Final Results for the year ended 30 June 2018

Barratt Developments PLC

Annual Results Announcement for the year ended 30 June 2018

Another year of strong performance, new medium term targets announced

£m unless otherwise stated1,2	Year ended 30 June 2018	Year ended 30 June 2017	Change
Total completions (units)3	17,579	17,395	1.1%
Revenue	4,874.8	4,650.2	4.8%
Gross margin (%)	20.7	20.0	70 bps
Profit from operations	862.6	799.2	7.9%
Operating margin (%)	17.7	17.2	50 bps
Profit before tax	835.5	765.1	9.2%
Basic earnings per share (pence)	66.5	61.3	8.5%
Total dividend per share (pence)	43.8	41.7	5.0%
ROCE (%)	29.6	29.8	(20) bps
Tangible net assets per share (pence)	366	340	7.6%
Net cash	791.3	723.7	9.3%

Highlights

• Strong financial and operational performance for the full year
• Leadership of quality and customer service recognised through both 14 consecutive years of achieving more NHBC Pride in the Job Awards than any other housebuilder and receiving the HBF maximum 5 Star customer satisfaction rating for nine consecutive years
• 50 bps of operational margin improvement as our margin initiatives have started to deliver
• Profit before tax up by 9.2% to £835.5m
• 4.7% increase in final ordinary dividend per share to 17.9p (2017: 17.1p) together with 17.3p (2017: 17.3p) special dividend per share, resulting in a total dividend for the financial year of 43.8p (2017: 41.7p)

Medium term targets

• 3-5% volume growth per annum
• Land acquisition hurdle rate of a minimum 23% gross margin
• Minimum 25% ROCE

Current trading

• Forward sales (including JVs) up 11.1%, as at 2 September 2018 at £3,054.0m (3 September 2017 at £2,749.9m)
• Net private reservations per active outlet per average week from 1 July were in line with the prior year at 0.75 (FY18: 0.74)

Commenting on the results David Thomas, Chief Executive of Barratt Developments PLC said:

“The Group has had another outstanding year delivering a strong operational and financial performance, and our highest volumes in a decade. As the UK’s largest housebuilder we are helping to address the country’s housing shortage – creating jobs and supporting economic growth whilst continuing to lead the industry in quality and customer service.

Our continued focus on operating efficiencies and margin initiatives is starting to deliver and we have today announced new medium term operational targets reflecting our confidence in the business going forward.

The Group starts the new financial year in a good position with a strong balance sheet, healthy forward sales and robust consumer demand supported by a positive mortgage environment.”

1. Refer to Glossary for definitions of key financial metrics.
2. Unless otherwise stated, all numbers quoted exclude JVs.
3. Includes JV completions in which the Group has an interest.

Certain statements in this document may be forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Accordingly undue reliance should not be placed on forward looking statements.

There will be an analyst and investor meeting at 9.00am today at Deutsche Bank, 1 Great Winchester Street, London, EC2N 2DB. The 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.

A listen only function will also be available. Dial in: 0800 376 7922

International dial in: +44 (0) 207 192 8000

Access code: 2599157

Further copies of this announcement can be downloaded from the Barratt Developments PLC corporate website www.barrattdevelopments.co.uk or by request 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 Jessica White, Chief Financial Officer	01530 278 259
Analyst/investor enquiries Chloé Barnes, Head of Investor Relations	020 7299 4895
Media enquiries Tim Collins, Head of Corporate Communications	020 7299 4874
Brunswick Jonathan Glass/Wendel Verbeek	020 7404 5959

Financial calendar update

As the Group has reported its full year results in early September in recent years, we have decided to bring forward the AGM and trading statement from mid-November to mid-October 2018.

The Group will provide current trading from 1 July 2018 to 14 October 2018 at the AGM on 17 October 2018. Given the short time period between full year results and the AGM there will not be an analyst and investor call. Please note that, unlike in previous years and as previously communicated, Barratt Developments does not intend to provide a trading update between the AGM trading update and the earlier than usual announcement of the Interim results on 6 February 2019.

