditions, means we are able to
secure land in locations of strong customer
demand, which can drive higher returns.
Our land buying also reflects Government
policy towards affordable housing and first-
time buyers.
We aim to build high quality homes that
are long lasting and energy efficient for our
customers. We have set a target to ensure
new standard housetype designs will be net
zero carbon in use by 2030.
We have a standard housetype range
for both Barratt and David Wilson, with
the most popular and build-efficient
housetypes featuring prominently in the
core ranges. We continuously review,
consolidate and update our housetypes in
response to customer, divisional and design
feedback. These ranges comprised 60.2%
of homes completed in the year (2019:
36.4% of homes completed). Feedback from
building teams continues to be positive;
sub-contractors like them because their
simpler designs and footprints mean they
are easier and quicker to build. The Group’s
central Technical team continues to assist
divisions and their external consultants in
choosing the right housetypes in the right
places, to ensure plotting efficiency while
not compromising on quality or design.
We continue to adapt our housetypes to
emerging legislative requirements, such
as mitigating overheating in standard
apartment and housetypes, the Future
Homes Standard, National Space Standards
and Mobility Building Regulations, without
compromising to architectural value and
quality of design.
Designing great places
Placemaking principles are fundamental to
our business: our customers want to live in
great places that create a positive legacy.
Our internal ‘Great Places’ principles,
aligned to the Government endorsed
Building for Life 12 criteria, ensure that our
developments have well connected streets
and spaces. We seek to retain existing
In FY20, we upgraded our Great Places
guidance to increase focus on how the
design of our developments supports good
physical and mental health, and helps
to improve people’s wellbeing. We shape
our developments around green spaces,
walk ways and cycle paths to integrate
healthy activities and experiences into
people’s everyday lives. This encourages
social interaction between the users of the
development and developing a sense of
ownership and pride in the surroundings.
We have also emphasised that all the
individual elements of placemaking and
design should work together to contribute
to the overall sense of quality.
The continued focus on placemaking has
continued our ongoing success in achieving
Built For Life accreditations. We have now
achieved 93 accreditations, of which 23
have been rated Outstanding.
Water efficiency
We are currently working with a water
utility company to investigate opportunities
for further collaboration on smarter meters
to identify leaks and benchmark use.
Guidance has been provided to divisions
with the aim of increasing uptake of
infrastructure credits for homes with high
levels of water efficiency.
Biodiversity
An in-depth Biodiversity Net Gain
good practice guide for our technical,
commercial and construction teams has
been developed in conjunction with working
groups set up to share and encourage best
practice. Our expert Biodiversity Manager
hosts net gain training events for technical
and land teams in our divisions. Three case
study developments were selected to build
capacity across our divisions and to test
our biodiversity net gain framework, and
we will be sharing the information with our
partners such as the RSPB.
We have launched an initiative to encourage
the uptake of swift bricks in the ten ‘Swift
Cities’ identified as having experienced
the steepest decline in swift populations.
We have also set ourselves a target that
all of our show home gardens should be
rated ‘Bronze’ or better for their wildlife
friendly credentials by the RSPB with 42
of our show homes having achieved the
certificate. We have also contributed to the
British Standards Institute consultation on
biodiversity net gain.
Key material issues
•
•
•
The lifetime environmental
performance of our homes and
buildings we build.
Affordability.
Biodiversity.
KPIs
6.7 years
Owned and controlled land
bank
(2019: 4.7 years)
Why we measure
•
Drives ownership of the optimum
amount of land to support business
activities.
9,441
Land approvals (plots)
(2019: 18,448)
Why we measure
• Monitors the Group is approving
enough land for purchase to
support future business activity.
•
Ensure land is approved at
minimum hurdle rates.
Risks
B C D
I
J
L
The inability to secure sufficient
consented land and strategic land
options at appropriate cost and quality
would affect our ability to provide
attractive developments that address
the housing shortage. A failure to
collaborate with our partners would
restrict development opportunities.
Changes to the regulatory environment
could affect our ability to achieve our
medium term targets.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Progress
The long term housing shortage in the UK
has increased demand for new homes,
which has resulted in pressures on the
availability of materials, skilled labour
and sub-contractors. In response to these
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.
Delivering high quality homes
We are committed to playing our part in
addressing the housing shortage. Building
high quality homes is a key priority for
business resilience over the longer term
and attracting ongoing customer demand.
We put customer satisfaction at the heart
of our construction processes with a focus
on getting things right first time. This also
drives operating efficiencies in the build
process.
Prior to the onset of COVID-19 and the
closure of our construction sites, we were
making good progress on our target to
increase volumes. The unprecedented
impact of COVID-19 and the closure of our
construction sites has significantly reduced
our total home completion volumes this
year to 12,604, (2019: 17,856).
Leading construction
Our priorities
The long term 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 continue to work with our partners to develop MMC at scale, to increase
build efficiency whilst minimising the environmental impacts of construction.
Value created for
stakeholders
Short term
• We build outstanding quality homes for
our customers and we seek to ensure
that our sites are well managed and safe
for our employees and sub-contractors.
Medium term
• Protect the natural environment by
using MMC, minimising resources used
and waste created from our operations.
Long term
• Our investment in innovative approaches
provides opportunities to address the
skills shortage facing the industry,
diversify the types of materials we use,
use resources more efficiently, build at a
greater speed and increase efficiency.
Our objectives
Short term
•
Ensure sites can operate safely and
efficiently in response to COVID-19 and
that quality of build remains a
key objective.
•
Continue to increase use of MMC.
Medium term
•
Develop our 2040 roadmap for reducing
waste.
•
•
Make further progress towards
achieving scope 1 and 2 carbon
emission reduction targets by reducing
diesel emissions from plant and
equipment on our construction sites.
Continue integrating Oregon into our
business and working towards our
MMC target.
Long term
•
Deliver 25% of completions using MMC
by 2025.
•
Improve data quality, availability and
learnings from the AIMCH research
to open up new opportunities for
improving and increasing modern
methods of construction, minimising
resource use, and waste generation.
•
Minimise diesel use on our sites.
→ An Oregon timber
frame home being
constructed at
Heritage Grange,
Edinburgh, Scotland.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Progress
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 safe, well-
managed sites. This has become even more
important in the wake of COVID-19. The
reopening of our sites from 11 May 2020
was undertaken in a safe, controlled and
efficient manner. Detailed Construction
Recommencement Plans where provided to
construction teams to assist in the process
as well as detailed briefings to our sub-
contractors and suppliers. Our enhanced
COVID-19 working practices and protocols
are in place on all of our construction sites.
These working practices and protocols
meet or exceed current government,
Public Health authorities and Construction
Leadership Council guidance. The proper
management of sites supports our principle
of Keeping People Safe. See pages 62 and
63 for more details on the changes we have
made to adapt our sites.
Our long term focus on quality and site
management is demonstrated by our
success in the NHBC Pride in the Job
Awards, which recognise site managers
who achieve the highest standards in
housebuilding across the UK. In January,
Mark Summersgill, a site manager from
our North East division, was named
Supreme Winner in the Large Builder
category for the 2019 NHBC Pride in
the Job Awards. In June 2020, our site
managers won 92 (2019: 84) awards,
more than any other housebuilder for
16 consecutive years. This achievement
demonstrates the high standard of work
that our site managers and their teams
deliver, and it also helps highlight our high
standards and quality to our customers.
Innovating to improve efficiency
During the year, we have delivered 21.0%
of our total home completions using MMC.
As a result of COVID-19, there was a delay
to the delivery of home completions, which
meant we delivered less homes using MMC
than planned for in FY20. Despite these
challenges, we have made good progress
towards our target of 25% of completions
using MMC by 2025, a target set after
achieving our previous goal of 20% of units.
MMC provides opportunities to address the
skills shortage facing the industry, diversify
the types of materials we use and build with
greater speed and efficiency, while also
delivering returns for our investors. We now
have experience of over 100 sites where we
have applied one or more MMC solutions.
We have collected knowledge which has
allowed us to clearly define the key criteria
needed to both obtain the benefits of MMC
and deliver a successful site. This has
meant we are now able to use MMC under
the correct circumstances to compete with
traditional brick and block construction,
mainly due to the time savings we have
been able to obtain. 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
FY20
2,031
269
143
209
–
–
2,652
21.0%
FY19
2,321
1,699
718
242
63
17
3,609
20.2%
Key material issues
Our approach to health and safety.
•
•
•
•
•
Lifetime environmental
performance of the 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).
KPIs
12,604
homes
(2019: 17,856 homes)
Why we measure
• Reflects activity and growth.
• Method by which business capacity
is monitored.
7.70 tonnes
per 100 sq.m. of build
Waste intensity
(2019: 6.53 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
E
F
I
J
L
Delays in build programmes, poor
product quality, or a failure to
maintain sufficient material and
sub-contractor availability could
hinder the achievement of excellence
in construction, harming reputation,
increasing costs, reducing revenue and
resulting in litigation and uninsured
losses.
1.
Total and percentage of completions includes JVs and has been adjusted for homes where more than one
technology has been used.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Leading construction CONTINUED
Our priorities
“ A key aspect of our MMC
and carbon reduction
strategy is the delivery of
timber frame homes.”
↓ Mark Summersgill, Site Manager and the
Supreme Winner in the Large Builder category
at the NHBC Pride in the Job Awards.
A key aspect of our MMC and carbon
reduction strategy is the delivery of timber
frame homes. Timber frames are built in
factories to high standards, and provide a
low carbon cost method of construction
with low levels of embodied carbon. In June
2019, we acquired Oregon, a manufacturer
and previously one of the Group’s valued
suppliers of timber frames. During the year,
we have integrated Oregon into the Group.
Our core English housetypes have now
been designed to reflect the use of Oregon
timber frames and we delivered 469 timber
frames from Oregon to our sites this year.
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.
We are partners in the AIMCH project,
jointly funded by Innovate UK and the
private sector to identify, develop and grow
new housebuilding technology. We have
held numerous visits to MMC sites with
suppliers and peers across our sector to
show them how we are delivering MMC
and the challenges posed. We recognise it
is critical the whole sector takes on MMC
and delivers robust solutions, and therefore
important we share our knowledge.
Technologies new to us 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.
Waste and resource efficiency
The industry is seeing high levels of
demand for materials, many of which cause
environmental and social impacts in their
extraction, manufacture and transport, so
it is important that we focus on waste and
resource efficiencies.
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Barratt Developments PLCwww.barrattdevelopments.co.uk We continue to focus on being efficient in
skip utilisation and segregation; however,
our diversion of waste from landfill reduced
during the year to 96% (2019: 97%).
Though our absolute waste tonnage
reduced by 16%, waste intensity has risen
18% compared with last year to 7.70 tonnes
per 100 sq.m. build area (2019: 6.53 tonnes
per 100 sq.m. legally completed build area).
We were aware of some increase in waste
tonnage from our operations; however,
the increase has mostly been driven by
the delay in legal completions resulting
from COVID-19. We therefore recognise
that waste must remain a priority area if
we are to meet our 2025 target of a 20%
reduction on 2015 levels. Our approach
will be to conduct analysis of the data from
each of our construction sites, and to use
these insights to drive performance across
every area. We will increase our waste
management efforts and bring in leaner
and more efficient working methods.
As part of efforts to investigate the root
causes of waste, we conducted a survey of
72 suppliers to investigate the extent and
types of single use plastic packaging on
site identifying opportunities to reduce it
through collaboration. Our latest ASPIRE
graduate cohort followed this with a study
to assess the plastic waste created on two
different sites across a number of sample
plots resulting in a set of recommendations
to reduce it, such as improving recycling
facilities and awareness materials in
site cabins.
To investigate the potential of MMC to
reduce waste, we completed an audit into
the impacts of timber frame on waste
generation in the construction process. This
small-scale study found that a traditionally
built home generated 25% more waste than
its timber frame equivalent. We are taking
action to find ways to reduce the amount of
waste generated by timber frame homes
even further.
21.0%
Percentage of home
completions using MMC
(2019: 20.2%)
96%
Percentage of construction
waste diverted from landfill
(2019: 97%)
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← Above and left: Oregon timber frame
installation at Heritage Grange,
Edinburgh, Scotland.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Investing in our people
Our priorities
The housebuilding industry continues to face a
skills shortage. We are playing our part to 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.
Our objectives
Value created for
stakeholders
Short term
• We will continue to develop high
potential employees, and create more
opportunities for young people by
extending our apprenticeship offer
including non-trade disciplines.
• Recognising the specific needs of our
sector, we continue to raise awareness
of effective ways our employees can
support and improve their mental,
physical and financial wellbeing.
Medium term
• By ensuring our employees have the
right skills at all levels, we will continue
to provide excellent award-winning
quality and service for our customers.
• Our Customer First Employee
Recognition Scheme recognises
our employees who go ‘above and
beyond’ for both external and internal
customers.
Long term
• We comply with relevant Government
and Regulator guidelines including the
Health and Safety regulations, Gender
Pay Gap Reporting and Diversity and
Inclusion. We are an accredited Living
Wage Employer.
• Our long term focus is to ensure our
business is representative of the
communities in which we operate, and
our programmes to address the skills
shortage in our industry.
Short term
•
Increased online training and
development, which is available to all
employees, and is designed to fit around
their schedules and facilitate learning at
their own pace.
•
•
•
Manage our social media platforms to
ensure our employer brand is enhanced.
Support employees following restart in
their adjustment to new ways of working.
Continue to support the health and
wellbeing of all employees.
Medium term
• Reconfigure our existing recruitment
programmes to explore modern
methods of delivery.
• Enhance our resourcing and onboarding
strategy to ensure our recruitment
and resourcing model can be delivered
through online mechanisms.
• Reward and recognise employees
with enhanced benefits via an easily-
accessible online benefits platform and
bespoke employee communications to
raise awareness of what we offer.
• Continue to listen and respond to the
feedback from our Workforce Forum.
Long term
• Continue with our diversity and inclusion
strategy, to create an environment where
everyone: feels like they belong; can be
themselves; and knows that their voice
will be heard.
• Reward and recognise our diverse range
of employees and provide segmented
benefit offerings.
• Continued enhancement of the health
and wellbeing of all employees based on
mental, physical and financial wellbeing.
• To conclude our strategy to achieve a
future-proof, integrated HR payroll system.
58
Progress
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
engaging with our employees, promoting
their wellbeing, investing in their
development, recognising their dedication,
and ensuring our employee packages
are effective and competitive. We are
committed to becoming a more diverse and
inclusive company. Having a diverse team
creates a stronger, more dynamic business,
makes us a more attractive employer, and
is better for our customers.
The development and
training of employees
We are playing our part to address the
industry skills shortage and to reduce its
impact on our business. We have a number
of award winning and well-established
development programmes which have
continued to be successful during the year.
In total we have developed or are developing
100 delegates through our Armed forces
transition programme, 30 of whom are
currently on programme. We have found that
the skills developed in the Armed Forces
translate well to site management, and the
scheme has brought a large number of high
calibre individuals into our business.
To date, 168 people have completed or
are working towards our Residential
Construction and Commercial degree at
Sheffield Hallam University, and 32 have
graduated with a BSc Honours degree.
Following the success of the Higher and
Degree Apprenticeships, we are now
working with Sheffield Hallam to develop
a similar qualification for our Technical
departments. This will support individuals
who are looking for a career in Technical
Design and/or Project Management.
Our new programme for bricklaying and
carpentry apprentices enables participants
to achieve apprenticeship level within a
reduced time frame. Our schemes focus
not only on bringing new talent to the
industry but also on retaining it for the
future. To date, 119 apprentices have
attended and 112 apprentices are due to
complete the course in FY21. We currently
employ 492 apprentices, graduates and
trainees, around 7% of our workforce. A
further 57 apprentices have been recruited
in FY20 for our FY21 intake. Whilst
COVID-19 has resulted in us being able to
bring fewer apprentices into our business
at the start of FY21, apprenticeships remain
a vital route to develop skilled tradespeople
for our industry.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Progress
We can also address the skills shortage
and prepare for the future by developing
our people across all aspects of the
business. In November 2019 we launched
the MyLearning Mobile App, providing our
colleagues with even more flexibility and
choice in how they access and consume
learning content.
We want to support our leaders and
managers of the future, and effective
succession planning is an important
element in our long term success. In
FY20, 227 high potential employees have
attended or are attending our Rising Stars
programme. We recently launched a more
robust development programme for our
potential future leaders and in FY20, 16
completed our assessment process.
Following the onset of COVID-19, we
identified a greater need for development
and training of our employees as they
adjusted to different ways of working or
a temporary suspension of their role.
Through a combination of online training
activities and short webinars we were able
to provide training and development to all
our colleagues including those on furlough.
The emphasis was on our employees’
health and wellbeing and in total over
23,000 learning activity completions were
recorded in March, April and May 2020. The
average number of unique users using our
online platform over the same period was
2,700 per month, compared to an average
of 2,000 per month last year.
↓ Harrison Godfroy, a
commercial apprentice in our
Southampton division.
We achieved 4.1 training days on average
per employee (FY19: 4.7 days) maintaining
our target of over 4.0 days training days per
employee on average. This slight decrease
is a result of our being unable to deliver
classroom-based training for four months
of the year due to COVID-19.
How we recruit and retain
the best talent
It is vital for us to recruit the best
candidates and to develop talent within
our business to ensure that we have the
necessary skills for continued operational
delivery and future growth.
For our 2020 recruitment, 25% (2019: 21%)
of our apprentices were recruited from the
most deprived areas according to the Index
for Multiple Deprivation.
Our Construction and Sales Academy
programmes develop talent within our
business and we continue to work with
the House Building Skills Partnership. We
have developed a new sales apprenticeship,
aimed at Sales Development Coordinators
and Sales Advisers, focusing on
customer service in a sales discipline and
delivered over 12 months. Additionally,
we are exploring a Digital Marketing
apprenticeship, aimed at Marketing
Coordinators, Marketing Executives or
Marketing Managers, who wish to gain
further qualifications.
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 employees.
KPIs
84.2%
Employee engagement
2020
(2019: 84.5%)*
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.
Surveying employees shows we care
and have the courage to listen to
them. We asked questions that can
help drive actions.
* Our 2019 engagement score was been re-
calculated (from 82%) to use our updated
2020 definition. As part of the transition from
our previous independent provider, we made
a planned change to the definition of the
Engagement Index in 2020. We replaced an
engagement measure with a more valid and
robust measure of engagement.
Risks G H
I
J
L
The provision of a safe working
environment is a fundamental priority;
without looking after the health and
wellbeing of our employees, including
in regard to the short and long term
impacts of COVID-19, our employees
could not work with confidence.
The skills shortage in our industry
means it is of utmost importance to
recruit and retain best-in-class people.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Investing in our people CONTINUED
Our priorities
Our updated careers website and new
applicant tracking system provide an
integrated recruitment process, improving
on the experience and efficiency for
candidates, with over 26,000 applications
since its implementation. Our increased
use of social media linked to this system
enables us to better understand our
audiences, what information channels they
use and what business highlights they
want to hear about. It has also resulted in
increased interest in our opportunities – for
example our Trade Apprentice programme
saw twice the volume of applicants during
this year’s campaign than previous years.
We have incorporated video interviewing
technology into the recruitment process,
providing further opportunities for
efficiencies as well as allowing candidates
to get closer to our business and the teams
they will potentially be working with, early
in the process. We will continue to enhance
our resourcing and onboarding strategy
to ensure our recruitment and resourcing
model can be delivered through online
mechanisms.
In response to some of the findings from
the engagement survey, we are working to
improve the visibility of career paths in all
functions and we are proactively prioritising
and tracking internal promotions.
Remuneration and benefits are an
important element of employee retention.
We continue to review our employee
packages to ensure they are effective and
competitive. We carry out biannual market
benchmarking and revise our internal
performance related salary increments to
ensure competitiveness and proactively
adjust salaries. Due to COVID-19, we did
not annually review salaries for FY21.
In April 2020, we invited all eligible
employees to participate in the 12th 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 2020, approximately
51% of employees participated in one or
more of the active Sharesave schemes,
compared to 46% as at June 2019.
We are pleased to be listed in the Glassdoor
Employees’ Choice Awards, recognising the
50 Best Places to Work in 2020. There is
no self-nomination or application process,
instead we have gained this position entirely
based on current and former employees
voluntarily and anonymously sharing
insights and opinions about us.
60
As a result of our ongoing efforts in this
area, and the uncertainties created by
COVID-19, our total Group employee
turnover has reduced to 10% for the year
to 30 June 2020, (2019: 16%) ahead of our
target of 15%.
How we are creating opportunities
for young people
We engage with our future workforce
through our work with schools, national
apprenticeship bodies, universities and
Armed Forces resettlement organisations.
This includes getting involved with campus
activities, attendance at Careers Fair and
employer led events.
In January 2020 we launched our Higher
and Degree Apprenticeships in Residential
Construction and Quantity Surveying, which
build on our existing degree and provide
enhanced learning for those on programme.
This includes on the job training to ensure
their academic learning is applied in their
roles, a work based learning coach who
guides them through the programme, and
support in working towards professional
accreditation. In the last three years, 72%
of those who have graduated with the
Residential Construction Degree have been
promoted during their time on programme
and 53% of them were in management and
senior management positions by the time
they finished.
How we are engaging with our
employees
We seek to create a great place to work,
founded on an open and honest culture. To
achieve this we need to regularly engage
with our employees to understand and
address their issues and concerns. Our
Group engagement score has been in the
upper quartile consistently since 2014.
As part of our embedded approach to
engagement, all divisions and functions
proactively agreed and delivered action
plans. Interim Pulse Surveys were carried
out in specific teams to support and
improve engagement where appropriate.
Our Workforce Forum, comprised of
employees representing all regions and
levels of our business, continues to meet
and provide insight to inform our actions.
We share our engagement results with the
Forum and seek recommendations on all
aspects of our business which impact our
people. See pages 42 and 43 for more detail.
Promoting the physical and mental
wellbeing of employees
During the year, we continued to progress
our health and wellbeing strategy,
endorsed by the Chief Executive and the
Executive Committee. This includes health
and wellbeing hubs on every site and in
every divisional office, stress awareness
training for employees and mental health
awareness training encouraging openness
and appropriate responses between line
managers and colleagues.
Mates in Mind ‘Manage the Conversation’
training was rolled out to all line managers
to provide them with the skills and
confidence to listen and talk to someone
who feels they need to share a problem
regarding their mental health. We also
introduced annual health checks via drop
in medicals in offices and on sites so
all employees benefit from access to a
health check.
Our focus on health and wellbeing
resulted in being shortlisted for the
prestigious Personnel Today Health and
Wellbeing Award.
Throughout the COVID-19 pandemic, one
of the Group’s key objectives has remained
the health and safety of its employees. Our
colleagues needing to self-isolate were
immediately reassured that they would
be provided with special paid leave, over
and above SSP. When schools closed, all
employees with childcare responsibilities
were given one week of special paid
leave to enable them to make necessary
arrangements.
When our construction sites, sales centres
and offices closed, the Group furloughed
the majority of employees, and maintained
their normal pay. All employees who were
not shielding returned by 30 June. We have
committed to paying those who are required
to follow shielding advice as normal. We
have also provided some employees with
additional special paid leave as a thank you
for their hard work.
Throughout the pandemic, we have
endeavoured to support the physical and
mental wellbeing of our employees. Weekly
communications from our Chief Executive
to all employees included valuable health
and wellbeing support information. We
partnered with our benefits providers to
offer training to support physical, mental
and financial wellbeing, and our Talent
team provided regular in-house mental
wellbeing webinars. We issued a ‘Working
From Home Guide’ to all employees, and
specific support was provided for those
balancing work whilst home schooling.
Diversity and inclusion
We seek to build without barriers and we
have continued to implement our diversity
and inclusion strategy to achieve this.
The diversity policy relating to the
appointment of PLC Directors is set out on
page 103.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Male and female employees
PLC Directors
Senior Managers
Employees
Executive Committee
Reports to
Executive Committee
n Male
Total
n Female
Total
2020
63%
5
38%
3
2019
63%
5
38%
3
n Male
Total
n Female
Total
2020
86%
246
14%
40
2019
85%
247
15%
43
n Male
Total
n Female
Total
2020
69%
4,391
31%
1,970
2019
69%
4,288
31%
1,918
n Male
Total
n Female
Total
2020
67%
4
33%
2
2019
67%
4
33%
2
n Male
Total
n Female
Total
2020
67%
24
33%
12
2019
68%
21
32%
10
We aim to create an atmosphere that
provides equal opportunities for all.
Selection for employment and promotion
is based on merit, following an objective
assessment of ability and experience,
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.
All new employees receive mandatory
diversity and inclusion training as part
of their induction and we have continued
to deliver our Building Without Barriers
workshop to newly appointed or promoted
leaders.
We have improved across all our diversity
metrics, with most significant progress
being made in female and BAME leadership
representation. At 30 June 2020, 7% of
employees were from BAME backgrounds
(2019: 6%) and 2.1% of senior leadership
positions were held by BAME employees,
(2019: 1.8%). We still have some way to
go in this area, and in the last year we
have looked in more detail at how we can
improve. We held focus groups to hear
colleagues’ perspectives on what it’s like
to work at Barratt, and to understand
what we should do differently. We used
this information to help create our BAME
Strategy, which we launched at the start of
the year. We have recently signed up to the
Business in the Community Race at Work
Charter, which supports the actions set
out in our BAME strategy and our aim to
ensure that ethnic minority employees are
represented at all levels in our business.
We have continued our focus on female
leadership development with our Catalyst
diversity mentoring programme. This year
over 60 delegates were nominated and
have been enrolled on the programme.
We have also matched 120 people as part
of our reciprocal mentoring programme.
We launched our first employee network,
which is focused on gender equality, and
the committee of the network have taken a
number of initial actions. At 30 June 2020,
women held 14% (2019: 15%) of senior
manager roles within the Group.
The requirement to publish a Gender Pay
Gap report in 2020 was suspended by
HMRC due to COVID-19. However, as a
business, we agreed that it was important
to keep stakeholders informed of our
gender pay position. Accordingly, we will be
publishing our report in September 2020.
We have revisited our policies and changed
the language in our family friendly policies
to make them gender neutral. We have also
introduced paid leave for carers and those
undergoing assisted fertility.
In 2020, for the first time we made a
submission to the Stonewall Equality Index
and we are reviewing the feedback from
our submission to ensure we continue to
develop actions which demonstrate our
commitment to the LGBT+ community.
Every effort is made to retain and support
employees who become disabled while
working within the Group. We completed
an initial disability access audit of all our
divisional offices. Our intention in the
coming 12 months is to seek to remove
physical barriers for disabled colleagues
or applicants.
We have redefined our Agile and Flexible
Working policy to give line managers
greater freedom to respond to requests,
and to monitor and ensure the effectiveness
of those with different working
arrangements.
Human rights and Anti-bribery
During the year, we received Living Wage
accreditation, showing our commitment to
our employees by paying an independently
calculated rate of pay that is based on the
actual cost of living.
Our respect for human rights underpins
our strategic priorities. 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 118.
Our non-financial KPIs in respect of health
and safety, and employee engagement
reflect our belief that it is a fundamental
human right to work in a safe and
supportive environment. Employees
undertake training in respect of modern
slavery and we are 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.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Keeping people safe
Our principles
To ensure our operations are safe and we have a
positive health impact on all those employed and
affected by what we do.
Strategic priority
Health and safety is a fundamental priority. All of our people are responsible for achieving
our commitment to the highest industry health and safety standards.
Our objectives
Value created for
stakeholders
Short term
• We continue to evaluate our processes
to ensure that we respond to any
Government or public health guidance
on controls for COVID-19.
Medium term
• We will continue to work with our
suppliers and contractors to improve
systems and processes and in
particular controls for plant and
equipment on site.
Long term
• 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 are enhancing our site induction
process with an off-site element, which
will be completed via a mobile app. This
will enable a passport to work on our
sites, complemented by a site-specific
induction process.
Short term
• A key objective is to provide a safe
working environment for all our
employees, sub-contractors and
customers, especially in response to
COVID-19. We will ensure our COVID-19
working practices and protocols remain
in line with the latest Government,
Public Health and Industry guidance.
Medium term
• We continue to engage with our sub-
contractors in developing appropriate
management systems to enhance their
controls on our sites.
Long term
• 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.
↓ Bruce Constantine, Commercial Director, and
Paul Ley, Construction Manager, in our Kent
division.
Progress
We prioritise health and safety across our
business and seek to manage the inherent
risks by applying our management system
across our operations and continuously
reviewing our safe systems of work.
The challenges this year were increased
by the COVID-19 pandemic, which required
us to implement controls to ensure the
safe lockdown of our operations and
enhanced safe systems of work to enable
our operations to recommence. Plans
were developed based on Government,
Public Health and Industry guidance, and
in consultation with colleagues and other
stakeholders who would implement our
enhanced COVID-19 working practices
and protocols.
We have put in place controls to ensure
social distancing and hygiene measures
are implemented on our construction sites,
and we developed a new set of working
practices and protocols to ensure our
sales and customer interactions could be
undertaken in accordance with relevant
Government guidelines.
To assist all our stakeholders in
understanding these controls, we provided
guidance and advice as well as videos
demonstrating the measures put in place.
We have also liaised with our stakeholders
on the controls that they consider
appropriate and adapted and amended our
approach where required.
Our colleagues have been key to
implementing the enhanced controls.
We provided e-learning modules for
our management, construction and
sales teams, and once our operations
recommenced, carried out wellbeing
surveys to enable us to further understand
how our teams consider the COVID-19
controls have been implemented and
reflect on any learning outcomes.
Our key objective with recommencing
operations was to ensure we minimised
the risk of spread of infection. We have
received an Assurance Statement from
the British Safety Council certifying that
our COVID-19 workplace safety, health
and environmental arrangements are in
accordance with current guidance and best
practice, demonstrating our commitment to
providing a safe and healthy workplace.
We have enhanced our approach to
inductions on site and have worked
with ‘Site Safety Systems’ to develop an
induction App linked to industry wide
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Barratt Developments PLCwww.barrattdevelopments.co.uk Progress
Key material issues
• Our approach to health and safety.
• Promoting the physical and mental
wellbeing to our employees.
KPIs
96%
Health and safety (SHE
monitoring compliance)
(2019: 96%)
Why we measure
•
•
To demonstrate compliance with
safety standards on our sites.
Lead indicator highlighting areas of
SHE focus.
Risks mitigated
by this principle G H
Prioritising the safety of our employees
minimises SHE incidents. Looking after
their health and wellbeing over the
long term, including in regard to the
impact of COVID-19, gives employees
the confidence and ability to provide
industry leading performance and
contributes to the creation of a great
place to work.
competency cards. This will provide a
more user-friendly approach to recording
inductions of site workers and ensuring
they have the required competency to carry
out the tasks necessary.
We have also continued to develop an App
for recording incidents and accidents, near
misses, environmental incidents, non-
conformances and good practice, providing
an increased ability to evaluate trends and
consider any improvements.
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, which assures
all of our operations. Our SHE audit
compliance scores and IIR are assured in
accordance with ISAE 3000 revised.
Positive engagement is key. Our team in
the Midlands has facilitated a group with
the Working Well together campaign, which
has promoted collaboration with others in
the sector, suppliers and contractors, and
organised events such as health, safety and
awareness days.
Our approach to health and safety
The wellbeing, health and safety of all
affected by our operations, including the
local communities in the locations we build,
is of paramount importance.
The Group’s dedicated SHE team has
considerable experience in providing
proactive support and advice to our teams
and an reactive incident led approach to
identify and mitigate health and safety risk.
We issued updates to our SHE management
system in January 2020, reflecting
our continued drive to improve all our
processes and procedures. These updates
are a result of feedback and consultation
with our teams, on their implementation
of requirements, and any learning from
incidents or near misses.
Compliance to our SHE management
system is verified by a programme of
site monitoring and internal and external
audits. During the year, our in-house team
carried out 5,968 (2019: 6,916) monitoring
visits and an average compliance rate of
96% (2019: 96%) was achieved. Our internal
audit programme of all our operating
divisions was interrupted by COVID-19,
but we have committed to complete those
locations that were not reviewed in the first
quarter FY21.
We believe all injuries are avoidable and,
whilst it is not possible to entirely eradicate
risk, we are determined to improve our
performance and reduce the number
of injuries occurring in our working
environment. The Group IIR for the year
is 256 (2019: 297) per 100,000 persons
employed (including sub-contractors). We
are pleased with this reduction but are
committed to continuing to improve.
We have continued to work with our
suppliers to reduce the risk of falls and,
in conjunction with one of our suppliers,
we have developed an interactive tool to
allow our teams to better interpret the
requirements for protecting stairwell
configurations during construction. We will
continue to collaborate with our suppliers
and contractors to improve our processes
and in particular controls for plant and
equipment on site.
Engagement with our stakeholders is key to
improving our operational health and safety
standards. We continued to engage with
our groundworks contractors in developing
appropriate management systems to
enhance their controls on our sites. This
continues to be a positive intervention
strategy and although COVID-19 interrupted
progress, we continue to work with this
group of stakeholders to improve standards
on our sites.
Promoting physical as well as
mental wellbeing
We recognise that positive emotional
wellbeing and mental health is fundamental
to colleagues and our continued business
success. We already had support structures
for our colleagues and in conjunction
with our key partner Mates in Mind have
complemented this by providing mandatory
mental wellbeing training to all our line
managers, including identifying signs
within self and others. We will enhance this
programme by providing mental health first
aid training for colleagues to provide initial
key support within our workplaces.
We have continued with our strategy to
improve the focus on occupational health,
conducting awareness campaigns on
mental wellbeing and general health issues
that could affect our workforce.
We have also continued with a programme
of random drug and alcohol sampling
and responding to suspicion reports across
our business.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Being a trusted partner
Our principles
Housebuilding is a long term business and the
development of sustained partnerships with
landowners, local authorities, suppliers and sub-
contractors is critical to our success.
Strategic priority
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.
Our objectives
Value created for
stakeholders
Short term
• 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.
• Highlight and address potential supply
performance risks, including through
our strategic supplier capability
assessment.
Medium term
• Work with our suppliers on ways we can
manage and reduce embodied carbon
in our supply chain.
• Adapt our business and supply chain
requirements to meet the Future
Homes Standard.
Long term
• Work with our offsite partners on more
advanced forms of MMC.
•
Investigate, develop and grow
industrialised offsite solutions to meet
housing demand through our AIMCH
project.
Short term
• Ongoing engagement with suppliers,
particularly as the impact of COVID-19
evolves, is important to help them
identify risks and plan accordingly to
ensure they can meet our demand.
Medium term
• 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.
• We are developing offsite solutions to
reduce embodied carbon and make our
operations efficient and effective.
Long term
• 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. It is essential for us
to build good, long-lasting relationships
that make us the developer of choice to
work and partner with.
Progress
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. It is vital that we have good
relationships with landowners and other
partners to ensure we are their developer
of choice. We have a comprehensive Group
Partnerships Policy to ensure proper
engagement with our key land partners and
stakeholders.
Working with our suppliers and
sub-contractors
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 continuously
communicate with our suppliers, holding
regular performance and business reviews
focusing on our ongoing relationship
and health and safety. This engagement
has become vitally important during the
COVID-19 pandemic. We are committed
to providing a safe place in which our
employees and sub-contractors can work.
We engaged with our suppliers throughout
the lockdown and remobilisation periods
of our site operations to ensure we had
clear visibility of each other’s plans. This
exchange of business planning information,
such as our build programmes and
their manufacturing plans, enabling a
smooth transition between our respective
operational phases.
The procurement for the majority of our
construction materials, site equipment
and business consumables is centralised.
This arrangement enables us to manage
supply, 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 to help
them identify and address opportunities
and mitigate risk. Through the COVID-19
pandemic we have been able to leverage
our investment in supplier relationships
to ensure we have appropriate supply
of scarce resources such as PPE and
other consumable material requirements
directly related to new COVID-19 operating
protocols. We have also been able to ensure
that whilst our supply chain returns from
hibernation and material supply in some
areas is constrained, they support our build
requirements as required.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Progress
collected knowledge and information in
order to refine this process and ensure we
maximise the benefits of MMC.
The AIMCH is a collaboration between
leading organisations in our sector focused
on industrialising the delivery of MMC.
The project aims to identify and develop
industrialised offsite solutions, which
are needed to meet current and future
housebuilding requirements such as low
embodied carbon emissions. During the
year we have continued our work on this
project and have successfully completed six
advanced closed panel timber frame homes.
The Future Homes Standard will lead to
changes in how we build our homes. We
are actively looking at how we can design
homes which are not connected to the gas
grid. Our Group Design and Technical team
have visited other countries to understand
how they are delivering low carbon homes,
the challenges they are facing and solutions
they are applying. We are also bringing
our suppliers together to understand each
other’s drivers and challenges in relation to
net zero carbon and electric, and this has
driven a number of key actions in relation
to our future plans to reduce carbon
emissions created by our operations.
The increased customer interest in Smart
technologies in the home has seen us
partner with Nest, part of the Google Group,
to look at how we can offer smart solutions
to our customers. We have done a number
of trials with this technology and continue
to work with Nest to develop a solution.
Key material issues
• The lifetime environmental
performance of the homes and
buildings we build.
• Having an energy efficient and low
carbon supply chain.
• Our approach to health and safety
•
Innovation (MMC).
Risks mitigated
by this principle B D E
F
Acting with integrity in all of our
relationships fosters future land and
development opportunities, allows for
smooth and efficient construction, and
ensures that our suppliers and sub-
contractors benefit from continuing to
work with us.
↓ Members of the AIMCH
project at our Kings Quarter
development in Warrington.
Image taken prior to the
introduction of social
distancing guidelines.
We are focused on the measurable steps
that we can take to reduce both the
embodied carbon in our supply chain and
in-use carbon from our homes. During
the year, we set a science-based target to
reduce indirect carbon emissions by 11%
from our supply chain and our homes by
2030. Our scope 3 data is reported on page
235. Partnerships with our suppliers are
key to the delivery of this and we shared our
goals and key actions with suppliers at our
virtual supplier conference in July 2020. We
remain fully supportive and engaged with
the SCSS and retain our own Gold status.
Our focus with key suppliers is to move
from “education” to “implementation” of
environmental initiatives, with a target of
50% of our high carbon intensive suppliers,
measured by spend, to be members of the
school by FY21. To support our suppliers we
have developed a performance assessment
approach with the school, launched
after our conference that will promote
implementation of initiatives.
We are signatories to the Gangmasters
Labour Abuse Authority Construction
protocol, helping us share and receive
information and training materials to
prevent modern slavery and are also a
signatory to the Prompt Payment Code.
During the year we received accreditation
as a Living Wage Employer. All of our
suppliers and sub-contractors are
encouraged to contact our confidential
Safecall hotline if they are not being paid
the Living Wage. 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 sustainable
timber sourcing policy in December 2013.
All centrally procured timber was FSC or
PEFC certified in our last timber sourcing
survey. We have implemented an external
assessment of policy to ensure we comply
with its requirements.
Innovation with our suppliers
We invest time and resource in working
with our MMC partners to ensure the
development of their products meets our
needs and there is a smooth transition into
our operations. All new MMC products and
innovations go through our established
New Product Introduction Process, which
includes developing their design, ensuring
third party certification and detailed trialling.
Since we started our MMC journey, we have
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Building strong community relationships
Our principles
To ensure our work creates a positive legacy that
helps local communities 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 thrive.
Our objectives
Value created for
stakeholders
Short term
• Reduce disruption to the construction
and sales process. Reduce the risk of
health and safety incidents occurring
on site.
Medium term
• Make a positive impact in the
communities where we build.
• Reduce objections to new development,
avoiding costly and time-consuming
planning delays.
•
Improve accessibility and quality of
developments through infrastructure
investment.
• Forge links with external organisations
to help improve our own processes.
Long term
• Grow our reputation as a responsible
business among all stakeholders,
including customers, landowners, local
and national politicians, and the general
public.
•
Improve perception of our business
and industry among potential future
employees.
• Promote economic growth in the areas
where we build.
Short term
• Mitigate disruption of development
for existing residents. Reduction of
delays accelerates our provision of new
housing for customers. Employees
gain new skills, team building and
health and wellbeing benefits through
charitable partnerships.
Medium term
•
Improve the quality of developments,
benefiting customers, existing residents
and the wider public. Charitable
partnerships do lasting good work in
communities.
Long term
• Economic growth through additional
tax and consumer spending generated
by new housebuilding benefiting all
stakeholders.
↓ Tony Palmer, Construction Director for our
Bristol division. During the year we donated
all 400 of our defibrillators to St John
Ambulance and St Andrew’s First Aid.
Progress
Building strong communities in our
developments
In order to build high quality homes and
developments where people want to live, it
is vital that we put a great deal of time and
investment into forging strong community
relationships and providing the facilities
that people want and need.
This year we have made over £599m
(2019: £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.
These contributions form part of the cost
of our developments. At a national level, it
is estimated that our activities generated
£2.9bn of Gross Value Added to the UK’s
economic output and supported 44,359 jobs
this year.
Community engagement is a vital element
of our planning process, and we seek
to maintain a dialogue with residents
throughout the development process. We
do this through local discussion forums
and the writing of letters to local residents,
as well as any other means requested by
the Local Planning Authority. This allows
residents to make their voices heard, but
it benefits us as well. Less than 5% of the
units we build require a planning appeal at
a local level.
In particular, we work hard to engage with
children in local schools as they play such a
big part in any community. We go to schools
to teach children about the importance of
health and safety on our developments,
as well as the construction process,
sustainability and careers in the industry.
Charitable giving
Charitable activities are a key part of
our strategy for building community
relationships. We support a number of
national and local good causes, as well as
encouraging our colleagues to get involved
with fundraising and volunteering. During
the year, the Group raised and donated
£4.4m to charities (2019: £2.9m).
COVID-19 has made it all the more
important to do what we can to support our
communities. We have donated £100,000
to the NHS Charities Together directly, and
an additional £50,000 to NHS Charities
Together through The Sun’s Who Cares
Wins campaign, and £25,000 to The Big
Issue to support vendors who are unable
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Barratt Developments PLCwww.barrattdevelopments.co.uk Progress
Key material issues
• Promoting the physical and mental
wellbeing of our employees.
Risks mitigated
by this principle
C K
L
Community relationships form part
of our strategy to be a responsible
business. Working together helps
us to build communities that benefit
local people and the environment.
These achievements mitigate the need
for Government regulation and are
recognised during the planning process
for future developments.
£4.4m
Raised and donated to
charities in the year
(2019: £2.9m)
44,359
Jobs supported
(2019: 47,360)
to sell the magazine during the lockdown.
In the early days of the pandemic, we also
donated 5,000 medical-standard facemasks
to the NHS and all 400 of our defibrillators
to St John Ambulance and St Andrew’s First
Aid. This is in addition to our Big Barratt
NHS Thank You, under which we provide a
deposit contribution to NHS workers trying
get onto the property ladder.
Charitable partnerships
The Group has also entered into new
partnerships with a number of charities
this year.
In September 2019, we signed up to a
three-year £1.0m partnership agreement
with Outward Bound Trust. The Trust uses
outdoor adventure programmes to help
young people access nature and build
resilience and self-belief. Our partnership
will help around 2,400 children, while 82
of our employees will get the opportunity
to act as mentors on Outward Bound
courses. From 2020 onwards, the Trust will
also manage our annual Big Barratt Hike,
providing support in planning, managing
and fundraising for the event, in return for
which our teams will raise money for the
organisation itself.
We have also entered into a three year,
£100,000 partnership with HighGround, to
help fund horticultural therapy services for
injured service personnel Defence Medical
Rehabilitation Centre at Stanford Hall.
Part of their activity is to help maintain the
grounds at the new Friends of the Tenth
memorial at Somerby, Leicestershire, to the
building of which we contributed £20,000.
We also have links to the RBLI, whom we
have previously supported.
This year we became the official sponsors
of the Whizz Kidz Kidz Board, a group of
young wheelchair users from across the
country who meet four times a year to
discuss and develop recommendations
around the issues facing disabled
youngsters. We will donate £60,000 to help
cover the transport and accommodation
costs for the Board for the next three years.
In September 2019, David Wilson Homes
donated £50,000 to Canine Partners to fund
the training of one of their support dogs
and to help fund the construction of new
kennels at one of their training centres in
Leicestershire, near to our Group Support
Centre and registered office.
These new commitments are in addition
to our existing collaborations. We have
maintained an industry leading partnership
with the RSPB since 2014, which enables
us to design and implement nature-friendly
features into our developments, like swift
bricks and wildlife-friendly garden guides,
and to develop best practice on how we can
design our developments to help nature
thrive. We are currently developing a project
to create digital content for residents, so
they can learn more about biodiversity
and share their knowledge. We are also
in the second year of our partnerships
with the St Mungo’s Putting Down Roots
programme, which uses the therapeutic
benefits of horticulture to support the
recovery of homeless people with mental
health challenges in London and elsewhere
in England.
Barratt and David Wilson
Community Fund
The Community Fund allows each of our
divisions to donate £1,000 each month
to a local charity or organisation doing
positive work in their area. This allows
our employees to support the causes
that matter to them. This year we have
supported a range of different causes, from
new equipment for a local cricket club to
playgroups at a children’s hospice, and
from support groups for cancer sufferers to
library buses for local schools. A number
of our divisions chose to use this money
to support the fight against COVID-19,
donating to Meals for the NHS and St John
Ambulance.
Getting our employees involved
The Group also has a generous matching
scheme, under which the charitable
fundraising efforts of our divisions are
eligible for £15,000 of match funding each
year, with £20,000 available for Group
Support functions. In FY20, our colleagues
raised and the Group matched, a total of
£901,000. We also provide up to £1,000 of
match funding for the efforts of individuals.
We encourage employees to volunteer for a
charity of their choice, and they are entitled
to one day of paid leave per year to do so. We
also partner with Payroll Giving in Action to
enable employees to make regular, tax-free
donations to their chosen charity.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Safeguarding the environment
Our principles
Progress
Our business seeks to drive progress
against all the environmental issues where
we have an impact. This includes carbon
emissions and fossil fuel reduction, the
need to reduce waste and resource use,
and taking the opportunities from MMC
such as timber frame and protecting world
forests through sustainable sourcing. These
issues ultimately apply to our supply chain,
our own operations and the homes and
place we design and build.
We aim to be at the forefront of the
drive to Build Back Better following the
COVID-19 pandemic, engaging closely with
Government and collaborating within the
sector. We will do our part in the national
challenge to ensure economic recovery
goes hand in hand with the UK’s net zero
carbon by 2050 target. We set science-
based targets in the reporting year based
on a 1.50C scenario, and conducted early
scenario analysis.
We are putting ever more ambitious
plans in place to reduce all aspects
of our environmental footprint, from
reducing carbon emissions and fossil
fuel consumption, to reducing resource
consumption and waste. We aim to enhance
biodiversity and natural capital and source
responsibly.
Our divisions hold certification to
Environmental Management Standard ISO
14001:2015
The energy use and carbon
emissions of our operations
Scope 1 and 2 emissions
Our greenhouse gas emissions in absolute
terms have reduced by 23% (location based)
and 28% (market based). This is mainly
driven by office and site closures resulting
from COVID-19, though we have also seen
some benefits from our renewable energy
purchases. Our acquisition of Oregon,
included in our carbon reporting for the
first time this year has contributed 1% of
our absolute carbon emissions.
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.
Interconnected environmental concerns over air quality,
water resources and habitats are already important
to the way we operate and over future years this will
only increase.
Our principle
Our operations should be energy efficient and low carbon, minimising waste, 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 and source from sustainably managed forests, while utilising
the possibilities in MMC.
Our objectives
Value created for
stakeholders
Short term
• Adoption of TCFD recommendations
will enable the Board to make more
informed decisions factoring in
environmental risks and opportunities.
By supporting and contributing to
the development of a net zero carbon
UK roadmap we can support the
development of legislation that yields the
best results and works for the industry.
Medium term
• By actively supporting a low carbon
supply chain now, we can promote the
growth of UK suppliers in providing
those innovative technologies
and materials that housing and
infrastructure needs, at scale. Reducing
fossil fuel dependence can avoid
increased costs as these are dis-
incentivised by Government.
Long term
• Low carbon homes and developments
can insulate our customers against
higher bills, secure our leading national
sustainable housebuilder reputation
and build trust that our developments
leave a positive legacy.
• We are focused on sustainability in
the benefits we offer by incorporating
electric vehicles in our car fleet and
enabling employees to access electric
cars through our partnerships.
Short term
•
Having set science-based targets we
will reduce our diesel consumption in
our operations and put in place a plan
to reduce scope 3 emissions from our
supply chain and implement upcoming
changes to Building Regulations Part L.
•
•
We are developing an updated waste
reduction strategy and researching
the benefits of MMC as well as how to
enhance them.
We will improve our CDP Forests
disclosure and continue to improve
data collection on timber product
certification from our suppliers.
Medium term
• Develop our strategy on water use
reduction, addressing the adaptation
risks of water shortages and flooding in
our operations and in our homes.
•
Further explore how materials and
construction method choice can impact
our scope 3 emissions.
Long term
• We have set a target to ensure new
standard housetype designs will be net
zero carbon in use by 2030.
•
Achieve broader environmental net
gains utilising new technologies and
building methods.
• Further investigate the carbon,
water and other resources which
are embodied into the materials and
services we purchase.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Progress
Our carbon KPI is a measure of carbon
emissions per area of legally completed
units. A large proportion of emissions
are generated during construction. The
significant delay to unit completions this
year has therefore meant that we have
seen a significant rise in our scope 1 and 2
location based carbon intensity – as a result
of the combination of carbon emitted during
the construction stages, coupled with the
fact that these units did not legally complete.
We have a target to reduce our carbon
intensity for scope 1 and 2 greenhouse
gas emissions by 29% by 2025 from 2018
levels. In order to help achieve this, we
are introducing telematics technology to
all generators to provide new insights on
diesel reduction opportunities and are
working with plant manufacturers and
hire companies to provide telematics
reports, to alert our equipment handlers
on our construction sites when there are
opportunities to reduce diesel consumption.
We are conducting trials of solar and
battery assisted generators, which have the
potential to reduce diesel use, as well as
minimising noise and air pollution.
Office energy reduction plans are underway
at our Eastern Counties, Yorkshire West
and South Midlands offices. The results
will inform further energy improvements
at our other offices. We have increased
our purchase of renewable tariff REGO
backed electricity from 46% to 68%. We
have identified further energy savings for
sites and offices as part of compliance with
Phase 2 of the Energy Saving Opportunities
Scheme.
We have pledged to buy 100% of our
electricity on renewable tariffs by 2025.
This will prepare the way to achieving our
target of becoming net zero carbon in our
operations by 2040 at the latest.
Our scope 1, 2 and scope 3 business
travel and transmission and distribution
emissions, have limited assurance to
the ISAE 3000 (revised) standard by an
independent third party.
Greenhouse gas emissions
2020
2019
2018
2015
Scope 1
Scope 2
Total gross scope 1
& scope 2 emissions
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
Location
based
Market
based
Location
based
Market
based
18,374
24,832
24,966
24,019
4,700
5,016
6,594
11,809
2,089
3,411
4,992
–
23,074
29,848
31,560
35,828
20,463
28,243
29,958
Energy consumption
MWh
97,686
117,551
116,998
Carbon intensity (per
100 sq.m. of legally
completed build area)
Scope 31
Total gross scope 1,
2 & 3 emissions
Location
based
Market
based
tCO2e/
100m²
tCO2e/
100m²
tCO2e
tCO2e
tCO2e
Location
based
Market
based
1.92
1.70
1.75
1.66
1.82
2.32
1.73
3,130,717
3,153,791
3,835,725
3,865,573
3,857,428
3,888,988
3,151,180
3,863,968
3,887,386
–
–
–
–
–
–
Key material issues
• The energy use and carbon
emissions of our operations.
