Final Results

RNS Number : 0935D

Barratt Developments PLC

10 September 2008

BARRATT DEVELOPMENTS PLC

Results for the financial year ended 30 June 2008

Highlights:

Completions for the full year were 18,588 (2007: 17,168), an increase of 8.3%. As a result, Group revenue rose by 16.7% to £3,554.7m (2007: £3,046.1m). On a like-for-like(1) basis, completions were down 13.8%.

The average selling price increased by 6.0% to £183,100 (2007: £172,800), reflecting a change in product and geographical mix and benefiting from a number of high value sales in premium London locations. On an underlying basis, excluding the effect of change in product mix, the average selling price decreased by approximately 5%.

Operating margin(2) decreased to 15.5% (2007: 16.9%(3)) and was down 1.7% on a like-for like(1) basis.

Profit before tax pre exceptional costs decreased by 13.0% to £392.3m (2007: £451.0m(3)). Exceptional costs(2) totalled £255.0m and comprised £208.4m impairment of inventories, £30.7m impairment of goodwill and intangible assets and £15.9m restructuring costs (2007: £26.2m). Profit before tax was £137.3m (2007: £424.8m(3)).

Adjusted basic earnings per share before exceptional costs(2) was 79.6 pence (2007: 123.0 pence(3)). Basic earnings per share was 25.0 pence (2007: 115.4 pence(3)).

Owned and controlled plots of land totalled 78,700, 4.2 years supply at current completion rates.

Net borrowings were £1,652.4m (2007: £1,301.2m), and have decreased by £86.1m since 31 December 2007.

Financial structure strengthened, with revised covenant package agreed and £400m refinancing completed.

Forward sales at 30 June 2008 were £697.6m (2007: £1,413.8m). £538.7m of the £697.6m forward sales were contracted as compared to £865.9m contracted in the prior year, a decline of 37.8%. As of 31 August 2008, forward sales had increased to £783.3m.

Given the performance of the business for the full year and the Board's view on the outlook for the current year, no final dividend for 2007/8 will be paid. The total dividend paid for the year ended 30 June 2008 is 12.23 pence per share, being the interim dividend paid in May.

Mark Clare, Group Chief Executive of Barratt Developments commented:

'Whilst we have produced a satisfactory set of results in an extremely challenging market, there is little prospect for any material improvement in trading conditions until mortgage finance and customer confidence return. In the meantime, we have successfully refinanced our business. Our focus today and looking forward is to maximise sales revenues, reduce costs and generate cash to reduce debt.'

(1)	'Like-for-like' basis assumes that the acquisition of Wilson Bowden was completed upon the first day of the comparative financial period. Wilson Bowden achieved 6,052 completions, revenue of £1,422.1m, operating profit of £219.2m, and a profit before tax of £191.7m in the 12 months ended 30 June 2007. Prior to acquisition, Wilson Bowden achieved 4,401 completions, revenue of £1,042.5m, operating profit of £165.3m (including £22.7m of exceptional costs) and a profit before tax of £141.2m.

(2)	Before exceptional costs, comprising impairment of inventories, goodwill and intangible assets, and restructuring costs of £255.0m of which £173.1m related to the housebuilding business and £81.9m to the commercial developments business (2007: £26.2m, of which £25.6m related to the housebuilding business and £0.6m to the commercial developments business). Post-tax exceptional items include related tax of £66.8m (2007: £6.5m).

(3)	The results for the year ended 30 June 2007 have been restated as explained in note 2.

A financial analysts' presentation will be broadcast live on the Barratt Developments corporate website, www.barrattdevelopments.co.uk, from 9.00am today. A playback facility will be available shortly after the presentation has finished.

The financial analysts' presentation slides will be available on the Barratt Developments corporate website, www.barrattdevelopments.co.uk, from 9:00am today, together with photographic images of

Bob Lawson, Mark Clare and a selection of Barratt developments.

Further copies of the announcement can be obtained from the Company Secretary's office at:

Barratt Developments PLC, Barratt House, Cartwright Way, Forest Business Park, Bardon Hill, Coalville, Leicestershire, LE67 1UF.

For further information, please contact:

Barratt Developments PLC
Mark Clare, Group Chief Executive
Mark Pain, Group Finance Director

For analyst/investor enquiries, please contact:

Barratt Developments PLC
Susie Bell, Acting Head of Investor Relations	020 7299 4880

For media enquiries, please contact:

Barratt Developments PLC
Dan Bridgett, Head of External Affairs	020 7299 4873

Maitland
Liz Morley	020 7379 5151
Neil Bennett

Group Chief Executive's statement

We have achieved satisfactory results for the year against the backdrop of a rapidly deteriorating UK housing market. With the successful renegotiation of our debt covenants, we have now strengthened our financial structure and have refocussed the business on clear priorities: sales delivery, cost efficiency and cash management to reduce debt.

Our operational performance

After a relatively stable start to the financial year, we saw a sharp decline in the UK housing market following the well-publicised financial difficulties of Northern Rock. Whilst there was some recovery in our sales following Christmas, the fourth quarter was particularly challenging for the Group. Sales became extremely difficult in the traditionally strong spring selling season, with cancellation rates rising to 37.4% during the second half as a result of the severe rationing of mortgage finance.

Total completions for the year, whilst up on a statutory basis, decreased on a like-for-like(1) basis by 13.8% to 18,588. However, difficult trading conditions, particularly in the fourth quarter, have led to a more significant reduction in forward sales and we consequently expect lower completion volumes in 2008/9. At the year-end forward sales totalled £697.6m of which £538.7m was contracted.

The overall average selling prices of the properties sold increased by 6.0% as a result of continued changes in our product mix. However, we saw an underlying reduction of around 5%, mainly in the last quarter of the year, as a result of pressure on prices and increased sales incentives.

Declining volumes and prices were partially offset by underlying improvements in the efficiency of the Group. Wilson Bowden synergies of £33m were delivered against the target of £30m set for 2007/8 with a series of additional cost reduction programmes, put in place 18 months ago, delivering an additional £20m of cost savings. Whilst these improvements have reduced the impact of lower volume and selling prices, overall Group profit from operations before exceptional costs(2), on a like-for-like(1) basis, fell by 21.5% with an operating margin before exceptional costs(2) of 15.5%.

Tight control of land spend helped to reduce our net debt to £1.65bn at the end of the second half. However, as a prudent response to future market conditions, we have agreed with our banks and private placement note holders to amend our covenant package. In addition, we have recently signed a new three-year £400m facility and have reached agreement to extend £350m of our existing £400m revolving credit facility. These debt facilities do not mature until 2011.

Competing in today's market

With the successful refinancing of the business, a good deal of the uncertainty about our future has been removed. However, there is little prospect of an immediate housing market recovery as mortgage finance remains highly constrained. We have therefore put in place detailed plans to drive improved operational performance in the key areas of sales, costs and cash.

Improved sales delivery

In current market conditions the effectiveness of the Group's marketing and sales capability will have a significant impact on our business performance in terms of maximising revenue. We have put additional investment into sales training and site marketing. Both our major brands, David Wilson Homes and Barratt Homes, have been refreshed, and there has been significant investment in our 'online' media activity. 'New media' marketing campaigns are currently driving circa 70% of sales leads and we expect this low-cost channel to continue to grow.

New products aimed at helping our customers overcome the current barriers in the housing market have also been introduced. Shared-equity products such as Dream Start and Head Start have proved particularly successful and we will continue to innovate in these areas.

Part-exchange is an important sales channel in the current market. Our ability to sell second-hand products is a key determinant of the extent to which we can use this offering and last year we sold over 1,900 second-hand properties through our Oakleaf network.

Reducing costs

Although we have made good progress on cost reduction, there is still considerable scope to improve the efficiency of the Group. Cost reduction programmes across the business are well established and are continuing to reduce construction and supply costs. We expect these programmes to deliver £40m of savings in 2008/9.

We have introduced additional cost saving measures to take account of the further deterioration in the market. During July we announced that we would further rationalise our divisional structure, and together with savings in other divisions this has resulted in the loss of approximately 1,200 jobs. The vast majority of these people have now left the organisation. This rationalisation will bring the total number of divisions down from 44, at the time of the Wilson Bowden acquisition, to 26. These initiatives are likely to result in further savings of around £40m per annum, the majority of which will be delivered in 2008/9 at a cost of £15m.The structure, whilst much leaner, still provides us with nationwide coverage and the sound foundations for growth when the market picks up.

We also remain on track to deliver approximately £60m of annualised savings arising from the integration of Wilson Bowden during 2008/9.

Managing Cash

Cash control will continue to be central to our objectives. Land spend in 2008/9 is likely to reduce to around £568m, almost all of which relates to contractual commitments - a reduction of £400m on 2007/8. Work in progress is being tightly controlled and we will continue to carefully match construction rates to projected sales rates. We will only start on new sites or new phases where we are confident of sales rates; so the number of sites will fall to an average of around 500 for 2008/9.

Whilst we have a minimal exposure to large, owned tranches of strategic land and high rise flatted developments, we have incurred pre-tax write-downs to the value of land and work in progress of £208.4m, of which £51.2m related to commercial developments. It is anticipated that a portion of these write-downs will enable the Group to release cash from work in progress more quickly.

We are progressing with the process to divest the assets from the Wilson Bowden Developments portfolio which have a potential cash value of around £200m. We hope to be able to move the majority of these through to completion over the next six to twelve months.

Long-term value

At the same time as focussing on current market conditions, as far as possible we will seek to protect the longer-term value creating qualities of the organisation. This means continuing to invest in our people, improving the quality of construction, safety standards, customer service, and ensuring that we develop our products to meet customers' preferences and changing regulatory requirements.

The importance of our continued emphasis on safety and quality was underlined by the tragic death of a resident at the Azure development, Bedfont, caused, it appears, by carbon monoxide poisoning. Our sympathies lie very much with the families of those involved at this time. We are working with the relevant authorities to understand the full cause of the incident.

Investing in people

At the heart of our capability is a high quality and dedicated work force. Their skill and expertise has once again been demonstrated by winning 73 National House-Building Council ('NHBC') 'Pride in the Job' quality awards for the quality of our construction teams. This is the highest number of awards ever made to a single business in the 26 year history of the scheme. It follows the unprecedented achievement of winning both of the NHBC Supreme Awards - the very highest construction awards for major housebuilders.

Driving up quality

We have continued to focus on driving up the quality of everything we do and improving customer satisfaction. Customer service must remain a high priority for the Group and against a background of considerable organisational change, the number of our customers that would 'recommend us to a friend' has remained at 88% (2007: 88% on a like-for-like(1) basis).

We have seen significant improvement in the health and safety performance of the Group. The reportable injury incidence rate was 656 per 100,000 people employed - a reduction of 23.5% on the previous year.

Product innovation

We continually review our product range to ensure that it meets customer and regulatory requirements. For example, our specialist regeneration skills have enabled us to continue to win large, high value development opportunities with limited cash outlay. Whilst it is inevitable that much needed regeneration of many areas will now be significantly slower as a result of market conditions, we continue to be well placed to compete when opportunities arise.

Part of our success in this area is due to the increasingly strong social and environmental credentials of the Group. These were further reinforced by the construction of the country's first zero carbon code level six house by a major housebuilder, and by winning the first English Partnerships Carbon Challenge. This will lead to the construction of the nation's first zero carbon community at Hanham Hall, near Bristol.