Chairman’s statement

2018 marks Barratt’s 60th anniversary and we are proud to have built more than 450,000 homes across the country since we began in 1958. As the largest housebuilder in the UK, we delivered 17,579 homes in the year, the second highest annual figure in our 60 year history.

The Group performed well again this year against key financial and operational metrics. We also continue to lead the industry in quality and service and reported record profits for the fourth year running.

At the heart of our business is a commitment to quality and service. Home buyers have the right to expect the highest quality and service. We strive to deliver this right across our business. This commitment to quality and service is recognised widely across the industry.

Our site managers were awarded 83 NHBC Pride in the Job Awards for site management this year, more than any other housebuilder for the 14th year in a row. We were also awarded the Home Builders Federation maximum 5 Star rating, meaning that over 90% of our customers would recommend us to a friend, for the ninth consecutive year – the only major housebuilder with this record. These achievements are a testament to our focus on leading the future of housebuilding by putting customers at the heart of everything we do.

Political and economic environment

The Government continues to emphasise its support of housebuilding and commitment to tackling the country’s housing shortage. We expect that the recently updated National Planning Policy Framework will positively impact housebuilding and Local Authorities have made good progress in preparing and submitting local plans.

The November 2017 budget included further positive measures to improve the health of the housing market. Notably this included a stamp duty cut for first time buyers, which has now benefited over 120,000 purchasers, and the £5 billion Housing Infrastructure Fund to unlock new sites for development.

While political uncertainty continues around the country’s departure from the EU and ministerial changes in the Ministry of Housing, Communities and Local Government, the Board remain confident in the strong fundamentals of the housing sector and our business.

Market conditions remain good with a wide availability of attractive mortgage finance, which, alongside Help to Buy, continues to support robust consumer demand. The Group is well positioned with a substantial year-end net cash balance, healthy forward sales position and an experienced management team.

Our employees

The outstanding progress the Group has made during the year would not have been possible without the capability, passion and dedication of our Senior Management team and all of our employees, whom I would like to thank on behalf of the Board. We ensure that we reward all of our employees appropriately so that we can recruit and retain the best people whilst motivating them to continue to perform year-on-year.

To celebrate Barratt’s 60th anniversary the Board wanted to recognise the contribution of employees at all levels and for the first time we granted a share award to all employees below Senior Management level, giving them the opportunity to share in the future success of the Group.

Corporate governance

The Board recognises that good, strong corporate governance is the foundation for any successful company. We continue to embed good corporate governance practices through our policies, processes and procedures across our business and seek to apply the provisions of corporate governance regulation and best practice.

New Code

In July 2018, the FRC issued the New Code. We welcome the simplicity of the New Code and the focus on building strong, transparent relationships with key stakeholders. We have already taken steps to apply some of the main changes introduced by the New Code.

Specifically we have established an employee forum to hear the views of our workforce and we have also continued to focus on the key stakeholders whose interests will continue to be taken into account throughout the Board’s decision-making process. The Nomination Committee will continue to enhance its approach to succession planning and diversity, and the Remuneration Committee will continue to ensure that Executive Directors’ remuneration is justified and takes into account the remuneration and related policies for the wider workforce. During FY19, we will assess our governance practices against the provisions of the New Code and the Guidance on Board Effectiveness and any changes proposed or made during the year will be reported on in our next Annual Report and Accounts.

Board changes

As announced on 2 October 2017, Sharon White joined the Board as a Non-Executive Director with effect from 1 January 2018. Sharon brings a wealth of public sector and public policy experience to the Board as current Chief Executive of Ofcom and having spent 25 years working in the public sector and Government.

Having concluded nine years of distinguished service, Tessa Bamford stepped down from the Board on 30 June 2018. I would like to thank Tessa for her constant commitment and significant contribution throughout her tenure and wish her every success for the future.

In the run up to the 2017 AGM, shareholders lodged votes against the re-election of Jock Lennox based on concerns that he was overboarded and therefore unable to commit sufficient time to his role at Barratt. In order to address shareholder concerns Jock decided to step down from his position as Audit Committee Chair and Non-Executive Director of Dixons Carphone plc with effect from 6 September 2018 and 31 December 2018 respectively.