• Having a low carbon supply chain.
• Reducing waste created from our
operations.
• The lifetime environmental
performance of the homes we build.
KPIs
1.92
Carbon intensity (per 100
sq.m. of legally completed
build area)
(2019 (restated): 1.75)
Why we measure
•
•
Monitors environmental impact of
our business activities.
Monitors progress in carbon
reduction arising from our
operations.
Risks mitigated
by this principle C L
Proactively safeguarding the
environment through our designs and
construction methods keeps us ahead
of Government regulation and planning
policy, such as in meeting the UK’s
target of net zero by 2050 and ensures
we are playing our role in combating
climate change.
1.
384 tCO2e of transmission & distribution losses from electricity and district heat and steam under
category 6, have been assured to ISAE 3000 (revised) standard by an independent third party.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Safeguarding the environment CONTINUED
Our principles
↑ An eco-friendly garden at our Ladden Garden
Village site in North Yate, Bristol.
68%
of electricity purchased
from renewable REGO
backed tariffs
(2019: 46%)
Having a low carbon supply chain
Scope 3 emissions
We have set a science-based target to
reduce scope 3 emissions by 11% by 2030.
This encompasses all material scope 3
categories identified by the science-based
targets initiative, the most significant
being purchased goods and services which
account for 65% of scope 3 emissions, and
our products in use over their lifetime,
accounting for 30%. This is a major step –
scope 3 emissions account for 99% of the
total carbon footprint of our value chain.
Currently emissions from purchased goods
and services are estimated on industry
averages, and we will improve the accuracy
of scope 3 data over time by obtaining
actual emissions from top carbon intensive
suppliers and sub-contractors. This will
enable us to better target our efforts in
carbon reduction.
As part of our commitment to reducing the
lifetime emissions of homes, we have set
a target to ensure new standard housetype
designs will be net zero carbon in use
by 2030. We continue to work on making
reductions as part of our net zero journey,
and contributing to governmental and
industry forums on the topic.
Reducing waste created from
our operations
We recognise that waste must remain a
priority area for us if we are to meet our
2025 target of a 20% reduction on 2015
levels, see Leading construction on pages
54 to 57.
The lifetime environmental
performance of the homes we build
Water
We have published our ‘Approach to
Water’, which explains the ways in which
the business is mitigating the risks from
flooding and freshwater scarcity both to our
business and to the communities in which
we operate.
We are collaborating with water companies
to install smart water meters, which will
enable a better understanding of how
water use can be reduced in homes, and
have issued new guidance to divisions on
eligibility for infrastructure credits available
for water efficient homes. We contributed
to a new ‘Bricks and Water’ report on
water use and housebuilding, making clear
our support for water labelling, water
saving measures and support for further
measures in Building Regulations.
Biodiversity
In line with our target to create a net
positive impact for ecology and biodiversity
across all developments that we progress
through planning from 2020 onwards, we
have tested our approach and embedded it
into our work, allowing us to monitor and
track progress. 42 show home gardens
have been certificated as wildlife friendly
by the RSPB and we have contributed to
the British Standards Institute consultation
on biodiversity net gain. Read more about
biodiversity in Great places on pages 52
and 53.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Risk management
Process of identifying our
principal risks
In pursuing our strategic priorities to create
value for stakeholders, we experience
risk. The Board is responsible for the
overall stewardship of our system of risk
management and must ensure that the
Group maintains the appropriate level of risk
to achieve its objectives whilst remaining
true to its principles.
Risk management controls are integrated
into all levels of our business and across
all of our operations, including at site,
divisional, regional and Group level. The
roles and responsibilities of the Board, its
committees and all levels of management
from a risk management perspective are
summarised on page 78.
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 after the implementation of risk
mitigation strategies.
The Group has identified ten principal risks
that it considers to be of high impact and
likelihood, detailed on pages 72 to 76. The
principal risks are presented by reference to
the strategic priorities to which they relate.
The illustration of the probability does not
consider the relative size of any associated
financial or reputational impact of each item.
Why and how our risks change
The principal risks identified, 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.
At each Risk Committee, updates on
principal risk areas are presented and
ongoing mitigating actions reviewed. The
Chairman of the Audit Committee routinely
attends Risk Committee meetings in order
to provide independent challenge to the risk
management process.
The Risk Committee considers the new and
emerging risks identified by the business
and the need for mitigation.
During the year, climate change and social
trends have been identified as emerging
risks. The Group is currently undertaking
scenario analysis to determine the potential
impact of and mitigations available for
climate change and will identify it as
a principal risk in future if warranted.
Emerging risks are detailed on page 77. No
new principal risks have been identified.
In addition, 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.
There is an overarching risk of a significant
unexpected event, such as the COVID-19
pandemic, having a material impact on
the business, manifesting through the
Group’s principal risks. Our business has
an established action plan for significant
unexpected events, the effectiveness of
which has been demonstrated by our
response to COVID-19 this year.
The Risk Committee reports its
recommendations on changes to and actions
to mitigate against the Group’s principal and
emerging risks to the Audit Committee. The
Audit Committee assesses these reports
in light of business performance and the
environmental social and governance
matters embodied in our strategic principles
and makes recommendations to the Board
as to the appropriate actions to adopt.
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 are
defined. Tolerances are 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 Board has completed its assessment
of the Group's principal and emerging
risks, including those that would threaten
its business model, future performance,
solvency or liquidity.
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 instances in which these
risks could have a moderate adverse
impact on the Group, be it financially or
operationally. To ensure that the Group’s
business model remains resilient over
the medium and long term, the Group
has modelled these scenarios alongside
achievable mitigating actions. The results
are presented in the Viability statement on
page 79.
Impact of COVID-19
COVID-19 presents a risk to the
health and safety of our employees,
sub-contractors and customers. The
Group prioritises health and safety and
has implemented COVID-19 working
practices and protocols in line with the
latest guidance from the Government,
Public Health Authorities and the
Construction Leadership Council.
In addition, the pandemic has
heightened the Group’s other principal
risks: it has required the Group
to quickly adapt to a new working
environment, involving changes to
construction methods and IT systems,
coupled with economic uncertainty and
challenges for our supply chain.
As the pandemic has evolved, the
Board has reassessed its impact on
principal risks. In addition, a ‘bottom-
up’ evaluation was completed to ensure
a comprehensive consideration of
the risks to the business. Additional
mitigating actions have been
implemented where necessary.
The impact of COVID-19 on each risk
and the mitigating actions adopted in
response are detailed on pages 72 to
77. Changes arising from the virus are
denoted by the symbol
.
The Group has updated its forecasts
with its best estimate of the impact of
these risks and reflected this within its
going concern and Viability statement.
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Principal risks
Principal risk
The Group has identified ten principal risks that it considers to be of material operational impact and likelihood:
A Economic environment, including housing demand
F Availability of raw materials, sub-contractors
and mortgage availability
B Land availability
and suppliers
G Safety, health and environmental
C Government regulation and planning policy
H Attracting and retaining high-calibre employees
D Joint ventures and consortia
I
Availability of finance and working capital
E Construction
J IT
The principal risks are further detailed on pages 72 to 76, categorised by the strategic priorities to which they relate.
Emerging risks are detailed on page 77.
Key risk
indicators
Gross and
operating
margins,
PBT, ROCE,
EPS, TSR,
total home
completions
Principal risk
Risk level (net of mitigation)
Risk appetite and response/mitigation
Customer first
A
H
—
M
—
Economic environment, including
housing demand and mortgage
availability
Changes in the UK macroeconomic
environment may lead to falling
demand or tightened mortgage
availability, on which the majority of
our customers are reliant, reducing
the affordability of our homes.
An inability to meet customers’ needs
will lead to reduced volumes and
affect our ability to provide profitable
growth.
Responsibility:
Executive Committee
COVID-19 and the ongoing
requirement for social
distancing has disrupted
the UK economy and greatly
heightened uncertainty over
employment levels in the
short and medium term.
Future developments of the
virus or an unfavourable
outcome to negotiations
regarding the UK’s
relationship with the
EU could cause further
economic disruption.
From April 2021, the
Government’s Help to Buy
scheme will be subject to
regional caps and restricted
to first time buyers. The
scheme is due to end in
March 2023.
• Continual monitoring of the market at a
Board, Executive Committee, regional and
divisional level, leading to amendments
in the Group’s forecasts and planning as
necessary.
Assessed likely market impact of
COVID-19. The Group’s Viability statement
is on page 79.
• Comprehensive sales policies and regular
review of pricing, local markets and
developing good working relationships with
mortgage lenders.
• Quarterly site valuations based on the
latest market data.
• Maintenance of an appropriate capital
structure and balance sheet control.
• Planning for the end of the transition
period for the UK’s exit from the EU and
adapting business operations as necessary.
• Development of alternative strategies
to drive sales following the announced
changes to Help to Buy.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Principal risk
Risk level (net of mitigation)
Risk appetite and response/mitigation
Key risk
indicators
Great places
B
Land availability
The inability to secure sufficient
consented land and strategic land
options at appropriate cost and quality
in the right locations which enhance
communities.
Securing favourable sites that meet
our margin and site ROCE hurdle
rates will enable volume growth.
Responsibility:
Land Committee
C
Government regulation and
planning policy
Changes in the regulatory
environment affect the conditions and
time taken to obtain planning approval
and technical requirements including
Building Regulations, increasing the
challenge of providing quality homes
where they are most needed.
Sufficient, appropriate planning
permissions on new sites will enable
the Group to deliver disciplined
volume growth at our target margins.
Responsibility:
Operations Committee
D
Joint ventures and consortia
The Group can facilitate large or
complex developments through joint
ventures or consortia arrangements,
allowing the provision of housing in
particular areas of need by sharing
risk and capital requirements.
Securing more JV sites that meet
our hurdle rates enables disciplined
volume growth, but the arrangements
may be complex and capital intensive.
Responsibility:
Operations Committee
M
—
M
—
The Group temporarily
suspended land purchasing
between March and August
2020. The temporary
closure of construction
sites and sales centres due
to COVID-19 reduced sales
volumes and cash inflows.
Our land bank is sufficient
to meet current operational
needs.
• All potential land acquisitions are subject
to formal appraisal and approval by the
Land Committee.
Land
approvals
(plots)
• 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.
M
—
M
—
The Government continues
to reiterate its commitment
to facilitating the provision
of new homes, but the
planning process remains
lengthy and complex.
Changes to Building
Regulations, such as
the Future Homes
Standard effective in
2025, will increase design
requirements.
Gross and
operating
margin,
PBT, ROCE,
EPS, TSR,
total home
completions
• Considerable in-house technical
and planning expertise focused on
complying with regulations and achieving
implementable planning consents that
meet local requirements.
• Robust and rigorous design standards for
the homes and places we develop that
exceed current and expected statutory
requirements.
• 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 monitor, understand and plan for
proposed regulation change.
L
—
M
—
Our investment in JVs is
£152.1m (2019: £189.0m) a
reduction from the previous
year.
Continual communication with our JV and
consortia partners concerning the impact
of COVID-19 on trading arrangements and
contractual requirements.
ROCE,
total home
completions
The temporary closure of
our construction sites and
sales centres as a result of
COVID-19 also affected our
JV and consortium sites.
• 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.
Risk level/appetite H High risk M Medium risk L Low risk Change from previous year ↑ Increase ↓ Decrease — No change
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Principal risks CONTINUED
Principal risk
Risk level (net of mitigation)
Risk appetite and response/mitigation
Key risk
indicators
Leading construction
E
Construction
Failure to achieve excellence in
construction, through delays from
adverse conditions, a failure to identify
cost overruns promptly, design and
construction defects, and deviation
from environmental standards.
Delays or deficiencies in construction
could increase costs, expose the
Group to liabilities, and result in poor
product quality, reduce selling prices
and sales volumes.
Inefficiency and competitive
disadvantage from a failure to develop
and implement new and innovative
construction methods.
Responsibility:
Operations Committee
F
Availability of raw materials,
sub-contractors and suppliers
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.
Maintaining sufficient material and
skilled sub-contractor availability
will enable disciplined growth in
the provision of high-quality homes.
Failure to do so may lead to increased
costs and delays in construction.
Responsibility:
Operations Committee
H
↑
L
—
The temporary closure of
construction sites during
the year caused a delay
to construction. Sites are
now operating COVID-19
working practices and
protocols in line with the
latest Government and
industry guidance to ensure
the safety of our employees
and sub-contractors. This
has increased costs and is
expected to increase site
duration.
The Group continues to
increase its use of MMC to
address skilled employee
shortages and reduce its
environmental impact.
Programme of site inspections to ensure
protection of sites during lockdown.
• Review of revised construction delivery
against expected sales rates.
• Executive Committee, regional and
divisional reviews and quarterly site
valuations assess expected margins.
• Continuous review of quality of design and
materials, which are both evaluated by
external and internal technical experts,
including the NHBC, to ensure compliance
with all building and other regulations.
• Monitoring and improving the
environmental and sustainability impact
of construction methods and materials.
Customer
service,
total home
completions,
gross
margin,
operating
margin, PBT,
ROCE, EPS,
construction
waste
intensity
and carbon
intensity
reduction
• Appropriate insurance cover.
• Detailed build programmes and
quality reviews.
•
Implementation of MMC by Design and
Technical teams.
• Technologies new to us go through a
rigorous testing and analysis process
before full implementation.
Customer
service,
gross and
operating
margin,
PBT, ROCE,
EPS, TSR,
total home
completions
H
↑
L
—
The COVID-19 pandemic
has increased pressure on
the availability of certain
build materials in the short
term, with potential for
further disruption if further
outbreaks occur.
There also continues to
be a shortage of skilled
labour in the housebuilding
industry, which may be
affected by an unfavourable
outcome to the negotiations
regarding the trading
relationship between the
UK and EU.
Around 10% of the
Group’s materials, by
spend, are imported and
a further 30%, by spend,
contain some imported
components.
Secured supply continuity for all supplies
with high potential to be disrupted by
COVID-19.
• Adhere to the Prompt Payment Code to
support the liquidity of our partners.
• Centralised team procures the majority
of the Group’s materials from within the
UK including subcontractor materials,
ensuring consistent quality and cost.
• Development of long-term supplier and
sub-contractor partnerships with all
significant supply agreements fixed in
advance, usually for 12 months.
• Key supplier audit programme to assess
risks to the reliability of supply continuity.
• Requirement to develop multiple supplier
relationships for both labour contracts
and material supplies, with 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Principal risk
Risk level (net of mitigation)
Risk appetite and response/mitigation
Key risk
indicators
Investing in our people
G
Safety, health and environment
Health and safety or environmental
breaches can result in incidents
affecting employees, sub-contractors
and site visitors and undermine the
creation of a great place to work.
SHE breaches affect the wellbeing
of our employees and could result
in reputational damage, criminal
prosecution and civil litigation, and
delays in construction or increased
costs.
Responsibility:
Safety, Health and Environment
Operating Committee
H
Attracting and retaining
high-calibre employees
Failure to recruit and/or retain
the best people so that both our
employees and the business
can benefit from the available
development opportunities.
Development of skilled employees
is critical to delivery of the Group’s
strategy of profit and volume growth
through quality and efficiency.
Responsibility:
Executive Committee
H
↑
L
—
The Group continues to
focus on health and safety,
ensuring consistent controls
are in place to reduce
accidents and injuries.
The Group IIR rate for the
year is 256 (2019: 297) per
100,000 persons employed
(including sub-contractors).
The Group has acted
to minimise the risk
to its employees, sub-
contractors and customers
of contracting COVID-19
whilst at work, incurring
additional cost.
The pandemic and the
workplace changes it
has required present a
challenge to the physical,
mental and financial
wellbeing of employees.
Sites and sales centres are operating
under a detailed set of social distancing
and hygiene practices and protocols in line
with the latest Government guidance.
Health
and safety
(SHE audit
compliance)
• Nominated social distancing marshal
present on all sites.
•
Internal committed health and safety team.
• Regular health and safety monitoring,
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 Board and SHE Operations
Committee that review key performance
indicators and improvement plans.
• Quarterly performance reviews by
divisional management within all
operating units.
•
Independent reviews of our SHE processes.
Partnered with benefit providers to offer
additional online training to support
the wellbeing of employees during the
COVID-19 lockdown, including on their
mental health, and working from home.
M
↓
M
—
Whilst competitiveness
for employees in the
operational business
continues, this has
reduced due to the current
economic uncertainty.
The pandemic has
necessitated a wide change
in working practices.
Employee
engagement
score
• Comprehensive human resources
programme including apprenticeships,
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.
Maintained normal pay for furloughed
employees and committed to paying those
who are required to shield. When schools
closed, all employees with childcare
responsibilities were granted one week
of special paid leave to enable them to
make necessary arrangements. Additional
paid leave provided to non-furloughed
employees.
Risk level/appetite H High risk M Medium risk L Low risk Change from previous year ↑ Increase ↓ Decrease — No change
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Principal risks CONTINUED
Principal risk
Risk level (net of mitigation)
Risk appetite and response/mitigation
Underpinning all priorities
I
Availability of finance and working
capital
Unavailability of sufficient borrowing
and surety facilities to settle
liabilities, manage working capital,
respond to changes in the economic
environment, and take advantage
of appropriate land buying and
operational opportunities to deliver
strategic priorities.
Responsibility:
Treasury Committee
J
IT
The Group continues to integrate its
IT systems to enhance control and
drive efficiency. The failure of any of
these systems, in particular those
relating to customer information,
surveying and valuation, could
restrict the Group’s operations and
disrupt progress in its strategic
priorities. Failure to comply with
data regulations could also incur
significant financial penalties and
reputational damage.
Responsibility:
Technology Risk Sub-committee
Key risk
indicators
Average net
cash
M
↑
L
—
In November 2019 the
Group extended its £700m
RCF until 2024 with the
option to extend this further
by one year. In addition,
the Group holds £200m of
fixed rate USPP notes that
mature in 2027.
The temporary closure
of construction sites and
sales centres in the year in
response to the COVID-19
pandemic significantly
reduced cash inflows to the
Group. The Group actively
managed its cash flows
with average net cash for
the year of £348.3m and net
assets of £4,840.3m as at
30 June 2020.
• Committed bank facilities and private
placement notes of around £900m with
maturity on the RCF in 2024 and the
USPP in 2027.
Increased frequency of monitoring of
working capital and cash requirements
and compliance with banking covenants.
Obtained confirmation of eligibility for
CCFF until March 2021, should it be
required.
• Policy requiring minimum headroom of
£150m of drawings against committed
facilities.
• Maintenance of an appropriate capital
structure
• Assessed the medium and long-term
viability of the business model (page 79).
M
—
L
—
Customer
service,
gross and
operating
margin, PBT,
ROCE, EPS
• Centrally maintained IT systems.
• Fully tested disaster recovery programme.
• Regular reviews to seek to reduce the risk
of successful cyber-attacks.
• GDPR compliant business processes and
data management.
• Technology Risk Sub-committee provides
oversight of technology risk.
• Group-wide compliance and policies
on passwords and transferring data to
third parties.
Wherever possible, the
Group has facilitated home
working for its employees,
prioritising their safety
during the pandemic.
This has necessitated
the adoption of new and
changes to existing IT
systems. Whilst presenting
an initial challenge, this
has also encouraged the
improvement of the Group’s
IT environment.
The threat of external
cyber attacks and phishing
attempts persists with
a number of high profile
incidents being reported in
the media during the year.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Emerging Risks
Emerging risk
Current status
Response/mitigation
Key risk
indicators
Customer
service
The Group’s marketing must
remain relevant to the latest
developments in communications
and social media or it will fail to
engage with new customers.
Our customers expect timely
and relevant communication
throughout the sales process
through channels that fit their
lifestyle.
Our customers increasingly
consider the Group’s social and
environmental impact when
deciding to buy our homes. The
Group must highlight the value
it creates for communities and
wider society.
The COVID-19 pandemic has
accelerated certain social
changes, such as the manner
in which our customers wish to
communicate.
• Weekly monitoring of our media
performance, including monitoring
of our competitors and other
industry best practice.
• Procurement of a social media
specialist team to monitor and
advise usage.
• Communications and Investor
Relations teams regularly assess
the effectiveness of the Group’s
messaging.
• Replacing the CRM system with an
online customer portal that allows
for easy communication throughout
the customer experience.
• Active working party focused
on delivering the Diversity and
Inclusion strategy to ensure that the
business is representative of and
acts in the interests of all within the
communities in which we operates.
Telephone and video appointments,
including video tours of show homes.
Carbon
intensity,
waste
intensity
A great global effort is required
to keep climate change below
1.5 degrees and avoid the most
severe effects of climate change.
The UK Government is aiming to
become net zero carbon by 2050,
with key environmental legislation
likely to accelerate in the future.
Local planning authorities are
declaring climate emergencies,
many with ambitions of carbon
neutrality by 2030.
The introduction of the Future
Homes Standard in 2025 and the
potential for overheating due to
increased average temperatures
in summer requires the Group to
reassess its designs.
The increased frequency of
extreme weather disrupts
construction and requires our
developments to be resilient to
its effects.
• Committed to reduce the Group’s
operational and indirect carbon
emissions significantly (including
those from its completed homes and
its supply chain) by 2025 and 2030
respectively. This is ahead of the
expected statutory requirements.
• Review of Future Homes Standard,
effective in 2025, adapt and plan for
compliance.
• The business has prepared for
upcoming legislation, for example
with the tools to create measured
biodiversity net gains on new
developments.
• Appointment of Group Sustainability
Director to co-ordinate the Group’s
response and advise the Board on
sustainability matters.
• Commenced scenario analysis to
determine the resilience of the
Group’s business model under
different climate related scenarios.
Customer first
K
Social trends
Social developments drive changes in
customers’ expectations of the service
they receive, the ways in which they
communicate with the Group, and the
manner in which the Group engages
with its stakeholders.
Responsibility:
Operations Committee
Underpinning all priorities
L
Climate change
In the short-to-medium term,
Government regulations and
customer and investor expectations
will require the Group to further
enhance its sustainable business
practices.
In the long-term the Group must
adapt to the physical changes to the
climate in which it operates.
The Group currently manages the
impacts of climate risk separately
through its principal risks, for
example the Future Homes
Standard is considered through
the management of Government
regulation and planning policy and
increased flooding risk is considered
in the management of land
availability.
Responsibility:
Executive Committee
Risk level/appetite H High risk M Medium risk L Low risk Change from previous year ↑ Increase ↓ Decrease — No change
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Principal risks 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.
Whistleblowing
line and
audit reports
throughout
the year
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
CONSIDERS ALL RISKS
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.
Operations
Committee
C D E
F K
Reviews operating
performance
Risk Committee
CONSIDERS
ALL RISKS
Considers identified
risks and their
mitigation
Identifies new and
emerging risks
Technology risk
sub-committee
J
Identifies and
considers
technology related
risks and their
mitigation
Land Committee
B
Reviews and
authorises all
proposed land
acquisitions to
manage land
acquisition risk
Treasury
Operating
Committee
I
Manages liquidity
and counterparty
risk and ensures
that treasury
policies are
implemented and
embedded within
the business
Safety, Health
and Environment
Operating
Committee
G
Reviews the
effectiveness
of health and
safety policies
and establishes
controls and
procedures to
manage these risks
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
Denotes responsibility for principal risk A Economic environment, including housing demand and mortgage availability B Land availability
C Government regulation and planning policy D Joint ventures and consortia E Construction F Availability of raw materials, sub-contractors
and suppliers G Safety, health and environment H Attracting and retaining high-calibre employees
Availability of finance and working capital
I
J IT K Social trends L Climate change
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Barratt Developments PLCwww.barrattdevelopments.co.uk Viability statement
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.
Viability statement
In accordance with 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 business
model is presented on pages 30 and 31 and
its future prospects are primarily monitored
through the risk management processes
detailed on page 71.
For the long term viability statement,
the Directors consider that a three-year
review period is appropriate. This period
is 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. Reduced
trading arising as a result of COVID-19
has increased our land bank years metric,
but future land investment will continue to
focus on our return on capital and aim for a
shorter than sector average supply of owned
land of c. 3.5 years, with which the three-
year review period is broadly consistent.
The Group has adapted its business plan
in response to COVID-19. This is reflected
in the Group’s forecasts through reduced
sales volumes and increased build times as
we prioritise the safety of our employees,
sub-contractors and customers. The
plan also incorporates the likely market
impact of the planned changes in the Help
to Buy Scheme in 2021 and 2023. The
Group is forecast to remain profitable and
sustainable in the new trading environment.
The Group continues to be subject to its
principal risks, which have been reassessed
in light of COVID-19. The principal risks,
including developments resulting from the
pandemic, are detailed in pages 72 to 76. In
particular, the economic outlook remains
unclear. This Viability statement 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 over
the review period.
To assess the Group’s resilience to adverse
outcomes, its forecast performance over
the three-year period, including dividends,
was sensitised to reflect a series of
scenarios based on the Group’s principal
risks and the downside prospects for the
UK economy and housing market presented
in the latest external economic forecasts.
This assessment included a reasonable
worst-case scenario in which the Group’s
principal risks manifest to a severe but
plausible level. The assessed risks,
for which the impacts were applied in
aggregate, were as follows:
Principal risk
Impact modelled
A
Economic
environment,
including
housing demand
and mortgage
availability
F
Availability of raw
materials,
sub-contractors
and suppliers
E
Construction
G
Safety, health and
environment
A decline in demand
leading to a 25%
reduction in total
sales volumes
pre-COVID-19
levels and 10%
fall in private
ASP, followed by a
gradual recovery.
A 5% increase in
the cost of material
and labour arising
from shortfalls in
supply, for instance
following the end of
the transition period
for withdrawal from
the EU.
A two month
nationwide closure
of sales centres and
construction sites.
Where necessary, mitigating actions were
modelled that would be adopted by the
Group in response to these circumstances.
These primarily involved a reduction in
investment in inventories in line with the
fall in expected sales and the actions
successfully deployed during the Group’s
closure of its operations in March 2020. It
is assumed that the Group does not receive
Government assistance and does not utilise
the CCFF.
Under the described scenarios, the
Group is able to operate within its current
facilities, meet its liabilities as they fall due,
and remain in compliance with its financial
covenants in the assessed period. The
mitigating actions required do not disrupt
the Group’s ability to grow over the long
term.
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 as they
fall due over the three-year period of their
assessment.
Assessing the Group's prospects beyond
the review period, the Directors consider
that the demand for high-quality new
homes will remain strong due to long term
undersupply. The Group has maintained
a well-capitalised balance sheet and
operates a resilient business model
focused on quality and customer service. As
a result, the Group is well placed to emerge
from the short to medium term disruption
caused by COVID-19 and rebuild completion
volumes towards its medium term target of
20,000 wholly owned completions. Through
this, disciplined land acquisition and the
optimisation of performance across build
and sales, the Group will look to rebuild to
achieve margin improvement and target
ROCE of 25%.
The Strategic Report on pages 2 to 79 was
approved by the Board and is signed on its
behalf by
David Thomas
Chief Executive
1 September 2020
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www.barrattdevelopments.co.ukStrategic ReportAnnual Report and Accounts 2020 Board of Directors
We have an experienced
and committed Board,
which continues to focus
on promoting the success
and long term sustainable
value of the Group.
Key
A Audit Committee
N Nomination Committee
R Remuneration Committee
D Disclosure Committee
S Safety, Health and
Environment Committee
Chair of Committee
N R
D
John Allan
Non-Executive Chair
David Thomas
Chief Executive
Appointment to the Board:
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.
Skills and qualifications:
David brings a wealth of finance
and leadership experience
acquired over a number of
years in senior positions and
is an Associate of the Institute
of Chartered Accountants in
England and Wales. He was
previously Group Finance
Director and Deputy Chief
Executive of The GAME Group
plc and Group Finance Director
at Millennium and Copthorne
Hotels plc. He has also held
senior financial roles with House
of Fraser plc and Forte plc.
External appointments:
David is a Non-Executive
Director of the HBF.
John joined the Board as a
Non-Executive Director on
1 August 2014 and became
Chair on 12 November 2014.
Skills and qualifications:
John has significant board,
business and retail experience
gained from both the
commercial and financial
sectors. He was CEO of Exel PLC
and, when it was acquired by
Deutsche Post in 2005, he joined
the board of Deutsche Post,
becoming CFO in 2007 until
his retirement in 2009. John
was also chair of Dixons Retail
plc, and, following its merger
with Carphone Warehouse,
was deputy chair and senior
independent director of Dixons
Carphone until 2015. He was
also previously a non-executive
director of Worldpay Group
PLC (where he was previously
Chair), National Grid plc, the UK
Home Office Supervisory Board,
3i plc, PHS Group plc, Connell
plc, Royal Mail plc, Wolseley plc
and Hamleys plc and chair of
London First.
External appointments:
John is currently Chairman of
Tesco PLC, Chair of the Council
at Imperial College and a regent
of the University of Edinburgh.
Having recently come to the end
of his term as President of the
CBI, John has been elected Vice
President of the CBI for a one-
year term.
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Barratt Developments PLCwww.barrattdevelopments.co.uk S
D
Steven Boyes
Chief Operating Officer
and Deputy Chief Executive
Jessica White
Chief Financial Officer
Richard Akers
Senior Independent
Director
R S
A N
A N
R
Nina Bibby
Non-Executive Director
Appointment to the Board:
Appointment to the Board:
Appointment to the Board:
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.
Skills and qualifications:
Steven has over 40 years’
experience in the housebuilding
industry, having joined us
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.
External appointments:
Steven holds no external
appointments.
Jessica joined the Board as an
Executive Director and Chief
Financial Officer on
22 June 2017.
Skills and qualifications:
Jessica brings significant
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.
External appointments:
Jessica holds no external
appointments.
Nina joined the Board as a
Non-Executive Director on
3 December 2012.
Skills and qualifications:
Nina brings a wealth of
marketing experience to the
Board. 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, and worked at Diageo plc,
latterly as Commercial Strategy
Director.
External appointments:
Nina is currently Chief
Marketing Officer at O2
(Telefonica UK) and a Trustee
for the Great Ormond Street
Hospital Children’s Charity.
Richard joined the Board as a
Non-Executive Director on
2 April 2012 and became Senior
Independent Director on
16 November 2016.
Skills and qualifications:
Richard has considerable board
experience and a broad range
of property knowledge. He
was a senior executive at Land
Securities Group plc (joining the
main Board in 2005), a Non-
Executive Director of Emaar
Malls PJSC, a member of the
Advisory Board for Battersea
Power Station Development
Company, and a Director and
President of the British Council
of Shopping Centres, the main
industry body for retail property
owners. Richard is a Chartered
Surveyor.
External appointments:
Richard is a Non-Executive
Director and Senior Independent
Director of Shaftsbury plc. He is
also a Non-Executive Director of
Unite Group plc.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Board of Directors CONTINUED
Key
A Audit Committee
N Nomination Committee
R Remuneration Committee
D Disclosure Committee
S Safety, Health and
Environment Committee
Chair of Committee
A N
R
A N
R
D
Jock Lennox
Non-Executive Director
Sharon White
Non-Executive Director
Tina Bains
Company Secretary
Appointment to the Board:
Appointment to the Board:
Appointment to the Board:
Jock joined the Board as a
Non-Executive Director on
1 July 2016.
Sharon joined the Board as a
Non-Executive Director on
1 January 2018.
Tina was appointed to the role
of Company Secretary on
1 January 2016.
Skills and qualifications:
Skills and qualifications:
Skills and qualifications:
Jock, a Chartered Accountant,
brings a multitude of business
and finance experience to the
Board. Until last year, he was
Chairman of Hill and Smith
Holdings plc and Enquest
plc. Jock was previously
Senior Independent Director
of Oxford Instruments plc
and Non-Executive Director
and Chairman of the Audit
Committees of Dixons Carphone
plc and A&J Mucklow Group
plc. 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.
External appointments:
Jock is Chair of the Audit
Committee Chairs’ Independent
Forum.
Sharon is Chair of the John
Lewis Partnership and also
brings over 25 years’ experience
in the public sector to the
Board. She was, until recently,
Chief Executive of Ofcom and
was formerly Director General,
Public Spending and Second
Permanent Secretary to HM
Treasury. 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 and Pensions and the
Ministry of Justice.
External appointments:
Sharon is Deputy Chair of
Sadlers Wells, a contemporary
dance company.
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.
External appointments:
Tina holds no external
appointments.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Executive Committee
The Executive Committee consists of:
David Thomas
Chief Executive
Steven Boyes
Chief Operating Officer and
Deputy Chief Executive
Jessica White
Chief Financial Officer
See page 80
See page 81
See page 81
Rob Tansey
Group HR Director
Jeremy Hipkiss
Group Sales and Marketing Director
Tina Bains
Company Secretary
See page 82
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.
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, business
change and sustainability.
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.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance
Regional Managing Directors
From 1 July 2020, the Group operates through five geographic housebuilding
regions and a commercial division. During the year ended 30 June 2020, the
Group operated from six geographical regions. Each operation has a Managing
Director as follows:
Doug McLeod
Regional Managing
Director –
Scotland
Mike Roberts
Regional Managing
Director –
Northern
Bernard Rooney
Regional Managing
Director –
Central
Richard Brooke
Regional Managing
Director –
East
Doug is responsible for the
Group’s operations in the
Scotland Region, which consists
of three divisions and our timber
frame 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.
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.
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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Chris Burton
Regional Managing
Director –
West
(retired 30 June 2020)
Chris was responsible for the
Group’s operations in the West
Region, which consists of three
divisions, prior to his retirement
on 30 June 2020.
Career and experience:
Chris joined the Group in 1985.
Formerly Managing Director of
Barratt Yorkshire West for 13
years, he was appointed to
the role of Regional Managing
Director in July 2012.
Gary Ennis
Regional Managing
Director –
London and Southern
(until 30 June 2020);
London, West and
Southern
(from 1 July 2020)
Gary is responsible for the
Group’s operations in the
London and Southern Region,
which consists of six divisions.
Following Chris Burton’s
retirement, Gary has assumed
responsibility for the Group’s
operations in the West Region.
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, of London in October 2016,
and West on 1 July 2020.
Nick Richardson
Managing Director –
Wilson Bowden
Developments
Nick is responsible for the
Group’s 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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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Corporate governance report
Introduction and overview
“The foundation of any resilient business is a strong
corporate governance framework and a positive culture
that is embedded throughout.”
Corporate governance statement
The Company is subject to the Code, which
was issued by the FRC in 2018. The Code
can be found on the FRC’s website, www.frc.
org.uk. The Board confirms that throughout
the year ended 30 June 2020, and as at
the date of this report, the Company has
complied with all relevant provisions set
out in the Code. This report, together with
the reports from the Nomination, Audit,
SHE and Remuneration Committees and
the other statutory disclosures, provides
details of how the Company has applied
the principles of the Code (pages 80 to
155). The Company has also complied with
the relevant requirements of the FCA’s
Disclosure and Transparency Rules and
the FCA’s Listing Rules; BEIS’ Directors’
Remuneration Reporting Regulations and
Narrative Reporting Regulations and the
FRC’s Guidance on Risk Management,
Internal Control and Related Financial and
Business Reporting.
John Allan
Chair
Introduction
The Board provides effective and
entrepreneurial leadership in promoting
the long term sustainable success
of the Company, generating value for
shareholders and contributing to wider
society. It establishes the Group’s purpose,
values and strategy, ensuring these are
aligned with the culture of the business
and that each of these is embedded
throughout the organisation. In addition,
the Board ensures that the necessary
resources are in place to deliver on its
purpose and strategy, and that we work
within a framework of prudent and effective
controls, which enable risk to be assessed
and managed. The Board also considers
and assesses the opportunities and risks
to the future success of the business and
the sustainability of the Group’s business
model. Throughout its decision making
process, the Board takes into account the
feedback received from its stakeholders.
Details of this can be found on pages 38 to
48 in the Strategic Report.
The last few months of our financial
year have proved to be a challenge as a
consequence of COVID-19. It has become
even more apparent that the foundation of
any resilient business is a strong corporate
governance framework and a positive
culture that is embedded throughout.
The Board acted quickly and decisively
in response to the impact of COVID-19,
leading the business through a full
closure to re-opening of all operational
sites. Details of these actions are set out
throughout this report.
John Allan
Chair
11/11
Other Board members:
David Thomas
Steven Boyes
11/11
11/11
Jessica White
Richard Akers
11/11
11/11
Nina Bibby
11/11
Jock Lennox
11/11
Sharon White
11/11
n Board meetings attended
n Board meetings held
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Barratt Developments PLCwww.barrattdevelopments.co.uk Implementation of the Code
Section of the Code
How we have applied the Code
Further information
Board leadership and company purpose
The Board is collectively responsible for the long
term sustainable success of your Company. The
Group’s purpose, values and strategy are set by
the Board, and the Group’s culture is aligned with
these and promoted by the Board, which leads by
example.
The Board is responsible for ensuring the
necessary resources are available to meet the
Group’s objectives, measure performance and
establish an effective risk and internal control
framework.
The Board recognises the importance of engaging
with the workforce and other stakeholders and
using feedback from them to inform its decisions.
Division of responsibilities
The Chair leads the Board, facilitates constructive
relations amongst its members and ensures
information received is accurate, timely and clear.
Executive Directors manage the business on a day-
to-day basis.
The Non-Executive Directors, all of whom are
independent, provide an appropriate level of scrutiny
and constructive challenge, strategic guidance and
specialist advice and hold management to account.
Board policies and processes are in place to ensure
that the Board functions effectively and efficiently.
Composition, succession and evaluation
The 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.
Board appointments are subject to a formal,
rigorous and transparent procedure and an effective
succession plan has been established and is
maintained for Board and Senior Management.
Appointments and succession plans are based on
merit and are objective, and promote diversity.
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.
This section details:
• the main activities and outcomes of the Board in
FY20 and how governance contributes to strategy;
• the Board’s ongoing work on culture; and
• the Group’s control framework.
Information on the Board’s work on the Group’s
purpose, values and strategy is given in the
Strategic Report.
Information on the Group’s stakeholders (including
the workforce), how we engage with them and the
impact of that engagement on the Board’s decisions is
set out in the Section 172 Statement and Stakeholder
engagement section in the Strategic Report.
Information regarding the management of conflicts
of interest is provided in the Nomination Committee
report.
See pages 89 to 91
See pages 92 to 95
See page 99
See pages 32 to 35
See pages 38 to 48
See page 108
This section outlines:
• Board balance and how responsibilities are divided
amongst the Board, its Committees and individual
Directors;
• Chair and Non-Executive Director independence;
• membership and attendance at the Board; and
• the structure and composition of the Board and its
Committees.
Information regarding the evaluation of individual
Directors, and the time commitments of the Chair and
Non-Executive Directors is given in the Nomination
Committee report.
See pages 96 to 99
See pages 97 and 102
See page 86
See pages 80 to 82
and 98 to 99
See pages 103 and
108
This section details:
• the main activities of the Nomination Committee and
their outcomes;
• a breakdown of the Board’s composition;
• the process for Board appointments;
• details of how succession plans are monitored and
updated;
• Board and Senior Management diversity; and
• Board and committee evaluation, progress on the
FY19 actions and results of the FY20 evaluation.
See page 101
See page 102
See page 102
See page 103
See page 103 and 104
See pages 105 to 108
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Corporate governance report CONTINUED
Introduction and overview
Implementation of the Code
Section of the Code
How we have applied the Code
Further information
Audit, risk and internal control
The Board is mindful of the risk environment in
which it operates when making any decisions.
It has established formal and transparent policies
and procedures to ensure independence and
effectiveness of internal and external audit functions.
The Board satisfies itself on the integrity of the
financial and narrative statements, and that they
present a fair, balanced and understandable
assessment of the Group’s position and prospects.
It maintains sound risk management and internal
control systems and regularly reviews the principal
and emerging risks impacting the business.
The Board assesses the appropriate appetite for risk
in striving to achieve the Group’s strategic objectives.
Remuneration
The Board, through its Remuneration Committee,
has established a formal and transparent procedure
for developing its policy on executive remuneration
and determining Director and Senior Management
remuneration.
The remuneration policy and practices are designed
to support the strategy and promote the long term
sustainable success of the Group.
Executive remuneration is aligned to the Group’s
purpose and values to support the successful
delivery of the Group’s long term strategy.
This section summarises:
• the main activities of the Audit Committee and their
outcomes;
• the significant issues the Audit Committee considered
relating to the financial statements and how these
issues were addressed;
• the approach to risk management, internal control
and risk management systems and the Audit
Committee’s review of their effectiveness; and
• an explanation of how the Audit Committee has
assessed the independence and effectiveness of the
external audit process and the approach taken to the
re-appointment of the External Auditor, including
information on non-audit services.
• the Directors’ statement of responsibility for a fair,
balanced and understandable Annual Report and
Accounts.
The following additional information can be found in the
Strategic Report:
• the Board’s assessment of the Group’s emerging
and principal risks and information on how these are
being managed;
• the long term viability statement;
• the Going Concern statement; and
This section sets out:
• details of the Group’s remuneration policy and
proposed changes for FY21;
• how the policy operated during FY20, including
remuneration outcomes based on the Company’s
performance and taking into account independent
judgement and discretion applied for the Company’s
and individual performance and wider circumstances;
and
• how policy will be applied in FY21.
See pages 112 to 115
See pages 115 to 117
See page 118
See page 119
See page 155
See pages 71 to 78
See page 79
See page 79
See pages 127 to 136
See pages 142 to 151
See pages 139 to 141
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Barratt Developments PLCwww.barrattdevelopments.co.uk Corporate governance report CONTINUED
Board leadership and company purpose
Main activities undertaken during the financial year
The Board follows an annual agenda to ensure that all key matters are allocated adequate time for discussion. During the lockdown period,
the Board scheduled additional meetings to ensure that it remained apprised on the steps being taken to safeguard the health, safety and
wellbeing of its employees, customers, suppliers, sub-contractors and the general public, whilst maintaining the liquidity and balance
sheet resilience of the business. A description of the main activities of the Board during the year under review and how these contributed to
the delivery of strategy is set out below.
Key activities and discussions in FY20
COVID-19
Following the Prime Minister’s lockdown announcement on 23 March 2020, the Board closely
monitored and actively managed the impact of COVID-19 on the business and in particular the
Group’s employees, customers, suppliers and sub-contractors.
The Board took immediate measures to manage the Group’s cost base and cash flows to ensure
resilience whilst ensuring the health and safety of its employees, customers, suppliers and sub-
contractors. The measures implemented included:
•
temporary closure of all of our sales centres, construction sites and offices by
27 March 2020;
• suspension of all land buying activity;
• cessation of all recruitment activity;
• postponement of non-essential capital expenditure;
• active management of cash flows whilst ensuring that our suppliers and sub-contractors
continue to be paid on time;
• cancellation of the interim dividend, which was due to be paid on 11 May 2020, the final
ordinary and special dividends payable in November 2020 and the special dividend proposed
for payment in November 2021;
•
furloughing around 85% of our employees at their normal pay in order to safeguard jobs;
• a successful application for access to funding under the CCFF to enhance the Group’s liquidity
position. Utilisation of the CCFF is not anticipated;
• a voluntary 20% reduction in base salary and fees for all Executive Directors,
the wider Executive and Regional Managing Director team, the Chair and the
Non-Executive Directors for the period our sites were closed;
• supported the recommendation of the Executive Directors and the decision of the
Remuneration Committee that there would be no payments to any Director or employee under
the FY20 annual bonus scheme;
• monitored the establishment of extensive COVID-19 working practices and protocols, to enable
site operations to gradually restart from 11 May 2020 in England and Wales and from 1 June
2020 in Scotland; and
•
return of the funding received under the CJRS taking into account the Group’s financial
position.
Purpose, strategy, values and culture
The Board undertook a review of the Group’s purpose and culture and the extent to which both
are aligned to the strategy and values of the business. COVID-19 interrupted this work but we are
committed to continuing this review in FY21.
Further details on this work can be found on pages 32 to 35.
Reviewed the Group’s modern slavery statement and the dissemination of this around the
workforce and processes associated with the policies.
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Link to strategic priorities
and principles
Customer first
Investing in our people
Keeping people safe
Being a trusted partner
Ensuring the financial health
of our business
Customer first
Great places
Leading construction
Investing in our people
Keeping people safe
Being a trusted partner
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Link to strategic priorities
and principles
Customer first
Great places
Leading construction
Investing in our people
Safeguarding the environment
Ensuring the financial health
of our business
Corporate governance report CONTINUED
Board leadership and company purpose
Key activities and discussions in FY20
Business performance and resourcing
Details of the performance of the Business are provided in the Strategic Report on pages 2 to 27.
Routes for growth
The Board identified a number of key opportunities the business should pursue to grow in terms
of volume and improve margin as well as enhancing its efficiency by leveraging the Group’s strong
brand position and the use of more digital platforms.
Modern methods of construction
The Board undertook a review of the progress made with enhancing the Group’s MMC capability.
Agreed updates should be made to tighten timber sourcing policies and include Oregon.
Concluded that MMC sites should be included in the annual Board visit schedule to further
educate the Board.
Internal aspirational targets to be set for each type of MMC.
Land
Reviewed a number of significant land investments and transactions.
Considered strategic acquisitions and disposals of joint ventures and subsidiaries.
Environmental, social and governance
The Board reviewed and agreed amendments to the Group’s sustainability policies to ensure that
they remain appropriate and fit for purpose.
Discussions around ensuring adequate resource being available to drive the sustainability agenda
forward resulted in the appointment of a new Group Sustainability Director. In addition, the Board
is exploring the benefits of establishing a Sustainability Committee to enhance its focus in this
area.
The Board considered and approved science-based targets to show the Group’s commitment to
reducing carbon emissions. Under these targets, the Group aims to reduce direct emissions by 29% by
2025 and indirect emissions by 2% by 2025, and 11% by 2030.
Reviewed, considered and updated potential conflicts of interest at each meeting and reviewed the
recommendations of the Nomination Committee’s more detailed annual review.
The Board reviewed and updated its Terms of Reference (including Matters Reserved) and that
of the Chair, Senior Independent Director and the Chief Executive in line with the Code and best
practice guidance.
Attraction, recruitment and retention
Considered work done by the Group to mitigate workforce skills shortages and steps taken to aid
retention, development, attraction and recruitment.
Financial and liquidity
Reviewed the proposed budget and five-year business plan, approval of which is subject to the
impact of COVID-19.
Reviewed half and full year results and announcements and the Group’s Annual Report and Accounts.
Approved dividend policy for FY20 and considered the policy for FY21 and beyond. Further details
can be found in the Chairman’s Statement on page 11.
Agreed a one-year extension on the Group’s RCF.
Closely monitored the forecast liquidity and cash flows of the Group following the temporary
closure of all construction sites, sales centres and offices and the gradual reopening of the same.
Reviewed reports on performance against budget and forecast.
Group pension scheme and Share Awards
Agreed to support the pension trustee with the buy in of the Group’s Defined Benefit pension
scheme (see page 148 for further details).
Given the reduced share price, and to limit the dilution of shareholdings, made the decision to
satisfy options and awards vesting in FY21 with shares purchased in the market and authorised
the EBT to purchase the number of shares required.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Key activities and discussions in FY20
Risk management and internal controls
Link to strategic priorities
and principles
Resilience
Based on lessons learnt from previous downturns the Board undertook a review of the Group’s
resilience prior to the onset of COVID-19. The business is seen to be in a strong position, however
further consideration is to be given to the resilience of the Group’s supply chain, potential impact
of the result of trade negotiations between the UK and the EU, organisational structure and land
strategy and land bank.
Risk appetite, risk management and internal controls
Customer first
Great places
Keeping people safe
Reviewed the Company’s appetite for risk, identified emerging risks and approved the principal
risks and uncertainties affecting the business. See pages 71 to 78 for further information.
Being a trusted partner
Robustly reviewed and approved the effectiveness of internal control and risk management
systems. For further information see page 99.
Received regular updates from the Audit Committee in respect of internal and external
audit reviews.
Considered recommendations of the Audit Committee regarding year end matters, including
Annual Report and Accounts: fair, balanced and understandable; letter of representation;
re-appointment of External Auditor; long term viability statement and adoption of going concern
basis of accounting. See the Audit Committee report on pages 109 to 119.
Cladding and Citiscape
The Board continually reviewed the progress being made with the replacement of cladding on our
multi-storey buildings and also the issues identified, as part of this review, relating to the design
of the reinforced concrete frame at Citiscape, which requires extensive remedial work. At its
meeting on 5 July 2020, and as announced on 6 July 2020, the Board agreed to pay for the required
remedial action, which would otherwise be borne by leaseholders, despite the Group having no
legal liability to cover the costs of this work. The decision reflects our commitment to customers
and recognises the responsibility we have for the work of our partners.
Stakeholder engagement
Stakeholder engagement is a key focus for the Board and its importance was brought to the
forefront during the COVID-19 lockdown. Details of how the Board engaged, directly and
indirectly, with its stakeholders prior to, during and since the lockdown period and how this
impacted the Board’s decisions can be found on pages 38 to 49 in the Strategic Report.
Building strong community
relationships
Ensuring the financial health
of our business
Customer first
Great places
Leading construction
Investing in our people
Keeping people safe
Being a trusted partner
Building strong community
relationships
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Board leadership and company purpose
Culture in the workplace
Our purpose
The Company’s purpose is to lead the future of
housebuilding by putting customers at the heart of
everything we do.
The way in which the Board has led the business towards achieving our purpose can
be found on pages 89 to 91 activities during FY20, and also pages 38 to 49 relating to
stakeholder engagement.
Understanding our culture
Prior to COVID-19, the Board initiated a review to better understand and assess the culture
of the business. This involved a variety of activities, which ranged from all employee surveys
and discussions with Senior Management, to reviewing feedback from exit interviews and
comments from current and former employees through Glassdoor and customer feedback
(see the Stakeholder Engagement section on page 42 for more details). A SWOT analysis
was then undertaken and themes collated.
For any organisation, it
is important to have a
clear understanding of
the culture within which
it operates. Whilst the
Board sets the culture and
tone from the top, each
and every employee is
responsible for ensuring
that the right culture
is embedded within
everything that we do. A
strong culture, which all
employees own and which
furthers our purpose,
underpins our success.
↑ Rebecca Roberts, a Site Manager in our South Wales division.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Our culture
The key traits that were identified as the culture of the business were:
Do the right thing
always ensure that what we do is in line with our policies and
procedures and looks after the interests of our stakeholders
Customer focus
always strive to meet the expectations and needs of our
customers, both internal and external
Resilience and adaptability
always look for new and innovative ways to do things in
order to improve efficiencies across the organisation and
recognise there is always room for improvement. Always
be willing to change the way in which we do things to meet
the requirements of stakeholders as well as those set by
legislation or regulation
Pride in what we do
always aim to operate in a way that satisfies the expectations
of our stakeholders particularly in terms of quality and service
Our work on enhancing the culture of the business was impeded by the onset of COVID-19. Therefore during FY21, the Board will revisit
the outcomes of the review to confirm our culture and to formally approve and agree the cascading of the values that will underpin this. In
addition, the Board will lead the way in determining what actions are required to further enhance the culture within which we operate. This
review will take into account the feedback received from the business and look to ensure continued consistency in our approach throughout
the organisation, further support open, honest and transparent communication and ensure that we continue to learn from our mistakes to
make Barratt an even better place to work. Details of how culture aligns with our purpose, and strategy can be found on pages 32 to 35 in
the Strategic Report.
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Board leadership and company purpose
KPIs
96%
Health and safety (SHE
monitoring compliance)
(2019: 96%)
84.2%
Employee engagement
2020
(2019: 84.5%)*
* Our 2019 engagement score was been re-
calculated (from 82%) to use our updated
2020 definition. As part of the transition from
our previous independent provider, we made
a planned change to the definition of the
Engagement Index in 2020. We replaced an
engagement measure to be a more valid and
robust measure of engagement.