Current trading and outlook

There remains considerable uncertainty about the near-term prospects for the sector with market recovery dependent on an improvement in the availability of mortgage finance and customer confidence. Whilst market conditions during the first two months of the new financial year have been broadly stable, they remain extremely challenging. In the last four weeks net private sales rates have been down around 30% on prior year. Pricing continues to be under pressure with higher incentive levels being required. Whilst we will deliver further cost savings during the year, we expect to see downward pressure on margins.

We will continue to focus on sales effectiveness, cost reduction and cash generation. When confidence returns, the enhanced capability and lower cost structure of our organisation will ensure that we are in a strong position to compete in the market and capitalise on available opportunities.

Mark Clare

Group Chief Executive

9 September 2008

Business review

This has been a very challenging year for the Group. Although the year started with relatively normal seasonal trends, the impact of interest rate rises and the liquidity squeeze affecting the availability and cost of mortgage finance led to a more difficult market place from September onwards.

The market worsened further from the beginning of April with selling prices coming under increased pressure and sales rates per site falling. In the context of this intensely difficult market, the Group has delivered a satisfactory performance with 18,588 completions (2007: 17,168) and profit from operations before exceptional costs(2) of £550.2m (2007: £513.3m (restated)). As a result of inventory write-downs of £208.4m and other exceptional costs(2) of £46.6m, the Group's profit from operations was £295.2m (2007: £487.1m (restated(3))).

The key performance indicators of the business are discussed in the table below.

Key performance indicator	2008	2007	Movement
Operational
Residential completion	18,588	17,168	8.3%	Discussed in the
numbers				section entitled
Average sales price	£183,100	£172,800	6.0%	'Housebuilding'
Residential turnover divided by the number of completions
Land bank plots	78,700	86,400	(8.9%)	Discussed in the
Number of residential plots owned and controlled				section entitled 'Land'
Customer recommendation	88%	88% on a like-	-	Discussed in the
levels		for-like(1) basis		section entitled
The percentage of customers who would 'recommend us to a friend'				'Quality and service'
Percentage of our workforce that are fully CSCS carded and qualified	90%	62%	28%	Discussed in the section entitled 'Our people and expertise'
Percentage of developments built on brownfield land	71%	78% of Barratt Homes developments	(7%)	Discussed in the section entitled 'Environment'
Reportable injury incidence	656	857	(23.5%)	Discussed in the
rate		restated to		section entitled
Rate per 100,000 people employed		include all Wilson Bowden reportable accidents		'Health and Safety'
Financial
Revenue	£3,554.7m	£3,046.1m	16.7%	Discussed in the
Profit from operations(3)	£295.2m	£487.1m	(39.4%)	Group Finance
Profit before tax(3)	£137.3m	£424.8m	(67.7%)	Director's Review
Earnings per share(3)Profit after tax divided by the weighted average number of ordinary shares in issue	25.0p	115.4p	(78.3%)

Housebuilding

We completed 18,588 properties in the year, up from 17,168 in the prior year. These completions delivered housebuilding total revenue of £3,414.2m (2007: £3,001.4m) and a housebuilding profit from operations before exceptional costs(2) of £530.0m (2007: £506.8m (restated(3))). Of our total completions, 14,803 were private sales (2007: 14,335), up 3.3%. Sales of social housing units increased by 33.6% to 3,785 sales (2007: 2,833).

On a like-for-like(1) basis, total completions decreased by 13.8%. Private completions were 18.4% lower whilst social completions were 10.1% higher. Social housing sales represented 20.4% of the Group's sales in the current year, versus 15.9% in the prior year on a like-for-like(1) basis.

The average sales price for the year was £183,100, which was up by 6.0% on the prior year and by 1.3% on a like-for-like(1) basis. The small increase on a like-for-like(1) basis reflects a 3.9% increase, from £197,600 to £205,400, in the average selling price of our private sales; a 3.9% increase in the price of our social units, to £95,900; offset by an increase in the proportion of social sales from 15.9% in the prior year to 20.4% this year. The increase of 3.9% in the average selling price of private homes benefits from a change in our mix of sales, since despite a fall of approximately 5% in the underlying sales prices and a 1.2% fall in the average size of unit sold, our overall average sales price has benefited from a number of high value sales in premium London locations.

The decrease in completions on a like-for-like(1) basis illustrates the challenging markets that the sector is facing. Over the course of the financial year, market conditions have progressively deteriorated. The year started with relatively normal seasonal trends in July and August, despite the well publicised issues impacting upon the US housing and sub-prime markets. From September onwards the market was affected by the collapse of Northern Rock, the impact of five interest rate rises and the 'credit crunch' on the availability and cost of mortgages. In the third quarter we experienced an uplift in visitor numbers and sales rates compared to the first half. However, this improvement proved to be short-lived with a significant deterioration in the market from the beginning of April.

Housebuilding profit from operations before exceptional costs(2) was £530.0m (2007: £506.8m (restated(3))) giving a margin of 15.5% (2007: 16.9% (restated(3))). The decrease in operating margin can be explained by a number of factors. Firstly, our underlying average selling prices have decreased by around 5%, which has reduced margins by 4%, reflecting the pressure upon sales prices particularly during the last quarter. In addition, increased selling costs further reduced margins by 0.6%. We have already referred to our cost reduction programme and this along with mix changes has benefited the margin by 2.7%. Land sales and other income also added 0.5% to the margin.

The Group is implementing the following further measures to reduce its costs.

We have in place a programme to reduce build costs by: changing specifications and improving build processes, renegotiating subcontractor rates, and reducing the cost of most major materials. These measures are expected to deliver £40m of annual cost savings in 2008/9, of which £20m was achieved in the current financial year.

In addition, the operational integration of the Wilson Bowden acquisition has been completed with £33m of cost savings being achieved in the current financial year. The Group remains on track to deliver approximately £60m of annualised cost savings in 2008/9 compared to the costs of the two organisations prior to acquisition.

During the year ended 30 June 2008, the Group has incurred £15.9m of restructuring and reorganisation costs. These include redundancies made during the year, divisional office closures, reorganisations, and contract termination costs.

At the beginning of July we announced that we would be closing two divisions and merging a further eight divisions into four. This has reduced the number of operating divisions within the business to 26, down from 35 at the end of last year and 44 at the time of the acquisition of Wilson Bowden and has resulted in the loss of approximately 1,200 jobs. This reorganisation along with other cost savings across the business is expected to deliver annualised savings of £40m. We expect to deliver the majority of these cost savings in 2008/9. The cost of these changes is anticipated to be £15m, of which most will be incurred in the first half of 2008/9.

Commercial developments

Commercial developments delivered a revenue of £140.5m (2007: £44.7m) and a profit from operations before exceptional costs(2) of £20.2m (2007: £6.5m). Exceptional costs(2) in the commercial developments segment were £81.9m consisting of full impairment of the goodwill and intangible assets created upon acquisition of £30.7m and impairment of inventories of £51.2m. The operating loss of the commercial developments segment was £61.7m. This performance reflected the increasingly difficult market conditions and the pressure upon yields in the commercial property market.

During the year ended 30 June 2008, we completed our 194,600 square feet Riverside Exchange office development in Sheffield, which was pre-let to the Home Office. We continue to make excellent progress on our forward-sold 102,000 square feet office development in the centre of Manchester, which we expect to complete in the autumn.

With regard to our industrial portfolio, we completed the sale of a 48,000 square feet unit let to Parcel Force at our Cambuslang site in Glasgow, and we also completed the sales of a 56,000 square feet unit to Takeuchi and a 27,500 square feet unit to Vindon Scientific at our prestigious development in Rochdale.

On the retail side, we are on target to complete our redevelopment of Wrexham town centre during 2008/9, delivering 382,000 square feet of prime retail space. Here, we have 90% of lettings either secured or under offer. In addition, as preferred developer, we continue to push forward with our town centre retail and office regeneration schemes in readiness to proceed when the market returns.

Land

The Group land bank consists of both owned and controlled plots, and plots where offers have been accepted.

	2008	2007
	plots	plots
Owned and controlled	78,700	86,400
Offers accepted	13,700	23,300
Total	92,400	109,700

Land additions during the year were £922m (2007: £1,013m). The Group has an extensive owned and controlled land bank, which is sufficient to meet our requirements at current completion rates for 4.2 years (2007: 4.0 years) and therefore almost all of the cash expenditure in 2008/9 on land will relate to contractual commitments already entered into.

During the year, the Group has impaired its inventories by £208.4m, further details of which are provided in the Group Finance Director's review on pages 14 and 15. After this impairment, our land bank has a carrying value of £3,117.5m (2007: £3,266.9m (restated(3))).

At 30 June 2008, 98% of our supply for the next financial year had detailed planning permission. In addition we have 10,900 acres of strategic land which we carry at its current realisable value until the Group obtains all necessary planning consents, so as to minimise the Group's exposure to risk from this portfolio.

Core strengths

Our core strengths of geographic and product diversity, quality and service, and people and expertise remain robust.

Geographic and product diversity

The Group offers a wide product range, from first time buyer to luxury apartments and family homes with prices ranging from under £68,000 to £11 million, and an average selling price of £183,100. The Group trades using the Barratt Homes, David Wilson Homes and Ward Homes brands. Barratt Homes is focussed upon urban regeneration, apartments and traditional houses whilst David Wilson Homes predominantly focusses upon family homes. Ward Homes is a regional brand based in Kent.

We operate throughout Great Britain and at 30 June 2008 we were selling from 585 sites (2007: 590 sites) spread over 32 (2007: 35) divisions. The post year-end announcement regarding divisional closures and mergers will reduce our number of operating divisions to 26, but will not reduce either our product range or our geographical reach.

The provision of affordable homes continues to be a key component of our activities with the Group completing 3,785 homes for housing association partners during the year at an average selling price of £95,900. We are one of the leading providers in the industry of affordable homes for rent, shared ownership or low cost homes for sale. We believe that our strength in this area provides opportunities for the Group's further growth especially in light of Government policy.

We continue to be committed to delivering affordable homes for first time buyers. We have continued to invest in our range of popular and pioneering iPad homes and during the year have legally completed 312 homes (2007: 120) and at 30 June 2008 had planning permission for over 700 homes not yet under construction. We are building iPads on developments in locations including Edinburgh, Leeds, Cardiff and Swansea, enabling as many people as possible to benefit from these innovative and affordable homes. We have also supported 1,459 buyers throughout the country with our own shared-equity products where we retain a proportion of the home interest-free for a specified period. In addition, during the year we completed 232 homes (2007: 133) under the English Partnerships' First Time Buyer Initiative at developments across the country including Leeds, Liverpool, Torquay and Brentwood. We have also participated in schemes to allow key workers to get onto the property ladder; for example at our Bloomsbury Terrace development in London almost 40% of the units are available for key workers who can purchase a minimum of 35% of the property with English Partnerships providing the remainder of the funds.

During the year we have made progress with a number of key regeneration schemes and sites.