Delivering returns for our shareholders

In accordance with the extended Capital Return Plan announced in February 2018 and the continued strong financial performance of the Group, the Board is pleased to recommend a final dividend of 17.9 pence per share (2017: 17.1 pence per share) and a special dividend of £175.0m (17.3 pence per share). We, subject to shareholder approval, will pay both the final and special dividends on 6 November 2018 to those shareholders on the register as at the close of business on 12 October 2018. The total proposed dividend for FY18, including the interim dividend of 8.6 pence per share paid in May 2018, is therefore 43.8 pence per share (2017: 41.7 pence per share).

Charitable giving

Our objective of providing people across the UK with homes they want to live in is aligned with our social commitment to giving back to the communities we live and work in. We believe it is important to support charitable causes both locally and nationally and encourage our employees in that pursuit. Each of our divisions and offices support local charities and the Group matches funds raised by our employees. Over FY18 we have raised and donated £1.2m to various charities.

We encourage all of our employees to take paid time off work to volunteer in their local communities and I was pleased to see employees across the business spend time helping their local communities, including maintaining nature reserves and volunteering at local schools. We continue to partner with the RSPB on how nature and wildlife are incorporated into our new communities.

Outlook and summary

The Group is well positioned to continue to improve its performance in future years.

I believe that we have an experienced and committed Board of Directors who continue to focus on promoting the success and long term sustainable value of the Group.

We will continue to monitor the balance of skills, experience and knowledge on the Board and ensure that it remains appropriate and relevant to drive the Group’s strategy forward over the coming years.

On behalf of the Board, I thank you for your continued support and look forward to welcoming you to our AGM on 17 October 2018.

John Allan

Chairman

4 September 2018

Chief Executive’s statement

Our results summary

It has been a strong year for the Group both operationally and financially, delivering a record profit before tax of £835.5m (2017: £765.1m), up 9.2% on the prior year and the highest number of housing completions in a decade.

Our regional business has performed particularly strongly over the year and as a result we have seen incremental improvement in operating margin of 50 bps, to 17.7% (2017: 17.2%), with both trading from new regional sites and regional mix driving improvement and our margin initiatives starting to deliver.

We have also continued to strengthen our balance sheet, ending the year with net cash of £791.3m (2017: £723.7m) and with net tangible assets of £3,705.5m (2017: £3,430.0m).

	Housebuilding	Commercial	Total
Total completions including JVs (units)	17,579	-	17,579
Revenue (£m)	4,827.0	47.8	4,874.8
Gross margin (%)	20.7%	15.7%	20.7%
Profit from operations (£m)	857.6	5.0	862.6
Operating margin (%)	17.8%	10.5%	17.7%
Share of post-tax profit/(loss) from joint ventures and associates (£m)	18.5	(0.5)	18.0

New medium term strategic objectives

We are very proud to not only be Britain’s largest housebuilder but also lead the industry in both customer service and build quality. This is about doing the right thing for our customers, and we believe the high quality of our homes and our excellent customer service is fundamental to our ongoing success. We are building the homes the country desperately needs, creating jobs and supporting economic growth whilst also delivering both operationally and financially for our shareholders.

As previously announced, whilst maintaining our industry leading standards of quality and service, the Group is committed to delivering margin improvements, continuing to grow volumes as well as returning excess cash to shareholders. Over the last five years we have grown and strengthened the Group significantly but we believe further operational improvements can be driven through the business.

Demonstrating the Board’s confidence in the business going forward we are now setting out our targets over the medium term.

Primary operational targets and key financial metrics

Completions	3-5% growth per annum Present business capacity of 20,000 per annum
Gross margin	New land acquisitions at minimum 23% gross margin
ROCE	Minimum of 25%

We are a national housebuilder and build homes across the country through our three brands: Barratt Homes, David Wilson Homes and Barratt London. We have grown volumes by 28.7% over the last five years to 17,579 units in 2018 (2017: 17,395 units). We are committed to disciplined volume growth to maintain quality standards and expect to grow volumes between 3-5% per annum over the medium term. We have recently opened a new Cambridgeshire division to support our volume aspirations and have capacity to grow to 20,000 annual completions under the current operational structure.

