Building Excellence Barratt Developments PLC Annual Report and Accounts 2015 WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Front and inside cover: Woodlands, Bedford, a range of beautifully designed three and four bedroom traditional homes. WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Barratt Developments PLC 1 Annual Report and Accounts 2015 Welcome to Barratt Developments Our vision is to lead the future of Report Strategic housebuilding by putting customers first and at the heart of everything we do. By investing in our people, we are leading Governance construction to create great places where people aspire to live, and generating sustainable returns for our shareholders. Financial Statements Inside this report Strategic Report Priorities in action Governance Financial Statements Other Information A snapshot of our business 2 The Board 46 Independent auditor’s report 103 Our performance and Customer first 18 Chairman’s introduction 48 Consolidated Income Statement 106 financial highlights 4 Overview 50 Statements of How we create and preserve value 6 Great places 22 Corporate governance report 51 Comprehensive Income 107 Chairman’s statement 8 Nomination Committee report 62 Statements of Changes in Key aspects of our market 10 Leading construction 26 Audit Committee report 66 Shareholders’ Equity 108 Chief Executive’s statement 12 Safety, Health and Environment Balance Sheets 110 Risk management 40 Investing in our people 30 Committee report 73 Cash Flow Statements 111 Remuneration report 75 Accounting Policies 112 Our principles Other statutory disclosures 96 Impact of Standards and Interpretations in issue Keeping people safe 34 Statement of Directors’ Responsibilities 102 but not yet effective 118 Being a trusted partner 35 Critical Accounting Judgements Building strong and Key Sources of Estimation community relationships 36 Uncertainty 119 Safeguarding the environment 37 Notes to the Financial Statements 121 Ensuring the financial health of the business 38 Other information 161 Notice regarding limitations on Director 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 45 and the Directors’ Report contained on pages 46 to 102. 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 45 inclusive comprise the Strategic Report and pages 46 to 102 inclusive comprise the Directors’ Report, both of which have been drawn up and presented in accordance with, and in reliance upon, English Company Law and liabilities of the Directors in connection with the reports shall be subject to the limitations and restrictions provided by such law. Cautionary statement regarding forward-looking statements The Group’s reports including this document and written information released, or oral statements made, to the public in future by or on behalf of the Group, may contain forward-looking statements. Although the Group believes that its expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different. WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Barratt Developments PLC 2 Annual Report and Accounts 2015 Strategic Report A snapshot of our business We are the nation’s leading housebuilder operating across Britain with 27 housebuilding divisions delivering 16,447 homes this year. Homes legally completed1 a Our homes a Our customers We are a HBF 5 Star housebuilder We put our customers first. and create great places to live. We build great homes and aim 16,447 We aspire to meet Building to provide customer service (2014: 14,838) for Life 12 standards3 on all of that exceeds expectations. our developments. Average active sites2 2015 completions by unit type 2015 completions by deal type 380 (2014: 364) Housebuilding divisions 27 (2014: 27) Owned and controlled 2015 2014 2015 2014 land bank plots 1 and 2 bedroom houses 12% 12% Help to Buy 31% 31% 3 bedroom houses 33% 35% Part Exchange 8% 8% 70,523 4 bedroom houses 28% 26% NewBuy/Mi New Home 0% 2% (2014: 66,570) 5 and 6 bedroom houses 4% 4% Other Private 32% 31% Flats London 9% 7% Investor 11% 12% Employees Flats non-London 14% 16% Affordable 18% 16% 5,971 (2014: 5,755) 1 Total completions, including joint ventures, were 16,447 (2014: 14,838) for the year. Private completions for the year were 12,746 (2014: 11,936). Affordable completions for the year were 2,853 (2014: 2,255) and JV completions in which the Group had an interest were 848 (2014: 647). 2 Unless otherwise stated, all numbers quoted exclude joint ventures (‘JV’) and are as at 30 June 2015 throughout this Annual Report and Accounts. 