In London, we recently began building 63 homes in one of London's largest regeneration schemes, a new Docklands community of 2,700 homes around the Canada Water basin in Southwark. As well as new homes, the project will include a new library, civic plaza, leisure amenities and green space. A key feature of the development will be the use of 10% renewable energy. We also recently started work upon the first major residential element, comprising 250 homes, of the £160m transformation of Dalston, Hackney. This project will provide over 550 homes plus shops, a library and a new Tube station, and will include environmentally-friendly measures such as green roofs and combined heat and power generation.

In the Midlands, we have been selected by Birmingham City Council to redevelop the Shard End Crescent shopping parade into a state of the art 'urban village centre'. The £33m scheme will contain approximately 2,000 square metres of retail, around 190 new homes, a new community library and neighbourhood office, and a new vicarage. All of the facilities will be arranged around a central square to create a safe, secure and pleasant living environment.

We have also started work upon a major riverside regeneration scheme in Tyneside, at the former Stella South power station site at Blaydon. This scheme will provide 275 new Barratt homes.

Quality and service

As a Group we are committed to offering the highest standards of customer service and to operating in a transparent way. Our customers are central to all of our business operations and as such we continue to develop our service by listening to our customers, monitoring our performance and adopting best practice throughout the organisation. In the year ended 30 June 2008, our overall customer satisfaction rating has improved to 81% (2007: 80% on a like-for-like(1) basis). In addition, 88% of customers responded that they would 'recommend us to a friend' (2007: 88% on a like-for-like(1) basis), a satisfactory achievement against a backdrop of considerable change in the business and the market. As part of our commitment to customer service, we continue to train and develop all of our employees to ensure the highest standards are met and we are further developing our customer service IT systems to support this.

The quality of our product offerings has been recognised once again this year with our construction teams winning an industry leading 73 National House-Building Council ('NHBC') 'Pride in the Job' quality awards, an improvement on last year's achievement of 71 awards. This excellent performance is a new record for the Group and is the largest number ever awarded to a single business. In addition, in 2007, Barratt became the first housebuilder to win both of the industry's most prestigious awards, for large housebuilders, for quality workmanship with two of our site managers, Jamie Bishop and Paul Robinson, winning Supreme Awards in the large builder and multi-storey categories.

We were also named 'Homebuilder of the Year' at the Mail on Sunday British Homes Awards and we won awards for the best housing project (Great West Quarter), best small house (eScape at Eden Village, Sittingbourne) and were joint winner of the best affordable housing development (Tachbrook Triangle). At the 'Your New Home' Awards the best city development was awarded for our 'The Zone' development in Bristol. In the 'Hot Property' Awards we won platinum awards for the best waterside development (Bakers Mill, Sudbury), best value for money development (Forest Place, Walthamstow) and best family homes (Kings Meadow, Newmarket).

Our people and expertise

We recognise that one of our key strengths as a Group is our people. The extent of the decline in the housing market and the unprecedented lack of access to mortgages has meant that we, in common with all other housebuilders, have had to reduce costs right across the organisation. It is deeply regrettable that the challenging market conditions have meant that we have had to look closely at our structure and as a result have seen around 1,200 talented people leave the Group.

Despite the current economic environment, it is important that we continue to develop and invest in our people and their expertise to ensure the continued success of our business.

Our Graduate Recruitment and Development Programme has been a success. We have 39 graduates participating in a two year multi-disciplinary programme of both on-job and off-job modules. All of the graduates have completed volunteering activities in the local community, supporting our corporate responsibility strategy.

We have embedded succession planning processes across the business with bi-annual reviews in place. Every individual identified on the succession plan with the potential to progress in the next two years has a personal development plan. This plan may involve items such as attending our Leadership Development programme or having a coach or mentor to promote development.

We conducted our first Engagement Survey in January 2008, which has enabled us to ascertain how we can make our business a better place to work and become an employer of choice. We have also introduced human resources key performance indicators to enable us to measure the success of our people strategy more effectively and to enable us to take appropriate action on staff turnover, retention, sickness, absence and capability.

We have continued to make progress towards our target of a fully Construction Skills Certification Scheme ('CSCS') carded and qualified workforce, including our subcontractors, by 2010. At present, 90% (2007: 62%) of our workforce, including subcontractors, has achieved this target.

Environment

During the year, we have made substantial progress in pursuing our environmental agenda to enable us to respond to the challenge made by the Government's requirement for all new homes to be zero carbon by 2016.

We have completed building the 'Green House' prototype home at the Business Research Establishment's Innovation Park using an award winning design developed by architects Gaunt Francis. The Minister for Housing, the Right Honourable Caroline Flint MP, officially opened this home in May 2008. This is the first house to be built by a mainstream housebuilder that meets the highest level, code level six, of the Government's code for Sustainable Homes which will emit zero carbon on average over the course of a year. The home includes innovative eco-friendly features such as heavyweight construction that mitigates peaks and troughs of temperature change within the house, an air source heat pump to convert the energy of air into heat supplying the house, solar hot water panels, automatic window shutters to prevent the house over-heating in the summer and photovoltaic panels to supply power. The home is now the subject of rigorous scientific testing over the next two years assessing every aspect of its design, construction and materials. We intend to take the most successful aspects of the design and apply them to future homes that we build.

We are to develop Hanham Hall, near Bristol into the first large-scale zero carbon community in Britain, having won the first site of English Partnerships' Carbon Challenge. The community will comprise 200 homes and commercial space and is due to be completed in 2011. All of the homes on the site will meet the requirements for code level six of the Government's Code for Sustainable Homes, which will enable a family living there to reduce its carbon footprint by 60%. The development will also include many environmentally friendly features including a combined heat and power plant generating carbon neutral energy, a sustainable urban drainage system and retention of existing hedgerows and trees. We continue to look to include carbon saving measures on our developments, and 21 of our sites, where we registered legal completions in the year ended 30 June 2008, incorporated a renewable energy source on-site. These included solar panels, wind turbines and combined heat and power units.

We continue to build the majority of our developments on brownfield sites, with 71% (2007: 78% of Barratt Homes developments) of our developments in the year being built upon brownfield land, which significantly exceeds the Government's target of 60%.

The Group continues to make excellent progress in accreditation of divisions to the environmental standard ISO 14001. We previously reported that all Barratt divisions had achieved accreditation and that we would target the eight David Wilson Homes divisions this year. This has been achieved and all the Group's divisions are now accredited to the standard.

The Group has reviewed its overall objectives for environmental management and has set targets for improved on-site and office performance. To assist the divisions all of the Safety, Health and Environmental management team are undergoing accredited training to enable membership of the Institute of Environmental Management and Assessment ('IEMA').

Health and safety

The Group considers health and safety to be of paramount importance for its employees, customers and the general public.

The Group is saddened to report the death of one person and serious illness of another at a completed development at Bedfont Lakes in West London in February 2008. The primary cause appears to be carbon monoxide poisoning from a gas heating installation. We continue to work closely with the authorities in their investigation and our thoughts remain with the families of those involved in the incident.

Notwithstanding this tragic event, we have continued to make good progress in the field of health and safety with a reduction in our reportable injury incidence rate to 656 per 100,000 persons employed, a reduction of 23.5% on the previous year (the enlarged Group had a reportable injury incidence rate of 857 for 2006/7).

In addition, we have revitalised and reissued our Safety, Health and Environmental management system and have further strengthened our in-house team. This has provided the focus to enable overall improvements in our performance with all divisions achieving over 88% compliance following monitoring visits to developments.

The Group continues with certifying divisions to the heath and safety standard OHSAS 18001. At 30 June 2008, 27 of the 32 housebuilding divisions and Wilson Bowden Developments were certified to this level, and we aim to have all remaining divisions certified by the end of 2008.

Corporate responsibility

As outlined in the sections above the Group has continued to make good progress on corporate responsibility throughout the year.

The Group's 2008 Corporate Social Responsibility Report will contain further details on our progress in corporate responsibility and will be found on the Group's website, www.barrattdevelopments.co.uk, later this year.

Group key risks

The Group's financial and operational performance is subject to a number of risks. The Board seeks to ensure that appropriate processes are put in place to manage, monitor and mitigate these risks which are identified in the table below.

The Group recognises that the management of risk is fundamental to the achievement of Group targets. As such all tiers of management are involved in this process.

Principal risks of the Group include, but are not limited to:

Risk	Mitigation
Market
Response to changes in the macroeconomic climate including buyer confidence and interest rates	The Executive Directors conduct a weekly meeting which reviews key trading indicators, including sales rates, visitor levels and levels of incentives and cash flow projections.
Availability of mortgage finance for our purchasers	The Executive Directors monitor on a weekly basis the number of reservations that require mortgages. The Group has a policy of giving mortgage providers complete transparency regarding house purchase prices alongside any discounts or other incentives in order that they have appropriate information upon which to base their lending decision.
Provision of high quality product and service to maintain brand quality and minimise remedial costs	The Group has a comprehensive approach to quality, service and customer care enshrined in the 'Forward through Quality' initiative and customer care code of practice.
Liquidity
Availability of sufficient borrowing facilities to enable the servicing of 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 it has sufficient available funds for operations. The Group's borrowings are typically cyclical throughout the financial year and as such the Group maintains sufficient headroom to cover these requirements. On a normal operating basis the Group has a policy of maintaining headroom of £250m of available committed facilities. The Group has in place a comprehensive detailed regular forecasting process encompassing profitability, working capital and cash flow that is fully embedded in the business. These forecasts are further stress tested at a Group level to ensure that adequate headroom within our facilities and banking covenants is maintained.
Inability of the Group to refinance its facilities as they fall due	The Group has a policy that the maturity of its committed facilities and private placement notes is at least three years on average.
Land
Securing sufficient land of appropriate size and quality to provide profitable growth subject to the available borrowing facilities	Each division produces a detailed site-by-site monthly analysis of the amount of land currently owned, committed and identified. These are consolidated upwards for regular review at Board level. In addition, each operating division holds weekly land meetings. Every land acquisition is subject to a formal appraisal procedure and is required to achieve an overall Group defined hurdle rate of return.
Government regulation
Delays obtaining required planning and technical consents	The Group has considerable in-house technical and planning expertise devoted to achieving implementable planning consents.
Consequence of changes in tax legislation	The Group has adopted a low risk strategy to tax planning and potential and actual changes in tax legislation are monitored by both our industry experienced in-house finance teams and our external tax advisors.
Construction
Failure to identify and achieve key construction milestones	The Group's weekly reporting identifies the number of properties at key stages of construction. Projected construction rates are evaluated as part of the monthly forecasting cycle.
Excessive investment in work in progress	The build status of all sites is reported weekly and compared to sales taken on each site.
Failure to promptly identify cost overruns	The total costs on every site in progress are evaluated once a quarter and reviewed by the divisional management teams.
Innovative design and construction techniques are not employed	The Group ensures that it is at the forefront of design and construction techniques by a combination of in-house technical departments, the employment of external consultants and an ongoing commitment to building experimental house types.
Health and safety	The Group has a dedicated health and safety audit department which is independent of the management of the operating divisions.
Consideration of the impact of construction schemes upon the environment and social surroundings	The Group regularly monitors a number of environmental impact indicators. The results of this will appear in our Corporate Social Responsibility Report later this year.
People
Ability of the Group to attract and retain a sufficiently skilled and experienced workforce	The Group has a comprehensive Human Resources policy in place which includes apprentice schemes, a Graduate Recruitment Programme, succession planning, training schemes tailored to each discipline and the Group has set itself the target of having a fully CSCS carded and qualified workforce by 2010.