We have grown margin significantly over the last five years and this year the Group has delivered a gross margin of 20.7% (2017: 20.0%). We have achieved this growth despite continued headwinds in the high-end Central London market, reflecting our strong regional performance and as a result of our margin initiatives starting to deliver.

In 2016, the Group undertook a review of its housing ranges. The new ranges maintain our high standards of design whilst being faster to build, help us reduce build cost and waste, and are more suitable for modern methods of construction. We continue to roll out our new housing ranges across the business with the new Barratt range now identified for 187 sites (September 2017: 132 sites) across the country and we currently have 101 sites (September 2017: 51 sites) under construction. The planned roll-out of the new product ranges will increasingly benefit margin going forward.

Our focus on driving further margin improvements through the business, and the operational improvements that we have made, including our new product range and our concentration on standardised product, are enabling us to acquire land at an increased minimum of 23% gross margin.

ROCE has grown from 11.5% to 29.6% since 2013, and we expect it to remain at a minimum of 25% over the medium term.

Operating framework and capital structure

Land bank	c. 3.5 years owned and c. 1.0 year controlled
Land creditors	Reduce usage to 25-30% of the land bank over medium term
Net cash	Modest average net cash over the financial year Year-end net cash
Treasury	Appropriate financing facilities
Capital Return Plan	2.5 x dividend cover Ordinary dividend supplemented by special returns when market conditions allow

We will continue to maintain an appropriate capital structure and a sustainable operating framework, with shareholders’ funds and land creditors funding the longer term requirements of the business and with term loans and bank debt funding shorter term requirements for working capital. We expect finance costs for FY19 to be around £45m of which c. £12m will be cash finance costs.

Going forward, we expect to have modest average net cash over each financial year and be cash positive at year end. As at 30 June 2018, the Group had a net cash balance of £791.3m (2017: £723.7m), ahead of expectations, driven by strong year end trading. We expect FY19 year-end net cash to be around £550m.

We will continue to seek to defer payment for some land purchases to drive a higher ROCE. As at 30 June 2018 the Group had reduced land creditors to 34% (2017: 37%) of the owned land bank in line with guidance. At 30 June 2019, we expect this to be 30-35% of the owned land bank, and we expect to continue to reduce this further and target 25-30% of the owned land bank over the medium term.

Net tangible assets were £3,705.5m (£3.66 per share) of which land net of land creditors and work in progress totalled £3,429.8m (£3.39 per share).

FY18 results review Our businesses

Our improved financial results have been driven by a strong and disciplined operational performance in both our housebuilding and commercial developments businesses.

Housebuilding

Housebuilding results

The business performed well throughout the financial year and delivered against both its financial and operational targets. Market conditions remain supportive, with attractive mortgage financing and the support of Help to Buy driving strong consumer demand for our homes across the country.

We are the UK’s largest housebuilder with total completions at 17,579 units including JVs (2017: 17,395), the highest number of completions in a decade. Private completions increased by 1.0% to 13,439 (2017: 13,303), affordable completions were 3,241 (2017: 3,342), and JV completions in which the Group had an interest were 899 (2017: 750).

Total ASP on completions in the year increased by 5.0% to £288.9k (2017: £275.2k), with private ASP also increasing by 5.0% to £328.8k (2017: £313.1k) benefiting from mix changes and some underlying house price inflation. Completions in our London business were ahead of expectations, with particularly strong final quarter Central London trading, resulting in a higher ASP in the second half. At 30 June 2018 we had 145 private wholly owned Central London homes remaining. As a result of this mix change, a higher proportion of our completions in FY19 will therefore be from Outer London and we would therefore expect ASP to reduce in FY19.

Our FY18 sales rate was in line with the prior year at 0.72 (2017: 0.72) net private reservations per active outlet per week in the full year and 0.77 (2017: 0.76) in the second half. During the year, we operated from an average of 380 active outlets including JVs (2017: 377).

We have delivered a 50 bps operating margin improvement for the year, driven in the main by trading from our new regional sites, regional mix and other items which accounted for margin improvement of 110 bps. We continue to increase the proportion of higher margin land completions, which accounted for 94% (2017: 92%) of the total in the year, and to trade through our legacy assets, and this has had a small positive impact on our margin. As expected we have seen a negative impact on our Group operating margin from Central London, resulting in a decrease in margin of 40 bps over the year.