10%*
Employee turnover
(2019: 16%)
* Reduction due to our ongoing efforts in
this area and the uncertainties created
by COVID-19
complete them on a regular basis.
The Board is notified of the levels of
completion and pass rates. Our Internal
Audit team undertake regular reviews
on the compliance against policies,
processes and procedures and reports
its findings to the Audit Committee,
who ultimately report to the Board. The
Internal Audit team also provide updates
to the Board on any matters raised via
the Group’s whistleblowing procedure
(see page 118).
• HBF Five Star rating – employees
across all levels of the organisation
recognise the importance of
maintaining high standards of quality
to support our strategic priorities of
Customer First (page 50 and 51) and
Great Places (pages 52 and 53) and
to be seen to be doing the right thing.
This is supported by the NHBC Pride
in the Job Award achievements by our
individual site managers (page 55).
Culture in action
COVID-19 may have hampered our progress
with completing the review in to our culture
and values, but it certainly confirmed how
well, our culture especially, is embedded
within our business. Below are some
examples of our culture in action during
FY20:
Doing the right thing
• Temporarily closed all construction
sites, sales centres and offices to
protect our employees, customers,
suppliers, sub-contractors and the
general public.
• Continued to pay furloughed employees
their normal pay.
• Due to the resilience of the Group’s
financial position, decided to return the
funding received from the CJRS.
• Put in place new health and safety
practices and protocols, which are
aligned to Government guidance and
verified by the British Safety Council.
• Continued to make charitable donations
throughout the year including during the
lockdown period (see pages 18 and 19)
• Offered support to employees on
maintaining physical and mental
wellbeing whilst working from home or
on furlough, and where assistance can
be sought from if required (see page 60)
How the Board measures
and assesses culture
The Board is responsible for monitoring and
assessing our culture. The Chair ensures
that the Board is operating appropriately and
sets the Board’s culture. This, in turn, forms
the culture of the Company, which the Chief
Executive, supported by the other Executive
Directors and Senior Management, is
responsible for ensuring is embedded
throughout the business and its operations
and in our dealings with our stakeholders.
The Board measures the culture of the
workplace through internal and external
KPIs, which also enable it to identify further
actions that may be required to ensure that
the culture remains appropriate. These are
set out below:
• Safety, health and the environment –
there is zero tolerance towards
breaches relating to the health and
safety of our employees, suppliers,
sub-contractors and the general
public. The Group is also conscious
of the impact that its operations have
on the environment, so the Board are
updated regularly of any environmental
breaches and of any new or ongoing
investigations and outcomes of such.
• Employee engagement survey – this
survey is conducted annually and
contains a number of culture-related
questions; the answers to which are
reviewed by the Executive Directors and
Senior Management team. The Chief
Executive reports the findings to the
Board. We are looking to further adapt
the survey to include questions relating
to the core values underpinning our
culture once these have been formally
defined.
• Employee retention – our employees
are our greatest asset. It is important
that we do everything that we can to
retain them. The Board is provided with
regular updates on the steps being
taken to attract, recruit and retain
employees.
• Policies and procedures compliance –
all policies, processes and procedures
are reviewed and signed off by
appropriate members of Senior
Management and the Executive Directors
twice a year. In addition, the Board
annually reviews its core policies relating
to important governance areas such as
anti-bribery and corruption; modern
slavery; health and safety, sustainability
and anti-money laundering. E-learning
modules have been developed for each
of these and employees are asked to
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Barratt Developments PLCwww.barrattdevelopments.co.uk Engagement with shareholders and significant shareholdings
The Board engaged with its shareholders in a number of different ways throughout the
financial year. Details of this engagement can be found in the Strategic Report on pages 40
and 41.
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 2020, the persons set out in Table 1 below have notified
the Company, pursuant to DTR 5.1, of their interests in the voting rights in the Company’s
issued share capital:
Table 1 – Notifiable interests
Number of voting
rights1
% of total issued
share capital2
Nature of holding
FMR LLC
BlackRock, Inc.
Royal Bank of Canada
34,579,199
56,413,704
30,741,978
8.24
5.60
3.02
Indirect
Indirect
Direct
1.
2.
Represents the number of voting rights last notified to the Company by the respective shareholder in
accordance with DTR 5.1.
Based on the Total Voting Rights as at the relevant notification dates.
On 9 July 2020, the Company was notified that the Royal Bank of Canada’s interest in the
voting rights in the Company’s issued share capital has reduced to below the disclosable
threshold. The Total Voting Rights of the Company as announced on 31 August 2020, are
1,018,308,218.
Customer focus
• Launched deposit contribution schemes
for the Armed Forces and also for NHS
employees.
• Continued to develop our new CRM
system and customer portal to ensure
that customers have a single source
of information and a repository to keep
everything in a central location.
•
Introduced virtual appointments to help
customers progress their purchases
and enabling safe handover of keys
whilst adhering to social distancing
measures.
• Provided appropriate PPE for Customer
Care teams to ensure that they can
enter the homes of our customers
to undertake remediation works,
protecting our employees and our
customers.
Resilience and adaptability
• Efficiently and effectively moved
all employees to home working
arrangements at the onset of the
lockdown, including distribution of
laptops and other essential equipment
to home addresses.
• Deployed innovative pre-cast insulated
concrete floor solution form NuSpan
and Spantherm into business as usual.
• Took action to conserve cash within the
business to increase financial resilience
such as cancelling the interim dividend
and the final ordinary and special
dividends, freezing recruitment, and
ceasing or deferring land acquisitions.
Pride in what we do
• Achieved HBF 5 star status for the 11th
consecutive year.
• Our site managers won 92 NHBC Pride
in the Job Awards – more than any
other housebuilder for the 16th year in
a row.
↑ Brendan Saba, Senior Site Manager, Megan Wilson, Sales Adviser and Shaun McGrath, Assistant
Site Manager, our team at our Huntingtower site in Perth, Scotland. Image taken prior to the
introduction of social distancing guidelines.
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Board leadership and company purpose
Board balance
The composition of the Board, including the names, responsibilities and other details of each of the Board Directors, is set out on pages 80
to 82. The Board believes the current balance of Executive and independent Non-Executive Directors remains appropriate having regard to
the size and nature of the business, and ensures that the Board’s decision making is not dominated by any single individual or small group.
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 responsibilities
and roles of Board members are clearly defined and set out below.
Board roles and their responsibilities
Chair
John Allan
Chief Executive
David Thomas
Chief Operating Officer and
Deputy Chief Executive
Steven Boyes
• 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.
• Ensures the Board receives accurate, timely
and clear information.
• 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.
• Develops the Group’s strategy for the
• Responsible for the Group’s operations
including day-to-day responsibility for SHE
ensuring stakeholder requirements are
appropriately addressed.
• Chairs the Operations Committee meetings,
the other members of which include the
Regional Managing Directors.
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.
• Board responsibility for sustainability policies
and practices of the Group.
Independent
Non-Executive Directors
Nina Bibby, Jock Lennox
and Sharon White
• 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.
Company Secretary
Tina Bains
• Supports the Chair and Chief
Executive in fulfilling their
duties especially in respect of
induction, training and Board
and Committee effectiveness
evaluations.
• Available to all Directors for
• Develop proposals on strategy.
advice and support.
• Monitor the implementation of
the Group’s strategy within its
risk and control framework.
• 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.
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 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:
• address any material issues or
concerns which the Chair and/
or Chief Executive have failed to
resolve;
• listen to their views to gain a
balanced understanding of their
issues and concerns;
• evaluate the performance of the
Chair, at least annually, and meets
with the Non-Executive Directors to
appraise the Chair’s performance;
• act as a sounding board for
the Chair and, if necessary,
an intermediary for the other
Directors; and
• provide a conduit from the
workforce to the Board as the
designated Non-Executive Director
for workforce engagement.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Board balance
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 year’s 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.
None of the Non-Executive Directors, or the
Chair, has been an employee of the Group
companies or had a material business
relationship with them. None of them has
close family ties with any of the Company’s
advisers, directors or senior employees, or
holds cross-directorships or has significant
links with other directors. None of them
represents a significant shareholder or has
served on the Board for more than nine years.
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.
John Allan was considered to be
independent on appointment to the Board
and on taking up the role of Chair. As part
of the FY20 annual review of the Chair’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, prior to the lockdown, he
spent 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.
The commitment that the Chair and each
of the Non-Executive Directors have to
the business was further demonstrated
during the lockdown whereby each of them
attended the additional Board calls to
discuss COVID-19, cladding and Citiscape
related matters, which were scheduled
at short notice and more frequently than
normal.
The Chair and the Non-Executive Directors
meet regularly without the Executive
Directors being present, usually prior
to or immediately following Committee
meetings, and have held six of these
meetings during the financial year.
Membership and attendance
at Board meetings
Members of the Board throughout the
financial year and attendance at each of
its scheduled meetings, as well as at the
additional meetings scheduled at short
notice to discuss the impact and response
to COVID-19, cladding and Citiscape, are
shown on page 86.
↑ David Wilson Homes at Drayton Meadows, Market Drayton, Shropshire.
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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
Audit Committee
• Monitors the integrity of the Group’s Financial Statements and formal announcements relating to its
financial performance, including reviewing financial reporting judgements contained within them.
• Advises the Board on whether the Group’s Financial Statements are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
• Reviews the Group’s internal financial controls and its systems for internal control and risk
management.
• Monitors and reviews the independence, objectivity and effectiveness of the External Auditor and
the Internal Audit function, and reviewing and recommending to the Board the re-appointment,
remuneration and terms of engagement of the External Auditor.
• Development and implementation of the Group’s policy on the engagement of the External Auditor to
supply non-audit services.
See pages 109 to 119 for full report
Remuneration Committee
• Designs and implements the Group’s overall remuneration strategy and policy, ensuring alignment
with purpose and 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 pages 123 to 151 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.
• In carrying out the above, promotes diversity of Board Directors and Senior Management.
• Ensures effectiveness evaluations of the Board, its Committees and individual Directors are carried
out on an annual basis.
See pages 100 to 108 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 pages 120 to 122 for full report
98
The Board
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
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Barratt Developments PLCwww.barrattdevelopments.co.uk Group management committees
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 and emerging risks) together with the
appropriateness of any mitigations.
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.
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 SHE strategy for the Group.
• Ensures that SHE policies and procedures are
adequately implemented and adhered to.
• Monitors the effectiveness of the Group’s
SHE systems.
• Keeps up to date with changes in legislation
surrounding SHE matters.
Membership of and attendance at Disclosure Committee
The members of the Disclosure Committee are David Thomas, Jessica White and Tina
Bains. The Disclosure Committee held four meetings during the year. At two of these
meetings all three members were present. Due to the immediacy of the matters discussed
at the meetings, often at short notice, the other two meetings were held with a quorum of
two out of the three members present.
Internal controls and risk management
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 109 to 119).
Internal Audit has developed a risk framework for all business functions, which has been
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. Further details of the work undertaken by Internal Audit as a consequence
of COVID-19 can be found on page 118.
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 71 to 78).
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.
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, we do not anticipate any materially adverse financial effect and our London business
continues to operate well.
The Board has not identified, nor been advised of, any failings or weaknesses that it has
determined to be significant. Therefore, a confirmation of necessary actions has not been
considered appropriate.
Fair, balanced and understandable
The Board has considered whether the Annual Report and Accounts are fair, balanced and
understandable. As part of their considerations, the Board has reflected on the feedback
shareholders provided in respect of our 2019 Annual Report and Accounts. It has also set
aside adequate time to review and discuss significant areas of the 2020 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 155. The process undertaken by the Audit Committee to assist the
Board in their assessment can be found on page 117. 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 that the FY20 Annual Report and Accounts are
fair, balanced and understandable.
On behalf of the Board
John Allan
Chair
1 September 2020
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Composition, succession and evaluation
“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.”
John Allan
Chair of the Nomination Committee
Statement from the Chair of the
Nomination Committee
I am pleased to present the Nomination
Committee report for the financial year
ended 30 June 2020. The Nomination
Committee is given its authority by the
Board and acts in accordance with its
written Terms of Reference, which can
be found in the corporate governance
section of the Company’s website. Our
responsibilities are also summarised
on page 98. 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 reviewed
the composition, skills and experience
of the Board and its Committees during
the financial year. The Nomination
Committee remained satisfied that no
changes were required to the Board or its
Committees during the year under review.
The Committee will continue to consider
succession planning at both Board and
Senior Management levels and recommend
changes to the Board as and when it deems
appropriate to do so.
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
satisfactorily. Further information on
the Company’s progress on diversity and
inclusion initiatives is available on pages 60
and 61 in the Strategic Report.
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.
Membership and attendance
at meetings
The membership of the Nomination
Committee and the attendance at each of
its scheduled meetings is set out to the left.
The majority of Committee members are
considered independent by the Company
and in accordance with Code provision 10.
Their biographies and qualifications are
shown on pages 80 to 82.
The following pages set out the work
undertaken by the Committee during
the year.
John Allan
Chair of the Nomination Committee
1 September 2020
John Allan
Chair
2/2
Other members:
Richard Akers
Nina Bibby
2/2
2/2
Jock Lennox
Sharon White
2/2
2/2
n Meetings attended n Meetings held
FY20 key achievements:
• Supported the business in
reviewing the process for
succession planning for senior
managers and other key
management positions within the
business.
• Reviewed and updated succession
plans for the Chief Executive.
Areas of focus in FY21:
• Continue to work on succession
planning.
• Continue to support the
development of potential internal
candidates and increase insight to
external talent pools.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Nomination Committee role and activity FY20
Main activities undertaken during the financial year
Priorities
Work carried out and outcomes
Governance
Conflicts of interest
Undertook an annual review of the full register of Directors’ conflicts of interest and considered changes
to existing conflicts of interest and any new ones notified by Directors, to determine whether these should be
authorised and on what terms and conditions the authorisation should be given. Recommendations were then made
to the Board.
Nomination Committee report
Reviewed, and recommended to the Board, the Nomination Committee Report for inclusion in the Annual Report
and Accounts.
Terms of Reference
Reviewed and updated its Terms of Reference in light of the new Code provisions.
Board Diversity policy
Reviewed the Board Diversity policy and agreed not to implement formal quotas for gender and ethnicity. Agreed that
promotion of diversity and inclusion across the business was effective.
Composition
Board and Committees
Reviewed the structure, size and composition of the Board and of its Committees. The conclusion was that the Board
remains appropriate across each of the above categories. However, it was agreed that consideration should be given
to how the business can increase focus on sustainability and what additional skills and/or experience, if any, this may
require on the Board.
Individual Directors and Board balance
Reviewed the skills, experience and knowledge of each Board member and of the Board as a whole, against the
needs of the business.
Independence
Agreed that all Non-Executive Directors (excluding the Chair) remain independent.
Chair and Non-Executive time commitments
Reviewed the time commitment required from the Chair and Non-Executive Directors to fulfil their roles, confirmed
that this remains appropriate and concluded that the Chair and each of the Non-Executive Directors have either met
or exceeded the required time commitments during the year.
Succession
Length of service
Assessed the tenure of Board members and held discussions with Directors on expected length of service in order to
inform the succession plan.
Re-appointments
Following a review of his effectiveness, it was agreed that the Chair, having served for six years, would
be appointed for a further three-year term.
Succession plans
Considered succession plans for Directors and Senior Management. Going forward, the Nomination Committee will
increase focus on how employees are being developed and the level of potential candidates available from internal
and external talent pools.
Evaluation
Committee effectiveness
Reviewed and monitored progress against matters arising from its annual evaluation for FY19.
Participated in an internal evaluation of its own performance and discussed and agreed an action plan
to address issues arising.
More information on Board and Committee effectiveness can be found on pages 105 to 108.
Effectiveness of Chair and Chief Executive
Considered and discussed the effectiveness of the Chair and the Chief Executive (without either being present)
and concluded that both remain effective in their respective roles.
Training and development
An assessment of the training and development needs for the Board highlighted the following areas: sustainability;
SHE; brand values; and IT (particularly cyber security and GDPR).
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Composition, succession and evaluation
Board composition
statistics
The Board and the Nomination Committee
are mindful of the importance of diversity to
the success of the Company and continue
to assess this on a regular basis.
Gender diversity
37.5%
Board appointment process
Stage 1
Nomination Committee determines any gaps in experience or balance on the Board.
Nomination Committee reviews and approves an outline brief and role specification
and appoints an external recruitment consultancy for the assignment, including
preferences relating to gender or ethnicity if this is required for Board balance.
62.5%
Stage 2
Female
Male
Independence
50%
12.5%
Stage 3
Recruitment consultancy prepares an initial longlist of candidates from which it
develops a shortlist.
40%
62.5%
37.5%
Nomination Committee considers the shortlist and holds interviews with potential
candidates.
Stage 4
Chair
Executive Directors
Non-Executive Directors
Board tenure
40%
20%
Nomination Committee makes recommendations to the Board for consideration.
Stage 5
Stage 6
Board agrees terms with the chosen candidate and makes an announcement to
investors.
During the year, there were no new appointments to the Board or any of its Committees.
37.5%
0–3 years
3–6 years
6+ years
40%
Skills and experience (number
of Directors with certain skills)
Directors
5
3
4
8
3
3
1
Property Industry
Finance/Accounting
Housebuilding
Leadership
Retail
Public Policy
Marketing
102
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Barratt Developments PLCwww.barrattdevelopments.co.uk How this supports diversity
In considering its brief to the external
recruitment consultancy, the Committee
considers the combination of skills,
experience and knowledge that it requires
and identifies any gaps. As part of this
process, the Nomination Committee will
also consider the existing balance of
gender, ethnicity and social backgrounds
to help inform a candidate profile.
The Nomination Committee and the
Board will continue to work only with
external recruitment consultancies
who have adopted a voluntary code of
conduct addressing gender diversity. The
Nomination Committee and the Board also
require external recruitment consultancies
to identify and present potential candidates
in accordance with the Parker review and
its recommendations regarding the ethnic
diversity of boards.
Re-appointment and
re-election of 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. 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.
Non-Executive Directors will normally step
down from their position on the Board and
its Committees at the AGM following their
ninth anniversary. 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 102.
During the year, the Nomination Committee
considered the re-appointment of John
Allan as Chair for a further three years,
given that in July 2020 he would have
served six years on the Board. In particular,
it looked at his availability outside Board
meetings as well as his commitment
to the business of the Group given his
other directorships and positions. The
Nomination Committee was satisfied
that throughout his six year tenure, John
Allan had positively demonstrated his
availability in and outside of meetings
and his dedication to the Company. His
effectiveness in directing the Company
and his objective judgement throughout
his tenure was also noted. Accordingly, the
re-appointment of John Allan as Chair for a
third three-year term was recommended to,
and endorsed by the Board.
As in previous years, all Board members will
stand for re-election by shareholders at the
2020 AGM. Each of the Directors 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 strategy.
Following these reviews, the Nomination
Committee and the Board are satisfied that
each Director continues to be effective in,
and demonstrates commitment to, their
respective roles. Biographical details of
each of the Directors are set out on pages
80 to 82 of this report and reasons why
their contribution is, and continues to be,
important to the Company’s long term
sustainable success can be found in the
Notice of the 2020 AGM. Details of the
Executive Directors’ service contracts can be
found in the Remuneration report on page
133. 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 2020 AGM for 15
minutes before the meeting and throughout.
The Board, in 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 the 2020 AGM for the
re-election of the Directors.
Succession planning
Succession planning is a live topic at the
Board and Nomination Committee meetings.
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, because lessons
gained through one property cycle can be
useful during the next.
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.
Executive Directors
During the year, the Board undertook its
annual review of the Group’s succession
plans, and met with the Chief Executive
to discuss the succession plans for the
other Executive Directors and Senior
Management below Board level.
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.
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 59.
How this supports a diverse pipeline
The Board continues to seek to appoint
on merit. However, when considering
succession plans the Board remains
cognisant of the need to ensure that there
is a diverse range of individuals who are
included in the plan. The business as
a whole continues to promote diversity
and inclusion from within, particularly in
respect of supporting female employees
to progress up the career ladder. Further
details of the work that has be undertaken
in this area can be found on page 104.
Diversity and inclusion
Board Diversity
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 and knowledge. 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, ethnicity, social background and
cognitive and personal strengths.
A copy of our Diversity Policy for
Board appointments can be found at:
www.barrattdevelopments.co.uk/
sustainability/our-policies.
Board composition statistics are provided
on page 102.
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Composition, succession and evaluation
Group Diversity Policy
The Nomination Committee and the Board recognise the importance of a diverse workforce, at all levels of seniority. Promoting diversity at
a Senior Management level and more generally across the workforce remains an objective for the Chief Executive and Group HR Director.
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 60 and 61. The main objectives, how they are implemented and progress towards
them are set out below.
Objectives
Implementation
Progress
Hold leaders accountable for diversity and
inclusion goals.
Data tracking and distribution.
Ensure that diversity and inclusion actions
and results are communicated and visible
across the workforce, to help embed
appropriate behaviours.
Improve the representation of women, as
well as BAME, LGBT+, disabled people and
other minorities across the group.
Local actions.
Launch of second intake of Catalyst – our
female leadership development programme.
Submission to Stonewall Equality Index.
Implementation of BAME action plan.
Supporting work placements.
Create an inclusive work environment
that fosters creativity and innovation, and
promotes employee engagement.
Reciprocal mentoring.
Launch employee network.
Policy review.
Create strong relationships with a more
diverse customer base.
Dignity and respect toolbox talks.
Diversity data down to divisional level
produced and distributed every month
to enable progress measurement.
Each division has a Diversity and Inclusion
action plan, which is reviewed regularly and
discussed with the Chief Executive and Chief
Operating Officer annually.
64 delegates attended launch event in
January 2020. All delegates were offered
one-to-one coaching.
Submission made and feedback received
in early April 2020, which will inform future
actions.
Profiles of colleagues collected and shared
internally for role modelling. Signed up to
Business in the Community’s Race at Work
Charter.
Identified 14 disability work placement
opportunities working with various charities.
Working with Women In Construction to
facilitate work placements in London and
the Midlands.
2020 scheme launched. 128 people
matched – 64 of which are on the Catalyst
Programme.
Launched gender equality employee-led
network called ‘Under One Roof’.
Introduced paid leave for carers and those
undergoing assisted fertility. Updated
family friendly policies with gender neutral
language.
Dignity and respect toolbox talks rolled
out to all sites for employees and sub-
contractors in October 2019.
Issued a Dignity, Respect and Equality Policy
across the business.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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. Last year, the Board appointed Lintstock to
facilitate the evaluation. This year, Lintstock supported the Chair and the Company Secretary with the delivery of an internally conducted
evaluation. Lintstock has no other connection with the individual Directors or the Company.
Progress on FY19 evaluation
We reported the outcomes of the internal Board evaluation for the last financial year in the 2019 Annual Report and Accounts. Details of
progress made on these are set out below.
Table 2 – The Board
FY19
outcomes
Actions for
FY20
Progress
made in FY20
Stakeholder engagement
Culture
Succession and diversity
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.
To explore opportunities to gain
further insight into the views and
concerns of our stakeholders and
into overall stakeholder dynamics.
The Board received various updates
on how the business engaged
with its stakeholders and the
feedback received. This was taken
into consideration when making
decisions on various areas. Details
can be found in the Strategic Report
on pages 38 to 49.
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.
Steps have been taken to understand
the culture of the business and how
this is perceived throughout the
organisation. How the culture of
the business will be communicated
to the workforce and how it will be
measured was being developed
pre-COVID-19. Work in this area will
continue throughout FY21. Further
details on the work undertaken to
date can be found on pages 92 to 95.
This continues to be a key area
of focus for the Board. The Board
formally met with the Chief Executive
to discuss succession plans in detail
for all levels of the organisation.
Updates were provided throughout
the year as deemed appropriate and
necessary.
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Composition, succession and evaluation
Table 3 – The Committees
Nomination Committee
Audit Committee
Remuneration Committee
FY19
areas of
improvement
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’s 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.
Progress
made in FY20
Information on succession planning,
which has taken place during the
year, can be found on page 103.
The Chair of the Audit Committee is
now invited to all Risk Committee
meetings and attends either part
or all of each meeting. He also has
separate discussions with the Chair
of the Risk Committee to ensure that
it is focused on the right things and
addressing them appropriately.
There has been a move to
consolidate agenda items over the
past year and for papers to have
a more risk-based focus. Work on
streamlining papers will continue
throughout FY21.
To work with our remuneration
consultants in terms of best practice
and risk assessment and refine
structures accordingly following
consultation with shareholders.
The Committee continuously reviews
its remuneration structures to
ensure that they do not inadvertently
encourage inappropriate behaviours
and to ensure that they focus the
workforce on the right things. As
the business recovers from the
impact of COVID-19, remuneration
structures have been reviewed to:
(i) mitigate against risks around
retention, succession and rewarding
inappropriate behaviours; and (ii) to
ensure that the focus is on getting
the business back to full capacity
efficiently as possible.
The Committee is mindful of the
various elements that comprise
remuneration for Executive Directors
and Senior Management, and the
wider workforce. The impact of
COVID-19 has further highlighted
areas where remuneration
structures can be simplified
throughout the organisation, as well
as to ensure that there is alignment
throughout. Changes have therefore
been made to the metrics for Annual
Bonus and LTPP awards for FY21.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Board and Committee
evaluation process
Stage 1
Online questionnaires issued to Board
and Committee members, and also
those who attend Committee meetings
on a regular basis.
FY20 external Board effectiveness evaluation outcomes
Overall the results of the evaluation were positive and showed that the Board continues to
be run effectively. It is seen as being cohesive and comprising the appropriate balance of
experience, skills and knowledge to implement the Group’s strategy over the short term.
Board meetings operate in a spirit of openness, fostered by the Chair, in which Directors are
able to challenge and discuss openly ideas of importance to the Group, its strategy and risk.
Table 4 – Key areas of improvement for the Board
Re-establish the
business following
COVID-19
Risk
Sustainability
To increase the
knowledge and
understanding of the
Board and Senior
Management on the
key areas and how the
business may address
these.
Organise training
sessions for the
Board and Senior
Management team,
which explain
the key areas of
sustainability focus
in a comprehensive
manner, whilst
illustrating how the
business can have an
impact in this area
and the benefits of
doing so.
Stage 2
FY20
outcomes
(External evaluation only) Interviews
conducted with Directors and regular
attendees.
To get the business
performing at pre-
COVID-19 levels as
quickly as possible
across all metrics.
To perform more
horizon scanning
for remote but
potentially significant
unidentified risks.
Actions for
FY21
Implement the
COVID-19 recovery
plan and business
renewal plans.
Look at lessons
learnt and determine
what, if any, changes
need to be made to
the organisational
structure, working
practices and
protocols and strategy
once the economic
impact of COVID-19
is clearer.
To identify an
appropriate process,
which will help
capture risks that
may potentially have
not been identified
and to determine the
best forum to discuss
findings and stipulate
mitigations against
those risks that are
most likely to impact
the business.
To include risks that
are not just specific
to the business but
which may impact
the wider economic
and/or political
environment in
which we operate,
which ultimately may
affect our business
operations.
Reflect findings within
our principal risks as
appropriate.
Stage 3
A summary of the results of the
questionnaire and interviews were
provided to the Company Secretary for
an initial review.
Stage 4
The reports are shared with the Chair
and Chairs of the Committees.
Stage 5
Results are presented and discussed at
the next Board or relevant Committee
meeting.
Stage 6
Actions for improvement are agreed for
the next financial year.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Nomination Committee report CONTINUED
Composition, succession and evaluation
Table 5 – Areas of improvement for the Committees
Nomination Committee
Audit Committee
Remuneration Committee
FY20
outcomes
Continue to monitor and improve
succession plans.
Consider lessons learnt from the
impact of COVID-19 and the risks
that arose from this.
More training around accounting
and risk management, and the
risks associated with sustainability
and ESG including climate change
and how the business can look to
mitigate against these.
Improve the use of non-financial
metrics for variable pay including
ESG metrics whilst recognising the
constraints and difficulties around
delivery as we come out of the
pandemic.
Increase training around wider
workforce pay matters and the
broader executive remuneration
debate.
Actions for
FY21
Continue with the one-to-one
meeting with the Chief Executive
to understand his thoughts around
the succession plans for Executive
Directors and Senior Management.
Ensure that the succession plans
for the Chief Executive, Non-
Executive Directors and the Chair
continue to be regularly reviewed
and remain fit for purpose and
relevant.
Engage with the wider business to
gain an understanding of the short
and long term risks faced by all
levels of the organisations during
the lockdown, understand how
these were mitigated, and what, if
anything, could be done further to
address these risks.
Arrange for external advisers and/
or internal specialists to provide
comprehensive teach in sessions
on their respective topics.
Consider the use of more non-
financial metrics for variable pay
as part of the overall remuneration
policy review in 2021.
Engage remuneration consultants
to provide annual training on latest
thinking on executive remuneration
and on wider workforce pay
matters.
Evaluation of the Chair and
Non-Executive Directors
The evaluation of the effectiveness of
the Chair was conducted by the Senior
Independent Director with assistance from
the Company Secretary. A questionnaire
was issued to each Board member
(excluding the Chair) and the result
was unanimous support for the Chair.
Of particular note was how supportive
the Chair 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
Chair 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 Chair.
The Chair held one-to-one meetings with
each Director to assess the effectiveness
of their contributions and to agree any
areas of improvement or training and
development 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.
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 that may arise for any Board
member, including details of any terms
and conditions that it deems necessary to
impose on any authorisation given. This
process was carried out satisfactorily
during the year in respect of all Directors.
Throughout FY20, 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 by the Nomination Committee
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.
This report forms part of the Corporate
Governance report and is signed on behalf
of the Nomination Committee by:
John Allan
Chair of the
Nomination Committee
1 September 2020
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Barratt Developments PLCwww.barrattdevelopments.co.uk Audit Committee report
Audit, risk and internal control
“ The arrival of COVID-19 has
had a dramatic effect on
the business and therefore
the priorities of the Audit
Committee changed as
explained below.”
Jock Lennox
Chair of the Audit Committee
Statement from the Chair
of the Audit Committee
I am pleased to present the Audit
Committee’s report for the year ended
30 June 2020. The report sets out our
work over the year and details how
responsibilities in relation to audit, risk and
internal control have been implemented.
In last year’s report I set out the priorities
for this year. The arrival of COVID-19 has
had a dramatic effect on the business
and therefore the priorities of the Audit
Committee changed as explained on the
following pages.
Role and responsibilities
The Audit Committee is given its authority
by the Board and acts in accordance with its
written Terms of Reference, which can be
found in the corporate governance section of
the Company’s website. Our responsibilities
are also summarised on page 98. 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 our finance, internal audit 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.
Jock Lennox
Chair
4/4
Other members:
Richard Akers
Nina Bibby
Sharon White
4/4
4/4
4/4
n Meetings attended n Meetings held
FY20 key areas of focus
•
In light of COVID-19, realigning
priorities for internal audit and
consideration of the continuing
integrity of internal controls and the
financial impact of the pandemic,
including liquidity.
• Working with the Risk Committee to
improve the focus on emerging risks
and receiving in depth reviews on key
risk areas, including changes to Help
to Buy.
•
•
•
Reviewing the Group’s response
to the replacement of cladding on
legacy properties and related issues.
The Group’s response to climate
change reporting including
consideration of data and systems
required to meet future reporting
obligations.
The implementation of IFRS 16 for
lease accounting; the continuing
development of systems, including
the implementation of the new
valuation system; and the impact
of COVID-19 on the assumptions
underpinning the Group’s key
financial judgements.
FY21 key areas of focus
•
Continuing to review the impact
of COVID-19 especially around the
“lessons learnt” review and the
related impact on internal controls,
risk management and financial
judgements; aligning responses
with the stakeholder reporting
obligations.
•
Further consideration of the
continuing review of reporting
and audit (Kingman, Brydon and
CMA) and the implications for the
Group, including anticipating the
formalisation of internal controls
reporting in the UK.
• Developing further the Group’s
approach to climate reporting ahead
of the deadline for reporting under
TCFD in 2022.
•
In depth review of fraud risk to the
business and the appropriateness
of the control framework in place to
mitigate against it.
•
Implementation of the new valuation
system.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Audit Committee report CONTINUED
Audit, risk and internal control
Areas of focus FY20
COVID-19
In common with most UK businesses the
arrival of COVID-19 had a dramatic effect
on the Company. Prior to lockdown we
were delivering strong progress against our
medium term targets including increasing
completion volumes. By 27 March 2020 all
of our construction sites had temporarily
closed and all production ceased. At 30
June 2020 all sites had reopened, albeit at
a lower level of productivity than “normal”.
This sequence of events has dominated the
work of the Audit Committee through this
year end period.
In April 2020, following discussions
between myself and the Head of Internal
Audit, the internal audit plan was realigned
to reflect the changed circumstances.
Closer attention was paid to the risk
of fraud given the changed working
environment and, as a consequence of the
lockdown, our employees working remotely
from home. We therefore had to review
our internal controls, particularly around
manual processes and adapt them for
the new working arrangements, including
updates to the delegation of authority
operated across the business.
Adequacy of liquidity was a high priority for
the Board and various reviews, including
scenarios to reflect a potential further
lockdown, have fed into the consideration
of going concern and viability presented by
management to the Audit Committee.
The changed environment has impacted a
number of the assumptions that underpin
the key accounting judgements. These
together with scenario assessments have
been reflected in the proposals presented
by management to the Audit Committee.
This included the impact of the sudden
deterioration in financial performance
as a result of the temporary closure over
the lockdown period, increasing the risk
of impairment of the Group’s assets. The
Audit Committee has considered in detail
management’s reviews of the carrying
value of goodwill, intangibles and land
and work in progress. Additional meetings
were arranged post the year end to ensure
adequate time was available for review.
The disclosure of the financial impact of
COVID-19 has been debated thoroughly by
the Audit Committee with management
and the External Auditors. We have taken
into account the FRC guidance in this area
with the aim of ensuring there is adequate
transparency in both the financial review/
commentary and the financial statements.
In addition and as outlined in the 2019
Annual Report and Accounts, the other
areas of focus for FY20 were as follows.
Cladding on legacy properties
We considered in detail the accounting and
presentation in the financial statements of
payments which are made in connection
with cladding on legacy properties.
Changes in regulation and accounting
standards
The key focus in this area has been
adoption of IFRS 16 ‘Leases’, which is now
in force and has been fully adopted for the
FY20 half and full year financial statements.
Processes and reporting in respect of
IFRS 16 have been developed to ensure
accounting disclosures required under the
standard are met.
Systems
We reviewed the governance and status of
the Group’s projects to upgrade the COINS
financial reporting system to the latest
version on the market and to upgrade the
valuation system on a number of pilot
divisions in the Group. Presentations and
regular updates on both projects were
received from the Group Commercial
Director and will continue to be provided
in FY21. In addition, I met with Jeremy
Hipkiss, Group Sales and Marketing
Director who has executive responsibility
for IT, and the Group IT Director to discuss,
and gain further insight into, the Group’s IT
systems and associated risks.
Principal risks and uncertainties
We have continued to undertake in-depth
reviews of any key areas of risk impacting
the business, particularly in respect of
COVID-19, the UK leaving the EU and
emerging risks from climate change.
Relationship with the Risk Committee
We have continued to enhance the
relationship with the Risk Committee and
I have attended each of the meetings held
during the year. Further progress has been
made by the Risk Committee to further
embed risk management into the business
and the Risk Committee has considered
the impact of COVID-19 on risk and related
mitigation.
Help to Buy
The tapering of Help to Buy from April 2021
and cessation of the scheme from 2023,
was leading to changes that were being
actively managed by the business. The
temporary closure of our construction sites
and resultant delays in our build programme
further developed the risks of operating
under the Help to Buy Scheme. Our site
management teams are focussed on the
delivery of homes reserved using Help to
Buy.
Climate change reporting systems
Climate change reporting as part of an
increased interest in ESG more generally
was further heightened as a result of the
COVID-19 experience and has continued
to occupy the Audit Committee’s attention.
The Government and stakeholders are
pushing for enhanced reporting on progress
made on helping to reduce climate change.
It is therefore imperative that we have the
systems and processes in place to collate
the required data and ensure that it is
accurate and reliable. Disclosure under
the TCFD is not applicable to the Group
until FY22; however, we will seek to report
against the requirements in our FY21
Annual Report and Accounts.
External audit
In last year’s Audit Committee report, I
wrote about the paramount importance
to the Committee of the quality of the
external audit. I also acknowledged the
increasing regulatory demands being
placed on the audit profession. This has
resulted in additional costs for the auditor
in conducting the audit. For FY20, we
have agreed an audit fee (including JVs) of
£790,000 (2019: £614,000). This increase
reflects inflationary increases for the year,
additional audit procedures required as a
result of COVID-19, and an increase in the
scope of the audit to include the testing of
controls for the upgraded COINS system,
and changes in the regulatory environment.
Further information regarding the audit
fees, including fees for the JVs in which we
participate, are shown in Note 2.3.4 on page
182.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Audit reform
The Kingman, CMA and Brydon reviews were
commissioned in 2018 to review and make
recommendations for the reform of audit
and corporate reporting. While some change
is already underway much will hinge on the
consultation by BEIS which is expected later
this year. We are considering our readiness
in certain areas, for example the potential
formalisation of reporting on internal controls
in the UK. Thought is also being given to
ideas like the Public Interest Statement. We
will detail in next year’s Annual Report and
Accounts which recommendations we have
decided to adopt and what progress we have
made in implementing them.
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
Chair of the Audit Committee
1 September 2020
Audit Committee role and activity FY20
Membership and attendance at
Audit Committee meetings
In compliance with the Code, the
Committee is comprised exclusively of
Non-Executive Directors and each member
is considered to be independent by the
Company. The Chair of the Board 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 who has previously chaired a
number of other listed companies’ Audit
Committees. He is also the Chair of the
Audit Committee Chairs’ Independent
Forum. 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
on page 109 and the biographies and
qualifications of the members are shown on
pages 80 to 82. In addition to the Company
Secretary, the Head of Internal Audit, Group
Financial Controller and representatives
from the External Auditor attended each of
the Audit Committee meetings. The Chair,
Chief Executive, Chief Operating Officer,
Chief Financial Officer, and other members
of Senior Management also attended
meetings (or parts thereof), by invitation.
Members of Senior Management included,
amongst others, the Group Procurement
Director, Group Commercial Director and
Group IT Director.
At its June meeting, the Audit Committee
established a sub-committee to finalise
certain matters delayed due to COVID-19.
These meetings took place in July and
August 2020.
After each meeting, the Chair of the
Committee reported to the Board on
the business undertaken by the Audit
Committee and made recommendations to
the Board as appropriate.
The Audit Committee met the Chief
Financial Officer, the Head of Internal Audit
and the External Auditor separately and
independently of management and the
Chair of the Board.
Main role and activities undertaken
during the financial year
The main role of the Audit Committee is to
assist the Board in fulfilling its 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. In agreeing the annual
programme, the Committee takes into
account the external environment, internal
operation of the business and regulatory
changes to ensure that all the main
priorities are included.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Audit Committee report CONTINUED
Audit, risk and internal control
Main activities undertaken during the financial year
Priorities
Work carried out and outcomes
Integrity of Financial
Statements and
announcements
Accounting judgements and estimates
Considered and approved the material accounting policies, and key sources of estimation uncertainty and
critical accounting judgements for the Financial Statements. This included management’s approach and
conclusions regarding revenue and margin recognition, costs associated with legacy properties, quality of
earnings, impairment of goodwill and indefinite life brands, the nature and carrying value of inventories,
and completed development provisions. Also considered were the External Auditor’s views and findings
and the impact of COVID-19. Further information can be found on pages 115 to 117.
Financial Statements
Reviewed and approved the Financial Statements for the half and full year.
Results announcements
Reviewed drafts of the half and full year results announcements prior to consideration by the Board.
Reviewed the process established for ensuring that the Annual Report and Accounts are fair, balanced and
understandable and concluded that it remains appropriate (further information can be found on page 117).
Considered and agreed management’s proposals for the improvement of disclosures highlighted by the
External Auditor during the audit.
Considered, approved and recommended to the Board the drafts of the management representation
letters for the half and full year, as provided by the External Auditor, for signature.
Accounting Standards and key regulatory changes
Received updates on the implications of new accounting standards and key regulatory changes,
including going concern, cash sources and uses and environmental disclosures under TCFD (including
improvements in climate change disclosures in line with the Financial Reporting Lab’s report on climate
change disclosures).
Tax rate
Reviewed and agreed the Group’s effective tax rate and the disclosure in the Group’s Financial Statements.
Finance function
Received an update on finance function benchmarking against best practice including results of a survey of
internal customers.
Response to FRC letter
Assessed and approved the Group’s response to a letter from the FRC regarding disclosures in the FY19
Annual Report and Accounts, including additional disclosures and explanations in the FY20 Annual Report
and Accounts. Further information is given on pages 117 and 118.
Preparation of Financial Statements on a going concern basis
Reviewed and discussed updates to sensitivity modelling for stress tests to reflect current risk scenarios in light
of COVID-19, and any mitigating actions required as a result of running the stress tests. The Audit Committee
concluded that the stress tests had been carried out on an appropriate basis and agreed with the outcome and
mitigating actions.
Considered and agreed to recommend to the Board that the Financial Statements be prepared on a going
concern basis.
Going concern and long term viability statements
Reviewed and agreed the going concern and long term viability statements for disclosure in the Annual
Report and Accounts (see page 79).
Assessed the long term prospects of the Company, and agreed the timescale to be covered by the long
term viability statement (see page 79).
Considered the sustainability of the Company’s strategy and business model in view of the principal risks
faced by the business and mitigating factors and the appropriate length of the period chosen for the long
term viability statement.
Going concern and
long term viability
statements
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Barratt Developments PLCwww.barrattdevelopments.co.uk Priorities
Work carried out and outcomes
Internal control and
risk management
systems
Risk Committee
Regularly reviewed the work of the Risk Committee, which included assessment of risks and mitigations
in place for various functions across the business. These comprised, amongst other things, construction
risk, mortgage availability, skills shortages, a ‘no-deal’ exit from the EU, a change in Government, supply
chain risk, and emerging risks including climate change. Additionally, the risks to the Group as a result of
COVID-19 and mitigations available have also been reviewed.
During FY21, the Audit Committee will further explore the emerging risks around sustainability and
climate change to ensure appropriate mitigations are developed and put in place.
Effectiveness of risk management
Regularly reviewed and challenged the Group’s risk framework, including the Group and Operational
risk matrices, and monitored and reviewed the effectiveness of the risk management systems. The risk
committee received formal strategic updates from the Group’s technical experts on responses to its
principal risks, including future house design solutions.
Reviewed the newly designed business risk map, including revised risk framework, mitigations identified
and controls implemented.
The Audit Committee Chair reported to the Board on a regular basis to assist it with its own assessment of
risk management systems.
Principal risks
Undertook a robust assessment of the principal risks including those that could threaten the business
model, future performance, solvency and liquidity, and the disclosures for inclusion in the half and full year
Financial Statements.
Due to COVID-19 a number of the Principal Risk ratings have increased (see page 71 to 77 for more
details).
Effectiveness of internal controls
Internal controls systems were considered to have been effective throughout the year, and the Committee
Chair reported to the Board on a regular basis to assist the Board with its own assessment of internal
control systems.
Approved the review and update of the delegation of authority matrix and a number of key financial
reporting controls as a result of COVID-19 to cater for the revised working practices due to remote
working. Internal Audit carried out regular tests on the revised controls and were comfortable that there
was no weakening of the control environment.
Whistleblowing
Encouraged the re-circulation of the details of the whistleblowing hotline to the business together with
information on the process for reporting any incidents anonymously.
Further details on whistleblowing matters can be found on page 118.
Reviewed the Group’s procedures for the protection of whistleblowers and were satisfied that these were
appropriate.
Risks and processes – in depth assessments of specific areas
Reviewed the impact of IR35, implementation of the new valuation system and related risks, the internal
controls around joint ventures, supply chain risk and mitigation.
The Head of Internal Audit updated the Committee on progress towards implementation of the new
valuation system. The Audit Committee acknowledged that the risks associated with the upgrade to the
new valuation system will extend into FY21. Going forward there will be an annual review of the risks
associated with joint ventures.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Audit Committee report CONTINUED
Audit, risk and internal control
Priorities
Work carried out and outcomes
Internal audit
Meeting without management
Met with the Head of Internal Audit without management present.
No material issues of concern were identified.
Internal audit plan
Approved the annual Internal Audit plan for FY20 and monitored progress against this throughout the year.
Due to COVID-19 the FY20 Internal Audit plan was suspended in March 2020 and replaced with a flexed
approach approved by the Audit Committee.
Considered and approved a new approach to divisional audit for the first half of FY21. The new approach
combines traditional divisional audits (undertaken remotely) with continuous monitoring and group wide
audit themes, which have been assessed based on key risk priorities. Given the success of this approach
during the lockdown period, the Internal Audit plan for FY21 has been adapted accordingly.
Internal audit work during COVID-19
During the lockdown period, a programme of new, continuous monitoring, data analytics and weekly/
monthly remote auditing was commenced to monitor trends, identify any unusual transactions and to
ensure that key controls over areas such as orders, invoice and payment approval and balance sheet
reconciliations continued, as well as ensuring that risks around duplicate payments and employee and
supplier master data changes continued to be mitigated and controlled.
The Head of Internal Audit kept the Audit Committee fully informed on the outcomes of audits undertaken
throughout the business. Appropriate action plans have been agreed to address areas of improvement
identified. The Head of Internal Audit monitors the completion of these action plans.
Effectiveness of the Internal Audit function
Reviewed the Internal Audit improvement plan following the strategic review of the internal audit function
(carried out by a third party and including external benchmarking).
Internal Audit Code of Practice
Reviewed and approved the changes proposed to the Group’s code of practice to bring it in line with the
requirements of the Institute of Internal Audit’s Code of Practice issued in January 2020.
External audit
Audit plan
Reviewed and approved the FY20 external audit plan.
External auditor’s reports on half and full year Financial Statements
Considered and discussed the audit findings for the half year and full year, including presentation of
adjusted items and disclosure of segmental reporting. CJRS grant income has been presented as an
adjusted item in, and segmented reporting has been removed from, the FY20 Financial Statements.
Meeting without management
Met with the external audit partner without management being present to discuss any concerns.
No material matters of concern arose from the discussion.
Audit and non-audit fees and services
Regularly reviewed the ratio between audit and non-audit fees to ensure that it remains within authorised limits
(further information is provided on page 119 and in Note 2.3.4) and also the provision of non-audit services.
Reviewed and agreed the proposal to increase audit fees, subject to scope of the audit being agreed for
each financial year.
Independence of the External Auditor
Assessed and satisfied itself of the independence of the External Auditor and sought confirmation from the
audit partner of its compliance with the relevant ethical standards (more information is given on page 119).
Effectiveness and performance of the External Auditor
Reviewed the results of questionnaires from different areas of the business to understand the overall
effectiveness of the External Auditor, and areas for improvement.
Determined that the External Auditor continued to be effective in its performance and agreed to
recommend its re-appointment to the Board for FY21. The Audit Committee noted areas for improvement
and the External Auditor’s own intention to carry out a review of the quality of its services and present its
findings to the Audit Committee.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Priorities
Governance
Work carried out and outcomes
Corporate governance disclosures for the Annual Report and Accounts
Reviewed the Corporate Governance Report, including whether as part of the Annual Report and Accounts,
it was fair, balanced and understandable and recommended the same to the Board for approval.
Received updates on general corporate governance requirements
Considered the content and potential impact of the recommendations from the Kingman, CMA and
Brydon Reports.
Terms of Reference
Reviewed and updated its own Terms of Reference to align them with best practice.
Policies on anti-bribery, anti-money laundering, competition compliance and ethics
Each policy was reviewed, updated and approved in the context of evolving governance, regulation and
best practice.
Committee effectiveness and evaluation
Progressed actions arising from the FY19 externally facilitated evaluation and discussed and agreed an
action plan to address issues identified by the evaluation of its performance in FY20. A description of the
work carried out on effectiveness evaluation can be found on pages 105 to 108.
FY20 Financial
Statements
Significant issues considered
during the financial year
The significant issues considered by the
Audit Committee in relation to the Financial
Statements during the financial year were
addressed as set out below. This is not a
complete list of all the accounting issues,
estimates and policies, but includes those
which the Committee considers are the
most significant, due to their potential
impact on the performance of the Group’s
activities.
COVID-19 has presented a pervasive
challenge to the business .The Audit
Committee required Senior Management
to demonstrate that the Annual Report and
Accounts give a true and fair representation
of the impact of the pandemic, including on
the judgements made in the preparation of
the Financial Statements and the Group’s
future prospects. External audit have
provided assurance over this matter.
1. Critical accounting judgements
and key sources of estimation
uncertainty
These are set out in the table on page 116
and 117.
2. Going concern
The Audit Committee:
• using the Group’s business plan,
assessed the Group’s available
facilities, headroom and banking
covenants;
•
reviewed management’s detailed
analysis, which included forecasts and
scenarios considering the Group’s
principal risks and the downside
prospects for the UK economy and
housing market, including changes
to the Help to Buy scheme in March
2021, the UK’s withdrawal from the EU
and potential further disruption to site
activities as a result of COVID-19;
• 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 in note
1.3 on pages 173 and 174, and the Group’s
going concern statement can be found on
page 79.
Senior Management considered various
scenarios and sensitivities relating to
each of the above significant issues. This
included a reasonable worst case scenario
in which sales volumes and average selling
prices fall below their pre COVID-19 levels
by 25% and 10% respectively, construction
costs increase by 5%, and that the Group
temporarily closes its operations for
two months in response to a national
resurgence of COVID-19. The information
presented set out how the Group’s activities
would be affected under each scenario and
the potential mitigations available in each
case. Having reviewed the scenarios and
sensitivities in detail, the Audit Committee
concurred with management’s conclusion
that the Company and the Group continue
to be a going concern and the Financial
Statements should be prepared on a going
concern basis.
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 the External
Auditor.
In the year the Company adopted and
revised the application of certain accounting
standards. IFRS 16 (Leases) was applied
from 1 July 2019 for the first time. In view
of the significant reduction in significance
over time the Commercial segment has
now been absorbed into Residential to form
a single segment. In addition, in accordance
with IFRS 32 (Financial Instruments -
Disclosure), it was determined that the
Group’s cash balances and bank overdrafts
should be presented gross rather than net
with prior periods being represented. There
was no change to net cash. In each of these
cases the Committee received reports from
management and the external auditors and
agreed with the proposed treatment and
disclosure.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Audit Committee report CONTINUED
Audit, risk and internal control
Significant issues considered by the Audit Committee relating to the Financial Statements for FY20 comprise:
Significant issues relating to Financial Statements:
How these issues were addressed:
Margin recognition
The Group holds £5,027.9m of land and WIP across housebuilding
and commercial developments and during the year has recognised
£614.3m of gross profit. 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 allocates
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 reassessed its estimates on a site-by-site basis
to incorporate the expected extension of site duration caused by
COVID-19 and the adoption of COVID-19 safe working practices
and protocols. It has also assessed costs incurred during the
controlled closure of construction sites and directly charged any
relating to non-productive site overheads or safety to cost of sales
in the income statement.
Costs associated with legacy properties
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 the Group’s buildings, including the
cladding used, as compliant with the relevant Building Regulations
at the time of completion. Following this review, the Group has
incurred and accrued £11.4m of costs for work involved at legacy
properties associated with removing and replacing cladding.
When cladding was removed from ‘Citiscape’, issues relating
to the design of the building’s reinforced concrete frame were
identified, requiring extensive remedial work. As a responsible
developer, the Group appointed independent structural engineers
to review all other developments where reinforced concrete
frames were designed by either the same original engineering
firm or by other companies within the group of companies which
has since acquired it. The Group has incurred and accrued £28.5m
of costs relating to Citiscape and the associated review.