Adequate succession planning to retain and develop key management skills
Underfunding of the Group's obligations in respect of the defined benefit pension scheme	An actuarial valuation is conducted every three years. The Group reviews this and considers what additional contributions are necessary to make good this shortfall.

Details of the Group's management of liquidity risk, market risk, credit risk and capital risk in relation to financial instruments is provided in the financial statements.

Group Finance Director's review

The Group has delivered a satisfactory performance in the current year in the context of the difficult market in which we have been operating. Performance highlights are as follows:

Revenue was up 16.7% to £3,554.7m (2007: £3,046.1m)
Total completions increased by 8.3% to 18,588 (2007: 17,168)
Profit from operations before exceptional costs(2) increased by 7.2% to £550.2m (2007: £513.3m (restated(3)))
Exceptional costs(2) comprised an impairment of inventories of £208.4m, an impairment of goodwill and intangibles of £30.7m and reorganisation costs of £15.9m
Profit from operations was £295.2m (2007: £487.1m (restated(3)))
Operating margin before exceptional items(2) was 15.5% (2007: 16.9% (restated(3))).
Operating margin was 8.3% (2007: 16.0% (restated(3)))
Profit before tax was £137.3m (2007: £424.8m (restated(3)))
Adjusted earnings per share before exceptional costs(2) was 79.6p (2007: 123.0p (restated(3)))
Basic earnings per share was 25.0p (2007: 115.4p (restated(3)))

Segmental analysis

The Group has two segments, being housebuilding and commercial developments. These segments reflect the different product offerings and market risks facing these areas of the business.

The table below shows the respective contributions for these segments to the Group:

		Commercial
	Housebuilding	Developments	Total
	£m	£m	£m
Revenue	3,414.2	140.5	3,554.7
Profit from operations before exceptional costs(2)	530.0	20.2	550.2
Profit/(loss) from operations	356.9	(61.7)	295.2

An analysis of the operational performance of these segments is provided within the Business review.

Exceptional costs

During the year, the Group has recognised a number of items which due to their size and unusual nature have been disclosed as exceptional costs.

i) Impairment of inventories

The total impairment of land and work in progress, recognised in exceptional cost of sales, in the year was £208.4m, which comprised £151.2m housebuilding, £51.2m commercial developments and £6.0m of historic Barratt and Wilson Bowden acquisition fair value adjustments.

The Group conducted a review of the carrying value of its housebuilding land at 30 June 2008 in accordance with normal practice and accounting standards. This review was carried out on a site-by-site basis using valuations incorporating forecast sales rates and average selling prices that reflect both current and anticipated trading conditions. We paid particular attention to high-risk sites including large and complex sites, apartment blocks outside London and sites with low sales rates. The review also considered sites that have not yet been started and larger, more capital-intensive sites where it may be more appropriate to realise cash through sale of the assets rather than developing the site through to completion. As a result of the review, the Group recognised an impairment of the housing land bank of £151.2m in the year ended 30 June 2008.

The Group also reviewed the land and work in progress held within its commercial developments business for impairment on a development-by-development basis. This identified the need for an impairment of £51.2m in the year ended 30 June 2008. This review reflects the marketplace currently experienced within commercial development and in particular declining yields. We have also considered the carrying value of sites where it may be more sensible to realise cash rather than to continue to develop the site.

In addition, the Group had £6.0m of fair value uplift that had not been recovered through cost of sales which arose on historic Barratt and Wilson Bowden acquisitions. Due to the current difficult market place, these balances have been written off on the basis that the fair values adopted do not reflect current market conditions.

ii) Impairment of goodwill and intangible assets

On the acquisition of Wilson Bowden, the Group recognised goodwill of £816.7m and intangible assets related to the brands acquired of £107.0m. These were split between the housebuilding and commercial developments businesses, with £792.2m of goodwill and £100.0m of brand value attributed to our housebuilding business and £24.5m of goodwill and £7.0m of brand value attributed to the commercial developments business.

In accordance with the requirements of accounting standards the Group has conducted its annual review of the carrying value of goodwill and intangible assets. This review was conducted by comparing discounted future cash flows with the carrying value of assets at the balance sheet date. The cash flows were generated using our current five-year business plan beyond which we used a long-term growth rate, in accordance with accounting standards, of 2.5% based upon the expected long-term growth rate of the UK economy. The business plan used in the analysis contains the Directors' current view of expected changes in selling prices for completed houses and site costs to complete. The discount rate used in the impairment review is 10%, being the Group's estimated pre-tax weighted average cost of capital. As a result of the impairment review, no impairment was recognised on the housebuilding business and all of the goodwill related to the commercial developments business, £24.5m, was impaired.

On acquisition, the David Wilson Homes brand was designated as having an indefinite life as the Group intends to hold and support the brand for an indefinite period and there are no factors that would prevent it from doing so. The Wilson Bowden Developments brand was designated as having a ten-year life as it is a business-to-business brand operating in niche markets. During the year, £0.8m of the Wilson Bowden Developments brand was amortised. As a result of the Group's impairment review, the Housebuilding brand was not impaired but the Wilson Bowden Developments brand was fully written off, resulting in an exceptional charge to the income statement of £6.2m. This impairment is driven by declining commercial property yields, which affects the ability of this brand to generate future revenues.

The total impairment of goodwill and intangible assets recognised in exceptional operating expenses in the income statement was therefore £30.7m, comprising a commercial developments goodwill impairment of £24.5m and the impairment of the Wilson Bowden Developments brand of £6.2m.

iii) Restructuring and reorganisation costs

During the year the Group incurred £15.9m of restructuring and reorganisation costs. These costs include redundancy costs arising from both divisional closures and reorganisations during the year, and costs related to office closures and contract severance. No charge for the reorganisation announced on 3 July 2008, estimated at £15m, has been included in the income statement for the year ended 30 June 2008.

Tax

The Group corporation tax charge for the year was £50.9m, an effective rate of 37.1%. When the impairment of goodwill of £24.5m, which is not allowable for tax purposes, is excluded the effective rate is 31.5%.

The tax charge of £50.9m comprises a total current year tax charge of £53.7m (33.2% of profit before tax excluding the impairment of goodwill) and a total prior year tax credit of £2.8m.

The Group's current year effective tax rate of 33.2% is higher than the standard rate of 29.5% due to writing off the deferred tax asset on anticipated tax relief on share options, as well as disallowable costs and tax on joint ventures, partially offset by contaminated land relief.

Dividend

The Board has decided that no final dividend will be paid for the year ended 30 June 2008. The total dividend for the year is therefore the interim dividend of 12.23 pence per share, which was paid in May 2008. Going forward, the Board will take due consideration of market conditions, the Group's trading performance and cash resources in determining future dividend policy.

Balance sheet

The net assets of the Group decreased by £54.3m to £2,843.7m. The decrease reflects the retained loss of £39.6m, after inventory write-downs, goodwill impairments, other exceptional costs and dividends paid in the year and other reserves movements of £16.5m offset by £1.8m issues of share capital during the year (including £1.3m on Wilson Bowden share option schemes). Significant movements in the balance sheet include:

The Group's book value of land was £3,117.5m (2007: £3,266.9m (restated(3))) a decrease of £149.4m. This decrease includes land additions of £922m offset by land usage and the impairment of land explained above. During the current year, the Group reduced its actual expenditure on land following the deterioration in the market to £1.0 billion from the £1.5 billion expenditure anticipated at the beginning of the year. It is our intention in the forthcoming year to only commit cash where land is already contracted.

Work in progress of the Group at 30 June 2008 was £1,569.3m (2007: £1,368.5m). We are actively reducing our investment in work in progress and as a result the value has fallen by £134.0m since 31 December 2007.

Part-exchange properties and other inventories were £143.2m (2007: £104.5m) with the increase reflecting the current demand for this as an incentive. In accordance with normal commercial practice, the Group provides against these properties when they are taken onto our balance sheet and we continue to actively manage and trade through these properties.

Group net debt increased by £351.2m to £1,652.4m over the full year. However, since December 2007, net debt has reduced by £86.1m reflecting reduced land spend and work-in-progress.

Goodwill and intangibles assets decreased by £31.5m to £892.2m reflecting the amortisation and impairments explained above.

The pension fund deficit on the Barratt Homes defined benefit pension scheme reduced by £7.6m in the year to £70.7m, reflecting the additional contributions that the Group has made to reduce the deficit.

Trade and other payables decreased by £179.1m to £1,405.9m reflecting a £109.2m decrease in land payables.

Other assets and liabilities have increased by £51.6m during the year.

Cash flow

The tables below explain the increase in the Group's borrowings.

Group net debt at the year-end was £1,652.4m (2007: £1,301.2m).

	Year	Half year	Half year	Year	Half year	Half year
	ended	ended	ended	ended	ended	ended
	30 June	31 Dec	30 June	30 June	31 Dec	30 June
	2008	2007	2008	2007	2006	2007
	£m	£m	£m	£m	£m	£m
Net (debt)/cash at start of year	(1,301.2)	(1,301.2)	(1,738.5)	34.9	34.9	(226.7)

Operating cash flow	91.4	(244.4)	335.8	139.5	(147.3)	286.8
Tax and net interest paid	(251.9)	(105.7)	(146.2)	(148.3)	(68.0)	(80.3)
Free cash flow	(160.5)	(350.1)	189.6	(8.8)	(215.3)	206.5

Acquisitions	(31.0)	1.3	(32.3)	(1,245.9)	-	(1,245.9)
Investments in joint ventures	(47.2)	(6.9)	(40.3)	(14.2)	-	(14.2)
Net fixed asset proceeds/(purchases)	16.9	2.0	14.9	(4.6)	(2.8)	(1.8)
Dividends	(126.0)	(83.8)	(42.2)	(77.1)	(49.7)	(27.4)
Share issue and disposals	0.5	0.5	-	14.5	6.2	8.3
Cancelled swaps	(3.6)	-	(3.6)	-	-	-
Purchase of shares for LTPP awards	(0.3)	(0.3)	-	-	-	-

Net debt at end of year	(1,652.4)	(1,738.5)	(1,652.4)	(1,301.2)	(226.7)	(1,301.2)

An analysis of the Group's free cash flow is as follows:

	Year	Half year	Half year	Year	Half year	Half year
	ended	ended	ended	ended	ended	ended
	30 June	31 December	30 June	30 June	31December	30 June
	2008	2007	2008	2007	2006	2007
	£m	£m	£m	£m	£m	£m
Operating profit before exceptional costs(2)	550.2	274.9	275.3	513.3	196.6	316.7
Exceptional costs(2)	(255.0)	(7.2)	(247.8)	(26.2)	-	(26.2)
Total non cash items	12.6	(6.8)	19.4	(16.7)	(6.2)	(10.5)
Land, work in progress and other inventories	(22.1)	(432.0)	409.9	(267.4)	(320.9)	53.5
Other working capital	(194.3)	(73.3)	(121.0)	(63.5)	(16.8)	(46.7)
Operating cash flow	91.4	(244.4)	335.8	139.5	(147.3)	286.8
Net interest paid	(137.1)	(50.3)	(86.8)	(27.8)	(8.7)	(19.1)
Taxation	(114.8)	(55.4)	(59.4)	(120.5)	(59.3)	(61.2)
Free cash flow	(160.5)	(350.1)	189.6	(8.8)	(215.3)	206.5

The increase in net debt of £351.2m during the year is made up of an outflow of £437.3m in the first half and an inflow of £86.1m in the second half. The inflow during the second half reflects our strategy of decreasing land spend and work in progress (inventories fell £409.9m, excluding the £68.0m increase due to acquisitions; a £201.5m net decrease plus £208.4m fall due to exceptional impairment) offset by an outflow in other working capital and a decrease in land payables of £14.1m.