Our share of profits from JVs and associates in the year for the housebuilding business decreased to £18.5m (2017: £26.5m), reflecting planned site build programmes and in line with previous guidance. As at 30 June 2018 we were selling from 12 (2017: 11) JV outlets. In FY19 we expect to deliver around 650 JV completions and our share of profits from JVs to be around £20m.

Following the Grenfell Tower tragedy, the Government commissioned independent reviews of Building Regulations and Fire Safety. The Group has undertaken a review of all of its current and legacy buildings where it has used cladding. Approved Inspectors signed off all of our buildings, including the cladding used, as compliant with the relevant Building Regulations during construction and on completion. While we are satisfied that we currently have no liability in respect of cladding, we have made a £4.0m provision for the work we have undertaken to carry out at one site to remove and replace cladding in line with our commitment to put our customers first.

Committed to building more high quality homes

As the UK’s largest housebuilder we remain committed to playing our part in addressing the UK’s housing shortage. We design developments which look great, meet our high quality standards, are a pleasure to live on, and will enhance local communities for years to come.

We believe our industry leadership in quality and customer service is fundamental to business resilience. That quality is recognised through the NHBC Pride in the Job Awards for site management. In June 2018 our site managers were awarded 83 awards, more than any other housebuilder for the 14th consecutive year. We are also the only major housebuilder to be awarded the maximum 5 Star rating by our customers in the HBF customer satisfaction survey for nine consecutive years.

We are always looking at new and innovative ways of sales and marketing as well as ways to provide affordable housing across the country. As part of this we have entered into a small bulk deal arrangement with a residential property provider which offers a part-buy part-rent option for its customers. In FY18 we completed on 79 homes in the North-West of England, with a further 81 homes due for delivery in FY19.

We are committed to investing in the future of housebuilding. We continue to offer a range of graduate, apprentice and trainee programmes and are one of the largest employers of apprentices in the industry. In 2013 we created the UK’s first ever degree programme in housebuilding, in partnership with Sheffield Hallam University, with the first students having graduated this summer with a BSc in Residential Development and Construction. The course, designed specifically for Barratt employees, helps to address industry-wide skills challenges and support future growth. We also continue to develop, trial and implement modern methods of construction. In FY18 we built and sold over 1,900 units using Timber Frame, Large Format Block and Light Gauge Steel Frame.

The key dimensions underpinning delivery of our strategy

In addition to the generally favourable market conditions during the year, the increase in our housebuilding profitability has benefited from our successful land investment strategy and from improvements in operating margin.

Land and planning

A key factor in the growth of our housebuilding business in recent years has been our land investment strategy, which has boosted absolute profit and led to increased completion volumes.

The land market remained attractive throughout the financial year and we secured excellent opportunities that exceeded our minimum hurdle rates. The Group approved £933.9m (2017: £957.2m) of operational land for purchase in the year, which equates to 20,951 plots (2017: 18,497 plots). To support our volume growth aspirations we expect to approve between 18,000-22,000 plots per annum over each of the next three financial years.

We continue to target a regionally balanced land portfolio with a supply of owned land of c. 3.5 years and a further c. 1.0 year of controlled land. Our target for a shorter than sector average land bank reflects our focus on ROCE and our fast build and sell model. Reflecting the excellent land opportunities we have seen over the year as well as our growth ambitions, at 30 June 2018 we are slightly above this target with a 4.8 years land supply comprising 3.7 years owned land and 1.1 years controlled land, with the owned land bank including land with both outline and detailed planning consents.

At 30 June 2018, the ASP of plots in our owned land bank was £270k (2017: £265k). In FY18, 27% (2017: 25%) of our completions were from strategically sourced land and we are making good progress in reaching our medium term target of 30% of completions from strategic land, which we believe is an appropriate level for our business.

Following our success with planning over the past 12 months we are very well positioned, with all of our expected FY19 completions (2017: all of FY18 completions) having outline or detailed consent.