While in most cases the Group has no legal liability, in line with
its commitment to put customers first it has ensured that no
costs associated with these remedial works will be borne by
leaseholders.
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, the External Auditor reported on its findings and
recommendations following their attendance at valuation meetings
as part of the external audit process. The Audit Committee also
considered the results of the Group’s internal audit reviews across
the business.
The Audit Committee considered management’s assumptions and
estimates in the assessment of margin recognition based on site
performance and the valuation of inventory including the impact of
the expected extension of site durations following COVID-19, based
on recoverability over the remaining activity of the site. Based on the
results of the internal audits, the views of the External Auditor 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 reviewed and agreed the basis on which the
costs associated with legacy properties have been accrued and
their classification within the Balance Sheet. Representations
for the amounts recognised were obtained from both Senior and
local management and the underlying judgements challenged.
Corroboration of the extent of the issues was obtained from
independent experts. The Audit committee also sought the opinion
of the External Auditor prior to making any conclusions.
The Audit Committee also considered and agreed the
appropriateness of presenting these costs as adjusted items in the
income statement, assisted by feedback from the External Auditor.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Significant issues relating to Financial Statements:
How these issues were addressed:
Impairment of goodwill and indefinite life brands
The Group has £805.9m of goodwill and £101.1m 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 2020, all of which is
attributable to its housebuilding business. 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 was also recognised on the
acquisition of Oregon. These assets are amortised as set out on
page 195.
The Audit Committee considered the level of goodwill and intangible
assets with an indefinite useful life held on the Group’s balance
sheet of £907.0m and whether, given the future prospects of the
Group and Oregon, the value of goodwill held on the Balance Sheet
remains appropriate. As part of the review, the Audit Committee
considered the appropriateness of the calculation of the discount
rate, the Group’s risk adjusted cash flows and scenarios, and
the probability of each scenario arising. The paper, which was
considered at the August Audit Committee meeting, outlined the
assumptions made, the sources for these assumptions, and the
resulting valuation. The External Auditor also reported on goodwill
and intangible assets valuation at this 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 the External Auditor, the Audit Committee agreed
with the estimates made by management and concluded that the
valuation of goodwill and intangible assets remains appropriate.
Fair, balanced and understandable considerations and conclusions
The Audit Committee received a draft of the Annual Report and Accounts prior to its August
2020 meeting, together with supporting material from management and the External
Auditor. At the meeting it considered and assessed the process undertaken in drafting the
Annual Report and Accounts to determine whether the 2020 Annual Report and Accounts
were fair, balanced and understandable.
Considerations
• The feedback provided by shareholders in respect of the 2019 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.
• 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.
• A report from the Company Secretary, which confirmed that: i) the process involved
collaboration between various parts of the Group including the Group Finance team,
Company Secretariat, Group Communications, Investor Relations and the Sustainability
team; ii) the Annual Report and Accounts had been reviewed by the Executive Directors;
and iii) the Company had received confirmation from its external advisers that the Annual
Report and Accounts adhered to the requirements of the Companies Act, the Code, the
Listing Rules and other relevant regulations and guidance.
Conclusions: The Annual Report and Accounts
• Clearly, concisely and accurately reflected the Group’s and Company’s performance in
the year under review, including the impact of COVID-19.
• Contained an accurate description of the business model.
• Correctly reflected the Group’s and Company’s purpose, strategy and culture.
•
Included consistent messaging and clear linkage between each of the sections of the
Report and Accounts.
•
Included KPIs, which were consistent with the business plan and remuneration strategy.
The decision was reached that the Annual Report and Accounts was 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 should be
recommended as such to the Board.
FRC
During the year the Group received
correspondence from the FRC’s Corporate
Reporting Review Team who had reviewed
the FY19 Annual Report and Accounts. The
FRC’s role is to consider compliance with
reporting requirements and consequently
their review does not provide assurance
that the FY19 Annual Report and Accounts
were correct in all material respects. The
FRC raised a number of enquiries, on
which the Group was required to respond,
to help the FRC Corporate Reporting Team
to understand how the Group had satisfied
relevant reporting requirements.
The queries related to:
• The disclosure of contract assets,
contract liabilities and revenue
recognised over time;
• Accounting for local contributions and
physical works;
• The sensitivity of pension scheme
liabilities to changes in the discount
rate; and
• Supply chain financing and reverse
factoring arrangements.
In addition, the Group was encouraged to
make improvements in relation to a number
of observations made by the FRC in the
FY20 Annual Report and Accounts if these
were material and relevant.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Audit Committee report CONTINUED
Audit, risk and internal control
The Group, assisted by the External Auditor,
compiled a comprehensive response to
the FRC’s queries and agreed to enhance
disclosures in the FY20 Annual Report and
Accounts to address the matters raised.
The Group’s response was approved by the
Chair and the Chair of the Audit Committee
and submitted within the requested time
requirements.
The FRC were satisfied with the response
and the proposed disclosures for FY20
and confirmed that no further response
was required and closed the enquiry. The
Group has reflected the agreed changes to
specific disclosures relating to the matters
listed above in the FY20 Annual Report
and Accounts.
Internal controls and
the risk management
process
The Audit Committee monitors the Group’s
risk management and internal control
systems, including their effectiveness, 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 71 to 78; 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.
118
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, with
additional testing performed as a result
of and reflecting the impact of COVID-19
including the temporary closure over the
lockdown period, 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.
Whistleblowing
The Head of Internal Audit updated the
Audit Committee on whistleblowing
incidents at each meeting. Concerns can
be raised with managers, or reported
anonymously to a confidential and
independent hotline. The hotline is
available 24 hours a day, with any issues
notified immediately by email. Any issues
requiring urgent attention, (including
corruption, human rights abuses and
safety) are notified to the Head of Internal
Audit by phone, including over the weekend.
The Head of Internal Audit reviews and
investigates the issues raised. The Audit
Committee reviews the overall procedure,
the investigations and outcomes as well as
the availability and frequency of use of the
whistleblowing hotline. During the year,
the Audit Committee reviewed the Group’s
process for protection of whistleblowers
and is satisfied that this remains
appropriate and that the investigations have
been dealt with sensitively and in a timely
manner. Therefore, the Audit Committee
is comfortable with the outcomes reached.
The Chair of the Audit Committee updated
the Board on whistleblowing reports and
investigations on a regular basis and
the Board reviewed the whistleblowing
arrangements and discussed the most
material issues.
Internal audit
Information regarding the Internal Audit
matters considered by the Committee is
given in the activities table on page 114.
To further improve the effectiveness
of Internal Audit, the Head of Internal
Audit continued the strategic review of
the Internal Audit function started in
FY19. The results of internal surveys of
Senior Management and key users were
supplemented by external benchmarking.
Improvements recommended by the Head
of Internal Audit included:
• consolidation of the different types of
divisional audits undertaken into one
risk-based divisional audit approach;
•
•
implementation of a formal
management action tracker; and
improvement and simplification of
audit reporting.
Two key strategic objectives of the
function were identified in response to the
benchmarking, comprising:
• development of an Internal Audit
Improvement Plan with the aim of
ensuring provision of value added risk
based assurance, improvements to
business partnering and ensuring the
team has adequate and relevant skills;
and
•
the Introduction of the Barratt Risk and
Internal Control Framework (BRICK).
Progress on achievement of these
objectives, due to commence in the second
half of the year, was stalled by COVID-19.
Plans for FY21 have been agreed and are
progressing now that the business has
returned to full capacity. This includes the
rollout of business-wide reviews of key
processes and policies, supplemented by
continuous monitoring of risk areas and
in-depth divisional audits.
The closure of construction sites, sales
centres and offices in response to COVID-19
required the Group to adapt its ways of
workings, including its control framework.
Internal Audit provided continual feedback
concerning the appropriateness of
proposed changes to controls. In addition,
the Group’s audit programme was adapted
to be workable under and more applicable
to the new working environment. This
resulted in improvements to the efficiency
and relevance of audit work that will be
continued after our offices reopen.
The Audit Committee considered the
effectiveness of the Internal Audit team 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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Barratt Developments PLCwww.barrattdevelopments.co.uk External audit
Audit performance and effectiveness
The Audit Committee assessed the
performance of the External Auditor and
the effectiveness of the external audit
for FY20. In coming to its conclusion the
Audit Committee reviewed amongst other
matters:
•
feedback on the effectiveness,
performance and knowledge of the
external audit from Group, divisional
and regional management and the
Head of Internal Audit, and their
responses to previous management
feedback;
• Deloitte LLP’s fulfilment of the agreed
audit plan for FY20;
•
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,
including its own representation about
its internal independence processes.
During the course of the audit, the External
Auditor challenged management’s
judgements and assertions on the following
matters:
•
•
•
•
Margin recognition, and in particular
the impact of COVID-19 on current and
future site margins;
The presentation of adjusted items and
COVID-19 related costs in the income
statement;
Costs relating to legacy properties; and
The assumptions underlying the
presentation of the Financial
Statements on the basis that the Group
is a going concern.
The Audit Committee asked the External
Auditor to confirm if they felt that the
Financial Statements provide a true and
fair reflection of the impact of COVID-19 on
the performance of the business, which the
External Auditor subsequently did.
The Audit Committee concluded that
the audit process as a whole had been
conducted robustly, the External Audit
team selected to undertake the audit had
done so thoroughly and professionally,
and the External Auditor had applied
sufficient experience and understanding
of the housebuilding industry, consulted
with accounting and real estate experts
as necessary, and is of sufficient size to
conduct a national audit. Deloitte LLP’s
performance as auditor to the Group during
FY20 was therefore considered to
be satisfactory.
In addition, the Audit Committee was
satisfied that management had provided
the External Auditor with appropriate
access to its operations and head office
teams, systems, records and supporting
information, whilst acting professionally
and with appropriate challenge, enabling
the audit to be conducted effectively.
Auditor independence and
non-audit fees
Following the review reported in the 2019
Annual Report and Accounts, with effect
from 1 July 2020, the Company’s Policy on
Auditor Independence and Non-Audit Fees
caps non-audit fees at 70% of the average
audit fees over the previous three years. The
Audit Committee continually monitors the
ratio of non-audit to audit fees to ensure
that it does not exceed this cap. For FY20,
non-audit fees (including audit-related
assurance services) for the Company, its
subsidiaries and JV’s represented 7.8% of
the total audit fee. Further details of the
audit and non-audit fees incurred by the
Group can be found in Note 2.3.4 on page
182. The non-audit fees related to the work
undertaken by Deloitte LLP in its role as
external auditor to the Group for the review
of the half year report, technical support
provided in drafting the response to a letter
from the FRC’s Corporate Reporting Review
Team and a short term, limited scope, piece
of advisory support. It was felt that this work
was best performed by the Group’s auditor
given its experience and knowledge of the
Group. Accordingly, the Audit Committee
was satisfied that both the work performed
by Deloitte LLP, and the level of non-audit
fees paid to it, were appropriate and did not
raise any concerns in terms of Deloitte LLP’s
independence as auditor to the Group.
The Policy sets out the duties of the
Committee with respect to protecting the
objectivity and independence of the auditor.
The pre-approval levels and conditions
required for different non-audit services
which might be required from the auditor,
together with those services that are not
permitted under any circumstances are
detailed in the Policy. The Policy also
sets out restrictions on the recruitment
of employees from the Group’s external
auditor. The policy is available at www.
barrattdevelopments.co.uk/investors/
corporate-governance. There are no
conflicts of interest between the members
of the Audit Committee and Deloitte LLP.
The Audit Committee requires written
confirmation from the External Auditor
annually that it remains independent.
For FY20 Deloitte LLP provided a
comprehensive report to the Audit
Committee verifying that it had performed
its audit and audit-related services in
line with independence requirements and
explaining why it believed that it remained
independent within the requirements of
the applicable regulations and its own
professional standards. The report also
explained why the ratio of audit to non-audit
fees and the extent and type of non-audit
services provided was appropriate.
Following receipt of confirmations from
the External Auditor, and the completion
of its own review, the Committee endorsed
the External Auditor’s conclusions that the
Policy had been appropriately complied
with throughout the year under review,
that there were no items that might affect
the independence of the External Auditor,
and that the non-audit fees remained at an
appropriate level.
External audit tender
Deloitte LLP were first appointed as
external auditor to the Group in 2007.
The Group therefore put the audit out to
competitive tender in FY17, as reported
fully in the FY17 Annual Report and
Accounts. Following the tender, 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 was appointed as lead audit
partner for the FY18 audit and continues in
this role. The team’s second audit partner
was rotated for the FY20 audit. The Group’s
policy is to rotate the lead audit partner
every five years.
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 will make
recommendations accordingly.
Assessment of the External Auditor
Having considered the External Auditor’s
performance, the Audit Committee
recommended to the Board that the External
Auditor remains independent, objective and
effective in its role and therefore should
be re-appointed for a further year. On the
recommendation of the Audit Committee, the
Board is putting forward a resolution at this
year’s AGM that Deloitte LLP be re-appointed
as External Auditor for a further year.
This report forms part of the Corporate
Governance report and is signed on behalf
of the Audit Committee by:
Jock Lennox
Chair of the Audit Committee
1 September 2020
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Safety, Health and
Environment Committee report
“ The SHE team were fully engaged in
assessing the risks associated with COVID-19
in advance of the temporary closure of our
construction sites, sales centres and offices
and afterwards in planning for the re-opening.”
Richard Akers
Chair of the Safety,
Health and Environment Committee
Statement from the Chair of the 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 final quarter of FY20 has been particularly challenging for the
business as a consequence of COVID-19. The SHE team were fully
engaged in assessing the risks associated with COVID-19 in advance
of the temporary closure of our construction sites, sales centres and
offices and afterwards in planning for the re-opening.
The pandemic presented particular challenges in ensuring
our operations could re-commence following lockdown, whilst
implementing enhanced safe systems of work. We assessed
our specific operations including activities and interfaces
with stakeholders on our construction sites, in sales centres,
manufacturing operations and within our customers’ homes. In
accordance with Government, Industry and Public Health guidance
we put in place mitigating working practices and protocols to ensure
that social distancing could be effectively managed. In considering
appropriate measures, we consulted with employees who would be
required to implement them and this feedback was invaluable in the
development of proportionate and flexible controls. The SHE practices
and protocols that we put in place were subsequently verified by
the British Safety Council. The focus for FY21 will be on monitoring
compliance with the risk mitigation measures put in place and
adjusting those measures where necessary to ensure the workforce,
customers and suppliers are kept safe.
The SHE Committee’s activities continue to help mitigate some of
our key operational risks relating to SHE. By receiving reports and
challenging those tasked with SHE performance where necessary,
the SHE 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.
Richard Akers
Chair
1/1
Other members:
Steven Boyes
1/1
Vince Coyle
Group SHE Director1
1/1
n Meetings attended n Meetings held
1.
The Group SHE Director is not a member of the Board or the
Executive Committee.
FY20 key achievements
• Managed the risks associated with the temporary
closure of our construction sites, sales centres and
offices during the COVID-19 lockdown, and their
subsequent re-opening.
• Continued with our wellbeing and occupational health
programmes, and supported our supply chain to meet
this obligation.
• Progressed our programme of random drugs and
alcohol testing in line with our policy in this area.
Areas of focus in FY21
• Ongoing focus on compliance with social distancing
requirements and management of COVID-19 related
risks.
• Revisit training and induction of Board members to
ensure that they can continue to visit sites safely.
• Formalise the use of more regular reporting on
progress and adaptation of policy to reflect the fast
changing circumstances of COVID-19, as adopted
during the COVID-19 pandemic.
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Barratt Developments PLCwww.barrattdevelopments.co.uk This SHE 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 SHE;
•
•
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.
Membership and attendance
at SHE Committee meetings
The members of the SHE Committee and
their attendance at the scheduled meetings
during the year are shown on page 120.
The Company Secretary acts as Secretary
to the Committee.
Only members of the SHE Committee have
the right to attend meetings; however, other
individuals may be invited, at the request
of the Chair, to attend all or part of any
meeting where it is deemed appropriate.
Two SHE Committee meetings had been
scheduled for FY20; however, due to the
onset of COVID-19 and the lockdown, the
meeting in March 2020 was cancelled to
enable individuals to focus on the safe
temporary closure of our construction sites,
sales centres and offices. Richard Akers, as
Chair of the SHE Committee, was kept fully
informed of changes to SHE practices
and protocols and policies throughout the
whole period.
↓ Andy Robson a Project Manager
at our Exeter division.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Safety, Health and
Environment Committee report CONTINUED
Main activities undertaken during the financial year
Priorities
Work carried out and outcomes
Social distancing
and other SHE
measures
Board SHE visits
Agreed new SHE practices and protocols to be put in place to protect our employees, customers, suppliers and
sub-contractors as they return to our construction sites and also agreed the controls put in place to monitor
compliance with the new measures.
Under normal circumstances all Directors will attend a SHE site visit with the Group SHE Director.
Unfortunately, due to COVID-19, these were not completed during FY20.
These SHE site visits are invaluable as they not only play an important role in ensuring our Board has a
full understanding of SHE policies and processes, it also shows the Board’s commitment to SHE and its
importance to the business and our culture.
IIR
We continue to monitor our SHE performance targets, our key performance indicators and our IIR, all of which
are available in the Strategic Report on pages 62 and 63.
SHE management
System
Updated and reviewed the SHE management system.
Monitored and updated SHE policies and procedures to ensure they are aligned with latest regulations and best
practice, and continuously improved to ensure continued relevance.
As a consequence of COVID-19, a series of rapid reviews and changes have been implemented to our SHE
management system, policies and procedures throughout the last few months of FY20 to ensure that they
remain effective, relevant and market leading during the rapidly changing situation. A review by the British
Safety Council of our policies, procedures and arrangements relating to the control of COVID-19 confirmed
that the protocols and associated control arrangements put in place were in accordance with Government and
sector-specific guidelines, and that arrangements for continual monitoring of their effectiveness were in place.
SHE training and
compliance
Reviewed and confirmed that the SHE training provided to employees and site-based workers remains fit for
purpose and up to date.
Continuously monitor attendance by employees at prescribed SHE courses and ensure that they familiarise
themselves with the SHE policies, processes and procedures during their induction.
Received reports on the compliance, application and implementation of our SHE management system and the
outcomes of site monitoring visits undertaken and agreed the action plans put in place to address areas of
improvement.
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. This
testing was postponed during the lockdown
period but will recommence during FY21.
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.
Working from home or being on furlough
is a new experience for many of our
employees. It was therefore vital that
we continued to support their physical
and mental wellbeing throughout this
unprecedented time. With support from our
HR team, employees were provided access
to a variety of webinars, e-learning modules
and newsletters, all of which contained tips
and guidance on staying healthy physically
and mentally. Virtual ‘drop-in’ sessions
were also introduced to enable employees
to interact not only with the experts on
hand but with other colleagues to share
experiences and learn from one another or
just to have a social chat.
Engagement with sub-contractors
During FY20 we continued to work with
our groundworks contractors following
the seminars we held with them in FY19.
As part of the improvement plan we have
embarked on the following initiatives:
• provision of cabs on dumpers (six
tonnes or over) from January 2022;
•
further controls for segregation of plant
and pedestrians, including onsite trials
of auto-detection equipment;
• enhanced levels of training for onsite
supervision; and
•
improved standards for all types of
plant provided onsite.
Many of these items were put on hold due
to COVID-19, however the SHE team are
committed and eager to get these up and
running again during the course of FY21.
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.
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.
Richard Akers
Chair of the SHE Committee
1 September 2020
122
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Barratt Developments PLCwww.barrattdevelopments.co.uk Remuneration report
Annual statement from the Chair 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 and our business strategy. It also
continues to drive appropriate behaviours for the long term
success of the Company.”
Richard Akers
Chair of the Remuneration Committee
On behalf of the Board, I am pleased
to present our Remuneration report
for the year ended 30 June 2020. Our
Remuneration report comprises three
parts: this Annual Statement, the
Remuneration Policy and the Annual Report
on Remuneration.
Remit of the Remuneration
Committee
Last year, I reported that we would be
working to further embed the extension of
the Remuneration Committee’s remit as
set out in the 2018 Code. For the first nine
months of the year this was one of our key
focus points, however, this all changed
with the onset of COVID-19. Details of how
we have applied the requirements of the
2018 Code can be found throughout this
Remuneration report. Our policy operated
as intended through the year, including
enabling us to effectively manage the
impact of COVID-19 on remuneration.
COVID-19 – actions taken
On 27 March 2020, we temporarily closed
all of our construction sites, sales centres
and offices to ensure the health and safety
of our workforce as COVID-19 gripped the
country. As a consequence, the business
furloughed c. 85% of its workforce and took
advantage of the CJRS to safeguard jobs. The
Executive Committee recognised that the
current circumstances were unprecedented
and that steps needed to be taken to assure
furloughed employees that they would
continue to be supported by the Group
financially. Accordingly, it was agreed with the
Remuneration Committee to continue to pay
all furloughed employees their normal pay
throughout their period of furlough.
Members of the Board, the Executive
Committee and the Regional Managing
Directors all took a voluntary 20% reduction
in their salaries/fees effective from April
2020 until the Group was able to restart on
its construction sites. In addition, following
the Board’s decision to cancel the interim
dividend, on the recommendation of the
Executive Directors, the Remuneration
Committee used its discretion to decide
that there would be no payments made
under the FY20 annual bonus scheme. In
line with our commitment to shareholders,
we have set out the targets for the FY20
annual bonus scheme in Table 12 on page
144. No other discretion was exercised in
the year.
Given that the Group remained financially
resilient throughout the lockdown period,
following the business restart, we made the
decision to return the funding received from
the CJRS in July 2020.
FY20 performance and reward
The lockdown period has had a significant
impact on our financial performance this
year and on the strong progress that we
had been making against our medium term
targets. Having decided not to make any
payments under the FY20 annual bonus
scheme this only left performance against
the 2017/18 LTPP to be considered by the
Remuneration Committee. Unfortunately,
neither of the EPS nor the ROCE targets
were achieved but the TSR performance
condition was partially met, resulting in
19.35% of the 2017/18 LTPP award vesting
for Executive Directors. The Remuneration
Committee believes that as the 2017/18
LTPP recognises the long term performance
of the Company over a three-year period,
and given the strong alignment to the
shareholder experience through TSR, it is
appropriate to allow this award to vest in line
with performance outcomes. Full details
are set out on Table 14 on page 145. The net
shares (after the payment of any tax and NI
due on release) will be subject to a further
two-year holding period. The Remuneration
Committee considers the bonus and LTPP
outcomes are appropriate and reflect the
overall performance of the Group during the
relevant performance period.
Richard Akers
Chair
4/4
Other members:
John Allan
Nina Bibby
4/4
4/4
Jock Lennox
Sharon White
4/4
4/4
n Meetings attended n Meetings held
FY20 key achievements
• Embedded extension of
Remuneration Committee remit.
• Reviewed and agreed changes
to FY20 remuneration in light
of COVID-19 and proposals for
how to deal with FY21 variable
remuneration with the ongoing
uncertainty.
• Updated Remuneration Policy
to bring it in line with market
practice.
Areas of focus in FY21
• Consider whether a fuller
review of Remuneration Policy is
appropriate.
• Set suitable targets for FY21
bonus and LTPP in light of
ongoing uncertainties.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Remuneration report CONTINUED
Annual statement from the Chair of the Remuneration Committee
Remuneration Policy review
Shareholders last approved the
Remuneration Policy in 2017 with over
98% of votes cast in favour. This policy
operated as intended during the year.
We are required to present a new policy
to shareholders for approval at our 2020
AGM. The Remuneration Committee has
carefully considered the appropriateness
of an in-depth review of our policy at
the current time. In particular, we have
taken into account the IA’s guidance
encouraging companies not to undertake
extensive policy reviews while the COVID-19
pandemic continues. The Remuneration
Committee agreed that whilst we are
required to put our Remuneration Policy
to shareholders for a binding vote at the
2020 AGM, the policy will essentially be
a continuation of our current policy and
include no major changes. However, we
are cognisant of recent developments in
governance and best practice, which we
feel should be incorporated in this policy
and which we believe will be welcomed by
our investors. I detail these below.
Over the course of the coming months, we
will deliberate on whether or not to bring
more substantial policy amendments to our
2021 AGM, based on consideration both of
our future business strategy and the evolving
economic environment. We will engage with
shareholders as part of this process.
The Remuneration Committee is proposing
the following minor changes to the
Remuneration Policy that will be presented
for approval at our 2020 AGM. All other
aspects of our Remuneration Policy remain
unchanged:
• Executive Directors’ pension
contributions
We are supportive of the requirements
of the Code, and the guidance of
various advisory bodies (including
the IA) on the alignment of Executive
Directors’ 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 had reduced the maximum
contribution to 15% of salary from 25%.
As of 1 July 2019, this was reduced
further for new joiners to 10% of salary,
equal to the maximum employer
contribution available to the workforce
in general. Having given this matter
much consideration, the Remuneration
Committee has agreed that with effect
from 1 January 2023, the pension
contribution rate for incumbent
124
Executive Directors, will be reduced
to the rate available to the wider
workforce, currently 10% of salary.
This is in line with the IA’s guidance on
Executive Directors’ pensions.
• Remuneration Committee discretion
The review of our Remuneration
Policy has highlighted some areas
where the Remuneration Committee
feels that it should have discretion to
make adjustments to executive pay
in certain circumstances. Should the
Remuneration Committee decide to use
this discretion, the impact of this and
the reasons surrounding the discretion
would be disclosed in my statement for
the relevant financial year. The main
scenarios for use of discretion being
included in the proposed policy include
overriding formulaic outcomes where
they are considered excessive, and
flexibility in relation to LTPP payments to
leavers in relation to pro-rating awards
and timing of release. Further details of
these changes are set out on page 131.
• Post cessation shareholding
requirements
Our shareholding policy for Executive
Directors previously included a
requirement for the Chief Executive and
the other Executive Directors to commit
to holding 100% or 75% of their salary
respectively, for a period of two years
after they leave employment, in order to
be classified as a ‘good leaver’. In order
to align this policy to IA guidance, we
have introduced some amendments so
that Executive Directors will be required
to hold 100% of their shareholding
requirement (currently 200% of salary),
or their actual shareholding if lower
(based on the share price at the date
of leaving), for a period of two years
after they leave employment. In order to
transition to the revised policy, any share
awards vesting from 2020 onwards will
be included in calculating the post-
cessation shareholding requirement
above the limits in the previous policy.
We believe that with these changes, the
Remuneration Policy continues to be fit
for purpose, aligning the interests of our
Executive Directors with those of our
shareholders and our business strategy.
It also continues to drive appropriate
behaviours for the long term success of
the Company.
FY21 remuneration
Aligned with the decision made for the
wider workforce, the Remuneration
Committee has agreed that there will be
no salary or fee increases for the Executive
Directors and the Non-Executive Directors
respectively for FY21.
For the FY21 bonus, performance measures
are set out on page 140 along with the
details of changes made since last year and
the rationale for these. In line with previous
years we will disclose the targets for the
FY21 annual bonus and our performance
against them in our Remuneration Report
for the financial year ending 30 June 2021.
In line with guidance from the IA, it is our
intention to defer the target setting of the
2020 LTPP for no more than six months
from the date of grant, at which point the
Remuneration Committee will give full
consideration to the performance of the
Company. The 2020 LTPP will be granted
to all eligible participants, including the
Executive Directors, as usual in October.
Details of the targets under the 2020 LTPP
will be disclosed on our website when they
are set and in the FY21 Remuneration report.
Shareholder engagement
In August 2020, we consulted with our major
shareholders and the main institutional
voting agencies on the proposed minor
changes to our Remuneration Policy and
on the proposed remuneration for FY21. No
areas of concern were raised.
Gender pay gap
The requirement to publish a Gender Pay Gap
report in 2020 was suspended by HMRC due to
COVID-19. However, as a business, we agreed
that it was important to keep stakeholders
informed of our gender pay position.
Accordingly, we will be publishing our report in
September 2020.
Employee engagement on
remuneration
We are mindful of the value of engagement
with the wider workforce on various matters,
including remuneration policies and
practices. This became more prominent
during the lockdown period. We continued
to utilise our Workforce Forum during
this period and sought their views on our
approach to pay and furlough of employees.
In addition, we set up a dedicated COVID-19
email address through which the workforce
was encouraged to raise queries, share
experiences and make suggestions to the
management team on a variety of matters
including remuneration. David Thomas,
Chief Executive, also provided weekly
updates to the workforce via email.
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Barratt Developments PLCwww.barrattdevelopments.co.uk I have attended each of the Workforce
Forum meetings during the year, in my
capacity as the designated Non-Executive
Director for employee engagement, and
have been impressed by the engagement
of both management and workforce
representatives and how well the meetings
have been run. Further details on the
Workforce Forum and the matters it has
discussed can be found on page 42.
Conclusion
The Remuneration Committee believes that
the decisions we have taken in respect of
FY20 pay outcomes, the proposed minor
amendments to our Remuneration Policy,
and the proposed approach to implementing
the Remuneration Policy in FY21 are in the
best interests of our shareholders, align with
our strategy and appropriately reflect the
wider business and economic environment.
We therefore hope that you will support the
revised Remuneration Policy, and also the
Annual Report on Remuneration, which
will be proposed at the AGM in October
2020. On behalf of the Board, I would like to
thank you for your continued support of our
remuneration framework.
Richard Akers
Chair of the Remuneration Committee
1 September 2020
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 Remuneration Committee
robustly applies the aims above.
In developing its Remuneration Policy, the
Remuneration 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 that apply across the
wider workforce, including average
base salary increases and pension
contributions;
•
•
information and surveys from internal
and independent sources; and
the economic environment and
underlying financial performance
of the Group.
↑ Barratt London homes at the Ridgeway Views, Mill Hill, London
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Remuneration report CONTINUED
Overview for FY20
The summary below outlines the remuneration outcomes for Executive Directors for the year under review, together with the minimum,
on-target and maximum (with and without share price growth) opportunities, targets set for variable remuneration and our performance
against them. Full details can be found in the Annual Report on Remuneration on pages 137 to 151. Details of Executive Directors’
shareholding requirements and whether they have been met are given in Table 19 on page 147.
Executive Director remuneration policy scenarios for FY21 and FY20 single figure outcomes
4,382
3,625
2,300
4,500
4,000
3,500
3,000
2,500
2,000
0
0
0
£
1,500
1,000
975
500
0
3,480
2,881
1,833
1,226
785
2,400
1,978
1,240
976
501
636
Salary
Pension
Benefits
Other
Annual Bonus
LTIP
Minimum On-target Maximum Maximum
plus 50%
share price growth
SF FY20 Minimum On-target Maximum Maximum
plus 50%
share price growth
COO
CEO
SF FY20 Minimum
On-target Maximum Maximum
plus 50%
share price growth
SF FY20
CFO
Notes: For the FY21 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
2020. The value of taxable benefits is the cost of providing those benefits in the year ended 30 June 2020. 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) and 50% vesting of the LTPP awards (with grant levels of 200% of salary). Maximum
pay includes fixed pay and assumes 100% vesting of both the annual bonus and the LTPP awards. Maximum pay plus 50% share price growth is the same as maximum
pay in respect of fixed pay, but assumes a 50% increase in the share price over the performance period for the LTPP. All amounts have been rounded to the nearest £1,000.
The following items are included in the single figure FY20, but excluded from the scenario chart for simplicity: i. Executive Directors’ participation in HMRC tax advantaged
all-employee share plans; and ii. the dividend equivalents permitted on vesting LTPP awards.
FY20 performance pay outcomes
Annual bonus outturn
As announced in July 2020, the Remuneration Committee approved management’s recommendation that no bonuses would be paid to
Executive Directors or the wider workforce for FY20. Further details of the performance targets are disclosed on page 144 in the Annual
Report on Remuneration.
LTPP vesting outturn
Further details are set out on page 145 of the Annual Report on Remuneration.
David Thomas
Steven Boyes
Jessica White
Percentage of award vesting (%) for each performance condition
Shares
awarded
226,307
179,103
126,222
EPS
0
0
0
ROCE
0
0
0
TSR
19.35
19.35
19.35
Total
19.35
19.35
19.35
Shares
vesting
43,790
34,656
24,423
Estimated Value
(£000)
219
173
122
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
MMC
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
Quality and service
PBT
Capital Employed
Trading outlets
LTPP
TSR
ROCE
PBT
Capital Employed
Quality and service
Margin improvement
ROCE
EPS
PBT
Quality and service
EPS
126
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Remuneration report CONTINUED
Directors’ Remuneration Policy
The Company’s current Directors’
Remuneration Policy (the ‘Policy’), was
approved by shareholders at the 2017 AGM.
A new Remuneration Policy is therefore due
to be presented for approval by shareholders
at the 2020 AGM (the ‘Remuneration
Policy’). Due to the current uncertainties
as a consequence of COVID-19 and in line
with the IA’s guidance, the Remuneration
Committee has made the decision to only
make minor changes to the Policy to bring it
in line with best practice regarding Executive
Directors’ pension contributions,
post cessation holding requirements and
Remuneration Committee discretion and
flexibility. Consultation with shareholders
has taken place and the revised
Remuneration Policy will be proposed to
shareholders at the AGM in October 2020. If
approved by shareholders, it will take effect
from the date of the 2020 AGM and remain in
force for at least three years unless changes
are required.
The full version of the current 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 description of how the
Company implemented the Policy in FY20
can be found on pages 142 to 146.
Policy table
The revised Remuneration Policy is set out
below. A summary of the main changes is
given on page 131 and details of how the
Remuneration Policy will be applied for
FY21 are set out on pages 139 to 141.
Purpose and link to
Company’s strategy
Base salary
How operated in practice
Maximum opportunity
Description of performance metrics
To help promote the
long term success of the
Company.
Normally reviewed annually and fixed for 12
months with any increases usually effective
from 1 July.
To reward individuals based
on the scope of the role.
To attract and retain high
calibre Executive Directors
to deliver the Group’s
strategy.
To provide a competitive
salary relative to
comparable companies
in terms of size and
complexity.
The Remuneration Committee considers:
•
individual responsibilities, skills,
experience and performance;
•
•
•
•
the level of pay increases awarded
across the Group (with the exception of
promotions);
the size and responsibility of the role;
economic and market conditions; and
the performance of the Group.
The Remuneration Committee, when setting
salaries, does take into account salary levels
for similar positions in the housebuilding sector
and within companies of a similar size to the
Group.
The Remuneration Committee does have the
discretion to vary salaries in the event there are
changes to any of the above within the 12 month
period for which salaries have been fixed.
Salaries are paid monthly in arrears.
Benefits (taxable)
To help promote the
long term success of the
Company.
To attract and retain high-
calibre Executive Directors.
To remain competitive in the
marketplace.
company car;
Benefits normally include:
•
• private medical insurance;
•
•
some telephone costs; and
contributions towards obtaining
independent financial advice.
There is no prescribed maximum
annual increase.
N/A
The Remuneration Committee is
guided by the general increase
for the broader UK employee
population but on occasions may
need to recognise changes in the
role and/or duties of a Director;
movement in comparator salaries;
and salary progression for newly
appointed Directors.
The Remuneration Committee
retains the right to approve a
higher increase in exceptional
cases, such as major changes
to the Executive Director’s role/
duties; new recruits; or internal
promotions to the position of
Executive Director whose salary
was set lower than the market
level for such a role and a
higher increase is justified as
the individual becomes more
established in the role. In these
circumstances a full explanation
of the increases awarded will be
provided in the Annual Report
on Remuneration.
There is no formal maximum.
Benefits are provided based on
market rates.
N/A
Other benefits offered to the wider workforce
will also be offered to Executive Directors on
the same basis.
The Remuneration Committee does have the
discretion to offer other benefits it deems
appropriate to secure the appointment of a
new Executive Director or retain an Executive
Director (including relocation benefits) and to
ensure that the benefits package for existing
Executive Directors remains competitive in the
UK market.
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Directors’ Remuneration Policy
Purpose and link to
Company’s strategy
Pension
To help promote the
long term success of the
Company.
To attract and retain high-
calibre Executive Directors.
To remain competitive
in the marketplace.
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.
Variable remuneration
allows the Group to manage
its cost base by giving it the
flexibility to react to changes
in the market and any
unforeseen events.
How operated in practice
Maximum opportunity
Description of performance metrics
N/A
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 Remuneration Committee retains the
discretion to honour the pension contribution
for those individuals who are internally
promoted to Executive Director.
Steven Boyes remains a member of the defined
benefit section of the Group’s pension scheme,
which closed to new entrants in 2001 and future
accrual of defined benefits for current members
ceased to be offered on 30 June 2009.
Existing Directors: Defined
contribution scheme or salary
supplement not exceeding:
• 25% of base salary to
31 December 2022; and
• the Company’s contribution rate
available to the majority of the
wider workforce, currently 10%
of base salary, from 1 January
2023.
Defined benefit scheme: 1/60
accrual rate and a retirement age
of 65.
New Directors: Defined
contribution scheme or salary
supplement not exceeding the
Company’s contribution rate
available to the majority of the
wider workforce, currently 10%
of base salary.
The potential annual maximum
bonus is 150% of base salary.
The level of bonus payable at
threshold is set annually but
will not exceed 20% of potential
maximum bonus (30% of salary).
50% of the potential maximum
bonus (75% of salary) is payable
for achievement of on-target
performance.
The performance targets set are stretching whilst
having regard to the nature and risk profile of
the Company, its strategy and the interests of its
shareholders.
When setting bonus targets, the Remuneration
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 focus of the performance targets is to deliver
profit growth and to ensure we have an adequate
land bank acquired within the constraints of our
Balance Sheet commitments.
Performance measures include:
•
financial items (e.g. profit before tax, margin
growth, net debt/land creditors; or land
commitment), with a weighting greater than
or equal to 50%; and
• non-financial items (e.g. quality and service,
health and safety and personal objectives).
The Remuneration Committee has the discretion
to:
• choose appropriate measures for each award;
• vary the elements of each of these items,
including targets, and the weightings of each
component on an annual basis; and
• ensure that they remain aligned to the strategy
of the business and to market conditions.
The Remuneration Committee has an absolute
discretion whether or not to award a bonus and
as to the level of bonus to be awarded up to the
prescribed maximum.
The Remuneration Committee annually sets
financial and non-financial performance targets
by taking account of the Company’s goals and
budget for the relevant financial year.
Group and individual performance against
these targets is measured at the end of the
financial year and the level of bonus payable
is calculated at that point. This also takes into
account the underlying financial and operational
performance of the business relative to the
sector (as noted in the column to the right).
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 deferred
into shares under the DBP.
Malus and clawback can be applied in certain
circumstances to both the cash and deferred
element of the bonus. For full details see
page 132.
The Remuneration Committee retains the
discretion to decide whether or not to pay an
annual bonus to an Executive Director who
has handed in their notice and to determine, in
respect of any employee who is a ‘good leaver’,
whether any annual bonus earned in excess of
100% of base salary should be paid in cash and
not deferred into shares.
Where the Remuneration Committee believes
that performance does not warrant the level of
bonus determined, it may use its discretion to
reduce the award (possibly to nil) as it deems
appropriate.
No Executive Director has any contractual right
to receive a bonus.
Annual bonus is not pensionable.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Purpose and link to
Company’s strategy
DBP
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 normally subject to a
continued employment
condition.
The aim is 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.
How operated in practice
Maximum opportunity
Description of performance metrics
No performance conditions apply to the vesting
of awards other than a continued employment
condition.
Deferred shares are normally granted in the
form of a conditional award (but may also be
granted as nil cost options or restricted share
awards in accordance with the rules of the
DBP).
Deferred shares will normally accrue dividend
equivalents during the three year deferral
period. Dividend equivalents may be paid in
cash or shares on the vesting of the award.
Malus and clawback can be applied in certain
circumstances to both the cash and deferred
element of the bonus. For full details see
page 132.
Any bonus paid in excess of 100%
of base salary is deferred into
shares and held in the DBP, unless
the Remuneration Committee
determines otherwise in the case
of a ‘good leaver’.
The Remuneration Committee
retains the discretion to adjust the
proportion of bonus deferred in
exceptional circumstances.
In accordance with the rules
of the LTPP, the Remuneration
Committee has the discretion to
grant an award up to 200% of base
salary to each of the Executive
Directors in respect of any
financial year of the Company.
LTPP awards:
•
are normally granted annually in the form
of conditional awards or nil-cost options at
no cost to the Executive Director;
•
•
•
are at the discretion of the Remuneration
Committee, taking into account individual
performance and the overall performance
of the Group;
are subject to the achievement of
stretching performance conditions
measured over three financial years with a
subsequent two-year post vesting holding
period. Awards may therefore only be
realised on conclusion of the five-year
combined period;
can be satisfied by either newly issued
shares or shares purchased in the market.
Newly issued shares are subject to the
dilution limits set out in the scheme rules
and in accordance with guidelines from
the IA; and
• may, at the discretion of the Remuneration
Committee, accrue dividend equivalents
which may be paid in cash or shares
on vesting of the award (or following
completion of the holding period for awards
made as nil cost options). Any accrued
dividend equivalent will be prorated,
depending on the level of award vesting.
Malus and clawback can be applied in certain
circumstances to the LTPP award. For full
details see page 132.
Any LTPP awards are subject to performance
conditions, which are stretching and aligned
with the Group’s strategy and the interests of
shareholders.
Financial performance conditions will have a
weighting of at least 50%.
The performance conditions are set on the basis
that they are:
• realistic and attainable;
• for the long term benefit of the Group; and
• do not encourage inappropriate business risks.
The Remuneration Committee has the discretion
to determine the weighting of each performance
condition on the grant of an LTPP award.
No more than 25% of an award will vest at
threshold performance (0% will vest below the
threshold level) increasing pro-rata to 100%
vesting for maximum performance.
Overall, the Remuneration 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 Remuneration Committee is not of this
view, then it is empowered to reduce the level of
vesting (potentially to nil).
Continued employment for the duration of the
scheme and ‘good’ and ‘bad’ leaver provisions in
line with the rules of the Sharesave.
Sharesave
To promote long term share
ownership amongst all
employees of the Group in
a tax-efficient way.
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.
To link employee benefits
to the performance of the
Group.
To aid retention of
employees.
Employees can elect to save between a
minimum of £5 and the maximum monthly
savings limit as approved by the Remuneration
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.
Save up to the maximum monthly
amount as specified by legislation
or HMRC and as approved by the
Remuneration Committee and the
Board.
The Remuneration Committee
reserves the right to amend
contribution levels to reflect
changes made by HMRC or the
Government from time to time.
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Directors’ Remuneration Policy
Purpose and link to
Company’s strategy
How operated in practice
Maximum opportunity
Description of performance metrics
Shareholding requirements
N/A
N/A
To further align the interests
of Executive Directors to
those of shareholders.
Executive Directors are required to build and
retain a shareholding equivalent to 200% of
base salary in the Company’s shares within
five years of the shareholding requirement
coming into force or the Executive Director
being appointed to the Board, whichever is the
later. The share price used for the purposes
of determining the value of the shares is that
prevailing on 30 June of the given year.
Executive Directors are also subject to a post
cessation shareholding requirement of 200% of
their salary or their actual shareholding if lower
(based on their salary and the share price at the
date of leaving), for a period of two years after
they leave employment.
The Remuneration Committee reserves the
right to amend the percentage holding required
by the Chief Executive and the other Executive
Directors depending on market conditions and
best practice guidance.
Details of the Executive Directors’
shareholdings can be found in Table 19 on
page 147.
Non-Executive Directors’ fees (including the Chair)
To attract and retain high
quality and experienced
Non-Executive Directors
(including the Chair).
The remuneration of the Non-Executive
Directors is set by the Board on the
recommendation of a committee comprising
the Chair and the Executive Directors.
Non-Executive Director fees must
remain within the aggregate limit
approved by shareholders from
time to time.
N/A
The current aggregate limit is
£800,000.
The Board sets the remuneration of the Chair.
The Chair 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 Chair’s and Non-Executive Directors’ fees
are paid in cash, monthly in arrears.
Neither the Chair 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 Chair 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.
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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Changes to Remuneration Policy
The Remuneration Committee is only proposing minor changes to the Remuneration Policy, with all other aspects remaining unchanged.
The minor amendments are to reflect best practice and governance requirements only. The table below summarises these changes.
Area of policy
Changes to 2020 /21 Remuneration Policy from the previous year
Executive Directors’
pension contributions
With effect from 1 January 2023, the pension contribution rate for incumbent Executive Directors will be
reduced to the rate available to the wider workforce, currently 10% of salary.
Post cessation holding
requirements
Introduction of requirement for Executive Directors to hold shares equivalent in value to 200% of their salary
or their actual shareholding if lower (based on their salary and the share price at the date of leaving), for a
period of two years after they leave employment, with a transitional arrangement for incumbents.
Remuneration Committee
discretion and flexibility
Amendments to discretion provisions to align to best practice. These changes include:
•
increased overall discretion to adjust outcomes where the formulaic outcome is not aligned with the
underlying financial and/or non-financial performance of the Group, or where environmental incidents,
health and safety incidents or other wider economic or market circumstances warrant an adjustment;
• discretion to adjust outcomes to avoid windfall gains due to a materially fallen share price at grant;
• amendments to flexibility under recruitment/termination policy;
• discretion to adjust bonus deferral in exceptional circumstances; and
• discretion to provide relocation benefits included.
Performance conditions
and target setting
The Remuneration Committee reviews
annually the performance measures and
targets taking into consideration a number
of factors including the performance of the
Group throughout the previous financial
year, internal and external forecasts and
consensus figures for the performance
period and the Group’s strategy.
The annual bonus scheme is measured
against key financial and non-financial
metrics. PBT and Capital Employed are
fundamental key performance indicators
for the Group. Non-financial measures
such as customer care, and land and sites
are aligned to our strategy, and allow
individuals to focus on the key factors that
will help drive short and long term success
of the business.
The LTPP is assessed against measures that
focus on delivering attractive cash returns to
our shareholders and encouraging efficiency
throughout the business.
Value delivered to shareholders is
recognised through relative TSR, which is
measured against both the 50+/50- group
and a housebuilder index. This ensures
that strong returns are delivered against
an appropriate size group of companies
and an index of our peers. Absolute EPS
and underlying ROCE ensure that we are
efficiently and effectively managing the
business, whilst aligning the Executive
Directors with the objectives
of shareholders.
Targets are set within the context of both
internal and external forecasts and are
designed to be appropriate within the
context of the Group’s strategic objectives
and historic and expected performance
levels. The performance targets are
designed to be sufficiently stretching in
order to ensure that maximum payout is
only achieved for delivering exceptional
performance.
Guidelines on responsible
investment disclosure
In line with the IA’s Guidelines on
Responsible Investment Disclosure, the
Remuneration 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
Remuneration Committee considers that no
element of the remuneration package will
encourage inappropriate risk taking within
the Company.
Remuneration Committee
discretion
The areas of the Remuneration Policy over
which the Remuneration Committee has
discretion are included in the policy table set
out on pages 127 to 130. 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 127 to 130);
• determining the application of dividend
equivalents, whether they should 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
or such other factors as it considers
appropriate;
• 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, including the
timing of any vesting.
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, divestment or wider market
or economic circumstances that the
Remuneration Committee deem relevant),
then the Remuneration Committee will
have the ability to adjust appropriately
the measures and/or targets, and/or to
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Directors’ Remuneration Policy
alter the weighting of the measures. The
Remuneration Committee also has the
discretion to increase or decrease any
annual bonus or LTPP awards (potentially
reducing them to nil) in the event that the
formulaic outcome is not aligned with
the underlying financial and/or non-
financial performance of the Group, or
where environmental incidents, health and
safety incidents or other wider economic
or market circumstances warrant an
adjustment to the final outcome in order
to determine a reasonable and appropriate
result. The Remuneration Committee also
retains discretion to adjust LTPP vesting
outcomes to avoid windfall gains in the
event the share price has fallen materially
before a given award is made. Any exercise
of discretion will be fully explained in the
corresponding year’s Remuneration report.
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.
In the case of malus, the Remuneration
Committee may, at any time prior to the
payment of any bonus or any deferred or
LTPP shares becoming vested shares,
decide to reduce the amount of bonus to be
paid and/or reduce the number of deferred
or LTPP shares (including to nil) on such
basis as it considers to be fair, reasonable
and proportionate where, in the opinion of
the Remuneration Committee, there are
exceptional circumstances (as defined below).
In the case of clawback, the Remuneration
Committee may decide at any time within
two years of the date on which the bonus is
paid or the deferred or LTPP shares become
vested shares (or such longer period as may
be applicable pursuant to the rules of the
relevant plan) that the individual to whom the
payment was made and/or deferred and/or
LTPP shares were granted shall be subject to
clawback if in relation to the bonus paid and/
or the deferred or LTPP shares granted, in
the opinion of the Remuneration Committee
there are exceptional circumstances (as
defined below).
Exceptional circumstances include
(without limitation):
a. a material misstatement in the
published results of the Company or
Group or any member of the Group in
relation to any period of time up to and
including the financial year in which the
132
that the number of deferred or LTPP
shares be retrospectively recalculated.
If the deferred or LTPP shares have
been granted, the number of shares
awarded will be reduced accordingly.
If the deferred or LTPP shares have
vested and shares have been issued to
the individual(s), they 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.
Recruitment of Executive Directors
The Remuneration Committee will
determine the remuneration for any new
Executive Directors in accordance with
the Remuneration Policy then in force and
will take into consideration each of the
following elements:
Salary and benefits – the Remuneration
Committee will take into account
market data for the scope of the job, the
remuneration for the relevant role, the
salaries of and benefits provided to existing
Executive Directors, the new Executive
Director’s experience, location and current
base salary and benefits package. In the
event an Executive Director is recruited at
below market levels, their base salary may
be re-aligned over a period of time (e.g. two
to three years) subject to their performance
in the role. The Remuneration Committee
may also agree to cover relocation costs if it
deems it appropriate.
Pension – Executive Directors will be
auto-enrolled from the date of recruitment
unless they opt-out. If an Executive Director
chooses to opt–out they may elect to
receive a pension supplement in cash. The
Remuneration Committee has discretion to
determine the level of pension supplement
to be awarded to the Executive Director, up
to a maximum which is equivalent to the
percentage normally offered to the wider
workforce. Alternatively, the Executive
Director may choose to join the defined
contribution money purchase pension plan
provided they meet all of the eligibility
criteria. The Executive Director also has
the option to receive some of their pension
entitlement in cash and have the remainder
contributed to the defined contribution
money purchase pension plan, provided this
does not, in aggregate, exceed the agreed
percentage.
bonus is paid and/or the deferred or
LTPP shares vest;
•
b. an error in assessing any applicable
performance target or the amount of
bonus to be paid and/or the number of
deferred or LTPP shares subject to an
Award;
c.
the assessment of any applicable
performance target and/or the amount
of bonus to be paid and/or the number
of deferred or LTPP shares subject to
an Award being based on inaccurate or
misleading information;
d. serious misconduct on the part of an
individual(s);
e. where, as a result of an appropriate
review of accountability, the
Remuneration Committee determines
that an individual(s) have caused wholly
or in part a material loss for the Group
as a result of:
− reckless, negligent or wilful actions
or omissions; or
− inappropriate values or behaviour;
f. material breach of health and safety or
environmental regulations;
g. material failure of risk management;
h. a member of the Group is censured
by a regulatory body or suffers, in the
Remuneration Committee’s opinion,
a significant detrimental impact
on its reputation, provided that the
Remuneration Committee determines
that, following an appropriate review
of accountability, an individual(s) were
responsible for, or had management
oversight over, the actions, omissions or
behaviour that gave rise to that censure
or detrimental impact; or
the Company or entities representing
a material proportion of the Group
become insolvent or otherwise suffer
a corporate failure so that ordinary
shares in the Company cease to have
material value, provided that the
Remuneration Committee determines,
following an appropriate review of
accountability, that an individual(s)
should be held responsible (in whole or
in part) for that insolvency or failure.
i.