Other cash movements include net interest payments of £137.1m, tax payments of £114.8m, dividend payments of £126.0m and proceeds from the issue of share capital of £0.5m (excluding the proceeds from the issue of shares under Wilson Bowden share schemes).

The Group is committed to reducing the level of borrowings of the business over the short-term and has focussed the business upon maximising cash generation whilst ensuring that on a site-by-site basis we maintain an appropriate balance between volume and margin.

Treasury

The Board approves treasury policies and certain day-to-day treasury activities have been delegated to a Treasury Operating Committee that in turn regularly reports to the Board. The Group operates a centralised treasury function which does not speculate and operates within guidelines established by the Board and the Treasury Operating Committee.

The Group has a conservative treasury risk management strategy which includes a target that 60-80% of year-end debt should be at fixed rates of interest. At 30 June 2008, 63.0% of the Group net debt was fixed (2007: 72.4%). Group interest rates are fixed using both swaps and fixed rate debt instruments. Net bank interest was covered 4.0 times before exceptional costs(2) (2007: 12.8 times covered).

Borrowing facilities and refinancing

At the year-end, the Group's committed facilities had an average life of 3.3 years, headroom of £870.0m, and we continued to operate within all of our banking covenants.

However, in the light of current market conditions, the Board considered that it would be a prudent approach to extend our short-term refinancing requirements and seek a more flexible covenant package which would be more suitable in the current trading environment.

Therefore, on 9 July 2008, the Company entered into a new £400m three-year committed revolving credit facility and agreed (subject to contract) to extend the maturity date of £350m of the existing £400m revolving credit facility to expire at the same date as the new facility. On 6 August 2008, the Company redeemed £400m of the existing acquisition facility.

In addition, the Company agreed with its bankers and private placement investors to amend its financial covenants. The interest covenant has been replaced with a cash flow covenant and the gearing and minimum tangible net worth covenants have been relaxed. These amendments were signed on 5 August 2008 and all conditions precedent were satisfied on 6 August 2008.

The new covenant package and revolving credit facility led to the weighted average cost of the Group's borrowings increasing to circa 9.75% from 6 August 2008.

As a result of the agreements reached with our bankers and private placement investors, we have put in place a more appropriate capital structure for the Group.

In conclusion

This has been a very challenging financial year for all housebuilders. We have taken appropriate measures to reflect the significant market downturn. Earnings have proved robust and we have continued to maintain asset quality. The refinancing and revised covenant package recently put in place was an important step in ensuring that the Group has strong foundations to weather market conditions which are likely to remain difficult for the foreseeable future.

Mark Pain

Group Finance Director

9 September 2008

Consolidated income statement

for the year ended 30 June 2008

		2008	2008	2008	2007	2007	2007
		Before	Exceptional		Before	Exceptional
		Exceptional	costs		Exceptional	costs
		costs	(note 4)		Costs	(note 4)	(restated*)
					(restated*)
	Note	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	3	3,554.7	-	3,554.7	3,046.1	-	3,046.1
Cost of sales		(2,872.5)	(208.4)	(3,080.9)	(2,446.1)	-	(2,446.1)
Gross profit		682.2	(208.4)	473.8	600.0	-	600.0
Administrative expenses		(132.0)	(46.6)	(178.6)	(86.7)	(26.2)	(112.9)
Profit from operations	3	550.2	(255.0)	295.2	513.3	(26.2)	487.1
Finance income	5	12.8	-	12.8	3.5	-	3.5
Finance costs	5	(168.1)	-	(168.1)	(64.8)	-	(64.8)
Share of post-tax loss from joint ventures		(2.6)	-	(2.6)	(1.0)	-	(1.0)
Profit before tax		392.3	(255.0)	137.3	451.0	(26.2)	424.8
Tax	6	(117.7)	66.8	(50.9)	(133.0)	6.5	(126.5)
Profit for the year from continuing operations		274.6	(188.2)	86.4	318.0	(19.7)	298.3

Profit for the year attributable to equity shareholders		274.6	(188.2)	86.4	318.0	(19.7)	298.3

Paid/proposed dividends per ordinary share
Interim paid	7			12.23p			11.38p
Final proposed	7			-			24.30p

Earnings per share from continuing operations
Basic	8			25.0p			115.4p
Diluted	8			24.9p			113.5p

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

Consolidated statement of recognised income and expense

for the year ended 30 June 2008

		2008	2007
			(restated*)
	Note	£m	£m
Profit for the year		86.4	298.3
Revaluation of available for sale financial assets	15	(4.6)	(0.7)
Foreign exchange loss	15	(1.8)	-
Net fair value gains on cross currency swaps designated as cash flow hedges	15	7.4	-
Net fair value (losses)/gains on interest rate swaps designated as cash flow hedges	15	(19.1)	12.3
Losses on cancelled interest rate swaps deferred in equity	15	(3.6)	-
Amortisation of losses on cancelled interest rate swaps deferred in equity	15	0.1	-
Tax credited to equity	15	3.1	0.8
Total recognised income for the year attributable to equity shareholders		67.9	310.7

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

Consolidated balance sheet

at 30 June 2008

		2008	2007
			(restated*)
	Note	£m	£m
Assets Non-current assets
Intangible assets	10	100.0	107.0
Goodwill	9	792.2	816.7
Property, plant and equipment	11	15.9	37.4
Investments accounted for using the equity method		65.5	20.9
Available for sale financial assets		66.9	37.3
Trade and other receivables		2.8	5.0
Deferred tax assets		-	2.5
Derivative financial instruments - swaps		10.1	12.3
		1,053.4	1,039.1
Current assets
Inventories	12	4,830.0	4,739.9
Trade and other receivables		100.9	141.7
Cash and cash equivalents	13	32.8	182.1
Current tax assets		20.6	-
		4,984.3	5,063.7
Total assets		6,037.7	6,102.8

Liabilities
Non-current liabilities
Loans and borrowings	13	(1,031.5)	(1,456.6)
Trade and other payables		(242.1)	(100.6)
Retirement benefit obligations		(70.7)	(78.3)
Deferred tax liabilities		(22.7)	-
Derivative financial instruments - swaps		(9.5)	-
		(1,376.5)	(1,635.5)
Current liabilities
Loans and borrowings	13	(653.7)	(26.7)
Trade and other payables		(1,163.8)	(1,484.4)
Current tax liabilities		-	(58.2)
		(1,817.5)	(1,569.3)
Total liabilities		(3,194.0)	(3,204.8)

Net assets		2,843.7	2,898.0

Equity
Share capital	14	34.7	34.7
Share premium		206.6	206.1
Merger reserve		1,109.0	1,107.7
Hedging reserve		(3.4)	7.8
Retained earnings		1,496.8	1,541.7
Total equity	15	2,843.7	2,898.0

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

Consolidated cash flow statement

for the year ended 30 June 2008

		2008	2007
	Note	£m	£m
Net cash outflow from operating activities	16	(170.4)	(12.3)

Cash flows from investing activities Purchase of property, plant and equipment	11	(5.4)	(7.9)
Proceeds from sale of property, plant and equipment		22.3	3.3
Acquisition of subsidiaries net of cash acquired	17	(31.0)	(811.6)
Investments accounted for using the equity method		(47.2)	(14.2)
Interest received		9.9	3.5
Net cash outflow from investing activities		(51.4)	(826.9)

Cash flows from financing activities
Proceeds from issue of share capital		0.5	3.9
Disposal of own shares		-	10.6
Dividends paid	7	(126.0)	(77.1)
Cancelled swaps		(3.6)	-
Purchase of shares for LTPP awards		(0.3)	-
Loan drawdowns		201.9	1,040.6
Net cash inflow from financing activities		72.5	978.0

Net (decrease)/increase in cash and cash equivalents		(149.3)	138.8

Cash and cash equivalents at beginning of year		182.1	43.3

Cash and cash equivalents at end of year		32.8	182.1

1. Accounting policies

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), International Financial Reporting Interpretations Committee ('IFRIC') interpretations and Standing Interpretations Committee ('SIC') interpretations endorsed by the European Union ('EU') and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS and therefore the Group financial statements comply with Article 4 of the EU International Accounting Standards Regulation. The financial statements have been prepared under the historical cost convention as modified by the revaluation of available for sale financial assets, derivative financial instruments and share-based payments. A summary of the more significant Group accounting policies is set out below.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of the amounts, actual results may ultimately differ from those estimates. The most significant estimates made by the Directors in these financial statements are set out in 'Critical accounting judgements and key sources of estimation uncertainty' within the financial statements.

Adoption of new and revised standards

In the year ended 30 June 2008, the Group has adopted IFRS7 'Financial Instruments: Disclosures'. IFRS7 has expanded the disclosure requirements of the Group regarding financial instruments. The adoption of this standard has not had any impact upon the profit or net assets of the Group in either the current or comparative year.

In the current financial year, the Group has also adopted the amendment to IAS1 'Presentation of Financial Statements Capital Disclosures'. This amendment has expanded the disclosures provided by the Group about the management of its capital resources. The adoption of this amendment has not had any impact upon the profit or net assets of the Group in either the current or comparative year.

Basis of consolidation

The Group financial statements include the results of the holding company and all its subsidiary undertakings made up to 30 June. The financial statements of subsidiary undertakings are consolidated from the date when control passes to the Group using the purchase method of accounting and up to the date control ceases. All transactions with subsidiaries and inter-company profits or losses are eliminated on consolidation.

Business combinations

All of the subsidiary's identifiable assets and liabilities, including contingent liabilities, existing at the date of acquisition are recorded at their fair values. All changes to those assets and liabilities, and the resulting gains and losses that arise after the Group has gained control of the subsidiary are included in the post-acquisition income statement.

Jointly controlled entities

A jointly controlled entity is an entity in which the Group holds an interest with one or more other parties where a contractual arrangement has established joint control over the entity. Jointly controlled entities are accounted for using the equity method of accounting.

Jointly controlled operations

The Group enters into jointly controlled operations as part of its housebuilding and property development activities. The Group's share of profits and losses from its investments in such jointly controlled operations are accounted for on a direct basis and are included in the consolidated income statement. The Group's share of its investments' assets and liabilities are accounted for on a directly proportional basis in the consolidated balance sheet.

Revenue

Revenue is recognised at legal completion in respect of the total proceeds of building and development and an appropriate proportion of revenue from construction contracts is recognised by reference to the stage of completion of contract activity. Revenue is measured at the fair value of consideration received or receivable and represents the amounts receivable for the property, net of discounts and VAT. The sale proceeds of part-exchange properties are not included in revenue.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Construction contracts

Revenue is only recognised on a construction contract where the outcome can be estimated reliably. Revenue and costs are recognised by reference to the stage of completion of contract activity at the balance sheet date. This is normally measured by surveys of work performed to date. Contracts are only treated as construction contracts when they have been specifically negotiated for the construction of a development or property. When it is probable that the total costs on a construction contract will exceed total contract revenue, the expected loss is recognised as an expense in the income statement immediately.