Improving efficiency and reducing costs

Improving the efficiency of our operations and controlling costs remains a key focus for the Group, as it will further enhance our margin and improve business resilience. We have launched our new cost effective housetype range but we are also seeking ways to improve efficiencies and reduce costs across the business in all areas.

We have a robust and carefully managed supply chain with around 90% of the housebuild materials sourced by our centralised procurement function manufactured or assembled in the UK. The cost of 75% of our centrally procured materials is now fixed until the end of FY19. On labour, we continue to see some pressure on skilled labour supply with shortages remaining location and trade specific. We are also improving construction efficiency and reducing demand on labour through implementing the new housetype ranges, which are easier to build, and through the use of alternative build options such as Timber Frames, Large Format Block and Light Gauge Steel Frames. We continue to expect that overall build cost inflation for FY19 will be c. 3-4%.

During FY18, administrative expenses were slightly lower than expected at £146.3m (2017: £132.8m), benefiting from some additional sundry income during the year. In FY19 we expect to receive both lower management fees from our joint ventures and less sundry income. Accordingly, despite carefully controlling our administrative cost base, with expected underlying inflation of c. 2%, we expect net administrative expenses to be around £165m.

Commercial developments

WBD is our commercial development division.

During the year WBD completed a 300,000 sq. ft. extension to a distribution warehouse it had previously built in Rochdale, together with two new specialist distribution facilities on the edge of Leicester and Nottingham, all of which were forward funded prior to starting on site. WBD also delivered a freehold design and build storage and distribution warehouse.

Commercial development revenue was £47.8m (2017: £61.1m) with an operating profit before adjusting items of £8.0m (2017: £10.2m). After charging a £3.0m (2017: £8.8m) provision against legacy commercial properties, we recognised an operating profit of £5.0m (2017: £1.4m).

Health and safety

The health and safety of our people, contractors, customers and the general public remains the Group’s number one priority.

Increased activity levels across the industry in terms of site openings and production volumes combined with shortages of skilled workers has contributed to an increased risk of accidents on sites. We remain fully committed to the highest standards of health and safety on our sites. In the year, our reportable injury incidence rate has increased with 462 (2017: 379) reportable incidents per 100,000 employees. We have already undertaken a review into factors that have contributed to this increase and will be working with our management teams to drive improvements in the prevention of injuries.

Reflecting our ongoing commitment to health and safety, nine of our site managers were awarded the prestigious “highly commended” status at the annual NHBC Health and Safety Awards, and our site manager at Ness Castle, Inverness was awarded the National Award in the Large Builder category.

Capital Return Plan

The Board proposes to pay a final ordinary dividend of 17.9 pence (2017: 17.1 pence) per share for the financial year ended 30 June 2018, which subject to shareholder approval, will be paid on 6 November 2018 to shareholders on the register at the close of business on 12 October 2018. Together with the interim ordinary dividend of 8.6 pence per share, which was paid in the year, this gives a total ordinary dividend for the year of 26.5 pence per share (2017: 24.4 pence per share). With basic earnings per share of 66.5p (2017: 61.3p) the ordinary dividend is therefore covered around two and a half times by earnings, in line with our ordinary dividend policy.

Under the special cash payment programme the Board is proposing a payment of £175m (17.3 pence per share), which subject to shareholder approval, will be paid by way of a special dividend on 6 November 2018 to shareholders on the register at the close of business on 12 October 2018.

Capital Return PlanA	Ordinary dividend £m	Special dividend £m	Total Capital Return £m	Total pence per share
Paid to dateB	667.6	399.7	1,067.3	106.1p
Proposed payment
November 2018	181.1D	175.0	356.1	35.2 pD
Year to November 2019	277.2 C,D	175.0	452.2	44.7 pD
Total proposed payment	458.3 C,D	350.0	808.3	79.9 pD
Total Capital Return Plan	1,125.9	749.7	1,875.6	186.0 pD