3 Building for Life 12 is the industry standard, endorsed by the Government, for well-designed homes and neighbourhoods that local communities, local authorities and developers are invited to use to stimulate conversations about creating good places to live. 4 Housebuilding contributes 98.5% (2014: 99.5%) of revenues. We also have a commercial developments business which contributes 1.5% (2014: 0.5%) of revenues. WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Barratt Developments PLC 3 Annual Report and Accounts 2015 Strategic Report Strategic a Our geographic spread a Our brands We are the nation’s leading We have three main brands – Barratt Homes, housebuilder committed to David Wilson Homes and Barratt London. operating throughout Britain4. Commercial developments are delivered by Wilson Bowden Developments. Governance Northern Financial Statements 3,289 homes (2014: 2,918) Total completions (including joint ventures) +11% on 2014 East Other Information 2,945 homes (2014: 2,526) Central 3,030 homes (2014: 3,132) Southern 2,882 homes (2014: 2,316) West 2,336 homes (2014: 2,336) London 1,965 homes (2014: 1,610) WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Barratt Developments PLC 4 Annual Report and Accounts 2015 Strategic Report Our performance and financial highlights It has been a record year. We delivered our highest ever profit before tax and a strong performance against all our key metrics. Revenue £m Gross margin % £3,759.5m 19.0% +19.1% 3,759.5 +220bps 19.0 3,157.0 16.8 2,606.2 2,323.4 12.7 13.8 2,035.4 11.2 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Target Target Controlled growth in At least 20% by FY17 completion volumes Status Status On target On target KPI KPI Profit before tax1 £m Earnings per share pence £565.5m 45.5p 565.5 +44.8% +45.8% 45.5 390.6 31.2 192.0 110.7 7.0 7.7 42.7 (1.4) 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Target Target £530.0m profit before tax in line 42.5p in line with consensus at the with consensus at the start of the start of the financial year financial year Status Status Achieved Achieved 1 Profit before tax in 2011-2013 is calculated before exceptional items. WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Barratt Developments PLC 5 Annual Report and Accounts 2015 KPI Total shareholder return for the Total capital return per share2 three years ended 30 June 2015 362.9% 25.1 pence KPI Strategic Report Strategic Completions from more Land approvals plots recently acquired land % 16,956 76% -21.1% 21,478 +1,100bps 76 18,536 16,956 65 49 12,085 35 8,861 Governance 16 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Target Target 95% of completions from more recently 15,000–17,000 plots approved acquired land for FY17 for purchase Status Status On target Achieved Financial Statements KPI KPI Return on capital employed3 % Year end net cash/(debt) £m 23.9% £186.5m 186.5 +440bps 23.9 +£113.4m 19.5 73.1 Other Information (322.6) (167.7) (25.9) 11.5 8.3 5.7 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Target Target At least 25% by FY17 Minimal year end net cash Status Status On target Achieved 2 The Board proposes a final dividend of 10.3 pence per share in addition to the interim dividend of 4.8 pence per share. A further special cash payment equating to 10.0 pence per share under the special cash payment programme is also proposed. 3 Return on capital employed (‘ROCE’) is calculated as earnings before interest, tax, operating charges relating to the defined benefit pension scheme and operating exceptional items, divided by average net assets adjusted for goodwill and intangibles, tax, cash, loans and borrowings, retirement benefit obligations and derivative financial instruments. Read more in the Strategic Report on pages 2 to 45 WorldReginfo - 1d4caf61-92e9-4b01-bbd9-a765b5a575b2 Barratt Developments PLC 6 Annual Report and Accounts 2015 Strategic Report How we create and preserve value Our business model focuses on delivering value across the housebuilding value chain, creating sustainable returns for shareholders and making a positive difference in the communities in which we operate. a What we do Resources and Relationships Targeted land buying and effective planning > Purchase land in targeted locations which at least critical to our business model meets our hurdle rates of 20% gross margin and 25% ROCE > Availability of financial capital > Work with local communities and authorities to deliver See Ensuring the financial health effective planning of our business