Amounts recoverable on construction contracts are included in trade receivables and stated at cost plus attributable profit less any foreseeable losses. Payments received on account for construction contracts are deducted from amounts recoverable on construction contracts.

Payments received in excess of amounts recoverable on construction contracts are included in trade payables.

Exceptional items

Items that are both material in size and unusual or infrequent in nature are presented as exceptional items in the income statement. The Directors are of the opinion that the separate recording of exceptional items provides helpful information about the Group's underlying business performance. Examples of events that, inter alia, may give rise to the classification of items as exceptional are the restructuring of existing and newly-acquired businesses, gains or losses on the disposal of businesses or individual assets and asset impairments, including currently developable land, work in progress and goodwill.

Restructuring costs

Restructuring costs are recognised in the income statement when the Group has a detailed plan that has been communicated to the affected parties. A liability is accrued for unpaid restructuring costs.

Profit from operations

Profit from operations includes all of the revenue and costs derived from the Group's operating businesses. Profit from operations excludes finance costs, finance income, the Group's share of profits or losses from joint ventures and tax.

Dividends

Interim dividends are recognised in the financial statements at the time that they are paid, and final dividends are recognised at the time of agreement by the shareholders at the Annual General Meeting.

The Company recognises dividends from subsidiaries at the time that they are received.

Segmental reporting

The Group consists of two separate segments for management reporting and control purposes, being housebuilding and commercial development. The Group manages these segments separately due to the different operational and commercial risks that they face. These segments therefore comprise the primary reporting segments within the financial statements. As all of the Group's operations are within the United Kingdom, which is one economic environment in the context of the Group's activities, there are no geographic segments to be disclosed.

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 acquisition of subsidiary undertakings and businesses is capitalised as an asset and reviewed for impairment at least annually.

For the purpose of impairment testing, goodwill is allocated to each of the cash-generating units of the Group at acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

Intangible assets

Brands

Internally generated brands are not capitalised. 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 result in 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.

The Group carries out an annual impairment review of indefinite life brands by performing a value-in-use calculation, using a discount factor based upon the Group's pre-tax weighted average cost of capital.

Investments

Interests in subsidiary undertakings are accounted for at cost less any provision for impairment.

Where share-based payments are granted to the employees of subsidiary undertakings by the parent Company, they are treated as a capital contribution to the subsidiary and the Company's investment in the subsidiary is increased accordingly.

Property, plant and equipment

Property, plant and equipment is carried at cost less accumulated depreciation. 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.

Inventories

Inventories are valued at the lower of cost and net realisable value on a weighted average cost basis. Cost comprises direct materials, direct labour costs and those overheads which have been incurred in bringing the inventories to their present location and condition.

Land held for development, including land in the course of development, is initially recorded at fair value. Where, through deferred purchase credit terms, the fair value differs from the amount that will ultimately be paid in settling the liability, this difference is charged as a finance cost in the income statement over the period of settlement. Due to the scale of the Group's developments, the Group has to allocate site-wide development costs between units built in the current year and in future years. It also has to estimate costs to complete on such developments. In making these assessments there is a degree of inherent uncertainty. The Group has developed internal controls to assess and review carrying values and the appropriateness of estimates made.

Leases as lessee

Operating lease rentals are charged to the income statement in equal instalments over the life of the lease.

Leases as lessor

The Group enters into leasing arrangements with third parties following the completion of constructed developments until the date of the sale of the development to third parties. Rental income from these operating leases is recognised in the income statement on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised in the income statement on a straight-line basis over the lease term.

Share-based payments

The Group issues equity-settled share-based payments to certain employees. In accordance with the transitional provisions, IFRS2 '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 fair value at the date of grant. Fair value is measured either using Present-Economic Value models or Monte Carlo models dependent upon 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.

Tax

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

Deferred tax is calculated at the rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

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.

Pensions

Defined contribution

The Group operates defined contribution pension schemes for certain employees. The Group's contributions to the schemes are charged against profits in the year in which the contributions fall due.

Defined benefit

The cost of providing benefits under the defined benefit scheme is determined using the Projected Unit Credit Method. The assets of the defined benefit pension scheme are measured at fair value. The liabilities of the defined benefit pension scheme are measured on an actuarial basis and discounted to present value. The net obligation is calculated by a qualified independent actuary and is recognised as a liability in the balance sheet.

The Group uses a corridor approach when accounting for actuarial gains and losses. The corridor used is the greater of:

10% of the present value of the defined benefit obligation at the end of the previous year; or
10% of the fair value of plan assets at the end of the previous year.

The amount recognised in the income statement is the excess of unrecognised actuarial gains and losses over the corridor spread over the expected average working lives of members of the scheme.

The operating and financing costs of the defined benefit pension scheme are recognised in the income statement.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

The Group derecognises a financial liability only when the Group's obligations are discharged, cancelled or they expire.

Financial assets

Non-derivative financial assets are classified as either 'available for sale financial assets' or 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Available for sale financial assets

Zero coupon loans granted as part of sales transactions that are secured by way of a legal charge on the respective property are classified as being available for sale and are stated at fair value. Fair value is determined in the manner described in the notes to the financial statements.

Gains and losses arising from changes in fair value are recognised directly in equity in retained earnings, with the exceptions of impairment losses and interest calculated using the 'effective interest rate' method, which are recognised directly in the income statement. Where the investment is disposed of, or is determined to be impaired, the cumulative gain or loss previously recognised in equity is included in the income statement for the period.

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 twelve months after the balance sheet date, which are classified as non-current assets and are measured at amortised cost less an allowance for any uncollectable amounts. The net of these balances are classified as 'trade and other receivables' in the balance sheet.

Trade and other receivables are classified as 'loans and receivables'.

Impairment of financial assets

Trade and other receivables are assessed for indicators of impairment at each balance sheet date and are impaired where there is objective evidence that the recovery of the receivable is in doubt.

Objective evidence of impairment could include significant financial difficulty of the customer, default on payment terms or the customer going into liquidation.

The carrying amount of trade and other receivables is reduced through the use of an allowance account. When a trade or other receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.

For financial assets classified as available for sale, a significant or prolonged decline in the value of the property underpinning the value of the loan is considered to be objective evidence of impairment. In respect of available for sale financial assets, impairment losses previously recognised through the income statement are not reversed through the income statement. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

Cash and cash equivalents

Cash and cash equivalents include cash and balances in bank accounts with no notice or less than three months notice from inception and are subject to an insignificant risk of changes in value.

Cash and cash equivalents are classified as 'loans and receivables'.

Financial liabilities and equity

Financial liabilities and equity are classified according to the substance of the contractual arrangements entered into.

Equity instruments

Equity instruments consist of the Company's ordinary share capital and are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

All non-derivative financial liabilities are classified as 'other financial liabilities' and are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the 'effective interest rate' method.

Other financial liabilities consist of bank borrowings and trade and other payables.

Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

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.

Bank borrowings

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs.

Where bank agreements include a legal right of offset for in hand and overdraft balances, and the Group intends to net settle the outstanding position, the offset arrangements are applied to record the net position in the balance sheet.

Finance income and charges are accounted for using the 'effective interest rate' method in the income statement.

Finance costs are recognised as an expense in the income statement in the period to which they relate.

Derivative financial instruments

The Group has entered into derivative financial instruments in the form of interest rate swaps and cross currency swaps to manage the interest rate and foreign exchange rate risk arising from the Group's operations and sources of finance. The use of financial derivatives is governed by the Group's policies approved by the Board of Directors as detailed in notes to the financial statements.

The swap arrangements are designated as hedging instruments, being either hedges of a change in future cash flows as a result of interest rate movements, or hedges of a change in future cash flows as a result of foreign currency exchange rate movements.

The fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the remaining maturity of the hedging relationship is more than twelve months and as a current asset or a current liability if the remaining maturity of the hedge relationship is less than twelve months.

Hedge accounting

All of the Group's interest rate and cross currency swaps are designated as cash flow hedges. At the inception of the hedge relationship the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedged transactions. In addition, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting the changes in cash flows of the hedged items.

Details of the fair values of the interest rate and cross currency swaps are provided in notes to the financial statements. Movements on the hedging reserve in equity are detailed in note 15.

Cash flow hedge

To the extent that the Group's cash flow hedges are effective, gains and losses on the fair value of the interest rate and cross currency swap arrangements are deferred in equity in the hedging reserve until realised. On realisation such gains and losses are recognised within finance charges in the income statement. To the extent that any hedge is ineffective, gains and losses on the fair value of these swap arrangements are recognised immediately in finance charges in the income statement.

Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss.

Hedge accounting is discontinued when the hedging instrument expires or is terminated or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss deferred in equity remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

Government grants

Government grants are recognised in the income statement so as to match with the related costs that they are intended to compensate. Grants related to assets are deducted from the carrying amount of the asset. Grants related to income are deducted from the related expense in the income statement.

2. Prior year adjustment

IAS2 'Inventories' and IAS39 'Financial Instruments: Recognition and Measurement' require that the Group's land purchases on deferred terms should be recorded at the discounted present value at the date of purchase. The value of the discount is expensed through finance costs in the income statement over the period of the deferral, with the associated land payable being increased to the settlement value over the period of deferral. The land value carried in inventories is reduced by the value of the discount and this therefore reduces land cost of sales in the income statement over the duration of the site.

The Group adopted the above policy upon transition to IFRS at 1 July 2004. The calculation methodology adopted at transition, and subsequently applied, did not discount any deferred term land payable at inception for the first twelve months that it was due to remain outstanding. The Group has reviewed this calculation methodology in the current year and considers that it is appropriate to discount any deferred term land payable for the entire period of deferral.

The Group has therefore recalculated the adjustment made for deferred term land payables and, due to the fact that the impact of the change is considered by the Directors to be material, it has adjusted the results presented at 30 June 2007 by means of a prior year adjustment.

The effect of this calculation change is summarised below:

	Year ended	At
	30 June	1 July
	2007£m	2006£m
Income statement
Cost of sales	6.1	-
Finance costs	(9.1)	-
Decrease in profit before tax	(3.0)	-
Tax	0.9	-
Decrease in profit for the period	(2.1)	-

Balance sheet
Deferred tax asset	2.5	4.7
Non-current assets	2.5	4.7
Inventories	(29.7)	(34.8)
Current assets	(29.7)	(34.8)
Trade and other payables	11.1	19.2
Deferred tax liabilities	3.1	-
Non-current liabilities	14.2	19.2
Net assets	(13.0)	(10.9)

Equity
Retained profits at the start of the period	(10.9)	(10.9)
Retained profit movement in the period	(2.1)	-
Equity	(13.0)	(10.9)

Earnings per share
Basic	(0.8p)	-
Diluted	(0.8p)	-

3. Segmental analysis

The Group consists of two separate segments for management reporting and control purposes, being housebuilding and commercial developments. The Group presents its primary segment information on the basis of these operating segments. As the Group operates in a single geographic market, the United Kingdom, no secondary segmentation is provided.