Where clawback is to be applied,
the Remuneration Committee may
determine that:
• Any bonus will be retrospectively
recalculated and, if bonus monies have
been paid, the relevant individual(s) will
be required to reimburse the Company
for an amount up to the total amount
of the original net bonus paid less any
bonus that the Remuneration Committee
determines would have been paid
regardless of the event in question; and
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Barratt Developments PLCwww.barrattdevelopments.co.uk Annual bonus and LTPP – new Executive Directors may be able to participate in the annual
bonus scheme and the LTPP on terms to be considered by the Remuneration Committee
on a case by case basis. Any award made to a new Executive Director will usually be on the
same terms as set out in the policy table on pages 128 and 129. The level of the award will
be no greater than that made to existing Executive Directors (150% of salary for the annual
bonus and 200% of salary for the LTPP) and will be pro-rated based on the number of weeks
remaining outstanding of the relevant performance period.
Buyout of existing entitlements – the Remuneration Committee may also consider buying
out existing entitlements that an individual would forfeit on leaving their current employer,
again this would be reviewed on a case by case basis. In determining any potential awards
to be granted to a new recruit, the Remuneration Committee will consider the relative
levels of certainty and balance of fixed to variable compensation in the forfeited package
in totality, including salary, benefits and other components. The Remuneration Committee
would however in all cases seek validation of the value of any potential entitlement that is
being forfeited and take into account the proportion of any performance period remaining
of the award, the type of award (i.e. cash or shares) and the performance achieved (or
likely to be achieved). Replacement share awards, if any, will seek to reflect (to the extent
possible) the value, degree of conditionality and form of award of the entitlement foregone.
In structuring any buyouts, existing arrangements will be used where possible, however, the
Company may also make use of the flexibility provided by the UKLA Listing Rules to make
awards without prior shareholder approval. Buyouts may therefore fall outside normal
policy maximum levels.
Where an individual is recruited internally to the position of Executive Director, the Company
will seek to honour any pre-existing contractual commitments, taking into account the
remuneration of the existing Executive Directors.
Executive Directors’ service contracts
Details of the Executive Directors’ service contracts are included in Table 6 below and their
emoluments are shown in Table 10 on page 142. 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 Remuneration 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.
Table 6 – Executive Directors’ service contracts
Executive Director
Service contract date Date of appointment Notice period
David Thomas
Steven Boyes
Jessica White
16 January 2013
21 February 2013
21 June 2017
21 July 2009
1 July 2001
22 June 2017
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.
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 untaken) or loss of office due to a
change of ownership of the Company. The
Remuneration Committee reserves the
right to make additional payments where
such payments are made in good faith:
(a) in discharge of an existing legal
obligation (or by way of damages for breach
of such an obligation); or (b) by way of
settlement or compromise of any claim
arising in connection with the termination
of an Executive Director’s office or
employment. The Remuneration Committee
may also provide a contribution towards
reasonable legal costs and the provision of
outplacement services. The Remuneration
Committee will apply mitigation against any
contractual obligations as it deems fair and
reasonable and will seek legal advice on the
Company’s liability to pay compensation.
The Remuneration Committee also seeks
to reduce the level of any compensation
payable and takes into account, amongst
other factors, the individual’s and the
Group’s performance; the Director’s
obligation to mitigate their own loss; and
the Director’s length of service when
calculating termination payments. The
Remuneration Committee reserves the
right to phase any such payments if it
deems that it is appropriate to do so. Any
amount that the Remuneration Committee
decides to pay an Executive Director will be
based on the main elements of executive
remuneration namely, base salary, annual
bonus (subject to the Remuneration
Committee’s discretion), benefits and
pension. The Remuneration Committee
also takes into account the rules of the
annual bonus and LTPP schemes when
determining any payments for loss of office
as follows:
Annual bonus – in accordance with the
provisions contained within the service
contracts, Executive Directors are not
usually entitled to any bonus payment
(other than in circumstances where they are
deemed by the Remuneration Committee
as a ‘good leaver’, which includes but is
not limited to redundancy, retirement,
ill-health, disability, death or any other
circumstances which the Remuneration
Committee may decide), unless they remain
employed and are not under notice as at
the payment date. The default position will
be that such payment will be pro-rated
depending on the proportion of the bonus
period worked by the relevant individual.
Any bonus payment to the leaving Executive
Director will normally be paid entirely in
cash. The Remuneration Committee retains
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance • 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
Remuneration 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.
Performance scenario charts
Performance scenario charts setting out
policy minimum, on-target, maximum and
maximum plus 50% share price growth for
FY21, are shown on page 126, along with
the single figure outcome for FY20. The
figures are split by the different elements
of pay.
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.
Remuneration report CONTINUED
Directors’ Remuneration Policy
the ultimate discretion to make bonus
payments and determine the basis on
which they are made and their value, taking
into account the individual circumstances
of the departure, the treatment of other
incentive awards and the performance of
the individual.
Deferred bonus – if the Executive Director
is deemed to be a ‘good leaver’ (as defined
on page 133 above), they will be entitled to
retain the shares subject to settling any tax
and national insurance liability that may
become due on release of the shares and
shares will normally be released on the
usual vesting date (other than in the case of
death when the shares will be released as
soon as practicable). In all other cases, the
shares will lapse immediately on the date
that the Executive Director’s employment
with the Company ends and there is no
entitlement to any compensation for the
loss of the shares. Deferred shares can,
at the discretion of the Remuneration
Committee, be released to the Executive
Director on cessation of employment.
LTPP – under the rules of the LTPP, unless
the Executive Director is deemed by the
Remuneration Committee to be a ‘good
leaver’ (as defined on page 133 above) any
LTPP awards held by them will lapse on
cessation of their employment. For ‘good
leavers’, the Remuneration Committee
would normally prorate the number of
awards for time measuring performance
over the original performance period and
vesting shares at the end of the vesting
period. In exceptional circumstances the
Remuneration Committee has discretion
to test performance at an earlier date and
shorten the vesting period. Any exercise
of discretion would be explained in full
to shareholders in the following year’s
Remuneration report. Following the vesting
of each scheme (absent a life changing
event such as retirement and the consent
of the Remuneration Committee), the
Executive Directors must retain any shares
vesting under the LTPP for a period of two
years commencing from the end of the
relevant performance period.
Change of control – the rules of each share
scheme operated by the Company contain
provisions relating to a change of control.
In the event that a change of control does
occur any unvested options or awards will
become vested on the date of the relevant
event. However, the number of options or
awards that vest will be prorated depending
on the number of weeks completed within
the relevant performance period and the
level of performance conditions achieved
during that period. The Remuneration
Committee has discretion to assess
the performance outcome in respect of
unvested awards and determine the extent
to which unvested awards may vest. Options
or awards which have already vested as at
the date of the relevant event may still be
exercised within the prescribed time scales
set out in the rules.
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 127 to 130 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 pension. The cash supplement or
employer’s contribution rate for existing
Executive Directors until 31 December
2022 does not exceed 25% of base
salary. With effect from 1 January 2023,
the pension contribution for Executive
Directors will be at the maximum rate
of employer’s contribution for the wider
workforce, currently 10%. Any new
Executive Directors appointed on or
after 1 July 2020 will receive a maximum
contribution in line with the average
pension contribution available to our
employees, which is currently 10%;
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Barratt Developments PLCwww.barrattdevelopments.co.uk Chair and Non-Executive Directors’ letters of appointment
The Chair 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 Chair 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 Chair and the Nomination Committee and
re-election by shareholders. Details of Non-Executive Directors’ letters of appointment can
be found in Table 7 below.
Process for determining the
Remuneration Policy
The process used to formulate the
remuneration policy was as follows:
Stage 1
Remuneration consultant
benchmarks best practice to help the
Remuneration Committee determine
areas of focus.
Table 7 – Non-Executive Directors’ letters of appointment as at 30 June 2020
Non-Executive
Director
Date elected/re-
elected at AGM
Date first appointed
to the Board
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White
16 October 2019
16 October 2019
16 October 2019
16 October 2019
16 October 2019
1 August 2014
2 April 2012
3 December 2012
1 July 2016
1 January 2018
Date last
re-appointed
to the Board
1 August 2020
1 April 2018
3 December 2018
1 July 2019
N/A
The letters of appointment for Non-Executive Directors are available for inspection by any
person at the Company’s registered office during normal office hours or are available on
the Company’s website: www.barrattdevelopments.co.uk/investors.
Gifts to Directors on leaving employment
The Remuneration Committee reserves the discretion to approve gifts to long serving
Directors who are retiring or who are ‘good leavers’ e.g. those leaving office for any reason
other than dismissal or misconduct. The value of the gift for any one Director shall be limited
to a maximum of £5,000 (excluding any tax or VAT liability). Where a tax or VAT liability is
incurred on such a gift, the Remuneration Committee has the discretion to approve the
payment of such liability on behalf of the Director in addition to the maximum limit.
Legacy arrangements
For the avoidance of doubt, in approving the Remuneration Policy, authority is given to the
Company to honour any previously disclosed commitments entered into with current or
former Directors including, but not limited to, payment of pensions or the vesting/exercise
of past share awards.
Stage 2
Remuneration consultant and
management provide detailed insight
into the areas of focus to determine
how the policy might be amended.
Stage 3
Remuneration Committee discusses
and approves proposed policy, taking
into account remuneration of the
wider workforce.
Stage 4
Consultation with shareholders and
main investor representative bodies
to obtain their views.
Stage 5
Feedback from the consultation is
considered by the Remuneration
Committee.
and final proposals approved.
Stage 6
Final proposals are disclosed in
the Annual Report and Accounts
and presented to shareholders for
approval at the AGM.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Remuneration report CONTINUED
Directors’ Remuneration Policy
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 Remuneration Committee takes
into consideration the pay and employment
conditions of all employees across the
Group. During the year, the Workforce
Forum discussed remuneration strategy,
including executive reward strategy, and
provided feedback to management. The
Company also operates a Sharesave
scheme and in the last two financial
years has made conditional awards of
shares to all employees. This enables all
employees to become shareholders in the
Company, and to 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, the
Workforce Forum, a dedicated Workforce
Forum email address and an email address
for employees to contact the designated
Non-Executive Director for workforce
engagement. Further details are given in
the Stakeholder engagement section of the
Strategic Report on page 42.
Statement of consideration of
shareholder views
Each year we normally update our major
shareholders on the Remuneration
Committee’s application of the
Remuneration 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
Remuneration 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 Remuneration Policy.
In addition, the Remuneration Committee
will seek to engage directly with major
shareholders and their representative
bodies should any material changes be
proposed to the Remuneration Policy. In
August 2020, we consulted with our major
shareholders and the main institutional
voting agencies over the proposed minor
change to the policy, and no areas of
concern were raised. Details of the votes
cast for and against the resolution to
approve last year’s Remuneration report
can be found on page 151.
How the Committee has addressed the requirements of the Code in determining Directors’ Remuneration Policy
and practices
Code requirement
How requirement was addressed in determining Remuneration Policy and practices
Clarity – remuneration arrangements
should be transparent and promote
effective engagement with shareholders
and the workforce.
Variable remuneration for any year is set out clearly in the prior year’s Annual Report, together
with performance targets (unless they are deemed to be commercially sensitive). Outcomes
are aligned with strategic objectives through the use of appropriate performance targets,
which align them with shareholder interests and the Group’s strategy and provides for the long
term success of the Company, which is in the interest of the workforce and other stakeholders.
Simplicity – remuneration structures
should avoid complexity and their
rationale and operation should be easy to
understand.
Risk – remuneration arrangements
should ensure reputational and other
risks from excessive rewards, and
behavioural risks that can arise from
target-based incentive plans, are
identified and mitigated.
Predictability – the range of possible
values of rewards to individual Directors
and any other limits or discretions should
be identified and explained at the time of
approving the policy.
Proportionality – the link between
individual awards, the delivery
of strategy and the long term
performance of the company should be
clear. Outcomes should not reward poor
performance.
Alignment with culture – incentive
schemes should drive behaviours
consistent with company purpose, values
and strategy.
The Company operates a UK market standard approach to remuneration which is familiar to
stakeholders. Performance targets are readily understandable and published as part of the
year end results.
The Remuneration Committee has discretion to ensure that variable pay outcomes are in line
with Company and individual performance. Share awards are subject to post vesting holding
periods, and malus and clawback are applicable to both LTPP and the annual bonus (including
deferred shares) for up to two years after payment or vesting in cases where the outcome is
subsequently deemed inappropriate.
Minimum, on-target and maximum outcomes for Directors are shown annually in this report
(see page 126). Limits and discretions for each type of reward are explained in the policy table
on pages 127 to 130.
The Company’s incentive plans reward the successful implementation of strategy through
the alignment of performance targets with strategic KPIs. The performance underpin which
applies to both the annual bonus and LTPP outcomes ensures that poor performance is not
rewarded. The Remuneration Committee also has discretion to override formulaic outcomes.
Our remuneration strategy ensures that performance targets do not encourage inappropriate
behaviours. The targets that are selected help align the interests of the workforce with those
of the Company’s purpose and strategy as illustrated on page 126.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Remuneration report CONTINUED
Annual Report on Remuneration
During the year, the Remuneration
Committee has taken advice from PwC
on its Remuneration Policy and practice,
implementation of its decisions and
remuneration benchmarking. The Chair
of the Remuneration 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
Remuneration Committee during the year
under review were £149,550.
The Remuneration Committee also receives
input into its decision making from the
Chief Executive (David Thomas), the
Company Secretary (Tina Bains) and the
Group HR Director (Rob Tansey), none of
whom were present at any time when their
own remuneration was being considered.
In this section, we provide an overview
of the Remuneration Committee and its
advisers, as well as how the Remuneration
Policy will be applied in FY21 and how it
has been implemented throughout FY20,
together with the resulting payments
to Directors. The Annual Report on
Remuneration will be subject to an advisory
vote at the 2020 AGM.
Membership and attendance at
Remuneration Committee meetings
Membership of the Remuneration
Committee and attendance at each of its
scheduled meetings during the year is set
out on page 123. The Company Secretary
acts as Secretary to the Remuneration
Committee. To prevent conflicts of interest,
the Executive Directors are not members of
the Remuneration Committee and no-one is
present at the Committee’s meetings when
their own remuneration is being considered.
Advisers to the Remuneration
Committee
In carrying out its principal responsibilities,
the Remuneration 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 Remuneration
Committee assesses annually 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. 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.
In addition to remuneration advice, PwC
also provides taxation, consultancy and
internal audit services to the Group. PwC
has no other connections with individual
Directors or the Company.
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Annual Report on Remuneration
Main activities undertaken during the financial year
The Remuneration 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 Remuneration 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.
Priorities
Work carried out and outcomes
Remuneration Policy
Reviewed the Directors’ Remuneration Policy and agreed to propose changes only to bring the current
policy into line with current market practice, with a view to a more fundamental review in FY21. Changes
to existing Executive Directors’ pension contributions, post cessation shareholdings and Remuneration
Committee discretion approved.
Salary/fees
Considered and agreed that there would be no salary or fee increase for FY21 Executive Directors, Senior
Management and Non-Executive Directors respectively.
Approved the payment of normal salaries for all of the workforce, including those on furlough, during the
COVID-19 lockdown period.
Pensions
Undertook commercial discussions around potential pension contributions for incumbent Executive
Directors going forward. See page 124.
Variable pay
Reviewed annual performance of the Executive Directors for FY20 in terms of variable pay.
Annual bonus
Considered annual bonus for FY20. Due to the impact of COVID-19 on the performance of the Company the
Remuneration Committee agreed with the recommendation of the Executive Directors, that there would be
no payments made under the FY20 annual bonus scheme.
Agreed the structure and performance conditions for FY21 annual bonus scheme. See page 140.
Long term incentives
Reviewed and approved the partial vesting of the 2017/18 LTPP. See page 145.
Considered and finalised the structure, performance conditions, participants and level of awards for FY21.
Agreed to defer the setting of targets for six months from the date of grant in line with IA guidance in the
hope that there will be more clarity around the full impact of COVID-19 on the business. See page 141.
CJRS
Supported management’s proposal to utilise the CJRS to preserve jobs and the subsequent decision to
return the funds given the Group’s continued financial resilience during and post the lockdown period.
FY19 review
Reviewed and made progress against all matters arising from the FY19 annual evaluation. See page 106.
FY20 review
Participated in the evaluation of its performance and discussed and agreed an action plan to address
issues identified. See page 108.
Assessed the effectiveness of the Committee’s remuneration consultants during FY20. See page 137.
Executive Directors’
and Senior Management
remuneration,
in the context of
overall workforce
remuneration
Remuneration
Committee
effectiveness
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Barratt Developments PLCwww.barrattdevelopments.co.uk Priorities
Governance
Work carried out and outcomes
Remuneration report
Considered and approved remuneration disclosure requirements for the Remuneration report.
Annual agenda and terms of reference
Reviewed and approved its annual agenda and terms of reference.
Remuneration Committee discretion
Reviewed and agreed its approach to the use of discretion, where this should be applied and how our
disclosures could be enhanced through revisions to the Remuneration Policy.
Shareholder engagement
Consulted with shareholders on the changes to and implementation of the Remuneration Policy, indicative
outcomes for FY20, and the remuneration proposals for FY21 and used the feedback received to finalise
the Remuneration Policy.
Statement of implementation of the Remuneration Policy for FY21
Executive Directors’ remuneration for FY21 will be based on the Remuneration Policy to be proposed at the October 2020 AGM, subject to
approval by shareholders. The Remuneration Policy is set out on pages 127 to 136.
Base salary
The Remuneration Committee reviewed the salaries of the Executive Directors in June 2020 and it was agreed that neither the Executive
Directors, nor the workforce as a whole, would receive an increase in base salary for FY21. This decision took into account the ongoing
impact of COVID-19; the consequent deterioration of trading conditions due to the temporary closure of all our construction sites, sales
centres and offices; the continued economic uncertainty; and the cancellation of the interim, full and special dividends for FY20. The
salaries for the Executive Directors with effect from 1 July 2021 will therefore remain unchanged:
Table 8 – Executive Directors’ salaries:
Executive Director
David Thomas
Steven Boyes
Jessica White
Salary with effect
from
1 July 2020
£000
Salary with effect
from
1 July 20191
£000
757
599
422
757
599
422
1.
The Executive Directors voluntarily agreed to a reduction in their salaries of 20% during the period for which our construction sites were closed due to COVID-19. The
amounts they received were therefore lower during FY20 than stated in the above table. Actual amounts received for the year to 30 June 2020 are given in the single
figure of remuneration table on page 142.
The salaries for each of the Executive Directors take into account the performance of the Company and remain within the range for similar
sized companies and the housebuilding sector.
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Annual Report on Remuneration
Pension
In FY17 the Remuneration Committee
agreed that any new Executive Director
would be given a pension equivalent to that
of Managing Directors, currently 15% of
salary. Accordingly, during FY21, Jessica
White (who was appointed to the Board
in 2018) will continue to receive a cash
supplement of 15% of salary. David Thomas
and Steven Boyes (both appointed prior to
2017) will both continue to receive a cash
supplement of 25% of salary.
During FY19, the Remuneration Committee
agreed that any new Executive Director
(or other employee) joining the Group
on or after 1 July 2020 will receive a
pension contribution (or cash supplement)
equivalent to that of the wider workforce,
currently 10% of base salary.
Annual bonus
Executive Directors and Senior
Management will participate in the Group’s
annual bonus scheme in accordance
with the Policy. In view of the economic
challenges and disruption to our business
resulting from COVID-19, we have
undertaken a comprehensive review of
the measures and their weightings for the
FY21 bonus. We are making the following
changes to the scheme, which will ensure
Executive Directors are incentivised in line
with our core business priorities for the
year, and in particular our focus on balance
sheet strength and workforce safeguarding:
Profit before tax – reduced weighting from
82.5% of salary to 63.75% to support the
increase in the weighting of the capital
employed element.
In line with the IA’s guidance, with effect
from 1 January 2023 incumbent Executive
Directors’ pension contributions (or cash
supplement) will be reduced to a level
equivalent to the workforce, currently 10%
of base salary.
Capital employed – increased weighting
from 15% of salary to 30% of salary to
ensure that improving the efficiency of
capital employed is prioritised as a result of
the significant impact of COVID-19 reducing
home completion volumes.
SHE – has been introduced as a separate
element for the first half of the year to
focus the business on compliance with
the new social distancing practices and
protocols implemented to safeguard the
workforce against COVID-19 as well as the
normal SHE scoring mechanism. SHE will,
for the full year, continue to be a penalty/
gateway for the customer care element.
Land and sites – this is a new measure
which will be focused on normalising the
length of land bank and the creation of new
sites from existing land, land contracts in
progress and any new land approvals.
The Remuneration Committee is of the
view that the individual annual bonus
performance targets are commercially
sensitive in terms of the Group strategy and
therefore targets are not disclosed until the
relevant performance year is completed.
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 FY21 will be:
Performance measure
Profit before tax
Financial/
non-financial
Financial
Reason for selecting
Rewards outperformance against stretching
targets and is a key measure of our
performance.
Capital employed
Financial
Ensures efficient use of available capital.
Safety, Health and Environment (SHE)
(measured in first half of FY21)
Non-financial
Customer care (with health and safety
underpin)
Non-financial
Land and sites
Non-financial
Total bonus achievable as a % of salary
Ensures a focus on the health and safety of
our employees, customers, suppliers and sub-
contractors particularly during the period that
COVID-19 continues.
Ensures a focus on quality and service to our
customers without compromising the health
and safety of our employees, customers,
suppliers and sub-contractors.
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.
Weighting (% of salary
maximum)
63.75
30.0
11.25
22.5
22.5
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.
The Remuneration 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 FY21 will be subject to the malus and clawback provisions set out on page 132.
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Barratt Developments PLCwww.barrattdevelopments.co.uk LTPP
The Remuneration Committee has agreed to grant an LTPP award to Executive Directors in FY21 (2020/21 LTPP) of 200% of base salary, in
line with the Remuneration Policy. The Remuneration 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 its strategy as well as the
interests of shareholders. The Remuneration Committee has again agreed that three independent performance conditions: TSR, EPS and
Underlying ROCE, will apply to the 2020/21 LTPP. The 2020/21 LTPP will be granted as normal in October 2020; however, given the current
uncertainties caused by COVID-19, the EPS and Underlying ROCE targets for this award will be determined as soon as practicable following
the grant and no later than six months from the grant date. This approach is in line with the guidance issued by the IA. The targets, once
set, will be published on our website and in the FY21 Remuneration Report.
Performance condition
Reason selected
TSR against a 50+/50-
comparator group
To ensure that the comparator group
remains current and relevant whilst
factoring in the continued movement in
the Company’s market capitalisation.
TSR against a
housebuilder index1
To ensure rewards are linked to
outperformance of our peers.
Absolute EPS for the
financial year ending
30 June 2023
To ensure efficient and effective
management of our business and align
interests with those of shareholders.
Underlying ROCE for the
financial year ending
30 June 2023
To ensure efficient and effective
management of our business and align
interests with those of shareholders.
Weighting (of
total award)
Below
threshold (0%
vesting)
Threshold
(25% vesting)
Maximum
(100% vesting)
20%
20%
20%
40%
Below
median
Median
Upper
quartile
Below
index
average of
peer group
Index
average of
peer group
Index
average
+8%
per annum
To be set in
March 2021
To be set in
March 2021
To be set in
March 2021
To be set in
March 2021
To be set in
March 2021
To be set in
March 2021
1.
The housebuilder index will comprise: Bellway, Berkeley Homes, Countryside Properties, Crest Nicholson, Galliford Try, Persimmon, Redrow, Taylor Wimpey and
Vistry Group.
Vesting will be on a straight-line basis between threshold and maximum. In addition, all LTPP awards are subject to overriding
Remuneration Committee discretion, as set out in the Policy table on page 131.
The 2020/21 LTPP will also be subject to the malus and clawback provisions set out on page 132 and a two-year post vesting holding period.
Non-Executive Directors’ fees
It was agreed that there would be no increase in Non-Executive Directors’ fees for FY21, in line with the rest of the business. The annual
fees payable to the Chair and Non-Executive Directors with effect from 1 July 2020 will therefore remain as follows:
Table 9 – Non-Executive Directors’ fees
Role
Chair
Non-Executive Director base fee
Chair of Audit Committee
Chair of Remuneration Committee
Chair of Safety, Health and Environmental Committee
Senior Independent Director
Fee as at
1 July 2020
£000
Fee as at
1 July 20191
£000
333
63
12
12
6
8
333
63
12
12
6
8
1.
The Non-Executive Directors volunteered a reduction in their fees of 20% during the period in which our construction sites were temporarily closed due to COVID-19.
The amounts they received were therefore lower during FY20 than stated in the above table. The actual amounts received for the year to 30 June 2020 are given in the
single figure of remuneration table on page 142.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Remuneration report CONTINUED
Annual Report on Remuneration
Directors’ remuneration outcomes for the year ended 30 June 2020
Single figure of remuneration
The total remuneration for each of the Directors for the financial year ended 30 June 2020 is as set out in Tables 10 and 11. The salary
for all Directors is the amount received in the year, and takes into account a 20% voluntary reduction in base salary in April and May 2020
covering the period our construction sites were temporarily closed as a consequence of COVID-19. Details of the base salaries to which
they were entitled in FY20 are set out in Tables 8 and 9 on pages 139 and 141.
Table 10 – Executive Directors’ single figure of remuneration (Audited)
Salary
£000
Benefits1
(taxable)
£000
Pension
benefits
£000
Total
fixed pay
£000
Annual
bonus3
£000
LTPP
£000
Sharesave
scheme
£000
Total
variable pay
£000
FY20
Total
£000
FY19
Total
£000
2019/20 2018/19 2019/20 2018/19 2019/202
2018/19 2019/20 2018/19 2019/20 2018/19 2019/204 2018/195 2019/206 2018/197 2019/20 2018/19
David
Thomas
Steven
Boyes
Jessica
White
Total
741
739
586
585
413
412
1,740 1,736
29
36
16
81
25
189
185
959
949
– 1,066
257 1,712
10
41
150
146
772
772
–
872
204 1,355
16
82
63
402
62
492
490
393 2,223 2,211
–
615
– 2,553
144
105
605 3,172
–
–
10
–
1
–
1
267 2,778 1,226 3,727
204 2,228
976 3,000
720
144
636 1,210
615 5,726 2,838 7,937
1.
2.
3.
4.
5.
6.
7.
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.
David Thomas and Steven Boyes received a pension benefit that was equal to 25% of their base salaries. Jessica White received a pension benefit equal to 15% of
her base salary. The Directors’ base salaries are set out in Table 8 on page 139 and the pension benefit was not reduced to take into account their temporary 20%
voluntary reduction in base salary during April and May 2020.
Annual bonus includes amounts deferred for David Thomas, Steven Boyes and Jessica White (see Table 13 on page 144).
Performance conditions for the LTPP were tested after 30 June 2020. 19.35% of the award granted to each of the Executive Directors is due to vest in November 2020
(see Tables 14 and 15 on page 145 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 2020 (£5.00 per share). As the value of shares at vesting was lower than that at grant, no portion of the award is attributable to share price growth.
In accordance with regulatory requirements, the values in this column have been re-calculated using a share price of £6.31 per share being the market value of
the shares on the vesting date, 26 September 2019, as opposed to the market price of £5.89 per share calculated based on an average market value over the three
months to 30 June 2019 disclosed in last year’s Remuneration report.
The Sharesave Scheme granted in April 2014, which matured on 1 July 2019, was subject to no performance measures other than a continued employment condition
and completion of a savings contract. The value is calculated using the difference between the exercise price of £3.49 and a share price of £5.77 (the mid-market
close price of a share on the date of maturity).
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 the difference between the exercise price of £4.47 and a share price of £5.15 (the mid-market
close price of a share on the date of maturity).
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Barratt Developments PLCwww.barrattdevelopments.co.uk ↑ David Wilson homes at Winnington Village,
Northwich, Cheshire.
Table 11 – Non-Executive Directors’ single figure of remuneration (Audited)
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White1
Total
Fees
£000
Benefits (taxable)
£000
2020 total
£000
2019 total
£000
2019/20
2018/19
2019/202
2018/193
325
87
62
74
62
610
325
88
62
74
62
611
1
–
–
–
–
1
2
–
–
–
–
2
326
87
62
74
62
611
327
88
62
74
62
613
1.
2.
3.
Between 1 July 2019 and 31 December 2019, Sharon White’s fees were paid directly to Ofcom on a monthly basis. From 1 January 2020 until the end of FY20, her fees
were paid directly to her.
Benefits (taxable) for 2019/20 include expenses incurred in attending the Company’s main corporate office and are £1,093 for John Allan and £237 for Richard Akers.
Benefits (taxable) for 2018/19 include expenses incurred in attending the Company’s main corporate office and were £2,114 for John Allan, £393 for Richard Akers,
£17 for Nina Bibby and £179 for Sharon White.
Annual bonus
For the year under review, in order to better align the Executive Directors’ remuneration to that of Senior Management and where possible,
the wider workforce, the Remuneration Committee had, as disclosed in last year’s Remuneration report, agreed to: i) introduce capital
employed as a performance measure for the Executive Directors’ annual bonus for FY20 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.
As in previous years, Executive Directors had the potential to earn an annual bonus of up to 150% of base salary based on the attainment of
Group performance targets 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. As a result of the impact of COVID-19 and the
associated ongoing uncertainty, the Committee accepted the recommendation of the Executive Directors to cancel the FY20 annual bonus
scheme. The Committee considers the outcome is appropriate and reflects overall performance of the Group over the year.
Performance targets for the FY20 bonus scheme are set out in Table 12 on page 144.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Remuneration report CONTINUED
Annual Report on Remuneration
Table 12 – Annual bonus (Audited)
Bonus measure
Profit before tax
Strategic objective
To support profitability.
Quality and service
improvement1,2
Capital Employed
To create a quality product that
customers recommend in a
safe way for our employees and
stakeholders.
To incentivise improvement of
capital management.
Strategic objective –
Group Operating Margin
Strategic objective –
trading outlets
To deliver an improvement in
regional trading margin to support
the profitability of our business.
To open the optimum number of
trading outlets to ensure growth
and delivery of our business plan.
Targets
Threshold: £890m
Target: £910m
Maximum: £950m
Divisions to achieve SHE audit of 94% and
customer service recommend score of 90%.
Target assessed by number of divisions
meeting both targets.
Threshold: £1,687m
Target: £1,687m
Maximum: £1,612m
Threshold: 18.3%
Target: 18.5%
Maximum: 18.7%
Threshold: 103
Target: 106
Maximum: 108
Potential bonus
weighting
% of salary
16.5%
41.25%
82.5%
22.5%
3%
7.5%
15%
3%
7.5%
15%
3%
7.5%
15%
1.
2.
In the case of a material breach of SHE policy or procedures, the SHE Committee retained the discretion to recommend the withholding of all or part of the bonus
depending on the nature of the breach.
The quality and service measure is pro-rated based on the number of divisions achieving both targets.
Executive Directors’ deferred bonus
No deferred bonus is payable in respect of FY20, as a consequence of the decision not to pay any bonus referred to above. As announced on
28 October 2019, conditional awards of shares were granted to each of the Executive Directors in respect of their deferred bonus for FY19.
The number of shares awarded was as follows:
Table 13 – Executive Directors’ deferred bonus (Audited)
David Thomas
Steven Boyes
Jessica White
FY19 deferred bonus
% of
salary
deferred1
Amount
deferred
£000
44.3
49.2
49.2
327
287
203
Number of
shares2,3
53,677
47,157
33,233
1.
2.
3.
The Executive Directors received between 144.3% and 149.2% of base salary for FY19. The bonus earned in excess of 100% of base salary was deferred into shares.
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.
The number of shares granted during the year were calculated at a share price of 609.5 pence 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 2019.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Long Term Performance Plans
Vesting of 2017/18 LTPP (included in 2019/20 single figure of remuneration) (Audited)
The 2017/18 LTPP award granted on 24 November 2017 was based on the three year performance period to 30 June 2020. The award
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 resulting vesting levels are as follows:
Table 14 – Vesting of 2017/18 LTPP
Metric
EPS
Underlying ROCE
TSR
(FTSE)
TSR
(Housebuilder)2
Performance condition
Threshold
Maximum
Actual
Absolute EPS growth for the financial year ended 30
June 2020.
66p
74p
To increase underlying ROCE.
TSR against the 50 companies above and below the
Company in the FTSE index measured over three
financial years with a three-month average at the
start and end of the performance period. 25% of this
element vests for median performance and 100% of
this element vests for upper quartile performance or
above.
TSR of at least the Index average of a housebuilder
Index measured over three financial years with a
three-month average at the start and end of the
performance period. 25% of this element vests for
Index average of peer group and 100% of this element
vests for Index average +8% per annum or above.
Basic
EPS
39.7p1
12.5%
Rank of
32.7 (TSR
of 6.1%)
19%
Median
ranking of
45.5 (TSR of
-12.2%)
22%
Upper
quartile
ranking of
23.3 (TSR
of 25.8%)
Unweighted
Index average
(TSR of 4.8%)
Unweighted
Index average
+ 8%
(TSR of 30.8%)
Above
unweighted
index average
(TSR of 6.1%)
Total level of award vesting
Portion
of award
vesting
0%
0%
13.65%
5.70%
19.35%
1.
2.
The actual EPS of 39.4 pence has been re-based using the corporation tax rate applicable at the date on which the 2017/18 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 2017/18 LTPP targets. The re-based EPS used for the purpose of determining vesting, which is directly comparable to the 2017/18 LTPP targets, was 39.7 pence.
The housebuilder Index comprises: Bellway, Berkeley Homes, Vistry Group, Countryside Properties, Crest Nicholson, Galliford Try, Persimmon, Redrow and Taylor
Wimpey.
The Remuneration Committee believes that as the 2017/18 LTPP recognises the long term performance of the Company over a three-year
period, and given the strong alignment to the shareholder experience through TSR, it is appropriate to allow this award to vest in line with
performance outcomes and is justified. No Remuneration Committee discretion was exercised in relation to the LTPP vesting outcome,
including in relation to share price depreciation. The 2017/18 LTPP accrued 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 vest. The
gross number of shares to be released to each of the Executive Directors and the value of the dividend equivalents are as follows:
Table 15 – 2017/18 LTPP vesting outcomes
Total
number of
shares to
vest1
43,790
34,656
24,423
Estimated
value of
vested
shares2
(£000)
219
173
122
Value of
dividend
equivalents
earned
on vested
shares2
(£000)
38
31
22
Total
Estimated
value2
(£000)
257
204
144
Number of
shares at
grant
Number of
shares to
lapse
226,307
179,103
126,222
(182,517)
(144,447)
(101,799)
Executive Director
David Thomas
Steven Boyes
Jessica White
1.
2.
The relevant number of shares will be released to each participant as soon as is practicable following the vesting date. The awards are subject to a two-year post
vesting holding period commencing 1 July 2020.
The estimated values of the vested shares and the dividend equivalents are based on the average share price during the three months to 30 June 2020 (£5.00 per
share).
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Remuneration report CONTINUED
Annual Report on Remuneration
LTPP granted during the year (2019/20 LTPP) (Audited)
On 24 October 2019, the following 2019/20 LTPP awards were granted to Executive Directors:
Table 16 – LTPP granted during the year
Executive
Director
David Thomas
Steven Boyes
Jessica White
Type of
award
Basis of award
granted
Conditional
award
Conditional
award
Conditional
award
200% of salary
£757,155
200% of salary
£599,225
200% of salary
£422,300
Share price
at date
of grant1
(pence)
Number of
shares over
which award
was granted
Face value of
award
(£000)
% of face
value that
would vest
at threshold
performance
Vesting
determined
by
performance
over
636.2
238,024
636.2
188,376
636.2
132,756
1,514
1,198
845
25
25
25
Three
financial
years to
30 June
2022
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 23 October 2019, being the day before the date of grant.
The 2019/20 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 2019, and against EPS and ROCE for the financial year ending 30 June 2022. On
completion of the performance period, assuming that shares vest, they will be subject to a further two-year holding period.
Performance of 2018/19 and 2019/20 LTPP awards
The following tables show the targets set on grant for each of the current LTPP awards together with performance to date.
The potential level of vesting if performance was measured over two years to 30 June 2020:
Table 17 – 2018/19 award performance against targets
Performance target
TSR FTSE1
TSR Housebuilder2
EPS
Underlying ROCE
Total
Below threshold
(0 % vesting)
Below median
Below unweighted
index average
Threshold
(25% vesting)
Median
Unweighted
index average
Maximum
(100% vesting)
Performance as
at 30 June 2020
Upper quartile
Unweighted index
average +8% p.a.
Upper Quartile
Above unweighted
index average
<75 pence
<19.0%
75 pence
19.0%
84 pence
22.0%
39.7 pence
12.5%
The potential level of vesting if performance was measured over one year to 30 June 2020:
Table 18 – 2019/20 award performance against targets
Below threshold
(0% vesting)
Below median
Below unweighted
index average
<76 pence
<19.0%
Threshold
(25% vesting)
Median
Unweighted
index average
76 pence
19.0%
Maximum
(100% vesting)
Performance as
at 30 June 2020
Upper quartile
Unweighted index
average +8% p.a.
85 pence
22.0%
Above median
Below unweighted
index average
39.7 pence
12.5%
Performance target
TSR FTSE1
TSR Housebuilder2
EPS
Underlying ROCE
Total
For both Table 17 and Table 18:
Level of vesting had
the award vested as
at 30 June 2020
20.0%
16.1%
0%
0%
36.1%
Level of vesting had
the award vested as
at 30 June 2020
6.8%
0%
0%
0%
6.8%
1.
2.
The comparator group for TSR FTSE is each of the members ranking 50 above and 50 below the Company in the FTSE Index.
The housebuilder Index comprises: Bellway, Berkeley Homes, Vistry Group, Countryside, Crest Nicholson, Galliford Try, Persimmon, Redrow and Taylor Wimpey.
The 2018/19 and 2019/20 LTPP awards 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 according to the number of shares that vest.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Statement of Directors’ shareholding and share interests (Audited)
For the financial year ended 30 June 2020, 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 Remuneration Committee. The Remuneration 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 Remuneration Committee
reserves the right to amend the percentage holding required by the Executive Directors depending on market conditions and best practice
guidance. At 30 June 2020, both David Thomas and Steven Boyes have met the shareholding requirement. Jessica White has until 21 June
2022 to meet the shareholding requirement.
Taking into consideration recent changes to market practice and investor guidelines, the post cessation shareholding requirement for
the Executive Directors is the lower of their shareholding requirement (currently 200% of salary) or their actual shareholding on the date
of leaving.
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 19 below.
On 13 July 2020, Sharon White purchased 363 shares. No other notification has been received of any change in the interests shown during
the period 30 June 2020 to 31 August 2020 inclusive.
Table 19 – Directors’ interests in shares as at 30 June 2020 (Audited)
Other shares held
Options
Shareholding requirements
Beneficially
owned
Interests subject
to performance
conditions (LTPP)
Interests not
subject to
performance
conditions
(DBP)
Interests in
Sharesave
options1
Shareholding
requirement %
salary
Current
shareholding
% salary4
Shareholding
requirement
met?
Executive Directors
David Thomas2
Steven Boyes3
Jessica White
Non-Executive Directors
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White6
1,000,766
457,890
67,825
76,705
60,000
8,500
10,000
-
736,757
583,081
410,923
156,624
136,286
66,964
6,002
5,916
6,465
200%
200%
200%
758%
492%
158%
Y
Y
N5
The Chair and Non-Executive Directors are not awarded incentive shares and
are not subject to a shareholding requirement
1.
2.
3.
4.
5.
6.
All of these options were unvested at 30 June 2020. On 1 July 2020, 1,939 of Steven Boyes’ Sharesave options matured. The exercise price is £4.64. Steven has not yet
exercised his option to purchase these shares.
On 22 July 2019, David Thomas exercised his option to purchase 4,297 Sharesave shares, all of which he retained. The exercise price was £3.49 and the share price
on the date of exercise was £6.43, giving an aggregate gain of £12,633.
Steven Boyes was granted 1,973 Sharesave options during the year. The option price of the award was £4.56, representing a 20% discount on the average share price
for the five business days immediately before the invitation to participate in the award (£5.69). The number of shares granted was based on the option price and the
total savings amount forecast at the end of the three-year savings period. The face value of the options based on the average share price above was £11,226. There
are no performance targets associated with this award. The shares are exercisable between 1 July 2023 and 31 December 2023.
The share price used for the purposes of determining the value of the shares is £4.96, being the mid market closing price on 30 June 2020.
Jessica White was appointed to the Board on 22 June 2017 and has five years from this date to meet the shareholding requirement.
Sharon White purchased 363 shares on 13 July 2020.
All conditional awards and share options are subject to an overriding Remuneration Committee discretion, in that the Remuneration
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 Remuneration Committee is not of this view, it has the authority to reduce the
level of vesting, including to nil, as it deems appropriate.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance 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
2020 (30 June 2019: £nil).
Payments for loss of office
(Audited)
No payments were made in respect of loss
of office during the year ended 30 June
2020 (30 June 2019: £nil).
Remuneration report CONTINUED
Annual Report on Remuneration
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
FY20, 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.
The Executive Directors’ cash supplement
in lieu of pension will reduce to be in line
with that of the wider workforce, which is
currently at 10% of base salary, with effect
from 1 January 2023.
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 2020.
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 2020 was £63,510 per annum. Steven
Boyes may take early retirement, 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 actuarial valuation of the Scheme
as at 30 November 2019 showed a deficit
of £14.0m calculated on the basis of the
Scheme’s technical provisions. On 16
June 2020, the Trustees of the Scheme
purchased a bulk annuity policy. Under
the policy, the insurer will pay to the
Scheme an amount equal to the benefit
payments due to be paid by the Scheme
to the members. The Company paid
contributions totalling £8.5m for FY20
under the previous contribution plan, of
which £1.2m was paid in December 2019
whilst the valuation was being undertaken.
Allowing for these contributions and
combined with experience after the
valuation date, investment experience and
the purchase of the bulk annuity policy, the
Scheme has a surplus of assets and so no
further contributions are required from the
Company. The valuation for the Financial
Statements was updated as at 30 June 2020
by a qualified independent actuary and a
surplus of £3.5m (2019: surplus of £62.6m)
is included in the Group Balance Sheet
as shown in note 6.2.2 to the Financial
Statements on page 216.
148
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Barratt Developments PLCwww.barrattdevelopments.co.uk Chief Executive’s relative pay
Table 20 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) long term incentive vesting level for the Chief Executive over a ten-year period.
Table 20 – Chief Executive’s pay
Chief Executive’s total
pay (£000)
Bonus outturn (as a percentage
of maximum opportunity)
LTI vesting (as a percentage of
maximum award)
Ten years to 30 June 2020
Mark Clare
David Thomas
2011
1,220
2012
2,099
2013
4,310
2014
6,430
2015
7,363
2016
3,155
2017
3,331
2018
2,720
2019
3,727
2020
1,226
36.6
99.2
100.0
100.0
93.2
97.4
97.5
92.2
96.2
0
0.0
32.8
73.9
95.8
100.0
100.0
100.0
76.4
92.8
19.4
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.
£900
£800
£700
£600
£500
£400
£300
£200
£100
0
)
m
£
R
O
0
0
0
£
(
June 2010
June 2011
June 2012
June 2013
June 2014
June 2015
June 2016
June 2017
June 2018
June 2019
June 2020
Index of currently listed housebuilders
FTSE 100
Barratt Developments PLC
Source: Datastream by Refinitiv
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance
Remuneration report CONTINUED
Annual Report on Remuneration
Annual percentage change in remuneration of Directors compared to employees
Table 21 shows the percentage change in salary, taxable benefits and annual bonus set out in the single figure of remuneration tables
(Tables 10 and 11 on pages 142 and 143) paid to each Director in respect of the financial years ended 30 June 2019 and 30 June 2020,
compared to that of the average pay of all employees of the Group.
Table 21 – Percentage change in remuneration
Executive Directors1
David Thomas
Steven Boyes
Jessica White
Non-Executive Directors1
John Allan
Richard Akers
Nina Bibby
Jock Lennox
Sharon White
Average pay of all employees 2
FY20
Salary/fees
% change
Benefits
% change
Annual
bonus
% change
0.3
0.2
0.2
0
-1.1
0
0
0
0.8
16.0
-12.2
0
-50.0
0
0
0
0
-1.5
-100.0
-100.0
-100.0
N/A
N/A
N/A
N/A
N/A
-100.0
1.
2.
The percentage changes in salary and fees of the Directors differs from the salary increase awarded to them for FY20, as it takes into account a temporary 20%
voluntary reduction in base salary in April and May 2020 covering the period our construction sites were temporarily closed as a consequence of COVID-19.
Average pay is determined using all employees in the Group, as the parent company employs only a very few senior employees. The figure represents the mean
employee pay.
Chief Executive pay ratio
In our 2019 Remuneration Report, we voluntarily disclosed our Chief Executive pay ratios ahead of the reporting requirement formally
applying to us this year. The table below compares the 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 22
Year
FY20
FY19
Method
Option B
Option B
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
40:1
123:1
32:1
88:1
21:1
59:1
The remuneration figures for the employee at each quartile were determined with reference to the financial year ending 30 June 2020.
Under Option B of The Companies (Miscellaneous Reporting) Regulations 2018, the latest available gender pay gap data (i.e. from April 2020)
was used to identify the best equivalent for three Group UK employees whose hourly rates of pay are at the 25th, 50th and 75th percentiles for
the Group. The Committee is comfortable that this approach provides a fair representation of the Chief Executive to employee pay ratios and is
appropriate in comparison to alternative methods, balancing the need for statistical accuracy with internal operational resource constraints.
A full-time equivalent total pay and benefits figure for FY20 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 is 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.
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:
Table 23
Salary
Total pay and benefits
150
25th percentile
(P25)
£30,098
£31,044
Median
(P50)
£35,112
£38,674
75th percentile
(P75)
£52,598
£59,133
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Barratt Developments PLCwww.barrattdevelopments.co.uk The FY20 pay ratios are significantly lower than last year. This is primarily attributable to a reduction in this year’s Chief Executive
single figure of remuneration compared to FY19, driven by no bonus being payable to Executive Directors in respect of FY20 as a result
of COVID-19, as well as the 2017/18 LTPP vesting at a lower level than the 2016/17 LTPP award. No bonuses were payable to the wider
workforce in respect of FY20, with the exception of awards earned and paid prior to the COVID-19 pandemic.
The Committee considers that the median 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. This also means that the ratio is likely to fluctuate depending on the
outcomes of incentive plans in each year (as illustrated by the FY20 ratios).
The Committee also recognises that, due to the nature of our business and the ways in which we pay our employees, 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.
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 24 – Relative importance of spend on pay
Employee costs (including Executive Directors)1
Profit from operations2
Total capital return3
FY20
£m
374.7
493.4
0
FY19
£m
427.1
901.1
469.2
%
change
-12.3
-45.2
-100.0
1.
2.
3.
During the year the Group utilised the CJRS. The Group recognised £26.0m of income under this scheme in the Income Statement in the financial year. Since the
year end, this amount has been returned and accordingly this income is not reflected in the FY20 employee costs figure above. Further details are provided in notes
6.1 and 7.3 to the Financial Statements.
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. The figure
used is from the Consolidated Income Statement on page 166.
For FY19, this includes the interim dividend paid in May 2019, and the final and special dividends paid in November 2019. For FY20, no dividends are being paid due to
uncertainties arising from the COVID-19 pandemic. There have been no share buybacks during the year ended 30 June 2020.
Non-executive directorships
Details of the Group’s policy on non-executive directorships held by Executive Directors is given in the Directors’ Remuneration Policy table
on page 134. 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.
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:
Table 25 – Vote on Remuneration Policy – 2017 AGM
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of votes % votes cast
687,989,418
8,526,959
696,516,377
2,232,003
98.78
1.22
100.00
–
At the 2019 AGM, a resolution was proposed to shareholders to approve the Annual Report on Remuneration (advisory vote) for the year
ended 30 June 2019 for which the following votes were received:
Table 26 – Vote on Remuneration report – 2019 AGM
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of votes % votes cast
685,316,685
11,234,681
696,551,366
133,008
98.39
1.61
100.00
–
This Remuneration report was approved by the Board on 1 September 2020 and signed on its behalf by:
Richard Akers
Non-Executive Director
1 September 2020
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Other statutory disclosures
Directors’ Report
For the financial year ended 30 June 2020, the Strategic Report is set out on pages 2 to 79 and the Directors’ Report on pages 80 to 155.
Together, these constitute the management reports required under Rules 4.1.8R of the FCA’s Disclosure Guidance and Transparency Rules.
The table below sets out the location of information required to be disclosed in the Directors’ Report (in accordance with Listing Rule 9.8.4R,
and otherwise) which can be found in other sections of this Annual Report and Accounts and is incorporated by reference:
An indication of likely future developments in the business of the Company and its
subsidiaries
2 to 29
Details of arrangement under which a Director has waived emoluments from the
Company and details of such waiver
123 and 142
Arrangements under which a shareholder has waived or agreed to waive a dividend,
and details of the waiver
212
Page numbers
Financial instruments
Post balance sheet events
Employment of disabled persons
Employee involvement and the Company’s approach to investing in and rewarding
its workforce
Principal risks
Stakeholder engagement
Greenhouse gas emissions
206 to 211
225
61
58 to 61
71 to 78
38 to 49
234 and 235
Results and dividends
The profit from continuing activities for
the year ended 30 June 2020 was £402.7m
(2019: £739.4m).
The Board has previously announced that
given the uncertainties caused by the
impact of COVID-19, the interim dividend of
9.8 pence per share, equating to c. £100m,
would be cancelled, and that it would not
propose an ordinary dividend in respect of
FY20 or the intended special dividend of
£175m in respect of FY20.
The Board continues to recognise
the importance of dividends to all its
shareholders. The Board however, also
feels that given the unprecedented impact
of COVID-19 and the importance of a
resilient balance sheet, it will no longer
propose the FY21 special dividend of
£175m which would have been payable
in November 2021. Further information
regarding future dividend policy can be
found on page 11.
Annual General Meeting
Our 2020 AGM will be held on Wednesday
14 October 2020. We are closely monitoring
the ongoing impact of COVID-19 and
developments in UK regulation in relation to
how AGMs may be held during this period.
Further details about the AGM will be
provided in the Notice of AGM.
Directors and their interests
Details of the Directors who held office
during the financial year ended 30 June
2020 and as at the date of this report can
be found on pages 80 to 82.
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 2020, and as at the date of this
report are disclosed in the Remuneration
report in Table 19 on page 147.
Appointment and
removal of Directors
In accordance with the Articles, there shall
be no fewer than two and no more than 15
Directors appointed to the Board at any
one time. Directors may be appointed by
the Company by ordinary resolution or by
the Board. The Board may, from time to
time, appoint one or more Directors to hold
employment or executive office for such
period (subject to the Act) and on such
terms as they may determine and may
revoke or terminate any such appointment.
Directors are not subject to a maximum
age limit.
In addition to the power under the Act
for shareholders to remove any Director
by ordinary resolution upon the giving
of special notice, under the Articles, the
Company may, by special resolution,
remove any Director before the expiration
of their term of office. The office of Director
shall be vacated if: (i) they resign or offer
to resign and the Board resolves to accept
such offer; (ii) their resignation is requested
by all of the other Directors and all of the
other Directors are not fewer 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 103.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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.
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.
Company’s issued share capital as at
6 September 2019), such authority to
remain valid until the end of the 2020 AGM
or, if earlier, until the close of business on
16 January 2021. A resolution to renew this
authority will be proposed at the 2020 AGM.