		Commercial	2008		Commercial	2007
	Housebuilding	developments	Total	Housebuilding	developments	Total
	Units	Units	Units	Units	Units	Units
Residential completions	18,588	-	18,588	17,168	-	17,168
				(restated*)		(restated*)
	£m	£m	£m	£m	£m	£m
Revenue	3,414.2	140.5	3,554.7	3,001.4	44.7	3,046.1

Result
Profit from operations before restructuring costs and impairment of goodwill, intangible assets and inventories	530.0	20.2	550.2	506.8	6.5	513.3
Impairment of goodwill and intangible assets	-	(30.7)	(30.7)	-	-	-
Impairment of inventories	(157.2)	(51.2)	(208.4)	-	-	-
Restructuring costs	(15.9)	-	(15.9)	(25.6)	(0.6)	(26.2)
Profit/(loss) from operations	356.9	(61.7)	295.2	481.2	5.9	487.1
Share of post-tax loss from joint ventures	(2.2)	(0.4)	(2.6)	(0.9)	(0.1)	(1.0)
Profit/(loss) from operations including post-tax loss from joint ventures	354.7	(62.1)	292.6	480.3	5.8	486.1
Finance income			12.8			3.5
Finance costs			(168.1)			(64.8)
Profit before tax			137.3			424.8
Tax			(50.9)			(126.5)
Profit for the year from continuing operations			86.4			298.3

Other information	£m	£m	£m	£m	£m	£m
Capital additions	5.0	0.4	5.4	7.9	-	7.9
Amortisation of intangible assets	-	0.8	0.8	-	-	-
Impairment of goodwill	-	24.5	24.5	-	-	-
Impairment of intangible assets	-	6.2	6.2	-	-	-
Depreciation	6.4	0.3	6.7	4.8	0.1	4.9

		Commercial	2008		Commercial	2007
	Housebuilding	developments	Total	Housebuilding	Developments	Total
				(restated*)		(restated*)
Balance sheet	£m	£m	£m	£m	£m	£m
Segment assets	5,787.5	329.1	6,116.6	5,624.9	314.6	5,939.5
Elimination of inter-company balances			(132.3)			(21.3)
			5,984.3			5,918.2
Deferred tax assets			-			2.5
Current tax assets			20.6			-
Cash and cash equivalents			32.8			182.1
Consolidated total assets			6,037.7			6,102.8

Segment liabilities	(1,529.7)	(88.7)	(1,618.4)	(1,565.1)	(119.5)	(1,684.6)
Elimination of inter-company balances			132.3			21.3
			(1,486.1)			(1,663.3)
Deferred tax liabilities			(22.7)			-
Current tax liabilities			-			(58.2)
Loans and borrowings			(1,685.2)			(1,483.3)
Consolidated total liabilities			(3,194.0)			(3,204.8)

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

4. Exceptional costs

Impairment of inventories

At 30 June 2008, the Group conducted a review of the net realisable value of its land and work in progress carrying values of its sites in the light of the current deterioration in the UK housing market. Where the estimated future net present realisable value of the site is less than its carrying value within the balance sheet, the Group has impaired the land and work in progress value. This has resulted in an impairment of £208.4m. Further details on this impairment are given in note 12.

Impairment of goodwill

At 30 June 2008, the Group conducted an impairment review of its goodwill as explained in note 9. This resulted in an impairment charge of £24.5m for the year.

Impairment of intangible assets

At 30 June 2008, the Group conducted an impairment review of its brands as explained in note 10. This resulted in an impairment charge of £6.2m for the year.

Restructuring costs

During the year ended 30 June 2008, the Group has incurred £15.9m (2007: £26.2m) of costs in relation to reorganising and restructuring the business, including redundancy costs of £3.7m (2007: £12.2m) where existing employees could not be retained within the Group.

5. Net finance costs

	2008	2007
		(restated*)
Recognised in the income statement	£m	£m
Finance income on short-term bank deposits	(2.3)	(3.5)
Imputed interest on available for sale financial assets	(2.9)	-
Interest receivable on swaps	(3.3)	-
Other interest received	(4.3)	-
Finance income	(12.8)	(3.5)
Interest on bank overdrafts and loans	142.3	43.5
Amortisation of losses on cancelled interest rate swaps	0.1	-
Imputed interest on deferred term land payables*	20.7	18.4
Finance costs related to employee benefits	1.7	2.9
Other interest payable	3.3	-
Finance costs	168.1	64.8
Net finance costs	155.3	61.3

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

6. Tax

	2008	2007
		(restated*)
Analysis of the tax charge for the year	£m	£m
Current tax
UK corporation tax on profits for the year	56.6	121.6
Adjustment in respect of previous years	(20.6)	(1.5)
	36.0	120.1
Deferred tax
Origination and reversal of temporary differences	(2.9)	4.9
Adjustment in respect of previous years	17.8	1.5
	14.9	6.4
Tax charge for the year	50.9	126.5

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

In addition to the amount charged to the income statement, deferred tax of £3.1m (2007: £2.5m charged) was credited directly to equity (note 15) and corporation tax of £nil (2007: £3.3m) was credited directly to equity.

Factors affecting the tax charge for the year

The tax assessed for the year is higher (2007: lower) than the standard rate of corporation tax in the UK for the period of 29.5% (2007: 30.0%). The differences are explained below:

	2008	2007
		(restated*)
	£m	£m
Profit before tax	137.3	424.8
Profit before tax multiplied by the standard rate of corporation tax of 29.5% (2007: 30.0%)	40.5	127.4
Effects of:
Goodwill impairment not deductible for tax purposes	7.2	-
Other expenses not deductible for tax purposes	7.1	2.7
Additional tax relief for land remediation costs	(1.9)	(1.7)
Adjustment in respect of previous years	(2.8)	-
Tax in respect of joint ventures	0.8	-
Impact of change in rate on future deferred tax balances	-	(1.9)
Tax charge for the year	50.9	126.5

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

The impact of the change introduced in the Finance Act 2007 regarding the reduction in the corporation tax rate from April 2008 from 30% to 28% has been incorporated into the Group's tax charge and deferred tax provided.

At 30 June 2007, the Group recognised a deferred tax asset of £5.8m in relation to the anticipated tax relief available on the future exercise of options under the Barratt Share Option and Long-Term Performance Plans. As a result of the fall in the Company's share price since that date, the anticipated tax relief on future exercises is now lower and accordingly the attributable deferred tax asset recognised as at 30 June 2008 is £nil. This has resulted in a charge to the income statement of £3.3m, included within other expenses not deductible for tax purposes in the table above, the balance being charged to equity.

7. Dividends

	2008	2007
	£m	£m
Prior year final dividend of 24.30p per share (2006: 20.69p)	83.8	49.7
Interim dividend 12.23p per share (2007: 11.38p)	42.2	27.4
	126.0	77.1
Proposed final dividend for the year ended 30 June 2008 of nil (2007: 24.30p) per share	-	83.8

8. Earnings per share

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders of £86.4m (2007: £298.3m (restated*)) by the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Benefit Trust which are treated as cancelled, which were 345.0m (2007: 258.6m).

Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders of £86.4m (2007: £298.3m (restated*)) by the weighted average number of ordinary shares in issue adjusted to assume conversion of all potentially dilutive ordinary shares from the start of the year, giving a figure of 346.7m (2007: 262.8m).

The earnings per share from continuing operations were as follows:

	2008	2007
		(restated*)
	pence	pence
Basic earnings per share	25.0	115.4
Adjusted basic earnings per share	79.6	123.0
Diluted earnings per share	24.9	113.5
Adjusted diluted earnings per share	79.2	121.0

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

The calculation of basic, diluted, adjusted basic and adjusted diluted earnings per share is based upon the following data:

		2008		2007
				(restated*)
	£m	pence	£m	pence
Earnings for basic and diluted earnings per share	86.4	25.0	298.3	115.4
Add: restructuring costs	15.9	4.6	26.2	10.1
Add: impairment of goodwill and intangible assets	30.7	8.9	-	-
Add: impairment of inventories	208.4	60.4	-	-
Less: tax effect of above items	(66.8)	(19.3)	(6.5)	(2.5)
Earnings for adjusted basic and adjusted diluted earnings per share	274.6	79.6	318.0	123.0

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

Earnings are adjusted, removing restructuring costs, impairments of goodwill, intangible assets and inventories and the related tax, to reflect the Group's underlying profit.

9. Goodwill

	2008	2007
	£m	£m
Cost
At 1 July	816.7	-
Acquisitions in the year	-	816.7
At 30 June	816.7	816.7
Accumulated impairment losses
At 1 July	-	-
Impairment losses for the year	24.5	-
At 30 June	24.5	-
Carrying amount
At 1 July	816.7	-
At 30 June	792.2	816.7

Goodwill cost of £792.2m relates to the housebuilding segment and £24.5m relates to the commercial developments segment.

The Group conducts its annual impairment review of goodwill and intangibles together for both the housebuilding and commercial developments segments. Any impairment identified is allocated first to goodwill and then to intangible assets.

The impairment review was performed at 30 June 2008 and compared the value-in-use of the housebuilding and commercial developments segments with the carrying value of their tangible and intangible assets and allocated goodwill.

The value-in-use was determined by discounting the expected future cash flows of the housebuilding and commercial developments segments. The key assumptions for the value-in-use calculations were those regarding the discount rates, expected changes in selling prices and sales volumes for completed houses and expected changes in site costs to complete. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and risks appropriate to the housebuilding and commercial developments businesses and therefore the discount rate that is considered by the Directors to be appropriate is a pre-tax risk adjusted discount rate of 10% being the Group's estimated pre-tax weighted average cost of capital. Changes in selling prices, sales volumes and direct costs are based upon past experience and expectations of future changes in the market taking into account external market forecasts.

The Directors have used the Group's current budget and internal forecasts for the first five years of the forecast cash flows. Following year five, the Group extrapolates cash flows in perpetuity using an estimated growth rate of 2.5%, which is based upon the expected long-term growth rate of the UK economy.

As a result of this review the Group has fully impaired the goodwill of the commercial developments business by £24.5m reflecting declining commercial property yields and the impact upon the future profit stream of the business. The impairment has been recognised within exceptional administrative expenses in the income statement.

10. Intangible assets

	Brands	Total
	£m	£m
Cost
At 1 July 2006	-	-
Acquisitions in the year	107.0	107.0
At 30 June 2007	107.0	107.0
At 30 June 2008	107.0	107.0
Amortisation
At 1 July 2006	-	-
At 30 June 2007	-	-
Charge for the year	0.8	0.8
Impairment	6.2	6.2
At 30 June 2008	7.0	7.0
Carrying amount
At 30 June 2007	107.0	107.0
At 30 June 2008	100.0	100.0

Brands

The Group does not amortise the housebuilding brand acquired with Wilson Bowden, being David Wilson Homes, valued at £100.0m, as the Directors consider that this brand has an indefinite useful economic life due to the fact that the Group intends to hold and support the brand for an indefinite period and there are no factors that would prevent it from doing so. The brand of Wilson Bowden Developments (valued at £7.0m prior to amortisation) was being amortised over ten years as it is a business-to-business brand operating in niche markets.

The Group tests indefinite life brands annually for impairment, or more frequently if there are indications that they might be impaired.