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
The Company’s policy is not to make
donations to any political party. No political
donations were made during the year. The
definition of political donations under the
Companies Act 2006 is very broad and may
catch activities such as funding seminars
and other functions to which politicians
are invited, supporting certain bodies
involved in policy review and law reform
and matching employees’ donations to
certain charities. Therefore, to ensure the
Company remains in strict compliance with
the Companies Act, the Board has again
decided to seek shareholders’ authority for
political donations and political expenditure
(as defined by the Companies Act) at the
2020 AGM. The Board has no intention of
making donations to any political party.
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 a
representative office in Beijing, 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 212. 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 16 October 2019, the Directors
were given authority to allot shares up to a
nominal value of £33,936,815 (representing
one-third of the nominal value of the
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.
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.
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 that is not a fully
paid share. Registration of a transfer of an
uncertificated share may be refused in the
circumstances set out in the uncertificated
securities rules (as defined in the Articles)
and where, in the case of a transfer to
joint holders, the number of joint holders
to whom the uncertificated share is to be
transferred exceeds four.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance Other statutory disclosures CONTINUED
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 16 October
2019, shareholders gave authority to the
Company to buy back up to an aggregate of
101,810,446 ordinary shares (representing
10% of the Company’s issued share capital).
This authority is valid until the end of the
2020 AGM or, if earlier, until the close of
business on 16 January 2021. Under the
authority there is a minimum and maximum
price to be paid for such shares. Any
shares that 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 2020 AGM.
Articles of Association
The Company’s Articles contain regulations
that 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.
154
A special resolution to update the
Company’s Articles will be proposed at
the 2020 AGM and further information
regarding the changes proposed is given in
the Notice of Meeting, which can be found
on the shareholder centre section of the
Barratt Developments PLC website.
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 2020. The Senior Accounting
Officer receives regular updates on tax
matters. In addition, taxation is discussed
by the Audit Committee at least annually.
Significant agreements
with change of control provisions
The following significant agreements as at
30 June 2020 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, December
2017, November 2018 and November
2019) 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
(principal and interest) under the notes.
If a noteholder accepts such offer of
prepayment, such prepayment shall
take place on a business day that is
not less than 30 nor more than 60
days after the Company notified the
noteholders of the change of control.
For these purposes a ‘change of control’
means the acquisition by a person or a
group of persons ‘acting in concert’ (as
defined in the City Code on Takeovers
and Mergers) such that they gain
control (as defined in the Corporation
Tax Act 2010) of the Company. The note
purchase agreements also impose upon
the holders customary restrictions on
resale or transfer of the notes, such
as the transfer being subject to a de
minimis amount.
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.
On behalf of the Board
Tina Bains
Company Secretary
1 September 2020
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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 EU 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.
IAS1 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
IASB’s ‘Framework for the preparation
and presentation of financial statements’.
In virtually all circumstances, a fair
presentation will be achieved by compliance
with all applicable IFRS.
Directors are also required to:
• properly select and apply accounting
policies;
• present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures
when compliance with the specific
requirements in IFRS are insufficient to
enable users to understand the impact
of particular transactions, other events
and conditions on the entity’s financial
position and financial performance; and
• 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 UK 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.
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, SIC interpretations as adopted
and endorsed by the EU, IFRIC
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 80 to 82. By
order of the Board
David Thomas
Chief Executive
Jessica White
Chief Financial Officer
1 September 2020 1 September 2020
The Directors’ Report from pages 80 to 155
inclusive was approved by the Board on
1 September 2020 and is signed on its
behalf by
Tina Bains
Company Secretary
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Governance 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 Application of accounting 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 Adjusted items
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 Contract assets and liabilities
3.5 Leases
3.6 Provisions
3.7 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
156
173
173
173
174
176
178
179
180
180
183
184
184
187
188
189
190
191
192
193
194
195
197
202
203
157
166
167
168
169
170
171
204
205
206
208
212
213
214
218
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 Contingencies, related parties, post balance sheet events
and subsidiaries
7.1 Contingent liabilities
7.2 Related party transactions
7.3 Post balance sheet events
7.4 Group subsidiary undertakings
223
224
225
225
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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Barratt Developments PLCwww.barrattdevelopments.co.uk
Independent Auditor’s Report
to the members of Barratt Developments PLC
Report on the audit of the Financial Statements
1. 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 2020 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 Shareholders’ Equity;
the Consolidated and Company Balance Sheets;
the Consolidated and Company Cash Flow Statement; 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.
2. 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. The non-audit services provided
to the Group and Company for the year are disclosed in note 2.3.4 to the Financial Statements. 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.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Margin recognition
• Costs associated with legacy properties
Within this report, key audit matters are identified as follows:
Newly identified
Similar level of risk
Increased level of risk
Decreased level of risk
Materiality
The materiality that we used for the Group Financial Statements was £35m which was determined on the basis of
considering a number of different metrics used by investors and other readers of the Financial Statements. These
included:
• Profit before tax;
• Revenue; and
• Net assets.
Scoping
Our scoping focused on the audit work of the two components, being housebuilding and joint ventures (JVs). All audit
work was completed directly by the Group audit team.
Significant changes
in our approach since
the prior year
The following additional key audit matter was identified in the current year:
• Following review of its legacy properties for potential cladding issues during 2019/20 and where potential
additional structural remediation was identified, estimates as to the costs of future remediation works for those
affected properties have been made. Given the estimation uncertainty in making these assessments, accordingly
this was identified as a key audit matter.
The basis for determining materiality was changed from profit before tax to a number of different metrics used by
investors and other readers of the Financial Statements to reflect the volatility in the results of the Group arising
from the impact of COVID-19.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements
Independent Auditor’s Report
to the members of Barratt Developments PLC
4. Conclusions relating to going concern, principal risks and viability statement
4.1. 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 the 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 the COVID-19 pandemic and 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 at
least 12 months from the date
of approval of the Financial
Statements.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
4.2. 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 Group to continue over
the time horizon considered
appropriate by the Directors.
•
•
•
the disclosures on pages 71-78 that describe the principal risks, procedures to identify emerging
risks, and an explanation of how these are being managed or mitigated;
the Directors' confirmation on page 71 that they have carried out a robust assessment of the
principal and emerging risks facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity; or
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
the Directors’ explanation on page 79 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 5. 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.
5.1. Margin recognition
Key audit matter
description
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. Estimation includes the use of
forecast data in respect of sales volumes and prices together with construction costs;
• 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 to those units impacted by the deviation.
As a result of COVID-19, in the current financial year Management supplemented their existing margin valuation
control to address the risk of remote working, to include a non-productive costs control to identify costs incurred
during lockdown which should be directly expensed in the Income Statement under IAS 2 'Inventories' as well as a
specific control to identify site extension costs which were estimated and recorded based on expected activity on a site-
by-site basis. There is a judgement in relation to the assumptions applied by Management such as house pricing and
cost estimates.
These judgements impact the profit recognised on each unit sold and reported margin is a key metric for the Group.
Refer to page 116 (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, the control changes as a response to COVID-19 and specifically
those relating to the valuation of sites and margin review;
• Assessed the non-productive and COVID-19 related site extension cost assumptions in the valuation for each site
by testing a sample and agreeing to underlying support;
• Made enquiries of Management to support their assumptions and sought external corroboration including from
our internal real estate specialists, regarding forecast sales prices and costs to complete;
• Used bespoke analytics to analyse the cost to complete. 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
enquiries and obtained corroborative evidence from divisions for exceptions identified;
• 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; and
• 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.
How the scope of
our audit responded
to the key audit
matter
Key observations
Based on the procedures performed, we concluded that margin was recognised appropriately in the year.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Independent Auditor’s Report
to the members of Barratt Developments PLC
5.2. Costs associated with legacy properties
Key audit matter
description
How the scope of
our audit responded
to the key audit
matter
Following the events at Grenfell Tower in 2017, the Group undertook a review of all legacy developments to identify
those that have been constructed with aluminium composite materials (“ACM”). Upon removal of the cladding work in
relation to the Citiscape development in Croydon during 2020, structural concerns were identified in the building. Given
the issues identified, the Group appointed independent structural engineers to review all of the other developments
designed by either the same original engineering firm that designed Citiscape or by other companies within its wider
corporate group, to assess whether there were other legacy properties with similar structural issues.
As at the end of the financial year the Group holds a provision of £28.2m (2018/19: £nil) in relation to legacy properties
following a charge of £39.9m (2018/19: £nil) recognised as an adjusted item.
The accounting for these provisions involves a number of assumptions when estimating the future costs. The key
judgements related to this key audit matter are:
• Determining which buildings the Group has an obligation to remediate at the balance sheet date; and
• The cost of the future works.
After the balance sheet date the Board committed to pay for the remedial work at Citiscape. The total estimated cost in
relation to the work is expected to be c.£48m and will be charged in 2020/21 financial year.
Further details are included in Note 3.6 to the Financial Statements and in the Audit Committee report on page 116.
Our work included the following:
• Obtained an understanding of controls relevant to the recognition and estimation of costs associated with the
legacy developments;
• Assessed how the value of the provision has been determined, whether a present obligation to rectify the
properties existed at the balance sheet date and that the associated costs have been recorded in the appropriate
accounting period;
• Validated a sample of cost estimates to underlying support and involved our internal real estate specialists to
perform independent external research and challenge the estimates;
• Assessed the associated disclosures, including consideration of costs classified as adjusted items.
Key observations
Based on the procedures performed we concluded the provision recorded by Management to be appropriate.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 6. Our application of materiality
6.1. 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
£35m (2018/19: £44m)
£31.5m (2018/19: £39.6m)
Basis for determining
materiality
Rationale for the
benchmark applied
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.
We considered the following metrics:
• Profit before tax;
• Revenue; and
• Net assets.
Using professional judgment we determined
materiality to be £35m.
In the prior year, materiality was determined on the
basis of 5% of statutory profit before tax.
In determining our benchmark for materiality we
considered a number of different metrics used
by investors and other readers of the Financial
Statements.
This approach is a change from the prior year to
reflect the volatility in the results of the Group
arising from the impact of COVID-19.
Materiality for the current year represents 7.1% of
profit before tax (2018/19: 5%),
1.0% of revenue (2018/19: 0.9%) and
0.7% of net assets (2018/19: 0.9%).
6.2. Performance materiality
We set performance materiality at a level lower than materiality 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 2020 audit (2018/19: 70%). In determining performance materiality, we considered the following factors:
• 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.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Independent Auditor’s Report
to the members of Barratt Developments PLC
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.8m (2018/19: £2.2m),
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.
7. An overview of the scope of our audit
7.1. Scoping
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 two identified components, being housebuilding and joint ventures, which take
into consideration all of the Group’s divisions, as well as the head office consolidation. The commercial business was not identified as a
separate component in 2019/20.
7.2. Our consideration of the control environment
We obtained an understanding of the internal controls over significant risks, including the key audit matters of margin recognition and
legacy properties. Controls over margin recognition were also tested as part of the current year audit process. In addition, we obtained an
understanding of other key controls which we would expect in a housebuilder, namely those over land and work in progress and those over
subcontractor and other expenses. In 2019/20, due to the potential impact of COVID-19 on the operation of controls, we fully tested controls
relating to subcontractors, expenditure and land and work in progress in the year rather than relying on testing performed in previous
years. Our IT specialists assessed the internal controls over the three key IT systems and gained an understanding over other supporting
systems.
8. Other information
The Directors are responsible for the other information. The other information comprises the
information included in the Annual Report, other than the Financial Statements and our Auditor’s
Report thereon.
We have nothing to report in
respect of these matters.
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.
In reaching this conclusion, we agreed financial and a sample of non-financial information included
in the Annual Report 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 9. 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.
10. 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 and non-compliance with laws
and regulations 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.
11. 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.
11.1 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, we considered the following:
• The nature of the housing market, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• The Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
• Results of our enquiries of Management, internal audit, 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 of fraud or non-compliance with laws and regulations;
• Discussions among the audit engagement team including relevant internal specialists, including tax, valuations, pensions, real estate
and IT regarding how and where fraud might occur in the Financial Statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: margin recognition and the valuation of costs associated with legacy
properties. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of those laws
and regulations that had a direct effect on the determination of material amounts and disclosures in the Financial Statements. The key
laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the Financial Statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s
environmental regulations, planning, and health and safety law.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Independent Auditor’s Report
to the members of Barratt Developments PLC
11.2. Audit response to risks identified
As a result of performing the above, we identified margin recognition and costs associated with legacy properties as key audit matters. The
key audit matters section of our report explains the matters in more detail and also describes the specific procedures we performed in
response to those key audit matters.
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 provisions of
relevant laws and regulations described 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.
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.
Report on other legal and regulatory requirements
12. 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.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• We have not received all the information and explanations we require for our audit; or
• Adequate accounting records have not been kept by the 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.
We have nothing to
report in respect of these
matters.
13.2. 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
14. Other matters
14.1. Auditor tenure
Following the recommendation of the Audit Committee, 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 re-appointed as auditor for
the year ending 30 June 2018 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals
and re-appointments of the firm is 13 years, covering the years ending 30 June 2008 to 30 June 2019.
14.2. 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).
15. 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
1 September 2020
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Consolidated Income Statement
Year ended 30 June 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Analysed as:
Adjusted gross profit
Cost associated with legacy properties
CJRS grant income
Administrative expenses
Part-exchange income
Part-exchange expenses
Profit from operations
Analysed as:
Adjusted operating profit
Cost associated with legacy properties
CJRS grant income
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
Profit before tax
Analysed as:
Adjusted profit before tax
Cost associated with legacy properties
CJRS grant income
Tax
Profit for the year
Profit for the year attributable to the owners of the Company
Profit/(loss) for the year attributable to non-controlling interests
Earnings per share from continuing operations
Basic
Diluted
Notes
2.1
2020
£m
3,419.2
(2,804.9)
614.3
2.2
2.3
2.3
2.3
2.2
2.2, 2.3
5.2
5.2
5.2
4.3
4.3
4.3
2.2
2.2, 2.3
2.6
4.1.2
2.4
2.4
631.4
(39.9)
22.8
(124.5)
327.5
(323.9)
493.4
507.3
(39.9)
26.0
5.1
(35.0)
(29.9)
28.3
28.3
–
–
491.8
505.7
(39.9)
26.0
(89.1)
402.7
399.7
3.0
39.4p
38.9p
20191
£m
4,763.1
(3,678.9)
1,084.2
1,087.4
(3.2)
–
(186.3)
341.1
(337.9)
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 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
The notes on pages 173 to 233 form an integral part of these Financial Statements.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Consolidated Statement of Comprehensive Income
Year ended 30 June 2020
Profit for the year
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Actuarial loss on defined benefit pension scheme
Tax credit relating to items not reclassified
Total items that will not be reclassified to profit or loss
Total comprehensive income recognised for the year
Total comprehensive income recognised for the year attributable to
the owners of the Company
Total comprehensive income/(expense) recognised for the year attributable to
non-controlling interests
Notes
6.2.2
2020
£m
402.7
(69.2)
13.1
(56.1)
346.6
20191
£m
739.4
(15.4)
2.9
(12.5)
726.9
343.6
727.5
4.1.2
3.0
(0.6)
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
The notes on pages 173 to 233 form an integral part of these Financial Statements.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Statement of Changes in Shareholders’ Equity –
Group
Share
capital
(note 5.5.1)
£m
Share
premium
£m
Merger
reserve
(note 4.1.1)
£m
Own
shares
(note 5.5.2)
£m
Share-
based
payments
(note 6.3)
£m
Group
retained
earnings
due to
share-
holders
of the
Company
£m
Total
Group
retained
earnings
due to
share-
holders
of the
Company
£m
Non-
controlling
interests
(note 4.1.2)
£m
Total
equity
£m
At 1 July 2018 as adjusted for
changes in accounting policies1
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 20191
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 2020
Dividend payments
Distributions to non-controlling
interests
Issue of shares
Share-based payments
Purchase of own shares
Transfers in respect of
share options
Tax on share-based
payments
At 30 June 2020
101.3
–
232.6
–
1,109.0
–
(1.2)
–
18.0
–
3,126.0
740.0
3,142.8
740.0
7.5
(0.6)
4,593.2
739.4
–
–
–
–
0.4
–
–
–
–
–
–
–
6.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(21.7)
–
–
–
–
–
14.1
–
(15.4)
(15.4)
2.9
2.9
727.5
(452.3)
–
–
–
727.5
(452.3)
–
14.1
(21.7)
7.8
(12.4)
4.7
0.1
–
101.7
–
–
239.3
–
–
1,109.0
–
–
(15.1)
–
1.2
20.9
–
0.4
3,406.3
399.7
1.6
3,412.1
399.7
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
5.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5.9)
–
–
–
–
–
–
6.8
–
(69.2)
(69.2)
13.1
13.1
343.6
(373.2)
343.6
(373.2)
–
–
–
–
–
–
6.8
(5.9)
0.9
(9.7)
8.1
(0.7)
–
101.8
–
245.2
–
1,109.0
–
(20.1)
(1.4)
16.6
1.6
3,386.4
0.2
3,382.9
–
–
(0.6)
–
–
–
–
–
–
6.9
3.0
–
–
3.0
–
(8.5)
–
–
–
–
–
1.4
(15.4)
2.9
726.9
(452.3)
7.1
14.1
(21.7)
0.1
1.6
4,869.0
402.7
(69.2)
13.1
346.6
(373.2)
(8.5)
6.0
6.8
(5.9)
(0.7)
0.2
4,840.3
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. The adoption of IFRS 16 had no effect on
the opening reserves at 1 July 2019. Further information on the initial application of this standard can be found in notes 1.4 and 1.5.
In the prior year, the Group’s equity at 1 July 2018 was adjusted for the initial application of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from contracts with
customers’.
The notes on pages 173 to 233 form an integral part of these Financial Statements.
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Barratt Developments PLCwww.barrattdevelopments.co.uk Statement of Changes in Shareholders’ Equity –
Company
Share
capital
(note 5.5.1)
£m
101.3
–
–
Share
premium
£m
232.6
–
–
Merger
reserve
(note 4.1.1)
£m
1,109.0
–
–
Own
shares
(note 5.5.2)
£m
(1.2)
–
–
Share-
based
payments
(note 6.3)
£m
18.3
–
–
Retained
earnings
£m
1,938.0
576.9
(15.4)
Total
retained
earnings
£m
1,955.1
576.9
(15.4)
Total
equity
£m
3,398.0
576.9
(15.4)
–
–
–
0.4
–
–
–
–
101.7
–
–
–
–
–
0.1
–
–
–
–
–
–
6.7
–
–
–
–
239.3
–
–
–
–
–
5.9
–
–
–
–
–
–
–
–
–
–
–
1,109.0
–
–
–
–
–
–
–
–
–
–
101.8
–
245.2
–
1,109.0
–
–
2.9
2.9
2.9
–
–
–
–
(21.7)
7.8
–
(15.1)
–
–
–
–
–
14.1
–
(12.4)
0.4
20.4
–
–
564.4
(452.3)
–
–
–
2.7
–
2,052.8
504.4
(69.2)
564.4
(452.3)
–
14.1
(21.7)
(1.9)
0.4
2,058.1
504.4
(69.2)
564.4
(452.3)
7.1
14.1
(21.7)
(1.9)
0.4
3,508.1
504.4
(69.2)
–
–
13.1
13.1
13.1
–
–
–
–
(5.9)
0.9
–
(20.1)
–
–
–
6.8
–
448.3
(373.2)
–
–
–
448.3
(373.2)
–
6.8
(5.9)
448.3
(373.2)
6.0
6.8
(5.9)
(9.7)
(0.9)
16.6
3.6
1.0
2,132.5
(5.2)
(5.2)
0.1
2,129.0
0.1
3,585.0
At 1 July 20181
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 20191
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 2020
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 2020
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. The adoption of IFRS 16 had no effect on
the opening reserves at 1 July 2019. Further information on the initial application of this standard can be found in notes 1.4 and 1.5.
In the prior year, the Group’s equity at 1 July 2018 was adjusted for the initial application of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from contracts with
customers’.
The notes on pages 173 to 233 form an integral part of these Financial Statements.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Balance Sheets
At 30 June 2020
Assets
Non-current assets
Other intangible assets
Goodwill
Property, plant and equipment
Right-of-use assets
Investments in subsidiary undertakings
Investments in joint ventures and associates
Retirement benefit assets
Secured loans
Deferred tax assets
Trade and other receivables
Current assets
Inventories
Secured loans
Trade and other receivables
Cash and cash equivalents2
Total assets
Liabilities
Non-current liabilities
Loans and borrowings
Trade and other payables
Lease liabilities
Deferred tax liabilities
Current liabilities
Loans and borrowings2
Trade and other payables
Lease liabilities
Current tax liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Total retained earnings
Equity attributable to the owners of the Company
Non-controlling interests
Total equity
2020
Notes
£m
20191
re-presented2
£m
Group
1 July 20181
re-presented2
£m
2020
£m
20191
re-presented2
£m
Company
1 July 20181
re-presented2
£m
4.2.2
4.2.1
4.5
3.5
4.1.3
4.3
6.2.2
3.7
2.6.3
3.2
3.1
3.7
3.2
5.1
5.1
3.3
3.5
2.6.3
5.1
3.3
3.5
3.6
5.5.1
4.1.1
4.1.2
101.1
805.9
19.0
46.7
–
152.1
3.5
1.0
–
1.3
1,130.6
5,027.9
1.1
84.9
619.8
5,733.7
6,864.3
(200.0)
(319.7)
(36.1)
(2.4)
(558.2)
(117.7)
(1,305.4)
(11.7)
(2.8)
(28.2)
(1,465.8)
(2,024.0)
4,840.3
101.8
245.2
1,109.0
3,382.9
4,838.9
1.4
4,840.3
102.3
805.9
17.4
–
–
189.0
62.6
1.4
–
1.5
1,180.1
4,824.3
1.2
223.6
1,136.0
6,185.1
7,365.2
(200.0)
(413.5)
–
(17.6)
(631.1)
(177.7)
(1,587.9)
–
(99.5)
–
(1,865.1)
(2,496.2)
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
1.9
–
3.1
1,201.6
4,516.7
0.3
226.5
1,176.2
5,919.7
7,121.3
(191.1)
(566.3)
–
(25.3)
(782.7)
(193.8)
(1,465.8)
–
(85.8)
–
(1,745.4)
(2,528.1)
4,593.2
101.3
232.6
1,109.0
3,142.8
4,585.7
7.5
4,593.2
–
–
9.5
4.8
3,086.2
–
3.5
–
1.0
–
3,105.0
–
–
405.4
424.0
829.4
3,934.4
(200.0)
–
(3.9)
–
(203.9)
(111.0)
(33.6)
(0.9)
–
–
(145.5)
(349.4)
3,585.0
101.8
245.2
1,109.0
2,129.0
3,585.0
–
3,585.0
–
–
7.7
–
3,085.9
–
62.6
–
–
–
3,156.2
–
–
87.2
889.3
976.5
4,132.7
(200.0)
–
–
(7.8)
(207.8)
(52.6)
(364.2)
–
–
–
(416.8)
(624.6)
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
874.5
960.5
4,109.9
(191.1)
–
–
(8.6)
(199.7)
(78.2)
(434.0)
–
–
–
(512.2)
(711.9)
3,398.0
101.3
232.6
1,109.0
1,955.1
3,398.0
–
3,398.0
1
2
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4). There is no impact on the net
assets of the Group or the Company.
The notes on pages 173 to 233 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 1 September 2020.
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 £504.4m (2019: £576.9m).
170
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Cash Flow Statements
Year ended 30 June 2020
Net cash (outflow)/inflow from operating activities (page 172)
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 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 issue of share capital
Payment of dividend equivalents
Loan drawdowns
Loan repayments2
Repayment of lease liabilities1
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year2
Cash and cash equivalents at the end of the year2
Group
20191
re-presented2
£m
361.3
2020
£m
(121.0)
Company
20191
re-presented2
£m
(85.4)
2020
£m
(667.0)
Notes
4.5
(7.5)
(7.2)
(4.9)
(4.1)
–
–
(15.8)
4.6
(31.2)
(51.0)
72.2
24.2
–
–
3.5
61.2
(373.2)
(8.5)
(5.9)
6.0
(0.7)
–
(60.0)
(14.1)
(456.4)
(516.2)
1,136.0
619.8
66.9
60.3
18.6
–
5.1
81.5
(452.3)
–
(21.7)
7.1
–
–
(16.1)
–
(483.0)
(40.2)
1,176.2
1,136.0
–
–
–
–
–
–
519.3
3.0
517.4
(373.2)
–
(5.9)
6.0
–
58.4
–
(1.0)
(315.7)
(465.3)
889.3
424.0
4.3
4.3
4.3
2.5
4.1.2
3.5
5.1
–
–
–
–
–
–
593.6
3.2
592.7
(452.3)
–
(21.7)
7.1
–
–
(25.6)
–
(492.5)
14.8
874.5
889.3
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
2 The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
The notes on pages 173 to 233 form an integral part of these Financial Statements.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements
Cash Flow Statements CONTINUED
Year ended 30 June 2020
Reconciliation of profit/(loss) from operations to cash flow
from operating activities
Operating activities:
Profit/(loss) from operations
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Depreciation of right-of-use assets¹
Amortisation of intangible assets
Profit on disposal of subsidiary undertaking
Impairment/(reversal of impairment) of inventories
Profit on redemption of secured loans
Share-based payments charge
Imputed interest on deferred term payables²
Imputed interest on lease arrangements1
Amortisation of facility fees
Finance income related to employee benefits
Total non-cash items
Increase in inventories
Decrease/(increase) in receivables
Decrease in payables
Increase in provisions
Total movements in working capital and provisions
Interest paid
Tax paid
Net cash (outflow)/inflow from operating activities
Notes
4.5
3.5
4.2.2
3.1
6.3
5.2
5.2
5.2
5.2
3.6
2020
£m
493.4
5.5
0.4
13.6
1.2
–
8.2
(0.4)
6.8
(19.9)
(2.0)
(2.3)
1.6
12.7
(211.8)
129.3
(373.8)
28.2
(428.1)
(11.7)
(187.3)
(121.0)
Group
20191
£m
901.1
4.3
–
–
–
(0.6)
(14.8)
(1.2)
14.1
(21.5)
–
(2.8)
2.0
(20.5)
(291.9)
(2.3)
(53.3)
–
(347.5)
(11.6)
(160.2)
361.3
2020
£m
(5.7)
2.7
0.4
0.9
–
–
–
–
1.4
–
(0.1)
(2.3)
1.6
4.6
–
(322.1)
(328.8)
–
(650.9)
(15.0)
–
(667.0)
Company
20191
£m
(10.1)
1.8
–
–
–
–
–
–
6.3
–
–
(2.8)
2.0
7.3
–
(13.4)
(55.3)
–
(68.7)
(13.9)
–
(85.4)
1
2
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
The Balance Sheet movements in land payables 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 173 to 233 form an integral part of these Financial Statements.
172
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Barratt Developments PLCwww.barrattdevelopments.co.uk Notes to the Financial Statements
Year ended 30 June 2020
1 Basis of preparation
1.1 Introduction
These Financial Statements for the Group and Parent Company 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 173 to 233.
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
• Costs associated with legacy properties – see note 3.6
•
Impairment of goodwill and indefinite life brands – see note 4.2.3
The Group has exercised judgement in evaluating the impact of COVID-19 on the Financial Statements. In addition to the key sources of
estimation uncertainty, the areas where COVID-19 has been considered are:
• Going concern – see note 1.3
• Nature and carrying value of inventories – see note 3.1
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 development, financial
performance and financial position are set out in the Strategic Report on pages 2 to 79. The material financial and operational risks and
uncertainties that may have an impact on the Group’s performance and their mitigation are outlined on pages 72 to 77 and financial risks
including liquidity risk, market risk, credit risk and capital risk are outlined in note 5.4 to the Financial Statements.
At 30 June 2020, the Group held cash of £619.8m and total loans and borrowings of £317.7m, consisting of £117.7m of overdrafts repayable
on demand and £200.0m sterling USPP notes maturing in August 2027. These balances, set against pre-paid facility fees, comprise the
Group’s net cash of £308.2m presented in note 5.1.
Should further funding be required, the Group has a committed £700m RCF, subject to compliance with certain financial covenants, that
matures in November 2024. In addition, on 28 April 2020 the Group received confirmation that it was eligible to access funding under the
CCFF until March 2021. Utilisation of the CCFF is not anticipated.
As such, in consideration of its net current assets of £4,267.9m, the Directors are satisfied that the Group has sufficient liquidity to meet its
current liabilities and working capital requirements.
The future financial performance of the Group is dependent upon the wider economic environment in which it operates. The factors that
particularly affect the performance of the Group include flat or negative economic growth, buyer confidence, mortgage availability and
affordability, competitor pricing, new housing supply, falls in house prices or land values and the cost and availability of raw materials, sub-
contractors and suppliers.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
1.3 Going concern CONTINUED
COVID-19 has heightened the inherent uncertainty in the Group’s assessment of these factors. Since the release from lockdown, UK
housing market activity has shown a marked rebound and demand relative to supply remains strong. However, the outlook remains unclear:
unemployment is expected to rise and market activity could be affected by an unfavourable outcome to negotiations regarding the UK’s
relationship with the EU or changes to the Government’s Help to Buy scheme. The suspension of trading under COVID-19 has increased the
Group’s short term sensitivity to its RCF covenants. Future outbreaks of the disease may cause further disruption.
The Group’s financial forecasts reflect the outcomes that the Directors consider most likely, based on the information available at the
date of signing of these Financial Statements. This includes the implementation of COVID-19 safe working practices and market changes
following revisions to the Help to Buy scheme.
To assess the Group’s resilience to more adverse outcomes, its forecast performance was sensitised to reflect a series of scenarios based
on the Group’s principal risks and the downside prospects for the UK economy and housing market presented in the latest available
external economic forecasts.
This exercise included a reasonable worst-case scenario in which the Group’s principal risks manifest in aggregate to a severe but
plausible level. This assumed that sales volumes and average selling prices fall below their pre-COVID-19 levels by 25% and 10%
respectively, construction costs increase by 5%, and that the Group temporarily closes its operations for two months in response to a
national resurgence of the virus.
The effects were modelled over the three-year period covered by the Directors’ viability review, alongside reasonable mitigation that the
Group would expect to undertake in such circumstances, primarily a reduction in investment in inventories in line with the fall in expected
sales and the actions successfully deployed during the Group’s closure of its operations in March 2020, without Government assistance.
In all scenarios, including the reasonable worst case, the Group is able to comply with its financial covenants, operate within its current
facilities without utilising the CCFF, and meet its liabilities as they fall due.
Furthermore, a reverse stress test was performed to determine the market conditions in which the Group, without mitigating action, would
cease to be able to operate under its current facilities. Based on past experience and current economic forecasts, the Directors consider
the possibility of this outcome to be remote and have identified mitigation that would be adopted in such circumstances.
Accordingly, the Directors consider there to be no material uncertainties that may cast significant doubt on the Group’s ability to continue
to operate as a going concern. They have formed a judgement that there is a reasonable expectation that the Group and Company have
adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from the date of signing
of these Financial Statements. For this reason, they continue to adopt the going concern basis in the preparation of these Financial
Statements.
1.4 Application of accounting standards
During the year ended 30 June 2020 the Group has applied accounting policies and methods of computation consistent with those applied
in the prior year except in respect of IFRS 8 ‘Operating Segments’ and IAS 32 'Financial Instruments: Presentation'; and as amended by the
adoption of new and revised standards including IFRS 16 ‘Leases’.
•
IFRS 8 ‘Operating segments’:
This standard requires disclosure of a segment’s information if its revenue, profit or assets constitute 10% of the Group’s total. In
recent years, the Group’s Commercial operating segment has consistently not met these criteria and its disclosure does not give useful
information to investors concerning the value and risks of the Group. Therefore it is no longer disclosed separately.
•
IAS 32 'Financial Instruments: Presentation':
The Group’s cash balances and bank overdrafts are subject to cash pooling arrangements. In accordance with IAS 32: ‘Financial
Instruments: Presentation’, cash balances are presented gross within cash and cash equivalents and bank overdrafts are presented
gross within current loans and other borrowings. In prior periods, these amounts were presented net in cash and cash equivalents. For
presentational purposes, the balances have been re-presented as at 30 June 2019 and 1 July 2018. The impact of this change is to increase
both cash and cash equivalents and bank overdrafts within current loans and other borrowings as at 30 June 2019 by £177.7m and as at 1
July 2018 by £193.8m in the Group’s Balance Sheet. This has had no impact on net assets.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 1.4 Application of accounting standards CONTINUED
During the year the Group has adopted the following new and revised standards and interpretations:
•
IFRS 16 ‘Leases’:
This standard became effective for accounting periods beginning on or after 1 January 2019 and was applicable to the Group for the year
beginning on 1 July 2019, replacing IAS 17 ‘Leases’ and IFRIC 4 ‘Determining whether an arrangement contains a lease’.
The Group has applied IFRS 16 using the modified retrospective approach, under which any cumulative effect of initial application is
recognised in retained earnings at 1 July 2019. Comparative information has not, therefore, been restated and is reported under previous
accounting policies.
IFRS 16 specifies how leases are recognised, measured and disclosed.
The Group has elected to apply the practical expedient in respect of the assessment of transactions as leases. Contracts not previously
assessed as leases under IAS 17 were not reassessed.
The Group as a lessee
Prior to the application of IFRS 16 the Group’s property and equipment leases were classified as operating leases. Under IFRS 16 right-
of-use assets and lease liabilities are recognised in the Balance Sheet. At transition, lease liabilities were measured at the present value
of remaining lease payments, discounted at incremental borrowing rates which ranged between 1% and 6% at 1 July 2019. Incremental
borrowing rates were calculated based upon risk free UK government bond rates adjusted for the average term of each lease portfolio and
Group specific spread adjustments. Lease liabilities are re-measured when the Group changes its assessment of whether it will exercise a
termination or extension option. Right-of-use assets are initially measured at cost comprising the initial measure of the lease liability plus
any direct costs less any lease incentives. Subsequently, right-of-use assets are measured at cost less accumulated depreciation and any
accumulated impairment losses.
The following practical expedients were used when applying IFRS 16 to leases previously classified as operating leases under IAS 17:
• a single discount rate is applied to portfolios of leases with similar properties
•
the exemptions not to recognise right-of-use assets and liabilities for leases with a low-value underlying asset or a lease term of less
than 12 months are applied
•
initial direct costs were excluded from measurement of the right-of-use asset at the date of initial application
• hindsight was used in determining the lease term
The Group as lessor
The Group is not required to make any adjustments on transition to IFRS 16.
Information on the impact of the adoption of IFRS 16 on the Financial Statements is provided in note 1.5.
There has been no impact on the Financial Statements as a result of:
•
IFRIC 23 ‘Uncertainty over Income Tax Treatments’;
• Amendments to IFRS 9 ‘Prepayment Features with Negative Compensation’;
• Amendments to IAS 28 ‘Long-term Interests in Associates and Joint Ventures’;
• Annual Improvements to IFRS Standards 2015-2017 Cycle; and
• Amendments to IAS 19 ‘Plan Amendment, Curtailment or Settlement’.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
1.5 Impact of changes in accounting policies
On transition to IFRS 16 the Group recognised £55.4m of right-of-use assets, £55.0m of lease liabilities and £0.4m of accruals.
The table below presents a reconciliation from operating lease commitments disclosed at 30 June 2019 to lease liabilities recognised at
1 July 2019.
Operating lease commitments disclosed under IAS 17 at 30 June 2019
Effect of discounting
Other adjustments including adjustments for short term leases and hindsight adjustments
Lease liabilities recognised at 1 July 2019
Group
£m
58.3
(10.4)
7.1
55.0
Company
£m
5.8
(0.2)
–
5.6
The Group has elected to adopt IFRS 16 using the modified retrospective approach, under which any cumulative effect of initial application
is recognised in retained earnings at 1 July 2019. Comparative information has not been restated. The tables below and on pages 177 and
178 summarise the impact of the adoption of IFRS 16 on the Income Statement, Balance Sheet and Cash Flow Statement.
Impact on Consolidated Income Statement:
Revenue
Cost of sales
Gross profit
Administrative expenses
Part-exchange income
Part-exchange expenses
Profit from operations
Finance income
Finance costs
Net finance costs
Share of post-tax profit from joint ventures
Profit before tax
Tax
Profit for the year
Earnings per share from continuing operations
Basic
Diluted
Year ended
30 June 2020
as reported
£m
Adjustments in
respect of the
adoption of IFRS 16
£m
Group
Year ended
30 June 2020 before
adjustments for the
adoption of IFRS 16
£m
3,419.2
(2,804.9)
614.3
(124.5)
327.5
(323.9)
493.4
5.1
(35.0)
(29.9)
28.3
491.8
(89.1)
402.7
39.4p
38.9p
–
0.5
0.5
0.8
–
–
1.3
–
(2.0)
(2.0)
–
(0.7)
0.1
(0.6)
(0.1p)
–
3,419.2
(2,805.4)
613.8
(125.3)
327.5
(323.9)
492.1
5.1
(33.0)
(27.9)
28.3
492.5
(89.2)
403.3
39.5p
38.9p
176
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Barratt Developments PLCwww.barrattdevelopments.co.uk 1.5 Impact of changes in accounting policies CONTINUED
As at
30 June 2020
as reported
£m
Adjustments
in respect of
the adoption of
IFRS 16
£m
Group
As at
30 June
2020 before
adjustments for
the adoption of
IFRS 16
£m
As at
30 June 2020
as reported
£m
Adjustments
in respect of
the adoption of
IFRS 16
£m
Company
As at
30 June
2020 before
adjustments for
the adoption of
IFRS 16
£m
46.7
1,083.9
1,130.6
5,733.7
6,864.3
(36.1)
(522.1)
(558.2)
(11.7)
(1,454.1)
(1,465.8)
(2,024.0)
4,840.3
3,382.9
1,456.0
1.4
4,840.3
46.7
–
46.7
–
46.7
(36.1)
–
(36.1)
(11.7)
0.5
(11.2)
(47.3)
(0.6)
(0.6)
–
–
(0.6)
–
4.8
1,083.9
1,083.9
5,733.7
6,817.6
–
(522.1)
(522.1)
–
(1,454.6)
(1,454.6)
(1,976.7)
4,840.9
3,383.5
1,456.0
1.4
4,840.9
3,100.2
3,105.0
829.4
3,934.4
(3.9)
(200.0)
(203.9)
(0.9)
(144.6)
(145.5)
(349.4)
3,585.0
2,129.0
1,456.0
–
3,585.0
4.8
–
4.8
–
4.8
(3.9)
–
(3.9)
(0.9)
–
(0.9)
(4.8)
–
–
–
–
–
–
3,100.2
3,100.2
829.4
3,929.6
–
(200.0)
(200.0)
–
(144.6)
(144.6)
(344.6)
3,585.0
2,129.0
1,456.0
–
3,585.0
Impact on Balance
Sheet:
Assets
Non-current assets
Right-of-use assets
Other non-current assets
per Balance Sheet
Current assets
Total assets
Liabilities
Non-current liabilities
Lease liabilities
Other non-current
liabilities
Current liabilities
Lease liabilities
Other current liabilities
Total liabilities
Net assets
Equity
Retained earnings
Other reserves and capital
Non-controlling interests
Total equity
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
1.5 Impact of changes in accounting policies CONTINUED
Year ended
30 June 2020
as reported
£m
493.4
Adjustments in
respect of the
adoption of
IFRS 16
£m
1.3
Group
Year ended
30 June
2020 before
adjustments for
the adoption of
IFRS 16
£m
492.1
Year ended
30 June 2020
as reported
£m
(5.7)
Adjustments in
respect of the
adoption of
IFRS 16
£m
0.1
Company
Year ended
30 June
2020 before
adjustments for
the adoption of
IFRS 16
£m
(5.8)
13.6
(2.0)
1.1
12.7
(211.8)
(244.5)
28.2
(428.1)
(11.7)
(187.3)
(121.0)
61.2
(14.1)
(442.3)
(456.4)
(516.2)
1,136.0
619.8
13.6
(2.0)
–
11.6
–
1.2
–
1.2
–
–
14.1
–
(14.1)
–
(14.1)
–
–
–
–
–
1.1
1.1
(211.8)
(245.7)
28.2
(429.3)
(11.7)
(187.3)
(135.1)
61.2
–
(442.3)
(442.3)
(516.2)
1,136.0
619.8
0.9
(0.1)
3.8
4.6
–
(650.9)
–
(650.9)
(15.0)
–
(667.0)
517.4
(1.0)
(314.7)
(315.7)
(465.3)
889.3
424.0
0.9
(0.1)
–
0.8
–
0.1
–
0.1
–
–
1.0
–
(1.0)
–
(1.0)
–
–
–
–
–
3.8
3.8
–
(651.0)
–
(651.0)
(15.0)
–
(668.0)
517.4
–
(314.7)
(314.7)
(465.3)
889.3
424.0
Impact on Cash Flow
Statement:
Profit/(loss) from operations
Depreciation of right-of-use
assets
Imputed interest on lease
arrangements
Other non-cash items
Total non-cash items
Increase in inventories
Movement in payables and
receivables
Increase in provisions
Total movements in working
capital and provisions
Interest paid
Tax paid
Net cash (outflow)/inflow
from operating activities
Net cash inflow from
investing activities
Repayment of lease liabilities
Other financing activities
Net cash outflow from
financing activities
Net decrease in cash and
cash equivalents
Cash and cash equivalents
at the beginning of the year1
Cash and cash equivalents
at the end of the year
1
The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
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 2020 and later periods. None of
these are expected to have a material impact on the Group. The Group has not early-adopted any standard, amendment or interpretation.
178
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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
The Group considers all contracts with commercial customers and registered providers on a contract by contract basis and determines
the appropriate revenue recognition based on the particular terms of that contract. For the majority of such contracts, there is a single
performance obligation for which revenue is recognised at a point in time, when construction has been completed and control is
transferred to the customer. The Group recognises revenue over time in relation to certain contracts with registered housing providers
only in circumstances in which control of the associated land is transferred to the customer before or during construction. Revenue is
only recognised from the point at which control of the associated land is transferred. Revenue is recognised because the construction
activity enhances an asset that is controlled by the customer.
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. The Group is satisfied that it is appropriate to measure performance by reference to surveys of work performed to date, because
these surveys identify the extent to which benefits have been transferred to the customer. 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
other revenue.
An analysis of the Group’s continuing revenue is as follows:
Revenue from private residential sales
Revenue from affordable residential sales
Other revenue including commercial sales
Residential completions1
2019
number
13,533
3,578
–
17,111
2020
number
9,568
2,466
–
12,034
2020
£m
2,971.5
402.0
45.7
3,419.2
Revenue
2019
£m
4,222.6
473.1
67.4
4,763.1
¹ Residential completions exclude JV completions of 570 homes (2019: 745) in which the Group has an interest.
Included within Group revenue is £140.9m (2019: £76.8m) of revenue from construction contracts on which revenue is recognised over
time by reference to the stage of completion of the contracts (note 3.4). Of this amount, £19.2m (2019: £3.3m) was included in the contract
liability balance at the beginning of the year.
Revenue includes £464.5m (2019: £521.4m) 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.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
2.2 Adjusted items
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, government grants received under
unusual circumstances, gains or losses on the disposal of businesses or individual assets, and asset impairments, including land, work
in progress, goodwill and investments.
Cost associated with legacy properties:
During the year, charges of £39.9m were recognised in respect of costs associated with legacy properties (2019: £6.9m charged in respect
of costs associated with legacy properties and £3.7m released following the disposal of a legacy property). These amounts have been
separately disclosed as adjusted items in the Income Statement. Further details are provided in note 3.6. No charge (2019: £7.0m) was
recognised in adjusted items in the year in respect of costs associated with legacy JV properties.
CJRS grant income:
During the year, the Group recognised grant income of £26.0m in respect of the UK Government’s CJRS (2019: £nil). This was a one-off,
temporary Scheme, from which the income has been voluntarily refunded by the Group after the balance sheet date. No income in respect
of CJRS will be recognised in future periods. It has therefore been presented as an adjusted item. Further information regarding the
repayment of the grant is included in note 7.3.
2.3 Profit from operations
Profit from operations includes all of the revenue and costs derived from the Group’s operating businesses. Profit from operations excludes
finance costs, finance income, the Group’s share of profits or losses from 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 allocates 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’s site valuation process determines the forecast profit margin for each site. The valuation process acts as a method of
allocating land costs and construction work in progress costs of a development to each individual plot and drives the recognition of costs
in the Income Statement as each plot is sold. Any changes in the forecast profit margin of a site from changes in sales prices or costs to
complete is recognised across all homes sold in both the current period and future periods. This ensures that the forecast site margin
achieved on each individual home is equal across the development.
The Group has reassessed its estimates on a site-by-site basis to incorporate the expected extension of site duration caused by
COVID-19 and the adoption of COVID-19 safe working practices and protocols. On average, the Group estimates that site durations will
increase by around six months, resulting in an additional allocation of £29.1m of site-wide development costs to homes sold in the
current year.
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 impact cost of sales and work in progress and would reduce the Group’s gross profit by £22.9m, a reduction in gross margin of
70 bps.
Depreciation of right-of-use assets
Right-of-use assets are depreciated in the Income Statement in equal instalments to the earlier of the end of the lease term or the end
of the useful life of the asset.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 2.3 Profit from operations CONTINUED
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.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to
them and that the grants will be received.
Government grants are recognised in the Income Statement so as to match with the related costs they are intended to compensate for.
Grants related to assets are deducted from the carrying amount of the asset. Grants related to income are included in the appropriate
line within the Income Statement.
Part-exchange income and expenses
Income on the sale of a part-exchange property is recognised at legal completion at the fair value of consideration received or receivable
for the property.
Part-exchange properties are recognised in inventories at the lower of cost, being their fair value at acquisition, and their net realisable
value. The amount of any write-down of inventories to net realisable value, or reversal of a previous write-down, is recognised in the
income statement in the period in which it occurs.
The carrying amount of a part exchange property is recognised as an expense in the period in which the related income is recognised.
Maintenance costs are recognised in the Income Statement in the period in which they are incurred.
2.3.1 Profit from operations is stated after charging/(crediting):
Cost of inventories recognised as an expense in cost of sales
Of which relate to incremental costs of extensions in site durations due to the adoption of
COVID-19 safety practices
Employee costs (including Directors)2
Of which relate to non-productive site employees expensed during the COVID-19 closedown
period that would ordinarily be capitalised as work in progress
Other non-productive site and safety costs expensed during the COVID-19 closedown period
that would ordinarily be capitalised as work in progress
Government grants
Depreciation of property, plant and equipment
Depreciation of right-of-use assets1
Lease income
Operating lease charges – hire of plant, machinery and vehicles1
Operating lease charges – other1
Notes
6.1
2.3.3
4.5
3.5
3.5
2020
£m
2,511.9
29.1
374.7
25.4
19.8
(26.0)
5.5
13.6
(1.2)
–
–
2019
£m
3,502.7
–
427.1
–
–
–
4.3
–
(1.2)
35.5
14.5
1
2
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
The employee costs reported above are before the deduction of government grants receivable in respect of these costs of £26.0m (2019: £nil). Further details are
provided in notes 2.3.3 and 6.1.
Profit from operations is stated after charging the Directors’ emoluments disclosed in the Remuneration report on pages 142 and 143 and
in note 6.1.
The Group does not recognise income from supplier rebates until it can be calculated reliably and it is certain that it will be received from
suppliers. During the year, £30.8m (2019: £33.5m) of supplier rebate income was included within profit from operations.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
2.3 Profit from operations CONTINUED
2.3.2 Cost of sales
In response to the COVID-19 pandemic, the Group took the decision to temporarily close its sales centres, construction sites and offices
during the year and implemented extensive working practices and protocols to enable a safe return to operations. Included within cost
of sales are £45.2m (2019: £nil) of non-productive site overheads and safety costs incurred during the controlled closure and restart of
our sites that would ordinarily be capitalised as work in progress including £25.4m of employee costs. Additional site-wide development
costs arising from extensions in site durations of £29.1m (2019: £nil) have been allocated to homes sold in the current year in line with the
Group’s margin recognition policy, more detail of which is included note 2.3.
Cost of sales is presented net of £22.8m in Government grant income received in respect of the CJRS (2019: £nil).
2.3.3 Government grants and assistance
During the year the Group recognised CJRS grant income from the Government designed to mitigate the impact of COVID-19. Amounts
receivable during the year are disclosed below. No Government grants were receivable or received during 2019.
Grant income in respect of the CJRS included in cost of sales
Grant income in respect of the CJRS included in administrative expenses
2020
Amounts
receivable
and received
£m
22.8
3.2
26.0
At 30 June 2020, receivables in respect of the CJRS of £4.4m (2019: £nil) were included in other receivables.
On 6 July 2020 the Group announced that it would return all Government grants received in respect of the CJRS. These grants have been
repaid since the balance sheet date (see note 7.3).
2.3.3 Administrative expenses
Administrative expenses of £124.5m (2019: £186.3m) include sundry income of £29.0m (2019: £26.3m) which principally comprises
management fees receivable from joint ventures, property management income, the sale of freehold reversions, ground rent receivable and
Government grant income.
2.3.4 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
2020
£000
2019
£000
275
290
565
32
20
52
617
148
253
401
28
30
58
459
1 Audit-related assurance services comprise the review of the interim report.
2
Other services comprise a short term, limited scope, piece of advisory support; and in the previous year were in relation to the provision of planning related
information required in the sale of a subsidiary.
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 page 119. 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.
182
2020
£000
163
10
173
2019
£000
145
10
155
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Barratt Developments PLCwww.barrattdevelopments.co.uk 2.4 Earnings per share
The earnings per share from continuing operations were as follows:
Basic earnings per share
Diluted earnings per share
2020
pence
39.4
38.9
2019¹
pence
73.2
72.3
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard 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 EBT that do not attract dividend
equivalents which are treated as cancelled.
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)
Note
2020
399.7
1,018.2
(4.3)
1,013.9
1,018.2
10.0
1,028.2
2019¹
740.0
1,014.2
(3.8)
1,010.4
1,014.2
10.0
1,024.2
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
2.5 Dividends
Amounts recognised as distributions to equity shareholders in the year:
Final dividend for the year ended 30 June 2019 of 19.5p (2018: 17.9p) per share
Special dividend for the year ended 30 June 2019 of 17.3p (2018: 17.3p) per share
Interim dividend for the year ended 30 June 2020 of nil (2019: 9.6p) per share
Total dividends distributed to equity shareholders in the year
Proposed final dividend for the year ended 30 June 2020 of nil (2019: 19.5p) per share
Proposed special dividend for the year ended 30 June 2020 of nil (2019: 17.3p) per share
2.6 Tax
All profits of the Group are subject to UK corporation tax.
2020
£m
197.8
175.4
–
373.2
2020
£m
–
–
2019
£m
180.6
174.6
97.1
452.3
2019
£m
197.1
175.0
The current year tax charge has been provided for, by the Group and Company, at a standard effective rate of 19.0% (2019: 19.0%) and the
closing deferred tax assets and liabilities have been provided in these Financial Statements at a rate of 19.0% (2019: 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.
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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 2.6 Tax CONTINUED
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 change in corporation tax rate
Tax charge for the year
Notes
2.6.3
2020
£m
100.0
(7.4)
92.6
(3.1)
(1.5)
1.1
(3.5)
89.1
2019
£m
176.3
(1.7)
174.6
(5.0)
0.2
0.6
(4.2)
170.4
Factors affecting the tax charge for the year
The tax rate assessed for the year is lower (2019: lower) than the standard effective rate of corporation tax in the UK of 19.0% (2019: 19.0%).
The differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax of 19.0% (2019: 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
2020
£m
491.8
93.4
4.8
(1.3)
(8.9)
–
1.1
89.1
2019
£m
909.8
172.9
0.5
(2.0)
(1.5)
(0.1)
0.6
170.4
Legislation was substantively enacted during the year to repeal the reduction of the main corporation tax rate, thereby maintaining 19.0%
throughout the financial year. Accordingly, the rate change includes the re-measurement of opening temporary differences to 19.0% where
these were previously measured at between 17.0% and 19.0% depending on the timing of expected reversal.
Completion volumes were significantly reduced by the Group's decision to pause activity in response to COVID-19, reducing profit before
tax for the financial year. Adjustments in respect of previous years reflect the latest estimates and assumptions and truing up to final
corporation tax computations. The proportional impact of those adjustments has a greater impact on this year’s effective tax rate due to the
lower profit before tax.
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 £13.3m (2019: £4.5m
credit) was recognised directly in equity.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
2.6 Tax CONTINUED
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:
Pension
scheme
£m
(11.1)
(3.4)
Share
options
£m
2.9
1.2
Indefinite
life brands
£m
(17.0)
–
Accelerated
capital
allowances
£m
1.2
–
Losses
£m
–
–
–
2.9
(11.6)
–
(11.6)
(2.2)
13.1
(0.7)
–
(0.7)
–
1.2
5.3
5.3
–
(1.3)
(1.4)
2.6
2.6
–
–
–
–
–
–
0.1
–
0.1
0.1
–
–
–
(17.0)
–
(17.0)
(2.0)
–
(19.0)
–
(19.0)
(0.1)
–
1.1
1.1
–
(0.4)
–
0.7
0.7
–
Other
(net)
£m
(1.3)
6.4
(0.5)
–
4.6
5.9
(1.3)
9.3
–
13.9
14.1
(0.2)
Group
Total
£m
(25.3)
4.2
(0.6)
4.1
(17.6)
12.3
(29.9)
3.5
11.7
(2.4)
17.5
(19.9)
At 1 July 2018
Income Statement (charge)/credit
Acquired with subsidiary
undertakings
Amounts taken directly to equity
At 30 June 2019
Comprising:
Deferred tax assets
Deferred tax liabilities
Year ended 30 June 2020
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2020
Comprising:
Deferred tax assets
Deferred tax liabilities
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 £2.1m (2019: £2.0m) in respect of
capital and other losses amounting to £10.9m (2019: £11.6m) because these are not considered recoverable in the foreseeable future.
The Company recognised a net deferred tax asset with the following movements in the year:
Pension
scheme
£m
(11.1)
(3.4)
2.9
(11.6)
–
(11.6)
(2.2)
13.1
(0.7)
–
(0.7)
Share
options
£m
1.5
0.8
0.4
2.7
Accelerated
capital
allowances
£m
0.7
(0.1)
–
0.6
2.7
–
(1.2)
(0.9)
0.6
0.6
–
0.6
–
0.1
–
0.7
0.7
–
Company
Total
£m
(8.6)
(2.5)
3.3
(7.8)
3.8
(11.6)
(3.4)
12.2
1.0
1.7
(0.7)
Other
(net)
£m
0.3
0.2
–
0.5
0.5
–
(0.1)
–
0.4
0.4
–
At 1 July 2018
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2019
Comprising:
Deferred tax assets
Deferred tax liabilities
Year ended 30 June 2020
Income Statement (charge)/credit
Amounts taken directly to equity
At 30 June 2020
Comprising:
Deferred tax assets
Deferred tax liabilities
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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. Overhead costs
include, but are not limited to, roads and other infrastructure costs required for a site and local contributions and physical works
contributions required under planning permissions granted for our developments
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.
2020
£m
3,112.3
1,852.4
63.2
5,027.9
Group
2019
£m
3,071.6
1,632.8
119.9
4,824.3
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 2020 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 £18.8m (2019: £5.5m) and gross impairment reversals of £10.6m (2019: £20.3m), resulting in a net impairment of
£8.2m (2019: £14.8m reversal) 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 effects of COVID-19 have been considered and the expected extension in the
time period required to trade through each site has increased site 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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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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 initially recognised at their transaction price and subsequently measured at amortised cost, being their
nominal value 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
Contract assets1
Amounts due from subsidiary undertakings
Other receivables
Prepayments and accrued income
Notes
3.4
2020
£m
1.3
1.3
34.6
0.9
–
33.7
15.7
84.9
Group
2019
£m
1.5
1.5
151.0
1.1
–
55.5
16.0
223.6
2020
£m
–
–
–
–
395.5
1.3
8.6
405.4
Company
2019
£m
–
–
–
–
76.3
1.0
9.9
87.2
1
In the prior year contract assets were included within trade receivables (see note 3.4).
Other receivables include £15.7m (2019: £19.8m) receivable from joint ventures.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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 and
contract balances
Lifetime expected
credit losses
(individually assessed)
Group
£m
6.1
5.8
(0.2)
(4.1)
7.6
Company
£m
–
–
–
–
–
Amounts
due from
subsidiary
undertakings
12 month
expected
credit losses
Company
£m
–
–
–
–
–
Other receivables
12 month
expected credit
losses
Group
£m
1.6
–
–
(0.7)
0.9
Company
£m
–
–
–
–
–
Allowance for doubtful receivables
Loss allowance at 1 July 2019
Charge for the year
Amounts written off
Recoveries of amounts previously written off
Loss allowance at 30 June 2020
Notes
5.3.4
5.3.4
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.
Non-current liabilities
Land payables
Other payables
Current liabilities
Trade payables
Land payables
Contract liabilities2
Amounts due to subsidiary undertakings
Accruals
Other tax and social security
Other payables
Notes
3.4
2020
£m
299.0
20.7
319.7
186.8
492.9
136.6
–
463.0
11.3
14.8
1,305.4
Group
2019¹
£m
385.6
27.9
413.5
353.6
575.1
101.2
–
533.4
13.9
10.7
1,587.9
2020
£m
Company
2019¹
£m
–
–
–
2.0
–
–
19.3
11.5
–
0.8
33.6
–
–
–
2.2
–
–
334.3
26.9
–
0.8
364.2
1
2
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
In the prior year contract liabilities were included within other payables.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
3.3 Trade and other payables CONTINUED
The carrying amount of trade payables approximates to their fair value.
Accruals include a £2.3m (2019: £4.7m) social security accrual relating to share-based payments (note 6.3). Other payables classified as
non-current liabilities at 30 June 2020 principally comprise payments and deposits received in advance in respect of freehold reversions
and housing association contracts.
The Group has £377.7m (2019: £486.4m) of payables secured by legal charges on land and buildings included within inventories and £20.2m
(2019: £43.5m) supported by promissory notes. Other non-current payables are unsecured and non-interest bearing.
Further disclosures relating to financial liabilities are set out in note 5.3.
3.4 Contract assets and liabilities
Contract assets relate to amounts due from customers primarily for construction work completed but not invoiced at the balance sheet
date in relation to contracts where revenue is recognised over time. These amounts are included in trade and other receivables. The Group
has taken advantage of the practical expedient in paragraph 94 of IFRS 15 to immediately expense the incremental costs of obtaining
contracts where the amortisation period of the assets would have been one year or less.
Contract liabilities relate to payments received from the customer on the contract, and/or amounts invoiced to the customer in advance of
the Group performing its obligations on contracts where revenue is recognised either over time or at a point in time. These amounts are
included within trade and other payables.
Significant changes in contract assets and liabilities are as follows:
At 1 July:
Amounts included within trade and other payables
Amounts included within trade and other receivables
Movements in the year:
Performance obligations satisfied in the year
Amounts invoiced in the year
Cash received for performance obligations not yet satisfied
Movements in retentions
At 30 June
Analysed as:
Amounts included within trade and other payables
Amounts included within trade and other receivables
Contracts on which
revenue is recognised
over time
2019
£m
2020
£m
Contracts on which
revenue is recognised
at a point in time1
2019
£m
2020
£m
(22.8)
1.1
(21.7)
140.9
(131.3)
–
–
(12.1)
(13.0)
0.9
(7.1)
2.8
(4.3)
76.8
(93.4)
–
(0.8)
(21.7)
(22.8)
1.1
(78.4)
–
(78.4)
3,278.2
(3,199.8)
(123.6)
–
(123.6)
(123.6)
–
(72.5)
–
(72.5)
4,686.3
(4,613.8)
(78.4)
–
(78.4)
(78.4)
–
1
These balances have previously been accounted for under IFRS 9, and therefore not disclosed as contract liabilities. We believe it is more appropriate to regard these
balances as being within the scope of IFRS 15 and have therefore reclassified them as contract liabilities.
Further revenue of £217.5m (2019: £272.5m) is expected to be recognised in future years in respect of contracts on which revenue is
recognised over time, of which 22.6% (2019: 28.1%) is expected to be recognised within 12 months of the balance sheet date.
The Company has no contract assets or liabilities.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 3.5 Leases
3.5.1 The Group as lessee
The Group and Company have applied IFRS 16 using the modified retrospective approach and therefore comparative information has not
been restated and continues to be reported under IAS 17. The impact of changes is disclosed in note 1.5.
Leases
A right-of-use asset and a lease liability are recognised at the commencement date of a lease. The right-of-use asset is initially
measured at cost comprising the initial amount of the lease liability plus payments made before the lease commenced and any
direct costs less any incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement of the lease to the earlier of the end of the lease term or the end of the useful life of the asset. The right-of-use asset is
also reduced for impairment losses, if any, and adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments at the commencement date discounted using the
Group’s incremental borrowing rate of between 1% and 6%, and is subsequently measured at amortised cost using the effective interest
method. The lease liability is re-measured when there is a change in the future lease payments, and a corresponding adjustment is
made to the right-of-use asset.
The Group has elected not to recognise right-of-use assets and lease liabilities for short term leases of plant and machinery that have a
lease term of 12 months or less and leases of low value including leases of office equipment. The lease payments associated with these
leases are recognised as an expense on a straight-line basis over the lease term.
In the comparative period, as lessee, the Group and Company classified its leases as operating leases, and no asset or liability was
recognised in the Balance Sheet. Payments made under operating leases were recognised on a straight-line basis over the term of the
lease. Further information on the transition to IFRS 16 and the initial application of the standard is provided in notes 1.4 and 1.5.
The Group and Company lease assets including land and buildings, vehicles, plant and machinery and office equipment. Information about
leases for which the Group or Company is a lessee is presented below.
Right-of-use assets:
Balance at 1 July 2019
Balance at 30 June 2020
Net additions during the year including
re-measurements
Lease liabilities included in the Balance Sheet:
Current
Non-current
Land and
buildings
£m
46.1
38.6
1.9
Other
£m
9.3
8.1
3.0
Group
Total
£m
55.4
46.7
4.9
Land and
buildings
£m
4.9
4.3
–
Other
£m
0.7
0.5
0.1
Group
2020
£m
11.7
36.1
47.8
A maturity analysis of the contractual undiscounted cash flows associated with these lease liabilities is presented in note 5.4.1.
Amounts recognised in the Income Statement:
Interest on lease liabilities
Depreciation of right-of-use land and buildings
Depreciation of other right-of-use assets
Expenses relating to short term and low value leases
Company
Total
£m
5.6
4.8
0.1
Company
2020
£m
0.9
3.9
4.8
Group
2020
£m
2.0
9.4
4.2
33.9
The total Group cash outflow for leases in the current year was £47.7m (Company: £1.1m), of which £14.1m (Company: £1.0m) related to the
repayment of lease liabilities recognised in the Balance Sheet.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
3.5 Leases CONTINUED
3.5.2 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. The Group retains the right
to sell these properties, with their future rental income, and it is intended that they will be sold to third parties in the normal course of
business. Therefore, they are classified as work in progress until the date of sale.
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
3.6 Provisions
Provisions
Notes
2.3
2020
£m
1.2
1.2
1.1
3.4
4.0
8.5
2020
Years
9.5
Group
2019
£m
1.2
1.1
1.1
3.0
4.3
8.4
2019
Years
8.3
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will
be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the
obligation at the balance sheet date and are discounted to present value where the effect is material.
At 1 July 2019
Additions to provisions in the year
Utilisation in the year
At 30 June 2020
The Company has no provisions.
Legacy properties
– cladding
£m
–
11.4
–
11.4
Legacy properties
– Citiscape and related
review
£m
–
28.5
(11.7)
16.8
Group
Total
£m
–
39.9
(11.7)
28.2
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Barratt Developments PLCwww.barrattdevelopments.co.uk 3.6 Provisions CONTINUED
Costs associated with legacy properties
Following the Grenfell tragedy, the Government issued a number of advice notes aimed at clarifying fire safety and building safety
requirements. These have now been replaced by updated consolidated Government guidance published on 20 January 2020. The updated
guidance applies to multi-storey, multi-occupied residential buildings.
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. As a result
there has been more scrutiny of all materials used on building facades. 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 at the time of completion. In line with our commitment to put our customers first, we
have incurred and accrued £11.4m of costs for work involved at legacy properties associated with removing and replacing cladding.
We voluntarily undertook to pay for work to remove and replace ACM cladding on the Citiscape development in Croydon in 2019. This is
a non-standard development which was designed for us in 2001 by a third-party structural engineering firm and was sold to the current
freeholders in 2003. When the ACM cladding was removed, structural concerns were identified and we appointed independent structural
engineers to undertake a full investigation of the building. These investigations have identified significant issues relating to the design of
the building’s reinforced concrete frame, requiring extensive remedial work.
As a responsible developer, we appointed independent structural engineers to review all of the other developments where reinforced
concrete frames were designed for us by either the same original engineering firm or by other companies within the group of companies
which has since acquired it. The preliminary reviews of all 26 of these developments, the majority of which were designed over ten years
ago, are complete and have not identified any issues as severe as those present at Citiscape. Engineers are now undertaking more
detailed reviews to see if any remediation of the concrete frames is required. Those detailed reviews have so far shown that eleven
developments have no defects while nine developments required some remedial action to address smaller-scale problems. At these
developments, remedial action has either been successfully completed or is underway.
We apologise unreservedly to affected customers that the standards that we set for ourselves and our partners were not met at these
developments. While in most cases we have no legal liability to cover the costs of this work, in line with our commitment to customers
and recognising the responsibility we have for the work of our partners, we have taken the decision to pay for the required remedial action
which would otherwise fall on leaseholders. We are actively seeking to recover costs from third parties, however there is no certainty
regarding the extent of any financial recovery. We have incurred £28.5m of costs for work relating to Citiscape and the associated review.
Management have made estimates as to the future costs, to the extent of the remedial works required and the costs of providing
alternative accommodation to those affected. The Financial Statements have been prepared based on currently available information,
including known costs and quotations where possible. However, the detailed review is ongoing and therefore the extent and cost of any
remedial work may change as this work progresses.
Management have performed a sensitivity analysis to assess the impact of a change in their estimate of total costs. A 10% increase in
estimated costs recognised in the year would impact cost of sales and would reduce the Group’s gross margin by 20 bps.
3.7 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).
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, 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.
Secured loans
At 1 July
Disposals (at cost)
Other provision movements
At 30 June
Balance at 30 June analysed as:
Current
Non-current
Notes
5.3.1
5.3.1
2020
£m
2.6
(0.9)
0.4
2.1
1.1
1.0
Group
2019
£m
3.4
(1.9)
1.1
2.6
1.2
1.4
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements
Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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 profit/(loss) for the year recognised in the Consolidated Income Statement
At 30 June
2020
£m
6.9
(8.5)
3.0
1.4
Group
2019
£m
7.5
–
(0.6)
6.9
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 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 in investment in subsidiaries related to share-based payments
At 30 June
Impairment
At 1 July and 30 June
Net book value
At 1 July
At 30 June
2020
£m
3,173.5
0.3
3,173.8
Company
2019
£m
3,172.9
0.6
3,173.5
87.6
87.6
3,085.9
3,086.2
3,085.3
3,085.9
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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. 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
2020
£m
830.4
–
830.4
24.5
Group
2019
£m
816.7
13.7
830.4
24.5
805.9
805.9
During the prior year the Group acquired all of the share capital of Oregon Timber Frame Limited. Goodwill arising on the acquisition of
£13.7m was capitalised and allocated to the Group’s housebuilding business.
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 business.
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.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
4.2 Goodwill and other intangible assets CONTINUED
4.2.2 Other intangible assets – Brands CONTINUED
Cost
At 1 July
Acquired during the year through business
combinations
At 30 June
Amortisation
At 1 July
Amortisation in the year
At 30 June
Carrying amount
At 30 June
Brands
2019
£m
Customer
contract relationships
2019
£m
2020
£m
107.0
1.4
2020
£m
107.9
–
107.9
7.0
0.5
7.5
0.9
107.9
7.0
–
7.0
–
1.4
–
0.7
0.7
0.7
100.4
100.9
–
1.4
1.4
–
–
–
1.4
Group
Total
2019
£m
107.0
2.3
109.3
7.0
–
7.0
2020
£m
109.3
–
109.3
7.0
1.2
8.2
101.1
102.3
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 prior year the Group acquired brands valued at £0.9m and customer contract relationships valued at £1.4m. These assets are
amortised on a straight-line basis in line with the contract relationships at the acquisition date.
4.2.3 Impairment of goodwill and indefinite life brands
The Group conducts an annual impairment review of goodwill and its indefinite life brand, David Wilson Homes, together for the cash-
generating unit to which it is allocated, being the housebuilding business.
Impairment of goodwill and indefinite life brands
The impairment review for the goodwill of the housebuilding business and the Group’s indefinite life brand requires an estimation of the
value-in-use of the housebuilding business. The value-in-use calculation requires an estimate of the expected future cash flows 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 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 2020 by comparing the value-in-use of the housebuilding business to the carrying value of
its tangible and intangible assets and allocated goodwill.
The value-in-use was determined by discounting the risk-adjusted expected future cash flows of the housebuilding business. The first year
of cash flows were determined using the Group’s approved detailed site-by-site forecast. The cash flows for the second 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%, based upon the historical long term growth rate of the UK economy.
COVID-19 has heightened the inherent uncertainty in the prospects for the wider UK economy and housing market in the medium term. The
Group’s financial forecasts reflect the outcomes that Management consider most likely, based on the information available at the date of
signing of these Financial Statements. The key assumptions underlying the forecasts are:
• 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 year dependent upon local market conditions and product type. For years two 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 year dependent upon local market conditions, land availability
and planning permissions. For years two 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 year dependent upon the expected
costs of completing all aspects of each individual development. For years two 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.
196
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Barratt Developments PLCwww.barrattdevelopments.co.uk 4.2 Goodwill and other intangible assets CONTINUED
4.2.3 Impairment of goodwill and indefinite life brands CONTINUED
The forecasts have been sensitised to reflect scenarios based on the Group’s principal risks and the downside prospects for the UK economy
through adjustments to the key assumptions. The adverse scenarios modelled are the Directors’ assessment of a reasonable worst-case
scenario, being that used to assess the Group’s ability to continue as a going concern in note 1.3, and a scenario in which the Group’s
risks manifest to an intermediate level. The risk-adjusted expected future cash flows are the weighted average of these possible economic
outcomes. The value-in-use constitutes the present value of these cash flows through the application of an appropriate discount rate.
The key variables for the value-in-use calculations were:
• Discount rate: this is a pre-tax rate reflecting the Group’s target capital structure, current market assessments of the time value
of money and risks appropriate to the Group’s housebuilding business. In the prior year, uncertainty in the Group’s cash flows was
reflected through an adjustment to the discount rate. In response to COVID-19, Management have reflected future economic uncertainty
in the risk-adjusted cash flows, giving a more accurate representation of the risks specific to the Group. As this risk has been reflected
in the underlying cash flows, no adjustment has been made to the discount rate. Accordingly, a rate of 10.0% (2019: 15.2%) is considered
by the Directors to be the appropriate pre-tax discount rate.
• Probability of variance in assumptions: Management consider the assumptions applied in the Group’s forecast to represent the
most likely outcomes. To reflect ongoing uncertainty, heightened by COVID-19, the likelihood that actual performance will differ from
these assumptions has been estimated at a Group level with reference to external market forecasts and the Group’s current trading
performance. A change in the assigned probabilities changes the weighting of the scenarios in the calculation of the expected cash flows.
The result of the value-in-use exercise concluded that the recoverable value of goodwill and intangible assets exceeded its carrying value
by £1,182.5m (2019: £2,095.6m) and there has been no impairment. The fall in headroom is due to a reduction in forecast completions
following COVID-19.
If the value-in-use is determined using only the reasonable worst case cash flows, a full impairment of goodwill and indefinite life brands
is required. The sensitivity of the recoverable amount of goodwill to changes in the discount rate and the probabilities of the occurrence of
adverse scenarios is shown below.
Variable
Discount rate
Probability of adverse scenarios
+100 bps
Change in
value
%
(11.1%)
(2.0%)
Change in
value
£m
(664.0)
(117.5)
Revised
headroom
£m
518.5
1,065.0
Change in
value
£m
830.6
117.5
-100 bps
Change in
value
%
13.9%
2.0%
Change
required
to reduce
headroom to
£nil
2.0%
10.1%
Revised
headroom
£m
2,013.0
1,300.0
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
Investments in JVs and associated entities are accounted for using the equity method of accounting.
The Group's share of the profit or loss of JVs and associated entities increase or decrease the carrying amount of the investment and
long-term interests.
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
Dividends received from JVs
Share of post-tax profit for the year from JVs
At 30 June
There are no losses in any of the Group’s JVs or associates which have not been recognised by the Group.
2020
£m
189.0
31.2
(72.2)
–
(24.2)
28.3
152.1
Group
2019
£m
234.1
51.0
(66.9)
(8.1)
(60.3)
39.2
189.0
197
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
4.3 Investments in jointly controlled entities and associated entities CONTINUED
4.3.1 Joint ventures CONTINUED
At 30 June 2020 the Group had interests in the following jointly controlled entities:
Percentage
owned
50.0%
Voting rights
controlled
50.0%
50.0%
50.0%
75.0%
50.0%
Country of
registration
England and
Wales
England and
Wales
England and
Wales
Principal
place of
business
UK
Financial year
Principal
activity
end date
Housebuilding 31 March*
UK
Housebuilding 31 March*
UK
Housebuilding 30 June
50.0%
50.0%
England and
Wales
UK
Holding
company
30 June
JV
51 College Road
LLP
Alie Street LLP2
Barratt
Metropolitan
LLP1
Barratt Wates (East
Grinstead) Limited
Barratt Wates
(East Grinstead)
No.2 Limited2
Barratt Wates
(Horley) Limited1
Barratt Wates
(Lindfield) Limited
Barratt Wates
(Worthing) Limited
BDWZest
Developments
LLP2
BDWZest 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
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
50.0%
50.0%
78.5%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
BK Scotswood LLP Barratt House, The Watermark,
50.0%
50.0%
Blackhorse Road
Properties LLP1
Brooklands Milton
Keynes LLP
DWH/Wates
(Thame)Limited
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
51.0%
50.0%
50.0%
50.0%
50.0%
50.0%
Enderby Wharf LLP Here East, 13 East Bay Lane,
50.0%
50.0%
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
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
Fulham Wharf
LLP2
Fulham Wharf
One Limited2
Fulham Wharf
Two Limited2
Harrow View
LLP
198
England and
Wales
England and
Wales
UK
Housebuilding 30 June
UK
Housebuilding 30 June
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
Housebuilding 30 June
UK
Housebuilding 30 June
UK
UK
UK
UK
Holding
company
Holding
company
31 March*
31 March*
31 December*
Holding
company
Housebuilding 30 June
UK
Housebuilding 30 June
UK
Housebuilding 30 June
UK
Housebuilding 30 June
UK
Housebuilding 31 March*
UK
Dormant
31 March*
UK
Dormant
31 March*
UK
Housebuilding 31 March*
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Barratt Developments PLCwww.barrattdevelopments.co.uk 4.3 Investments in jointly controlled entities and associated entities CONTINUED
4.3.1 Joint ventures CONTINUED
JV
Infinity Park
Derby LLP
Nine Elms LLP2
Nine Elms
One Limited2
Nine Elms
Two Limited2
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
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
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%
Country of
registration
England
and Wales
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
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
Commercial
development
Financial year
end date
30 June
UK
Housebuilding 31 March*
UK
Dormant
31 March*
UK
Dormant
31 March*
UK
Dormant
30 June
UK
Housebuilding 31 March*
UK
UK
UK
UK
UK
UK
UK
Commercial
development
Dormant
31 December*
30 June
Investment
entity
30 June
Dormant
30 June
Housebuilding 30 June
Housebuilding 31 March*
Holding
company
31 March*
* 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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199
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Barratt Metropolitan LLP
Blackhorse Road
Developments LLP
Brooklands
Milton Keynes LLP
Other JVs
Group Total
2020
£m
4.2
(0.7)
–
–
–
3.5
3.5
2.7
–
–
–
2.8
0.5
2.1
98.4
2019
£m
52.9
(49.9)
–
–
–
3.0
3.0
2.2
12.8
72.9
–
–
(0.8)
2.2
(0.5)
2020
£m
18.9
(15.2)
–
–
–
3.7
3.7
1.9
–
–
–
31.9
26.7
13.7
13.6
19.7
27.3
2019
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
£m
61.4
(41.7)
–
–
–
19.7
9.8
10.7
14.5
–
–
0.2
5.6
0.1
2019
£m
82.6
(55.3)
–
–
–
–
–
27.3
13.7
14.8
31.8
2.0
14.1
1.0
2020
£m
12.7
(10.8)
–
(1.3)
0.6
0.2
0.8
0.4
5.0
76.4
13.9
(54.7)
(43.2)
(7.6)
16.1
(4.1)
2019
£m
106.8
(84.9)
(7.0)
(0.1)
14.8
(0.5)
14.3
7.6
19.7
110.0
13.7
(54.2)
(43.9)
25.6
32.1
12.6
2020
£m
278.8
(222.6)
–
(1.8)
54.4
0.2
54.6
28.3
24.2
375.1
13.9
(206.8)
(43.2)
139.0
64.0
70.2
2019
£m
480.8
(397.1)
(7.0)
(0.3)
76.4
(0.5)
75.9
39.2
60.3
493.6
13.7
(213.6)
(43.9)
249.8
138.9
124.6
(95.6)
(73.7)
(5.2)
(14.3)
(29.8)
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
Interest payable
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
Cash and cash equivalents included in the above net
assets/(liabilities)
Group share of net assets/(liabilities) recognised in the
Consolidated Balance Sheet at 30 June
Harrow View LLP
2020
2019
£m
£m
58.8
17.0
(48.3)
(14.1)
–
–
–
–
10.5
2.9
Fulham Wharf LLP
2019
£m
105.5
(98.2)
–
–
7.3
2020
£m
43.1
(38.4)
–
(0.1)
4.6
–
10.5
5.3
2.5
92.7
–
(12.7)
–
80.0
11.4
40.0
–
2.9
1.5
–
115.0
–
(35.4)
–
79.6
14.4
39.8
–
4.6
2.3
–
44.7
–
(13.7)
–
31.0
3.5
15.5
–
7.3
3.6
–
29.7
–
(3.4)
–
26.3
3.6
13.2
Nine Elms LLP
2019
£m
116.0
(94.7)
–
(0.2)
21.1
2020
£m
79.7
(67.5)
–
(0.4)
11.8
–
–
11.8
21.1
5.9
6.0
16.5
–
(10.6)
–
5.9
13.2
3.0
10.6
13.0
134.2
–
(17.1)
–
117.1
72.5
58.5
A reconciliation of the Group’s share of net assets to the carrying value of investments included in the Balance Sheet is presented below:
Group share of the net assets of its JVs
Group loans to JVs
At 30 June
2020
£m
70.2
81.9
152.1
Group
2019
£m
124.6
64.4
189.0
The Group has made loans, net of loss allowances, of £81.9m (2019: £64.4m) to its JVs, which are presented with Group investments. The
loss allowances for Group loans to JVs 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. At 30 June 2020 the
loss allowance is immaterial (2019: immaterial).
Included within the Group’s share of net assets of JVs is a proportion of the loans to the JVs (net of fair value adjustments made in one JV)
calculated using the Group’s ownership share of £75.1m (2019: £65.7m).
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 7.2.3. The Group and Company have a number of contingent liabilities relating to their JVs. Further details
on these are provided in note 7.1.2.
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.
200
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Barratt Developments PLCwww.barrattdevelopments.co.ukNotes to the Financial Statements CONTINUED Year ended 30 June 2020 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:
4.3 Investments in jointly controlled entities and associated entities CONTINUED
4.3.1 Joint ventures CONTINUED
Income
Adjusted expenditure
Costs associated with legacy properties
Interest payable
Tax
income/(expense)
Profit/(loss) for the year, being total comprehensive
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
Cash and cash equivalents included in the above net
assets/(liabilities)
Group share of net assets/(liabilities) recognised in the
Consolidated Balance Sheet at 30 June
Harrow View LLP
Fulham Wharf LLP
Nine Elms LLP
2020
£m
58.8
(48.3)
10.5
10.5
5.3
2.5
92.7
–
–
–
–
–
80.0
11.4
40.0
2019
£m
17.0
(14.1)
–
–
–
2.9
2.9
1.5
–
–
–
79.6
14.4
39.8
2020
£m
43.1
(38.4)
–
(0.1)
4.6
–
4.6
2.3
–
–
–
31.0
3.5
15.5
2019
£m
105.5
(98.2)
7.3
7.3
3.6
–
–
–
–
–
–
26.3
3.6
13.2
2020
£m
79.7
(67.5)
(0.4)
11.8
–
–
11.8
5.9
6.0
16.5
–
–
13.2
3.0
2019
£m
116.0
(94.7)
(0.2)
21.1
–
–
21.1
10.6
13.0
134.2
–
–
72.5
58.5
115.0
44.7
29.7
(12.7)
(35.4)
(13.7)
(3.4)
(10.6)
(17.1)
5.9
117.1
A reconciliation of the Group’s share of net assets to the carrying value of investments included in the Balance Sheet is presented below:
Barratt Metropolitan LLP
2019
£m
52.9
(49.9)
–
–
3.0
2020
£m
4.2
(0.7)
–
–
3.5
Blackhorse Road
Developments LLP
2020
2019
£m
£m
18.9
–
(15.2)
–
–
–
–
–
3.7
–
Brooklands
Milton Keynes LLP
2020
2019
£m
£m
61.4
82.6
(41.7)
(55.3)
–
–
–
–
19.7
27.3
–
3.5
2.7
–
98.4
–
(95.6)
–
2.8
0.5
2.1
–
3.0
2.2
12.8
72.9
–
(73.7)
–
(0.8)
2.2
(0.5)
–
3.7
1.9
–
31.9
–
(5.2)
–
26.7
13.7
13.6
–
–
–
–
–
–
–
–
–
–
–
–
19.7
9.8
10.7
14.5
–
(14.3)
–
0.2
5.6
0.1
–
27.3
13.7
14.8
31.8
–
(29.8)
–
2.0
14.1
1.0
Other JVs
2019
£m
106.8
(84.9)
(7.0)
(0.1)
14.8
(0.5)
14.3
7.6
19.7
110.0
13.7
(54.2)
(43.9)
25.6
32.1
12.6
2020
£m
12.7
(10.8)
–
(1.3)
0.6
0.2
0.8
0.4
5.0
76.4
13.9
(54.7)
(43.2)
(7.6)
16.1
(4.1)
Group Total
2019
£m
480.8
(397.1)
(7.0)
(0.3)
76.4
(0.5)
75.9
39.2
60.3
493.6
13.7
(213.6)
(43.9)
249.8
138.9
124.6
2020
£m
278.8
(222.6)
–
(1.8)
54.4
0.2
54.6
28.3
24.2
375.1
13.9
(206.8)
(43.2)
139.0
64.0
70.2
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
25.0%
Country
of registration
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.
In relation to the Group’s interests in associates, the Group’s share of assets and liabilities of its associate at 30 June 2019 and 30 June
2020 is £nil. The Group’s share of the associate’s result during the year was £nil (2019: £nil).
The Group has made loans of £nil (2019: £nil) to its associate. Further details of transactions between the Group and its associate are
provided in note 7.2.4.
The Group has no contingent liabilities relating to its associated entity.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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 (2019: none).
The Group has significant interests in the following jointly controlled operation:
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
2020
£m
12.2
(11.1)
1.1
13.0
(1.9)
11.1
Group
2019
£m
17.2
(16.2)
1.0
11.0
(1.0)
10.0
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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 2018
Additions
Acquired at fair value
Disposals
At 30 June 2019
Additions
Disposals
At 30 June 2020
Depreciation
At 1 July 2018
Charge for the year
Disposals
At 30 June 2019
Charge for the year
Disposals
At 30 June 2020
Net book value
At 30 June 2019
At 30 June 2020
Group
Property
£m
Plant and
equipment
£m
Total
£m
Property
£m
Plant and
equipment
£m
Company
Total
£m
3.5
0.5
2.3
–
6.3
-
(0.8)
5.5
2.9
0.4
–
3.3
0.3
(0.8)
2.8
3.0
2.7
36.7
6.7
0.6
(0.3)
43.7
7.5
(3.3)
47.9
25.7
3.9
(0.3)
29.3
5.2
(2.9)
31.6
14.4
16.3
40.2
7.2
2.9
(0.3)
50.0
7.5
(4.1)
53.4
28.6
4.3
(0.3)
32.6
5.5
(3.7)
34.4
17.4
19.0
0.2
–
–
–
0.2
-
-
0.2
0.2
–
–
0.2
-
-
0.2
–
-
18.1
4.1
–
–
22.2
4.9
(2.1)
25.0
12.7
1.8
–
14.5
2.7
(1.7)
15.5
7.7
9.5
18.3
4.1
–
–
22.4
4.9
(2.1)
25.2
12.9
1.8
–
14.7
2.7
(1.7)
15.7
7.7
9.5
Authorised future capital expenditure that was contracted but not provided for in these Financial Statements amounted to £0.3m (2019: £1.3m).
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
5 Capital structure and financing
5.1 Net cash
Net cash is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings and prepaid fees.
Net cash at 30 June is shown below:
Cash and cash equivalents1
Drawn debt
Borrowings:
Sterling US private placement notes
Bank overdrafts1
Total borrowings being total drawn debt
Prepaid fees
Net cash
Total borrowings at 30 June are analysed as:
Non-current borrowings
Current borrowings¹
Total borrowings being total drawn debt¹
Group
2019
re-presented1
£m
1,136.0
2020
£m
619.8
Company
2019
re-presented1
£m
889.3
2020
£m
424.0
Notes
5.1.1
(200.0)
(117.7)
(317.7)
6.1
308.2
(200.0)
(117.7)
(317.7)
(200.0)
(177.7)
(377.7)
7.4
765.7
(200.0)
(177.7)
(377.7)
(200.0)
(111.0)
(311.0)
6.1
119.1
(200.0)
(111.0)
(311.0)
(200.0)
(52.6)
(252.6)
7.4
644.1
(200.0)
(52.6)
(252.6)
¹ The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4). There is no impact on net cash.
Movement in net cash is analysed as follows:
Net (decrease)/increase in cash and cash equivalents1
Repayment/(drawdown) of borrowings:
Loan drawdowns
Loan repayments1
Other movements in borrowings:
Movement in prepaid fees
Movement in net cash in the year
Opening net cash
Closing net cash
Group
2019
re-presented1
£m
(40.2)
2020
£m
(516.2)
–
60.0
(1.3)
(457.5)
765.7
308.2
–
16.1
(1.5)
(25.6)
791.3
765.7
Company
2019
re-presented1
£m
14.8
–
25.6
(1.5)
38.9
605.2
644.1
2020
£m
(465.3)
(58.4)
–
(1.3)
(525.0)
644.1
119.1
¹
The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4) and as a result the
movements reported in the prior year have been amended.
Changes in liabilities arising from financing activities are shown below:
Liabilities from financing activities at 1 July 20181
Financing cash flows
Other movements
Liabilities arising from financing activities at 30 June 20191
Liabilities recognised on transition to IFRS 16
Liabilities from financing activities at 1 July 2019
Financing cash flows
Other movements
Liabilities arising from financing activities at 30 June 2020
Total
borrowings
£m
(384.9)
16.1
(8.9)
(377.7)
–
(377.7)
60.0
–
(317.7)
Lease
liabilities
£m
–
–
–
–
(55.0)
(55.0)
14.1
(6.9)
(47.8)
Group
Total
£m
(384.9)
16.1
(8.9)
(377.7)
(55.0)
(432.7)
74.1
(6.9)
(365.5)
Company
Total
borrowings
£m
(269.3)
25.6
(8.9)
(252.6)
–
(252.6)
(58.4)
–
(311.0)
Lease
liabilities
£m
–
–
–
–
(5.6)
(5.6)
1.0
(0.3)
(4.9)
Total
£m
(269.3)
25.6
(8.9)
(252.6)
(5.6)
(258.2)
(57.4)
(0.3)
(315.9)
¹
The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
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Barratt Developments PLCwww.barrattdevelopments.co.uk
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 and LIBOR 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.
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 initially recognised at fair value less directly attributable transaction costs and subsequently
measured at amortised cost, being the amount recorded at recognition plus accrued interest applied to the account less any
repayments made.
All debt facilities at 30 June 2020 are unsecured.
The principal features of the Group’s committed debt facilities at 30 June 2020 and 30 June 2019 were as follows:
Committed facilities:
RCF
Fixed rate sterling USPP notes
Facility
30 June 2020
Amount drawn
30 June 2019
Maturity
£700.0m
£200.0m
–
£200.0m
–
£200.0m
22 November 2024¹
22 August 2027
¹ On 22 November 2019 the Group’s £700.0m RCF was amended and extended from November 2023 to November 2024.
In addition, on 28 April 2020 the Group received confirmation that it was eligible to access funding under the CCFF until March 2021 should
that be required.
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. Publication of LIBOR is expected to cease before the end of 2021, after
which floating interest rates currently linked to LIBOR will be transitioned to an appropriate alternative reference rate under the existing
agreements.
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
Finance charge on leased assets1
Amortisation of facility fees
Other interest payable
Net finance costs
Notes
6.2.2
2020
£m
(3.0)
(1.6)
(0.5)
(5.1)
9.5
19.9
2.0
2.3
1.3
35.0
29.9
2019
£m
(2.8)
(2.0)
(2.3)
(7.1)
9.7
21.5
–
2.8
1.9
35.9
28.8
1 The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
5.2 Net finance costs CONTINUED
The weighted average interest rates (excluding fees) paid in the year were as follows:
USPP notes
5.3 Financial instruments
Recognition
2020
%
2.8
Group
2019
%
2.8
2020
%
2.8
Company
2019
%
2.8
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 assets classified as 'fair value through profit and loss' are measured at fair value at the end of each reporting period. Gains
and losses arising from changes in fair value are charged directly to the Income Statement to the extent that they are not part of a
designated hedging relationship.
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 note 3.2. Any impairment is recognised
immediately in the Income Statement.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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
2020
Carrying
value
£m
Notes
Group
2019
Carrying
value2
£m
Fair
value2
£m
Fair
value
£m
2020
Carrying
value
£m
Company
2019
Carrying
value2
£m
Fair
value2
£m
5.1
619.8
619.8
1,136.0
1,136.0
424.0
424.0
889.3
889.3
56.0
56.0
177.9
177.9
0.5
0.5
3.2
–
–
–
–
395.5
395.5
3.7
3.7
1.0
1.1
1.0
1.1
1.4
1.2
1.4
1.2
–
–
–
–
0.2
76.3
–
–
0.2
76.3
–
–
677.9
677.9
1,316.5
1,316.5
820.0
820.0
965.8
965.8
Cash and cash
equivalents2
Measured at
amortised cost
Trade and other
receivables¹
Intercompany
receivables
Fair value through
profit and loss
Non-current secured
loans
Current secured
loans
Total financial
assets2
¹ Excludes amounts recoverable on contracts, prepayments and accrued income, and tax and social security.
2 The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
5.3.2 Financial liabilities
The carrying values and fair values of the Group and Company financial liabilities are as follows:
Fair
value
£m
2020
Carrying
value
£m
Group
2019
Carrying
value3
£m
Fair
value3
£m
117.7
184.5
117.7
200.0
177.7
196.8
177.7
200.0
1,252.7
1,245.1
1,628.7
1,631.1
–
47.8
–
47.8
–
–
–
–
2020
Carrying
value
£m
Company
2019
Carrying
value3
£m
Fair
value3
£m
111.0
200.0
11.8
19.3
4.8
52.6
196.8
52.6
200.0
13.5
13.5
334.3
–
334.3
–
Fair
value
£m
111.0
184.5
11.8
19.3
4.8
1,602.7
1,610.6
2,003.2
2,008.8
331.4
346.9
597.2
600.4
Notes
5.1
5.1
3.3
3.5
Measured at
amortised cost
Bank overdrafts3
Loans and borrowings
Trade and other
payables¹
Intercompany
payables
Lease liabilities2
Total financial
liabilities3
1 Excludes deferred income, payments received in excess of amounts recoverable on contracts, tax and social security and other non-financial liabilities.
2
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
3 The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
The fair values of liabilities in the above table are measured in accordance with level 2 as defined in note 5.3.3 and have been determined
using discounted cash flows.
Trade and other payables include items secured by legal charges as disclosed in note 3.3.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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 assets 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:
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Secured loans
Non-current secured loans
Current secured loans
3.7
3.7
–
–
–
–
–
–
1.0
1.1
2.1
2020
Total
£m
1.0
1.1
2.1
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
1.4
1.2
2.6
Group
2019
Total
£m
1.4
1.2
2.6
The Group had no derivative financial instruments at 30 June 2020 or 30 June 2019 and no financial liabilities were measured at fair value.
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 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
Notes
3.2
3.2
2020
£m
5.8
(4.1)
(0.4)
2019
£m
7.5
(5.0)
(1.2)
5.4 Financial risk management
The Group’s approach to risk management and the principal operational risks of the business are detailed on pages 71 to 78. 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: liquidity risk,
the availability of funding at reasonable margins, credit risk 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 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.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
5.4 Financial risk management CONTINUED
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. In response to the potential
impact of COVID-19 on the Group’s forecast cash flows, the Group applied for, and has received confirmation that it is eligible to access,
funding under the CCFF until March 2021 should that be required. The Group’s drawn debt, excluding fees, represented 35.3% (2019: 42.0%
(re-presented – see note 1.4)) of available committed facilities at 30 June 2020. In addition, the Group had £619.8m (2019: £1,136.0m
(re-presented – see note 1.4)) of cash and cash equivalents.
The Group was in compliance with its financial covenants at 30 June 2020. The Group’s resilience to its principal risks, including potential
impacts resulting from COVID-19, has been modelled together with possible mitigating actions, over a three-year period. At the date of
approval of the Financial Statements, the Group’s internal forecasts indicate that it will be able to operate within its current facilities and
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 2020, the average
maturity of the Group’s committed facilities was 5.0 years (2019: 5.2 years).
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
2020
£m
700.0
Group
2019
£m
700.0
2020
£m
700.0
Company
2019
£m
700.0
On 28 April 2020 the Group received confirmation that it was eligible to access funding under the CCFF until March 2021 should that be
required.
In addition, the Group had undrawn uncommitted overdraft facilities available at 30 June 2020 of £55.0m (2019: £95.0m).
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
2020
Loans and borrowings (including
bank overdrafts)1
Trade and other payables2
Lease liabilities3
2019
Loans and borrowings (including
bank overdrafts)4
Trade and other payables2
Notes
5.3.2
5.3.2
3.5
5.3.2
5.3.2
Carrying
amount
£m
Contractual
cash flow
£m
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
Over
5 years
£m
317.7
1,245.1
47.8
1,610.6
377.7
1,631.1
2,008.8
239.6
1,276.7
56.7
1,573.0
307.1
1,668.6
1,975.7
5.5
953.4
13.2
972.1
19.5
1,249.2
1,268.7
5.5
171.0
10.4
186.9
19.5
248.9
268.4
16.6
136.6
17.9
171.1
50.5
165.2
215.7
212.0
15.7
15.2
242.9
217.6
5.3
222.9
1 The Group is party to banking agreements that include a legal right of offset which enables the overdraft balances of £117.7m to be settled net with cash balances.
These balances have been excluded from contractual cash flows.
2 Excludes deferred income, payments received in excess of amounts recoverable on contracts, tax and social security and other non-financial liabilities.
3 The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
4 The presentation of prior year balances for bank overdrafts has been adjusted to meet the requirements for offsetting in accordance with IAS 32. Further
details are in note 1.4.
The Group had no derivative financial instruments at 30 June 2020 or 30 June 2019.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements
Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
5.4 Financial risk management CONTINUED
5.4.1 Liquidity risk CONTINUED
Company
2020
Loans and borrowings (including
bank overdrafts)
Trade and other payables1
Intercompany payables
Lease liabilities2
2019
Loans and borrowings (including
bank overdrafts)3
Trade and other payables1
Intercompany payables
Notes
5.3.2
5.3.2
5.3.2
3.5
5.3.2
5.3.2
5.3.2
Carrying
amount
£m
Contractual
cash flow
£m
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
Over
5 years
£m
311.0
11.8
19.3
4.8
346.9
252.6
13.5
334.3
600.4
350.6
11.8
19.3
5.0
386.7
357.0
13.5
334.3
704.8
116.5
11.8
19.3
0.9
148.5
69.5
13.5
334.3
417.3
5.5
–
–
0.8
6.3
19.5
–
–
19.5
16.6
–
–
2.1
18.7
50.5
–
–
50.5
212.0
–
–
1.2
213.2
217.5
–
–
217.5
1 Excludes tax and social security and other non-financial liabilities.
2 The Company has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
3 The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
The Company had no derivative financial instruments at 30 June 2020 or 30 June 2019.
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.
Due to the level of the Group’s interest cover ratio and in accordance with the Group's policy to hedge a proportion of the forecast RCF
drawings based on the Group’s three-year plan, no interest rate hedges are currently required.
The exposure of the Group’s financial liabilities to interest rate risk is as follows:
Group
2020
Financial liability exposure to interest rate risk
2019
Financial liability exposure to interest rate risk1
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
Non-interest
bearing
financial
liabilities
£m
Total
£m
–
–
200.0
1,410.6
1,610.6
200.0
1,808.8
2,008.8
The exposure of the Company’s financial liabilities to interest rate risk is as follows:
Company
2020
Financial liability exposure to interest rate risk
2019
Financial liability exposure to interest rate risk1
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
Non-interest
bearing
financial
liabilities
£m
130.0
200.0
384.2
200.0
16.9
16.2
Total
£m
346.9
600.4
1 The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
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Barratt Developments PLCwww.barrattdevelopments.co.uk 5.4 Financial risk management CONTINUED
5.4.2 Market risk (price risk) CONTINUED
Interest rate risk CONTINUED
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 Group retained a strong cash position throughout the year and therefore the use of floating rate facilities
was minimal. The weighted average interest rate for floating rate borrowings in 2020 was 1.7% (2019: 2.0%).
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 2020, 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 £2.6m (2019: £2.2m), the Group’s post-tax profit
would increase/decrease by £2.1m (2019: £1.8m) and as such the Group’s equity would increase/decrease by £2.1m (2019: £1.8m).
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 £12.0m (2019: £77.6m) 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 £619.8m (2019: £1,136.0m (re-presented, see note 1.4) on deposit with seven
financial institutions. As a result of the pension scheme buy-in (note 6.2) the Group and the Company are exposed to credit risk associated
with the insurer which is assessed to be low. Other than this, neither the Group nor the Company has a significant concentration of credit
risk, as their exposure is spread over a large number of counterparties and customers.
The Group manages credit risk through its credit policy This limits its exposure to financial institutions with high credit ratings, as set by
international credit rating agencies, and determines the maximum permissible exposure to any single counterparty.
The maximum exposure to any counterparty at 30 June 2020 was £100.7m (2019: £158.3m) 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 2020, the Company was exposed to £389.4m (2019: £76.3m) of credit risk in relation to intercompany loans. which are
considered to be of low credit risk and fully recoverable, as well as financial guarantees, performance bonds and the bank borrowings of
subsidiary undertakings. Further details are provided in notes 7.1 and 7.2.
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 the impact of COVID-19, 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, including its mitigating actions in response to COVID-19 are detailed on pages 71 to 78.
Following the lockdown introduced by the UK Government in response to COVID-19, in order to manage its cash flows and capital structure,
the Group cancelled payment of the 2020 interim dividend and no final dividend or special cash payments will be made in respect of the
year ended 30 June 2020. The Group also temporarily suspended land buying activity and carefully managed its operational cash flows. In
addition, on 28 April 2020 the Group received confirmation that it was eligible to access funding under the CCFF until March 2021 should that
be required.
Other methods by which the Group can manage its short term and long term capital structure include: further 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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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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: 1,018,302,400 (2019: 1,016,985,862) 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 the EBT to satisfy future exercises
At 30 June
2020
£m
101.8
2020
Number
2,629,027
3,142,874
583,505
1,254,200
7,609,606
2019
£m
101.7
2019
Number
2,940,565
1,673,444
644,386
1,221,120
6,479,515
2020
Number
1,016,985,862
39,215
1,277,323
–
1,018,302,400
2019
Number
1,012,722,682
39,090
1,524,090
2,700,000
1,016,985,862
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 on behalf of the Company in order to satisfy options and awards that have been granted by the Company.
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.
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 495.9p (2019: 572.6p) per share
2020
4,708,806
£20.1m
£23.4m
2019
6,172,255
£15.1m
£35.3m
During the year the EBT purchased 1,174,900 (2019: 4,000,000) shares in the market and disposed of 111,851 (2019: 58,801) shares in
settlement of exercises under the SMSOP 2009/10; and 2,526,498 (2019: 1,400,549) shares were used to satisfy the vesting of the 2016 LTPP
and the 2016 DBP. No shares (2019: 2,700,000 shares) were issued to the EBT at par.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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 123 to 151.
A summary of key management remuneration is as follows:
Salaries and fees (including pension compensation)
Social security costs1
Performance bonus
Benefits
Share-based payments2
2020
£m
2.8
1.2
–
0.1
0.4
4.5
2019
£m
2.8
0.9
2.6
0.1
2.1
8.5
1 Excluded from the Executive Directors’ and Non-Executive Directors’ single figure of remuneration tables on pages 142 and 143.
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)
2020
Number
Group
2019
Number
2020
Number
Company
2019
Number
6,632
6,419
370
353
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
Employee costs before grant income
Less CJRS grant income
Employee costs for the year
Notes
6.2
6.3
2.3
2.3.3
2020
£m
318.8
1.0
34.5
13.6
6.8
374.7
(26.0)
348.7
Group
2019
£m
357.4
1.3
41.1
13.2
14.1
427.1
–
427.1
2020
£m
27.4
0.2
3.3
1.3
1.4
33.6
(0.6)
33.0
Company
2019
£m
36.5
0.2
5.2
2.7
6.3
50.9
–
50.9
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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 asset recognised in the Balance Sheet represents the excess of the fair value of the scheme assets over the
present value of the defined benefit obligation.
The Directors engage a qualified independent actuary to calculate the Group’s liability in respect of its defined benefit pension scheme.
In calculating this liability, it is necessary for actuarial assumptions to be made, which include estimations of discount rates, salary and
pension increases, price inflation and mortality. As actual rates of increase and mortality may differ from those assumed, the gross
pension liability may differ from that included in these Financial Statements; however, in the current year, these liabilities are matched
by an insurance asset.
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.
Contributions during the year
Group defined contribution schemes' Consolidated Income Statement charge
2020
£m
13.6
2019
£m
11.5
At the balance sheet date, there were outstanding contributions of £2.0m (2019: £2.0m), 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 Group continues to meet the Scheme’s administration
expenses and Pension Protection Fund levy.
On 16 June 2020, the Trustees entered into a bulk annuity insurance contract with an insurer in respect of the liabilities of the defined
benefit scheme. This type of deal is also known as a ‘buy-in’. The insurer will pay into the Scheme cash matching the benefits due to
members. The Trustees are of the opinion that this investment decision is appropriate, reduces the risks in the Scheme and provides
additional security for the benefits due to members of the Scheme. The Trustees retain the legal obligation for the benefits provided under
the Scheme.
As the buy-in policy is a qualifying insurance asset, the fair value of the insurance policy is deemed to be the present value of the
obligations that have been insured. The policy secured exactly matches the benefits due to Scheme members under the Scheme's Trust
Deed and Rules, and the asset has therefore been set equal to the liabilities covered. An additional liability has been recognised in respect
of GMP equalisation, where a small premium will be paid to the insurer once the process of equalisation has been completed.
The buy-in has resulted in a re-measurement of the Scheme’s assets, with a re-measurement loss of £69.2m recognised in the Group and
Company Statement of Comprehensive Income.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 6.2 Retirement benefit obligations CONTINUED
6.2.2 Defined benefit scheme CONTINUED
The Scheme previously exposed the Group to a number of risks. As a result of the buy-in these risks have been reduced and at the balance
sheet date the principal risk is the credit risk associated with the insurer which is assessed to be low.
For the purposes of calculating the accounting costs and obligations of the Scheme, the assets of the Scheme were previously calculated at
fair (bid) value. In the current year they are assumed to match the value of the obligations insured. 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
Pensions-in-payment increase rate
Rate of price inflation
Weighted average assumptions to determine net cost
Discount rate
Pensions-in-payment increase rate
Rate of price inflation
2020
2019
1.58%
2.94%
3.08%
2.31%
3.17%
3.38%
2.31%
3.17%
3.38%
2.91%
3.08%
3.30%
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 1955 (life expectancy at age 65)
Non-retired member born in 1975 (life expectancy at age 65)
Male
22.7 years
23.9 years
Female
24.3 years
25.5 years
The base mortality assumptions are based on the SAPS SP3MA/S2PFA_M (2019: 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 2019 projections with a long term trend of 1.25% per annum (2019: CMI 2018
projections with a long term trend of 1.25% per annum).
The sensitivities regarding the principal assumptions used to measure the Scheme liabilities are set out below:
Assumptions
Discount rate:
Rate of inflation:
Life expectancy:
Change in assumption
Increase of 0.25%
Increase of 0.50%
Increase of 0.25%
Increase of 0.50%
Increase by 1 year
Increase/
(decrease)
in Scheme
liabilities
£m
(19.2)
(37.2)
9.3
19.0
20.7
Increase/
(decrease)
in Scheme
liabilities
%
(4.5)
(8.7)
2.2
4.5
4.9
The changes in the actuarial assumptions used in the calculation of sensitivities were selected on the basis that they provide a range of
reasonably possible changes.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
6.2 Retirement benefit obligations CONTINUED
6.2.2 Defined benefit scheme CONTINUED
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
Total pension income recognised in the Consolidated Income Statement
Notes
5.2
The amounts recognised in the Group and Company Statements of Comprehensive Income were as follows:
Expected return less actual return on Scheme assets
Loss arising from changes in the assumptions underlying the present value of benefit obligations
Total pension re-measurements recognised in the Group and Company Statements of Comprehensive Income
2020
£m
–
(8.9)
10.5
1.6
1.6
2020
£m
(29.6)
(39.6)
(69.2)
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 Statement 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
2019
£m
(1.7)
(10.1)
12.1
2.0
0.3
2019
£m
28.8
(44.2)
(15.4)
2019
£m
58.7
19.0
0.3
(15.4)
62.6
2020
£m
62.6
8.5
1.6
(69.2)
3.5
(425.8)
429.3
(393.9)
456.5
A deferred tax liability of £0.7m (2019: £11.6m) has been recognised in the Group and Company Balance Sheets in relation to the pension
asset (note 2.6.3).
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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
Benefits paid from Scheme
Present value of defined benefit obligations at 30 June
The maturity profile of these obligations at 30 June 2020 was as follows:
Expected total benefit payments:
Within one year
Between one and two years
Between two and five years
Between five and ten years
Movements in the fair value of Scheme assets were as follows:
Fair value of Scheme assets at 1 July
Interest income
Actuarial (loss)/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
Assets held by insurance company
Cash
Total
2020
£m
393.9
–
8.9
39.6
(16.6)
425.8
2020
£m
456.5
10.5
(29.6)
8.5
(16.6)
429.3
£m
67.4
380.7
–
8.4
456.5
£m
–
–
425.8
3.5
429.3
2020
%
–
–
99.2
0.8
100.0
The fair values of the Scheme assets in the above table are measured in accordance with Level 2 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 2021 is £nil.
2020
£m
(19.1)
2019
£m
357.3
1.7
10.1
44.2
(19.4)
393.9
2020
£m
17.2
17.8
57.2
109.6
2019
£m
416.0
12.1
28.8
19.0
(19.4)
456.5
2019
%
14.8
83.4
–
1.8
100.0
2019
£m
40.9
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
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/(credit):
Equity-settled share-based payments:
LTPP
Sharesave
SMIS
DBP
ELTIP
2020
£m
(3.1)
2.0
(0.2)
3.5
4.6
6.8
2019
£m
4.1
1.6
3.7
2.9
1.8
14.1
As at 30 June 2020, an accrual of £2.3m (2019: £4.7m) was recognised in respect of social security liabilities on share-based payments.
6.3.1 Share-based payments reserve
The share-based payments reserve represents the obligation of the Group in relation to equity-settled share-based payment transactions.
Details of movements in the share-based payments reserve are shown on the Statement of Changes in Shareholders’ Equity.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 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
Sharesave
29 April 2015 – 5-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
7 April 2020 – 3-year plan
7 April 2020 – 5-year plan
Total Sharesave options
LTPP
24 November 2017 – Executive
22 October 2018 – Executive
24 October 2019 – Executive
22 October 2018 – Senior Management
24 October 2019 – Senior Management
Total LTPP awards
DBP
17 October 2017
22 October 2018
24 October 2019
Total DBP awards
ELTIP
20 July 2018 – 60th Anniversary Award
15 July 2019 – HBF 5 Star Award
Total ELTIP awards
Total
Option price
pence
2020
number
Not exercisable after
447
482
464
464
449
449
519
519
456
456
–
–
–
–
–
–
–
–
–
–
145,268
85,610
31 December 2020
31 December 2021
1,631,118
31 December 2020
196,288
31 December 2022
1,890,848
31 December 2021
201,314
31 December 2023
1,276,741
31 December 2022
161,246
31 December 2024
2,634,371
31 December 2023
483,761
31 December 2025
8,706,565
1,233,928
1,536,033
1,317,308
1,181,785
1,185,290
6,454,344
524,853
629,796
569,142
1,723,791
913,063
1,133,948
2,047,011
18,931,711
–
–
–
–
–
–
–
–
–
–
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
6.3 Share-based payments CONTINUED
6.3.3 Further information relating to the share-based payment schemes
LTPP
The grant of awards under the LTPP is at the discretion of the Remuneration Committee taking into account individual performance and
overall performance of the Group. Vesting under this schemes is dependent upon performance conditions including TSR, EPS and ROCE.
Further details can be found in the Remuneration report on pages 145 and 146.
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 144.
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. There is
currently no intention to make any further grants under the SMSOP.
ELTIP
The Board approved the HBF 5 Star Award in July 2019 and the 60th Anniversary Award in July 2018 under the ELTIP. The Awards were
made to all eligible employees employed as at 15 July 2019 and 19 July 2018 respectively. Participants were entitled to receive shares in
the Company when the 60th Anniversary Award vested on 1 July 2020, and participants of the HBF 5 Star Award will be entitled to receive
shares in the Company when the Award vests on 15 July 2021. Senior Management are not eligible to participate in the ELTIP. The Awards
are 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:
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
–
–
–
–
–
–
2020
Number of
award units
7,110,634
(1,222,060)
(2,063,257)
2,629,027
6,454,344
–
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
–
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Barratt Developments PLCwww.barrattdevelopments.co.uk 6.3 Share-based payments CONTINUED
6.3.4 Number and weighted average exercise price of outstanding share-based payments CONTINUED
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
ELTIP
Outstanding at 1 July
Forfeited 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
120
120
–
–
Weighted average
exercise price in
pence
470
477
454
456
467
–
Weighted average
exercise price in
pence
–
–
–
–
–
–
2020
Number of
award units
111,851
(111,851)
–
–
2020
Number of
award units
7,545,862
(665,633)
(1,316,538)
3,142,874
8,706,565
–
2020
Number of
award units
1,639,741
(36,214)
(463,241)
583,505
1,723,791
–
2020
119
118
120
120
Weighted average
exercise price in
pence
452
459
437
519
470
–
Weighted average
exercise price in
pence
–
–
–
–
–
–
Weighted average
exercise price in
pence
Number of
award units
Weighted average
exercise price in
pence
–
–
–
–
–
1,024,259
(231,448)
1,254,200
2,047,011
–
–
–
–
–
–
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
–
2019
Number of
award units
–
(196,861)
1,221,120
1,024,259
–
The weighted average share price, at the date of exercise, of share options exercised during the year was 637.9p (2019: 499.0p). The
weighted average life for all schemes outstanding at the end of the year was 1.8 years (2019: 1.7 years).
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
6.3 Share-based payments CONTINUED
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
86.9
495.0
495.0
453.0
Valuation model
Black–Scholes model
Black–Scholes model
Black–Scholes model
Black–Scholes model
2020
pence
73.5
645.0
645.0
536.0
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
625p
–
29.1%
2.0 years
0.54%
7.51%
Sharesave
471p
456p
26.8%
3.3 years
0.16%
2.71%
LTPP
646p
–
24.6%
3.0 years
0.41%
–
Grants
2020
DBP
646p
–
24.6%
3.0 years
0.41%
–
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%
–
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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Barratt Developments PLCwww.barrattdevelopments.co.uk 7 Contingencies, related parties, post balance sheet events and subsidiaries
7.1 Contingent liabilities
7.1.1 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 £399.1m (2019: £444.8m), and confirm that at the date of these Financial
Statements the possibility of cash outflow is considered minimal and no provision is required.
Cladding
As disclosed in note 3.6, 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 at the
time of completion.
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 may change as building works progress. In
addition, further changes to Building Regulations and Fire Safety Regulations are currently in the consultation phase and revised requirements
may alter the current position.
Structural issues
As disclosed in note 3.6, following the issues identified at Citiscape, the Group is conducting a review of developments where reinforced
concrete frames have been designed by either the same original engineering firm which designed Citiscape, or by other companies within
the group of companies which has since acquired it. The Financial Statements have been prepared based on currently available information,
however, the detailed review is ongoing and therefore the extent and cost of any remedial work may change as this work progresses.
While in most cases we have no legal liability, in line with our commitment to put our customers first we will ensure that no costs associated
with remedial works are borne by leaseholders. We are actively seeking to recover costs from third parties, however there is no certainty
regarding the extent of any financial recovery.
7.1.2 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 £10.4m at 30 June
2020 (2019: £12.5m).
At 30 June 2020, the Group no longer has an obligation to repay grant monies received by a JV upon certain future disposals of land
(2019: £0.9m).
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. These guarantees have been reviewed in the light of COVID-19, and at 30 June 2020 the probability of any loss to the Group
resulting from these guarantees is considered to be remote.
There are no contingent liabilities in relation to associates at 30 June 2020 or 30 June 2019.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
7.1 Contingent liabilities CONTINUED
7.1.3 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.
7.2 Related party transactions
7.2.1 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 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 2020.
7.2.2 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 by the Company to subsidiary undertakings
Amounts due to the Company from subsidiary undertakings
2020
£m
67.2
5.0
519.3
19.3
395.5
Company
2019
£m
82.7
4.1
593.6
334.3
76.3
The Company and its subsidiaries have entered into counter-indemnities in the normal course of business in respect of performance bonds.
7.2.3 Transactions between the Group and its JVs
The Group has entered into transactions with its JVs as follows:
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
Dividends received from JVs
Balances at 30 June:
Funding loans and interest due from JVs net of impairment
Other amounts due from JVs
Loans and other amounts due to JVs
2020
£m
5.6
0.5
24.2
81.9
15.7
(0.9)
Group
2019
£m
8.4
2.2
60.3
64.4
19.8
(1.8)
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 7.1.2.
7.2.4 Transactions between the Group and its associate
The amount of outstanding loans due to the Group from its associate at 30 June 2020 was £nil (2019: £nil). There were no other amounts
outstanding between the Group and its associate as at 30 June 2020.
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Barratt Developments PLCwww.barrattdevelopments.co.uk 7.3 Post balance sheet events
Structural issues
As disclosed in note 3.6, following the issues identified at Citiscape, the Group is conducting a review of developments where reinforced
concrete frames have been designed by either the same original engineering firm which designed Citiscape, or by other companies within
the group of companies which has since acquired it.
The detailed reviews of these developments is ongoing. We apologise unreservedly to affected customers that the standards that we set for
ourselves and our partners were not met at these developments. While in most cases we have no legal liability, in line with our commitment
to put our customers first we will ensure that no costs associated with these remedial works are borne by leaseholders. After the year end,
the Group has committed to undertake remedial work at additional developments.
Based on our current assessments, it is estimated that the total future costs, in addition to those costs recognised in FY20 and prior, will
be £48.0m. This is for the required remedial programme at Citiscape, the review itself, and any remediation required at other buildings.
We are actively seeking to recover costs from third parties, however there is no certainty regarding the extent of any financial recovery. No
adjustments have been made to these Financial Statements in respect of these costs.
Coronavirus Job Retention Scheme
During the year the Group utilised the Government’s CJRS. The Group recognised £26.0m of funding under this scheme in the Income
Statement in the financial year. The furlough scheme provided welcome and timely support but on 6 July 2020 the Group announced that
because of the resilience of the Group’s financial position it would return all the furlough funds received. These funds were returned
in August 2020. Given the timing of the decision to repay the CJRS, there was no liability recognised at 30 June and the costs will be
recognised and treated as an Adjusted item in the year ending 30 June 2021.
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.
Registered
office Notes
A
2
Class of
share held
Ordinary
Registered
office Notes
Class of
share held
% of
shares
owned
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
% of
shares
owned
100%
100%
100%
100%
100%
100%
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Subsidiary
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
Ordinary
100%
Barratt London Limited
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Barratt Manchester Limited
Barratt Newcastle Limited
Barratt North London Limited
Barratt Northampton Limited
Barratt Northern Limited
Barratt Norwich Limited
Barratt Pension Trustee Limited
Ordinary
100%
Barratt Poppleton Limited
Barratt Preston Limited
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
1
1
1
1
1
1
1
1
1
52
1
2
1
2
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
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
225
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
7.4 Group subsidiary undertakings CONTINUED
Registered
office Notes
A
1
Class of
share held
Ordinary
Subsidiary
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
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
BDW North Scotland Limited
51
BDW Trading Limited
BLLQ LLP
Bradgate Development Services
Limited
Broad Oak Homes Limited
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
226
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
% of
shares
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
N/A
N/A
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
N/A
100%
100%
100%
100%
100%
100%
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Subsidiary
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
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
Registered
office Notes
Class of
share held
% of
shares
owned
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
1
1
1
1
1
1
1
1
1
1
1
1
51
51
1
1
2
2
1
53
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
A
A
A
A
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
100%
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
90%
100%
Ordinary
100%
Scothomes Limited
Ordinary
100%
Scottish Homes Investment
Company, Limited
Skydream Property Co. Limited
Ordinary
100%
SQ Holdings Limited
Ordinary
100%
Squires Bridge Homes Limited
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
27218-Barratt-AR2020-Financials.indd 226
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Self-edit
07-Sep-20 4:55:40 PM
Barratt Developments PLCwww.barrattdevelopments.co.uk 7.4 Group subsidiary undertakings CONTINUED
Registered
office Notes
A
1
Class of
share held
Ordinary
Registered
office Notes
Class of
share held
% of
shares
owned
A
Ordinary
100%
Subsidiary
Squires Bridge Limited
Swift Properties Limited
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
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
Waterton Tennis Centre Limited
WBD (Wokingham) Limited
Westcountry Land (Union
Corner) Limited
William Corah & Son Limited
William Corah Joinery Limited
% of
shares
owned
100%
100%
100%
N/A
100%
Ordinary
Ordinary
N/A
Ordinary
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
100%
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
100%
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
100%
100%
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
Subsidiary
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
Ambler's Meadow (East Ardsley)
Management Company Limited
Applegarth Manor (Oulton)
Management Company Limited
Ash Tree Court Management
Co. Ltd
Aspects Management Company
Limited
Autumn Brook (Yate)
Management Company Limited
Aylesham Village (Barratt)
Residents Management
Company Limited
B5 Central Residents
Management Company Limited
Baggeridge Village
Management Company Limited
Barley Fields Management
Company Limited
Beaufort Park (Wotton Bassett)
Management Limited
Beavans House Management
Company Limited
Belle Vue (Doncaster)
Management Company Limited
Bentley Fields 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
Bishops Green (Wells)
Management Company Limited
Bishop’s Hill Residents
Management Company Limited
Blackberry Park Residents
Management Company Limited
Blackwater Reach
(Southminster) Management
Company Limited
Blossomfields Residents
Management Company Limited
Bluebell Woods (Wyke)
Management Company 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
1
1
1
1
1
1
1
1
29
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
A
A
A
A
A
A
27218-Barratt-AR2020-Financials.indd 227
27218
3 September 2020 4:11 pm
Self-edit
1
1
1
1
1
1
1
5
12
5
30
5
28
10
1
27
13
49
23
5
10
50
1
6
23
15
5
20
17
12
23
32
14
5
10
A
A
A
A
A, B
A, B
A, B
A, B
A, B
A, B
A, B
Ordinary
100%
Ordinary
100%
Ordinary
100%
Ordinary
Ordinary
Ordinary
100%
100%
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
0%
A, D
Ordinary
A
Ordinary
50%
A, B
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
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
N/A
N/A
227
07-Sep-20 4:55:41 PM
www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
7.4 Group subsidiary undertakings CONTINUED
Registered
office Notes
Class of
share held
% of
shares
owned
Registered
office Notes
Class of
share held
% of
shares
owned
Subsidiary
Bodington Manor (Adel)
Management Company Limited
Bowds House 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
Bruneval Gardens (Wellesley)
Management Company Limited
Buckshaw Village Management
Company Limited
Bure Meadows (Aylsham)
Management Company Limited
Canal Quarter Resident
Management Company Limited
Cane Hill Park (Coulsdon)
Management Company Limited
Cane Hill Park (Gateway)
Management Company Limited
Canes Meadow (Brixton)
Management Company Limited
Canford Paddock (Poole)
Management Company Limited
Carlton Green (Carlton)
Management Company Limited
Castle Hill (DWH1) Residents
Management Company Limited
Castlegate & Mowbray Park
Management Company Limited
Cedar Ridge Management
Company Limited
Central Area Heat Company
Limited
Centurion Fields (Adel)
Management Company Limited
Chalkers Rise (Peacehaven)
Management Company Limited
Charfield Gardens Management
Company Limited
Cherry Blossom Meadow
(Newbury) Management
Company Limited
Chestnut Grange Residents
Management Company Limited
Clements Gate (Poringland 2)
Management Company Limited
Clipstone Park (Leighton
Buzzard) Management
Company Limited
Coat Grove (Martock)
Management Company Limited
Colliers Court (Speedwell)
Management Company Limited
Compass Point (Swanage)
Management Company Limited
Coppice Green Lane
Management Company Limited
Copsewood Management
Company Limited
Corinthian Place Management
Company Limited
228
9
1
40
13
9
15
1
10
8
14
16
17
17
40
7
9
8
6
10
12
6
17
32
12
5
15
15
40
13
7
20
5
14
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
Ordinary
87%
A, B
N/A
N/A
A
Ordinary
50%
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
N/A
N/A
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
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
Dida Gardens (Didcot)
Management Company Limited
Doseley Park Residents
Management Company Limited
Drayton Meadows Management
Company Limited
Earls Park Management
Company Limited
Edwalton (Sharp Hill)
Management Company Limited
Elderwood (Bannerdale)
Management Company Limited
Elm Tree Park Management
Company (Beverley) Limited
Embden Grange (Tavistock)
Management Company 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
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
Great Pastures Management
Company Limited
10
12
12
15
A, B
A, B
A, B
A, B
33
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
15
30
22
5
5
5
8
12
5
23
30
48
9
25
40
42
16
6
15
6
13
1
26
9
40
8
12
10
15
38
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
27218-Barratt-AR2020-Financials.indd 228
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07-Sep-20 4:55:41 PM
Barratt Developments PLCwww.barrattdevelopments.co.uk 7.4 Group subsidiary undertakings CONTINUED
Registered
office Notes
Class of
share held
% of
shares
owned
Subsidiary
Greenkeepers Mews (Phase 3)
Management Company Limited
GWQ Management Limited
H2363 Limited
Hallam Park Residents
Management Company Limited
Harlow Gateway Limited
Hartley Brook (Netherton)
Management Company Limited
Hawley Gardens Management
Company Limited
Hazelmere Management
Company Limited
Heather Croft (Pickering)
Management Company Limited
Heathwood Park (Lindfield)
Management Company Limited
Helme Ridge (Meltham)
Management Company Limited
Henbrook Gardens Management
Company Limited
Heron House (Wichelstowe)
Management Company Limited
Hesslewood Park Management
Company Limited
Hewenden Ridge (Cullingworth)
Management Company Limited
High Elms Park (Hullbridge)
Management Company Limited
Highgrove Gardens (Romsey)
Management Company Limited
Hollygate Park (Cotgrave)
Management Company Limited
Holmesgate Place (Hayes)
Management Company Limited
Infinity Park Derby Management
Company Limited
Interlink Park Management
Company Limited
Jenkins House Management
Company Limited
Keeper's Meadow Residents
Management Company Limited
Kennett Heath Management
Limited
Kilners Grange (Tongham)
Management Company 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
Kingsley Meadows (Harrogate)
Management Company Limited
Kipling Road (Ledbury)
Residents Management
Company Limited
Knights Park (Watton)
Management Company Limited
15
24
50
23
35
A, B
A, C
A, B
A, B
A, B
9
A, B
36
A, B
A, D
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
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
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1
9
17
28
20
1
10
9
14
46
16
54
1
1
1
23
8
17
14
23
17
8
16
25
13
6
33
14
N/A
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
N/A
N/A
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
Knights Rise (Temple Cloud)
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
Lavender Grange (Stondon)
Resident Management
Company Limited
Lay Wood (Devizes)
Management Company Limited
Letcombe Gardens (Grove)
Management Company Limited
Leithfield Park (Godalming)
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
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
Marlborough Grove Estate
Management Company Limited
Marston Park (Marston
Moretaine) Management
Company Limited
Martello Lakes (Barratt)
Resident Management
Company Limited
Martindale Place (Southwater)
Management Company Limited
Martingale Chase (Newbury)
Management 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
Registered
office Notes
Class of
share held
% of
shares
owned
12
12
30
30
15
31
44
15
50
12
17
22
10
12
5
40
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
11
A, B
7
18
16
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
15
A, B
N/A
N/A
8
15
8
9
A, B
A, B
A, B
A, B
13
A, B
N/A
N/A
N/A
N/A
N/A
1
50
39
46
A, C
Ordinary
A, B
A, B
A, B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2%
N/A
N/A
N/A
12
A, B
N/A
N/A
27218-Barratt-AR2020-Financials.indd 229
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3 September 2020 4:11 pm
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229
07-Sep-20 4:55:42 PM
www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
7.4 Group subsidiary undertakings CONTINUED
Registered
office Notes
Class of
share held
% of
shares
owned
Registered
office Notes
Class of
share held
% of
shares
owned
Subsidiary
Montague Park No2 (Buckhurst
Farm) Management Company
Limited
Montgomery Place Residents
Management Company Limited
Monument House Management
Company Limited
Mortimer Park (Driffield)
Management Company Limited
Morton Meadows (Thornbury)
Management Company Limited
Mulberry Park (Poringland)
Management Company Limited
Needham's Grange Residents
Management Company Limited
N.E. Horley Resident
Management Company Limited
Newbery Corner Management
Company Ltd
Newbury Racecourse
Management Limited
New Heritage (Bordon)
Management Company Limited
New Mill Quarter (BL) Residents
Management Company Limited
New Mill Quarter Estate
Resident Management
Company Limited
Nexus Point 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
Oakhurst Place (Bexhill)
Management Company Limited
Oaklands (Pontefract)
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
Orchard Green Estate
Management Company Limited
230
12
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
N/A
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
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
N/A
N/A
5
1
9
1
14
33
25
13
19
46
8
8
1
32
15
30
20
1
1
42
20
5
16
7
17
9
16
50
7
1
12
16
Subsidiary
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
Pinn Brook Park (Monkerton)
Management Company Limited
PL2 Plymouth (2016) Limited
Poppy 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
Priestley House Management
Company Limited
Priory Fields (Pontefract)
Management Company Limited
Prospect Rise (Whitby)
Management Company Limited
Pye Green Management
Company Limited
Quarter Jack Park (Wimborne)
Management Company Limited
Raleigh Holt (Barnstaple)
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
Riverdown Park (Salisbury)
Management Company Limited
River Whitewater Management
Company (Hook) Limited
Riverside Exchange
Management Company Limited
Romans Edge Godmanchester
Management Company Limited
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
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
0%
N/A
N/A
15
30
30
6
6
30
26
30
40
15
6
49
49
40
40
6
8
12
45
1
10
6
20
7
40
20
40
14
40
40
11
15
10
1
15
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
A, C
Ordinary
17%
A, B
A, B
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
N/A
N/A
Ordinary/
Preference
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
22.8%
N/A
N/A
27218-Barratt-AR2020-Financials.indd 230
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Barratt Developments PLCwww.barrattdevelopments.co.uk 7.4 Group subsidiary undertakings CONTINUED
Registered
office Notes
Class of
share held
Registered
office Notes
Class of
share held
% of
shares
owned
Subsidiary
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 Corner (Emsworth)
Management Company 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
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
Springfield Village Estate
Limited
St. Andrews Place (Morley)
Management Co. Limited
St Andrews View (Morley)
Management Company Limited
Stansted Road (Kingswood
Place Elsenham) 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 Mary's Park (Hartley Wintney)
Management Company Limited
Stoneyfield Management
Limited
St. Oswald's View (Methley)
Management Company Limited
Stratford Park (Wolverton)
Management Company Limited
St Rumbolds Fields
Management Company Limited
St Wilfrids Walk Management
Company Limited
A
Ordinary
100%
A, C
Ordinary
A, B
A, B
A, B
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
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
A
Ordinary
42
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
Ordinary
100%
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
4%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
19%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Subsidiary
Swallows Field (Hemel
Hempstead) Management
Company Ltd
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 Bridleways (Eccleshill)
Management Company Limited
The Causeway Park (Petersfield)
Management Company Limited
The Chocolate Works
Management Company Limited
The Fieldings (Worthing)
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
The Limes (Lindfield)
Management Company Limited
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 Paddocks (Skelmanthorpe)
Management Company Limited
The Paddocks (Southmoor)
Management Company Limited
The Pastures (Knaresborough)
Management Company Limited
The Pavilions Management
Company (Southampton)
Limited
The Pavilions Resident
Management Company Limited
The Spires (Chesterfield)
Management Company Limited
The Spires (St Ives)
Management Company Limited
The Vineyards Management
Company Limited
The Zone (Temple Quay)
Management Company Limited
Tranby Fields Management
Company Limited
1
5
8
8
8
42
16
10
28
7
10
40
10
6
17
15
9
5
10
4
28
18
15
29
9
28
20
25
1
9
15
16
6
22
12
12
40
9
6
15
28
34
37
3
9
39
10
28
9
15
13
5
47
41
1
8
5
10
12
6
46
23
26
15
30
43
10
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
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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
27218-Barratt-AR2020-Financials.indd 231
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Notes to the Financial Statements CONTINUED
Year ended 30 June 2020
7.4 Group subsidiary undertakings CONTINUED
Subsidiary
Trinity Square (NW9)
Management Company Limited
Trumpington (Phase 8 – 11)
Management Company Limited
Trumpington Vista Management
Company Limited
Union Park (Falmouth)
Management Company Limited
Victoria Heights (Alphington)
Management Company Limited
Waite House Management
Company Limited
Walton Gate (Felixstowe)
Management Company Limited
Warboys 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
Waterside (The Quays Barry)
Management Company Number
3 Limited
WBD Blenheim Management
Company 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
Registered
Class of
share held
% 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
office Notes
11
14
14
40
40
1
14
38
49
8
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
A, B
29
A, B
N/A
N/A
29
A, B
N/A
N/A
29
A, B
N/A
A, C
Ordinary
A
Ordinary
A, C
Ordinary
A, B
N/A
N/A
1%
17%
25%
N/A
A
A
Ordinary
100%
Ordinary
100%
A, B
N/A
N/A
1
1
1
1
1
1
9
Subsidiary
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
Wichelstowe Estate
Management CIC
Willow Farm Management
Company Limited
Willow Grove (Stopsley)
Management Company Limited
Willow Grove (Wixams)
Management Company Limited
Willow Lane (Beverley)
Management Company Limited
Willowmead (Wiveliscombe)
Management Company Limited
Winnington Village Community
Management Company Limited
Withies Bridge Management
Company Ltd
Woodhall Grange Management
Company Limited
Wychwood Park (Haywards
Heath) Management Company
Limited
Registered
office Notes
Class of
share held
% of
shares
owned
33
5
26
50
12
1
1
8
15
6
50
26
30
6
A, B
A, B
A, B
A, B
A
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
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
17
A, B
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.
The Group is a minority shareholder but has voting control.
The Group does not own any shares but has control via directors who are
employees of the Group.
C
D
232
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Barratt Developments PLCwww.barrattdevelopments.co.uk 7.4 Group subsidiary undertakings CONTINUED
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. 31 Chapel Road, Worthing, BN11 1RG
4. 55 Baker Street, London, England, W1U 8EW
5. One Eleven, Edmund Street, Birmingham, West Midlands, B3 2HJ
6. Unit 11, Omega Business Park, Omega Business Village, Thurston Road, 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. Newbury Racecourse Plc, The Racecourse, Newbury, Berkshire, RG14 7NZ
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. 100 Avebury Boulevard, Milton Keynes, England, MK9 1FH
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. Cumberland Court, 80 Mount Street, Nottingham, Nottinghamshire, United Kingdom, NG1 6HH
39. PO Box 648, Gateway House, Tollgate, Chandler’s Ford, Eastleigh, Hampshire, SO50 0ND
40. Woodwater House, Pynes Hill, Exeter, Devon, EX2 5WR
41. Unit 7, Astra Centre, Edinburgh Way, Harlow, Essex, England, CM20 2BN
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. C/O Raymond Beer & Co, Manor Road, Chatham, England, ME4 6AG
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
51. Blairton House Old Aberdeen Road, Balmedie, Aberdeen, Scotland, AB23 8SH
52. Telford House, 3 Mid New Cultins, Edinburgh, Midlothian, EH11 4DH
53. Cash's Business Centre, Widdrington Road, Coventry, United Kingdom, CV1 4PB
54. C/O Rendall and Rittner Ltd, Portsoken House, 1550157 Minories, London EC3N 1LJ
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07-Sep-20 4:55:44 PM
www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Greenhouse gas emissions disclosure
Greenhouse gas emissions
Scope 1
Scope 2
Total gross scope 1 &
scope 2 emissions
Energy Consumption
Carbon Intensity (per 100 sq.m.
of legally completed build area)*
tCO2e
Location based
Market based
Location based
Market based
Location based
Market based
Scope 3
Total gross scope 1, 2 & 3 emissions Location based
Market based
tCO2e
tCO2e
tCO2e
tCO2e
MWh
tCO2e/100m2
tCO2e/100m2
tCO2e
tCO2e
tCO2e
2020
18,374
4,700
2,089
23,074
20,463
97,686
1.92
1.70
3,130,717
3,153,791
3,151,180
2019
24,832
5,016
3,411
29,848
28,243
117,551
1.75
1.66
3,835,725
3,865,573
3,863,968
2018
24,966
6,594
4,992
31,560
29,958
116,998
1.82
1.73
3,857,428
3,888,988
3,887,386
2015
24,019
11,809
–
35,828
–
–
2.32
–
–
–
–
* Carbon intensity has been restated to include scope 1 and scope 2 emissions only – see section 5
1. Organisational Boundary
The Group has used the GHG Protocol Corporate Accounting and Reporting Standard (Revised Edition) as the method to quantify and report
greenhouse gas emissions. Greenhouse gas emissions are reported in line with the UK Government’s ‘Environmental Reporting Guidelines:
Including streamlined energy and carbon reporting guidance’ (dated March 2019).
As the Group operates in England, Wales and Scotland only, the Group’s emissions stated above are amounts for UK and offshore
emissions, with no additional global emissions.
In line with the revised Greenhouse Gas Reporting Protocol, the Group reports the sources of material greenhouse gas emissions from
its main activities, categorised as scope 1, 2 and 3 emissions. Scope 1 comprises direct emissions from sources owned or controlled by
the Group such as the use of red diesel, natural gas and liquid petroleum gas on construction sites and natural gas, biomass fuel and
refrigerant losses in our offices and other administrative activities. Scope 2 comprises indirect emissions associated with the consumption
of energy from purchased electricity, heat and steam. Scope 3 relates to all other indirect emissions that occur in the value chain, including
upstream and downstream emissions.
The Group has increased its breadth of reporting scope 3 emissions in the current year to extend to all scope 3 emissions. Scope 3 emissions
relate to an estimate of the end-to-end carbon emissions from the Group’s activities, comprising indirect emissions such as those from the
supply chain, waste disposal by third parties and carbon emissions incurred throughout the use of sold buildings. In the 30 June 2019 Annual
Report and Accounts, scope 3 emissions included business travel and losses in transmission from scope 1 and 2 sources only. Scope 3
emissions for 2019 have therefore been restated for the purpose of the 30 June 2020 Annual Report and Accounts – see section 4 below.
The Group is reporting location-based and market-based scope 2 electricity data. Market-based footprint is based on the emissions from
electricity 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 (‘REGO’) certificates.
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.
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.
See our Carbon Reporting Methodology Statement at www.barrattdevelopments.co.uk/sustainability/our-publications for more detail on the
methodology and organisational boundaries applied.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
2. Methodology
Scope 1 and 2 data are obtained directly such as by obtaining meter readings or using invoices from suppliers. Scope 3 emissions, such as
upstream supplier emissions, are estimated based on total spend and carbon emissions in our completed properties. Carbon emissions in
our completed properties are estimated based on plot-level dwelling emissions rates (DER) and number of properties completed.
The Group has used the greenhouse gas (‘GHG’) emission factors outlined in the BEIS ‘UK Government Conversion Factors for Company
Reporting’, Version 1.2 November 2019 (2019: Version 1.01 June 2018) to convert activities undertaken into tonnes CO2 equivalent. Supply
chain emissions are estimated by applying supply chain emission factors published in the UK Government’s ‘Environmental Reporting
Guidelines: Including streamlined energy and carbon reporting guidance’ (dated March 2019).
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.
See our Carbon Reporting Methodology Statement at www.barrattdevelopments.co.uk/sustainability/our-publications for more detail on the
methodology applied.
3. Carbon intensity measure
In order to capture the global warming impact of carbon dioxide as well as other greenhouse gases such as methane and nitrous oxide,
greenhouse gas emissions are reported in carbon dioxide equivalent (CO2e). Carbon intensity is measured as tonnes of scope 1 and scope 2
CO2e per 100 sq.m. of homes and other properties legally completed in the year.
4. Science-based target
In January 2020, the Board approved our own new challenging science-based carbon reduction targets in line with efforts to limit global
warming to 1.5⁰C. In our own operations, we will aim to reduce combined scope 1 and 2 emissions by 29% by 2025 compared to the 2018
base year, through measures such as reducing diesel used by generators on site, amending our vehicle policies and implementing energy
efficiency opportunities across our offices, sites, sales centres and show homes.
In addition, we are focused on the measurable steps that we can take to reduce both the embodied carbon in our supply chain and in-use
carbon from our homes, including increasing the use of timber frame in home construction, which is a sustainable, low energy technology.
We have set a target to reduce scope 3 carbon emissions by 11% from our supply chain and our homes by 2030 compared to the 2018 base
year. The charts below illustrate the breakdown of scope 3 emissions by category, which shows the majority of supply chain emissions
come from our purchased goods and services from suppliers. Therefore, partnerships with our suppliers is key to the delivery of our goals
and we are engaging our suppliers and sub-contractors.
Scope 3 Emissions
FY2020
930,797
121,032
58,547
5,869
4,792
3,648
26,580
17,658
2,020,341
Use of Sold Products
2019: 1,311,087
2020: 930,797
Upstream Transportation
& Distribution
2019: 143,985
2020: 121,032
Purchased Goods & Services
2019: 2,305,017
2020: 2,020,341
Fuel and Energy Related
Activities*
2019: 6,229
2020: 4,792
End of Life Treatment
of Sold Products
2019: 37,390
2020: 26,580
Business Travel
2019: 8,825
2020: 5,869
Waste generated in
operations
2019: 4,123
2020: 3,648
Employee Commuting
2019: 19,068
2020: 17,658
* 384 of FY20 tCO2e of transmission and distribution losses from electricity and district heat and steam under category 6 have been assured
to ISAE 3000 (revised) standard by an independent third party.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Greenhouse gas emissions disclosure CONTINUED
5. Restatement of comparative year and base year
The Group seeks to provide comprehensive and useful reporting of emissions to the readers of its Annual Report and Accounts, and to
evolve its reporting practices as necessary. The Group’s approach was reviewed during the year in advance of setting new, challenging
carbon reduction targets. The 2019 comparative year and the 2018 base year from which these targets have been set were restated to
include all scope 3 emissions and to reflect an estimate of the end-to-end carbon emissions from the Group’s activities. Scope 3 emissions
previously disclosed were limited to business travel and transmission and distribution losses.
The Group engaged advisers to calculate estimated scope 3 emissions across all 15 categories outlined in the Corporate Value Chain
(Scope 3) Accounting and Reporting Standard by applying the emissions factors outlined above to the Group’s historical data from relevant
activities.
The effect of these changes on the total greenhouse gas emissions for the comparative year and base year was:
Greenhouse gas emissions (tonnes CO2e)
Total gross scope 1 & scope 2
emissions (as published)
Location based
Market based
Scope 3
As published
Increase in scope
Restated total gross scope 3
emissions
Restated total annual gross
emissions
Location based
Market based
2019
2018
29,848
28,243
31,560
29,958
7,896
3,827,829
7,923
3,849,505
3,835,725
3,857,428
3,865,573
3,863,968
3,888,988
3,887,386
Following the expanded reporting on scope 3 emissions, the Group has also restated carbon intensity to include only scope 1 and scope 2
emissions, but exclude scope 3 emissions such as business travel. The effect of this restatement is as follows:
Carbon intensity tCO2e
per 100m2 as published
Less scope 3 emissions
previously reported
Restated carbon intensity
(scope 1 and 2) tCO2e per 100m2
Location based
Market based
Location based
Market based
Location based
Market based
2019
2.21
2.12
(0.46)
(0.46)
1.75
1.66
2018
2.28
2.19
(0.46)
(0.46)
1.82
1.73
2017
2.52
2.35
(0.48)
(0.48)
2.04
1.87
2016
2.57
–
(0.47)
–
2.10
–
2015
2.82
–
(0.50)
–
2.32
–
6. Assurance
Limited assurance over all scope 1 and 2 emissions and scope 3 business travel, transmission and distribution emissions is provided by a
third party, DNV GL, to the ISAE 3000 revised standard. A copy of their assurance statement can be found at
www.barrattdevelopments.co.uk/sustainability/our-publications.
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Barratt Developments PLCwww.barrattdevelopments.co.uk
Five year record and alternative
performance measures
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)
2020
3,419.2
491.8
4,840.3
39.4
–
–
2019¹
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
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
Definitions of alternative performance measures and reconciliation to IFRS
The Group uses a number of APMs which are not defined within IFRS. The Directors use these APMs, along with IFRS measures, to assess the
operational performance of the Group as detailed in the Key performance indicators section of the Strategic Report on pages 4 to 7. Definitions
and reconciliations of the financial APMs 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
2020
3,419.2
614.3
18.0%
20191
4,763.1
1,084.2
22.8%
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
Adjusted gross margin is defined as adjusted gross profit divided by revenue:
Revenue per Consolidated Income Statement (£m)
Adjusted gross profit per Consolidated Income Statement (£m)
Adjusted gross margin
2020
3,419.2
631.4
18.5%
20191
4,763.1
1,087.4
22.8%
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
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
2020
3,419.2
493.4
14.4%
20191
4,763.1
901.1
18.9%
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
Adjusted operating margin is defined as adjusted profit from operations divided by revenue:
Revenue per Consolidated Income Statement (£m)
Adjusted profit from operations per Consolidated Income Statement (£m)
Adjusted operating margin
2020
3,419.2
507.3
14.8%
20191
4,763.1
904.3
19.0%
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
Net cash is defined in note 5.1.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements 20191
£m
901.1
–
3.2
–
1.7
37.5
943.5
30 June
2018
£m
4,597.7
(100.0)
(792.2)
85.8
25.3
(58.7)
(1,176.2)
384.9
–
2,966.6
3,000.3
20191
943.5
3,180.2
29.7%
Five year record and alternative
performance measures CONTINUED
Definitions of alternative performance measures and reconciliation to IFRS CONTINUED
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
Amortisation of intangible assets
Cost associated with legacy properties
CJRS grant income
Defined benefit past service cost
Share of post-tax profit from JVs and associates including loss on disposal of JVs
Earnings before amortisation, interest, tax, adjusted items and defined benefit scheme charges
2020
£m
493.4
1.2
39.9
(26.0)
–
28.3
536.8
Group net assets per Consolidated Balance Sheet
Less:
Other intangible assets per Consolidated Balance Sheet
Goodwill per Consolidated Balance Sheet
Current tax liabilities/(assets)
Deferred tax liabilities
Retirement benefit assets
Cash and cash equivalents2
Loans and borrowings2
Prepaid fees
Capital employed
Three point average capital employed
30 June
2020
£m
4,840.3
31 December
2019
£m
4,849.1
30 June
20191
£m
4,869.0
31 December
2018
£m
4,551.7
(101.1)
(805.9)
2.8
2.4
(3.5)
(619.8)
317.7
(6.1)
3,626.8
3,443.8
(101.7)
(805.9)
(0.4)
16.2
(68.6)
(826.0)
399.3
(7.1)
3,454.9
(102.3)
(805.9)
99.5
17.6
(62.6)
(1,136.0)
377.7
(7.4)
3,249.6
3,180.2
(100.0)
(792.2)
84.3
21.5
(53.1)
(844.5)
465.4
(8.6)
3,324.5
2020
536.8
3,443.8
15.6%
Earnings before interest, tax, adjusted items and defined benefit scheme charges (from table above) (£m)
Three point average capital employed (from table above) (£m)
ROCE
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
2 The prior year balances for cash and cash equivalents and bank overdrafts have been re-presented in accordance with IAS 32 (see note 1.4).
Total gearing including land creditors is defined as land creditors and net debt/cash divided by net tangible assets:
Net cash (£m)
Land creditors (£m)
Net assets (£m)
Less goodwill and other intangible assets (£m)
Total gearing including land creditors
2020
(308.2)
791.9
483.7
4,840.3
(907.0)
3,933.3
12.3%
20191
(765.7)
960.7
195.0
4,869.0
(908.2)
3,960.8
4.9%
1
The Group has applied IFRS 16 using the modified retrospective approach and therefore comparatives have not been restated. Further information on the initial
application of this standard can be found in notes 1.4 and 1.5.
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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Barratt Developments PLCwww.barrattdevelopments.co.uk Glossary
ACM
Act
Aluminium Composite Material
COP26
The Companies Act 2006
Active outlet
A site with at least one plot for sale
AGM
AIMCH
APM
Articles
ASP
ASPIRE
BAME
Barratt
BBA
BEIS
BITC
Brexit
BRICK
Building for
Life 12
Annual General Meeting
Advanced Industrialised Methods for the
Construction of Homes
Alternative performance measure
The Company’s Articles of Association
Average selling price
The Group's two-year graduate programme
Black, Asian and minority ethnic excluding
white ethnic groups
Barratt Developments PLC and its subsidiary
undertakings
British Board of Agrément
Department for Business, Energy and Industrial
Strategy
Business in the Community
The withdrawal of the United Kingdom from the
European Union
Barratt Risk and Internal Control Framework
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
Building
Regulations
The requirements relating to the erection and
extension of buildings under UK Law
Capital employed Average net assets adjusted for goodwill and
intangibles, tax, cash, loans and borrowings,
prepaid fees, retirement benefit assets/
obligations and derivative financial instruments
CBI
CCFF
CDP
CEO
CFO
CITB
CJRS
CMA
CMI
CO2e
Code
COINS
Confederation of British Industry
COVID Corporate Financing Facility
Carbon Disclosure Project
Chief Executive Officer
Chief Financial Officer
Construction Industry Training Board
Coronavirus Job Retention Scheme
Competition and Markets Authority
The actuarial profession’s Continuous Mortality
Investigation
Carbon dioxide equivalent
UK Corporate Governance Code issued in July
2018 (copy available from www.frc.org.uk)
Construction Industry Solutions (software used
by the Group)
Company
Barratt Developments PLC
Connected
Persons
As defined in the EU Market Abuse
Regulation
The 26th session of the Conference of the
Parties of the UN Framework Convention on
Climate Change
COVID-19
Coronavirus Disease 2019
CRM
DBP
DECC
DEFRA
DER
DTRs
EBT
ELTIP
EPC
EPS
ESG
EU
FCA
FRC
FSC
Customer Relationship Management
Deferred Bonus Plan
Department of Energy and Climate Change
Department for Environment, Food and Rural
Affairs
Dwelling emissions rates
Disclosure Guidance and Transparency Rules
Barratt Developments Employee Benefit Trust
Employee Long Term Incentive Plan
Energy Performance Certificate
Earnings per share
Environmental Social Governance
European Union
Financial Conduct Authority
Financial Reporting Council
Forest Stewardship Council
FTSE4Good
Equity index series of companies demonstrating
strong ESG practices.
FY
GDPR
Group
GHG
GMP
HBF
HMRC
HR
IA
IAS
IASB
IFRIC
IFRS
IIA
IIR
IIRC
IR35
ISA
ISAE
ISDA
ISO
JVs
KPI
Financial year ended 30 June
General Data Protection Regulation
Barratt Developments PLC and its subsidiary
undertakings
Greenhouse Gas
Guaranteed Minimum Pension
Home Builders Federation
HM Revenue & Customs
Human Resources
Investment Association
International Accounting Standards
International Accounting Standards Board
International Financial Reporting
Interpretations Committee
International Financial Reporting Standards
Chartered Institute of Internal Auditors
Injury incidence rate
International Integrated Reporting Council
Integrated Report
HMRC off-payroll working rules
International Standards on Auditing
International Standard on Assurance
Engagements
International Swaps and Derivatives Association
International Organisation for Standardisation
Joint ventures
Key performance indicator
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Glossary CONTINUED
LGBT+
LIBOR
LTI
LTPP
LTV
MHCLG
MMC
MP
NED
Net cash
Net tangible
assets
New Code
NHBC
NHS
NI
Non-recurring
items
NPPF
Ofcom
ONS
Lesbian, gay, bisexual, transgender and other
gender expressions
Regional trading
margin
The London Interbank Offered Rate
Long term incentive
Long Term Performance Plan
Loan to Value
Ministry of Housing, Communities and Local
Government
Modern methods of construction
Member of Parliament
Non-Executive Director
Cash and cash equivalents, bank overdrafts,
interest bearing borrowings and prepaid fees
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 Health Service
National Insurance
REGO
RICS
ROCE
RSPB
RTPI
SAPS
Scheme
SCSS
SECR
SHE
SIC
Site ROCE
Costs associated with legacy properties,
CJRS grant income, reversal of impairment/
impairment of inventories and non-productive
site overheads expensed during the COVID-19
lockdown
The National Planning Policy Framework
The regulator and competition authority for the
UK communications industries
Office of National Statistics
SMIS
SMSOP
SSP
SWOT
TCFD
Basic trading profit (revenue less land costs,
build costs and site marketing and running
costs) divided by revenue for the regional
business
Renewable Energy Guarantees of Origin
Royal Institution of Chartered Surveyors
Return on capital employed calculated as
described on page 238
Royal Society for the Protection of Birds
Royal Town Planning Institute
Self-Administered Pension Scheme
the Barratt Group Pension & Life Assurance
Scheme
Supply Chain Sustainability School
Streamlined Energy and Carbon Reporting
Safety, Health and the Environment
Standing Interpretations Committee
Site operating profit (site trading profit 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
Strengths, Weaknesses, Opportunities and
Threats
The Task Force for Climate-related Financial
Disclosures
Sharesave
Savings-Related Share Option Scheme
Operating margin Profit from operations divided by revenue
Total completions Unless otherwise stated, total completions
Oregon Timber Frame Limited and its
subsidiary Oregon Contract Management
Limited
Profit before tax
The Programme for the Endorsement of Forest
Certification
Personal protective equipment
PricewaterhouseCoopers LLP
Prior year equivalent period
Royal British Legion Industries
Revolving Credit Facility
Total gearing
including land
creditors
TRADA
TSR
UKLA
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
Underlying ROCE ROCE as defined on page 238, with net assets
also adjusted for land creditors
UN SDGs
United Nations' Sustainable Development Goals
USPP
WACC
WIP
US Private Placement
Weighted average cost of capital
Work in progress
Oregon
PBT
PEFC
PPE
PwC
PYEP
RBLI
RCF
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Barratt Developments PLCwww.barrattdevelopments.co.uk Integrated reporting approach
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 2020.
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
Framework
The International Integrated Reporting Council’s Integrated Reporting Framework
Purpose
Framework that is focused on articulating the value creation of an entity over time.
Framework
United Nations Sustainable Development Goals
Purpose
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.
Framework
Task Force on Climate-related Financial Disclosures (‘TCFD’) recommendations
Purpose
Recommendations for disclosing clear, comparable and consistent information about the
risks and opportunities presented by climate change.
Our primary disclosures aligning with TCFD recommendations as we continue on our
journey towards full alignment, 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.
Legal requirements
Framework
International Financial Reporting Standards (‘IFRS’)
Purpose
Global framework for how companies prepare and disclose their financial statements.
Framework
Companies Act 2006
Purpose
Company law in the UK.
Framework
UK Corporate Governance Code
Purpose
The standards of good practice for listed companies on board composition and
development, remuneration, shareholder relations, accountability and audit.
Framework
Streamline Energy and Carbon Reporting (‘SECR’)
Purpose
Disclosures required by the UK Government on a company’s energy consumption and
greenhouse gas emissions.
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
collectively considered preparation
and presentation of this report and
concluded that it has been prepared
and presented in accordance with the
Framework.
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www.barrattdevelopments.co.ukAnnual Report and Accounts 2020Financial Statements Group advisers and Company information
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0371 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 278278
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
2020 Annual General Meeting and Trading update
2021 Interim Results Announcement
Trading update
Trading update
2021 Annual Results Announcement
14 October 2020
4 February 2021
6 May 2021
14 July 2021
2 September 2021
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Barratt Developments PLCwww.barrattdevelopments.co.uk We’re supporting responsible management of the world’s forests and being
kinder to the planet by using FSC® certified paper.
The carbon emissions of this paper have also been offset through the World
Land Trust’s Carbon Balanced programme, which protects tropical forests
under imminent threat of deforestation and degradation.
We printed this publication in the UK using biodegradable vegetable inks.
CBP002836
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