An impairment review was conducted using the calculations and assumptions as explained in note 9. As a result of this review an impairment of £6.2m has been recorded in relation to the Wilson Bowden Developments brand to reduce the carrying value of this asset to £nil. This impairment has been recognised within exceptional administrative expenses in the income statement.

11. Property, plant and equipment

		Plant and
	Property	equipment	Total
	£m	£m	£m
Cost
At 1 July 2006	5.2	14.7	19.9
Additions	3.9	4.0	7.9
Acquired with subsidiary	15.5	7.6	23.1
Reclassification	1.5	(1.5)	-
Disposals	(0.7)	(1.2)	(1.9)
At 30 June 2007	25.4	23.6	49.0
Additions	1.8	3.6	5.4
Reclassifications	0.9	(0.9)	-
Disposals	(16.7)	(13.5)	(30.2)
At 30 June 2008	11.4	12.8	24.2
Depreciation
At 1 July 2006	-	7.8	7.8
Charge for the year	0.3	4.6	4.9
Reclassification	0.5	(0.5)	-
Disposals	-	(1.1)	(1.1)
At 30 June 2007	0.8	10.8	11.6
Charge for the year	2.4	4.3	6.7
Reclassifications	0.4	(0.4)	-
Disposals	(1.9)	(8.1)	(10.0)
At 30 June 2008	1.7	6.6	8.3
Net book value
At 30 June 2007	24.6	12.8	37.4
At 30 June 2008	9.7	6.2	15.9

Authorised future capital expenditure that was contracted, but not provided for in these financial statements amounted to £nil (2007: £nil).

12. Inventories

	2008	2007
		(restated*)
	£m	£m
Land held for development	3,117.5	3,266.9
Construction work in progress	1,569.3	1,368.5
Part-exchange properties	137.9	97.9
Other inventories	5.3	6.6
	4,830.0	4,739.9

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

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 twelve months. It is not possible to determine with accuracy when specific inventory will be realised as this will be subject to a number of issues such as consumer demand and planning permission delays.

At 30 June 2008, the Group conducted a review of the net realisable value of its land and work in progress carrying values of its sites in the light of the current deterioration in the UK housing market. Where the estimated future net present realisable value of the site was less than its carrying value within the balance sheet, the Group has impaired the land and work in progress values. This has resulted in an exceptional impairment of £208.4m. The key judgement in estimating the future profit stream is the evaluation of the likely sales prices. Following this impairment £557.0m (2007: £nil) of inventories are valued at fair value less costs to sell rather than at historical cost.

The value of inventories expensed in 2008 and included in cost of sales was £2,714.2m (2007: £2,348.3m (restated*)) including £10.4m (2007: £3.5m) of inventory write-downs incurred in the course of normal trading and a reversal of £5.4m (2007: £1.4m) on inventories that were written down in a previous accounting period, but excluding the £208.4m exceptional impairment. The £5.4m reversal arose mainly due to obtaining planning approval on strategic land and other interests that had previously been written down to net realisable value.

The value of inventories written down and recognised as an expense in 2008 totalled £218.8m (2007: £3.5m), being the £208.4m classified as an exceptional cost and the remaining £10.4m incurred in the normal course of trading.

13. Net debt

Net debt is defined as cash and cash equivalents, bank overdrafts and interest bearing borrowings.

	2008	2007
	£m	£m
Cash and cash equivalents	32.8	182.1
Bank overdrafts	(7.5)	(26.7)
Net cash and cash equivalents	25.3	155.4
Bank loans	(1,355.3)	(1,273.2)
Loan notes	(46.4)	(101.6)
Private placement notes	(276.0)	(81.8)
Net debt	(1,652.4)	(1,301.2)

14. Share capital

	2008	2007
	£m	£m
Authorised: 439,460,000 (2007: 402,850,000) ordinary shares of 10p each	43.9	40.3
Allotted and issued ordinary shares of 10p each fully paid: 346,718,019 ordinary shares (2007: 346,511,877)	34.7	34.7

The authorised share capital of the Company was increased to 439,460,000 from 402,850,000 on 27 November 2007.

The issued share capital of the Company was increased during the year to 346,718,019 ordinary shares of 10p each by the issue of:

85,630 (2007: 840,300) ordinary shares of 10p each for a cash consideration of £479,107 (2007: £3,909,080) in satisfaction of options duly exercised in accordance with the rules of the share option plans
120,512 (2007: 102,571,785) ordinary shares as £1,313,581 (2007: £1,118,032,457) of the consideration for the acquisition of Wilson Bowden Limited

The Barratt Developments PLC Employee Benefit Trust (the 'EBT') holds 1,711,046 (2007: 1,714,046) ordinary shares in the Company. The cost of the shares, at an average of 165.9 pence per share (2007: 164.6 pence per share), was £2,838,386 (2007: £2,821,186). The market value of the shares held by the EBT at 30 June 2008, at 58.0 pence per share (2007: 993.0 pence per share), was £992,407 (2007: £17,020,477). The shares are held in the EBT for the purpose of satisfying options that have been granted under The Barratt Developments PLC Executive and Employee Share Option Plans. These ordinary shares do not rank for dividend and do not count in the calculation of the weighted average number of shares used to calculate earnings per share until such time as they are vested to the relevant employee.

15. Reconciliation of movements in equity

	Total
	(restated*)
	£m
Balance at 1 July 2006 as previously reported	1,539.9
Prior year adjustment	(10.9)
Balance at 1 July 2006 as restated	1,529.0
Profit for the year	298.3
Revaluation of available for sale financial assets	(0.7)
Net fair value gains on interest rate swaps designated as cash flow hedges	12.3
Tax credited to equity	0.8
Total income recognised for the period attributable to equity shareholders	310.7
Disposal of own shares	10.6
Dividends	(77.1)
Issue of share capital	1,122.0
Share issue costs	(0.1)
Share-based payments	4.4
Amounts transferred to the income statement	(1.5)
Balance at 30 June 2007	2,898.0
Profit for the year	86.4
Revaluation of available for sale financial assets	(4.6)
Foreign exchange loss	(1.8)
Net fair value gains on cross currency swaps designated as cash flow hedges	7.4
Net fair value losses on interest rate swaps designated as cash flow hedges	(19.1)
Losses on cancelled interest rate swaps deferred in equity	(3.6)
Amortisation of losses on cancelled interest rate swaps deferred in equity	0.1
Tax credited to equity	3.1
Total income recognised for the period attributable to equity shareholders	67.9
Dividends	(126.0)
Issue of share capital	1.8
Share-based payments	2.3
Purchase of shares to satisfy LTPPs	(0.3)
Balance at 30 June 2008	2,843.7

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

16. Cash flows from operating activities

	2008	2007
		(restated*)
	£m	£m
Profit for the year from continuing operations	86.4	298.3
Tax	50.9	126.5
Finance income	(12.8)	(3.5)
Finance costs	168.1	64.8
Share of post-tax loss from joint ventures	2.6	1.0
Profit from operations	295.2	487.1

Foreign exchange loss	(1.8)	-
Gains on swap arrangements transferred to the income statement	-	(1.5)
Amortisation of deferred loss on swaps	0.1	-
Amortisation of intangible assets	0.8	-
Impairment of intangible assets	6.2	-
Depreciation	6.7	4.9
Impairment of goodwill	24.5	-
Share-based payments	2.3	4.4
Imputed interest on deferred term land payables	(20.7)	(18.4)
Imputed interest on available for sale financial assets	2.9	-
Finance costs related to employee benefits	(1.7)	(2.9)
Revaluation of available for sale financial assets	(4.6)	(0.7)
Profit on disposal of property, plant and equipment	(2.1)	(2.5)
Total non-cash items	12.6	(16.7)

Increase in inventories	(22.1)	(267.4)
Decrease/(increase) in trade and other receivables	43.0	(10.1)
Decrease in trade and other payables	(207.7)	(56.1)
(Increase)/decrease in available for sale financial assets	(29.6)	2.7
Total movements in working capital	(216.4)	(330.9)

Interest paid	(147.0)	(31.3)
Tax paid	(114.8)	(120.5)

Net cash outflow from operating activities	(170.4)	(12.3)

* The results for the year ended 30 June 2007 have been restated as explained in note 2.

17. Acquisitions

The Group acquired the entire issued share capital of three entities during the year being:

Unitary Limited	Acquired on: 5 December 2007
Chancerygate (Lionel Road) Limited	Acquired on: 3 January 2008
Yeovil Developments Limited	Acquired on: 4 April 2008

The total cash consideration was £54.6m, £22.3m of which is deferred. These companies were solely acquired for the land and land options that they hold. The book value of land acquired was £20.3m and the fair value was £68.0m which was offset by a deferred tax creditor of £nil (£13.4m at fair value). No goodwill arose on these acquisitions.

The acquisitions did not contribute to the revenue or profit of the Group for the year and would not have done had these companies been acquired on 1 July 2007.

Additionally, the Group received cash contributions under the Wilson Bowden SAYE scheme of £1.3m in the year.

18. Contingent liabilities

The Company has guaranteed certain bank borrowings of its subsidiary undertakings, amounting to £0.8m at the year-end (2007: £8.4m). This guarantee relates to a loss making subsidiary. The liability of the Group, which is equal to the net liabilities of this subsidiary, has been provided within the consolidated financial statements.

The Group has entered into counter-indemnities in the normal course of business in respect of performance bonds. Certain subsidiary undertakings have commitments for the purchase of trading stock entered into in the normal course of business.

19. Related party transactions

Disposal of WBD (Atlantic Square) Limited to Capella Developments Limited and Development Management Agreement with Capella Consultancy Limited

On 30 June 2008, a wholly owned subsidiary of the Group, WBD (Atlantic Square) Limited, was sold by Wilson Bowden Developments Limited to Capella Developments Limited for total consideration of £4.3m (on a debt and cash free basis). In addition, the Group entered into a Development Management Agreement with Capella Consultancy Limited, a sister company of Capella Developments Limited, in respect of the management by Capella Consultancy Limited of certain of the Group's other Scottish properties and interests. The maximum consideration (including in respect of certain performance-related incentive arrangements) under the Development Management Agreement is £2.5m.

Capella Developments Limited and Capella Consultancy Limited were related parties of the Barratt Group because, at completion, each company was an associate of James Fitzsimons who was a former director of Wilson Bowden Developments Limited, WBD (Atlantic Square) Limited and certain other companies within the Group.

At 30 June 2008, there was no outstanding balance due to the Group from either Capella Developments Limited or Capella Consultancy Limited.

20. Post balance sheet event

On 9 July 2008, the Company entered into a £400m three-year committed revolving credit facility. In addition, £350m of the existing £400m five-year revolving credit facility (effective from 2 February 2005) was extended on 6 August 2008 to match the maturity period of the new three-year £400m revolving credit facility. The remaining £50m of this facility expires on 1 February 2010.

On 9 July 2008, the Company agreed with its bankers and private placement investors to amend the financial covenants to support the Group through the current difficult economic climate. The amendments were signed on 5 August 2008 and all conditions precedent were satisfied on 6 August 2008. From 6 August 2008 the weighted average interest rate paid by the Group increased to circa 9.75%.

21. Statutory Accounts

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under sections 237(2) or (3) Companies Act 1985.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS as adopted for use in the EU.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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