1. All ordinary and special dividends are subject to shareholder approval. The fourth special dividend will be subject to shareholder approval at the Annual General Meeting in October 2018 and subsequent special dividends will be subject to shareholder approval.
2. Comprises FY15 interim dividend of 4.8 pence per share (£47.5m), FY15 final dividend of 10.3 pence per share (£103.1m), FY15 special dividend of 10.0 pence per share (£100.0m), FY16 interim dividend of 6.0 pence per share (£60.1m), FY16 final dividend of 12.3 pence per share (£123.6m), FY16 special dividend of 12.4 pence per share (£124.7m), FY17 interim dividend of 7.3 pence per share (£73.4m), FY17 final dividend of 17.1 pence per share (£172.9m), FY17 special dividend of 17.3 pence per share (£175.0m) and FY18 interim dividend of 8.6 pence per share (£87.0m).
3. Based on Reuters consensus estimates of earnings per share of 68.4 pence for FY19 as at 31 August 2018 and applying a two and a half times dividend cover in line with previously announced policy. This consensus estimate is provided for illustration purposes. No member of the Group nor any of their respective directors, officers or employees: (i) has commented on the consensus estimate, (ii) endorses the consensus estimate, or (iii) accepts any responsibility whatsoever for the accuracy of the consensus estimate and shall accordingly have no liability whatsoever in respect of the consensus estimate.
4. Based upon 30 June 2018 share capital of 1,011,791,077 shares for proposed payments.

We have a well-defined ordinary dividend policy with the Group paying an ordinary dividend cover of two and a half times. We have previously announced that when market conditions allow, ordinary dividends will be supplemented with special dividends and in February 2018 the Board proposed to extend the special dividend and pay dividends of £175m in November 2018 and 2019.

Whilst the Board propose no change to the existing arrangement to pay the special dividend of £175m in November 2018, it has reviewed the mechanism for delivering the £175m cash return to shareholders in November 2019 and any future special dividends beyond the current commitment period. The Board believes that at times there are differences between market valuation and both underlying market conditions and the strength of our business.

As a consequence, the Board is proposing to introduce flexibility to this policy such that the £175m cash return proposed in November 2019, and any future special returns, can be made through a combination of share buybacks and special dividends, as opposed to solely special dividends. Whilst the payment of special dividends represents the Board’s preferred method of returning excess capital to shareholders, this recognises that at certain share price points, share buybacks will be in the best interest of shareholders.

The Company will consult with shareholders on any consequential changes required to the LTPP prior to the 2019 AGM. The Board believes that this will ensure that the Company’s shareholders fully benefit from the underlying value of the business which at certain price points is not reflected in the market valuation.

Current trading and outlook

In the first nine weeks of the financial year, the Group has achieved net private reservations per average week of 264 (FY18: 265), resulting in net private reservations per active outlet per average week of 0.75 (FY18: 0.74), with the particularly strong rate benefiting from reservations on two bespoke design and build arrangements.

Forward sales (including JVs) up 11.1%, as at 2 September 2018 at £3,054.0m (3 September 2017: £2,749.9m), equating to 12,648 units (3 September 2017: 12,160 units).

	2 September 2018		3 September 2017		Variance £m
Forward sales	£m	Units	£m	Units	%
Private	1,650.4	5,273	1,722.3	4,994	(4.2)
Affordable	1,013.1	6,592	749.0	6,260	35.3
Wholly owned	2,663.5	11,865	2,471.3	11,254	7.8
JV	390.5	783	278.6	906	40.2
Total	3,054.0	12,648	2,749.9	12,160	11.1

We continue to make good progress in trading through our Central London sites and now have 118 wholly owned private units remaining, of which 77 are reserved. We have three joint ventures in Central London, one of which is Fulham Riverside. On 30 August 2018, the Group completed a deal for the sale of 162 units at our Fulham Riverside site to Riverstone Living. The deal is for the development of retirement units and anticipated to be completed in FY21.

This has been another outstanding year for the Group and we have started the new financial year in a good position, with £791.3m year-end net cash and a healthy forward order position.

We deliver industry leading quality and customer service, and have a talented and committed workforce whose outstanding contribution drives our success. I am proud to lead our first class team who are all determined to build on our outstanding operational and financial performance.

In FY19 we are focused on our new medium term targets, being a land acquisition hurdle rate of a minimum 23% gross margin, volume growth of 3-5% and a minimum 25% ROCE, whilst continuing to lead the industry by building the highest quality homes across the country.

David Thomas

Chief Executive

4 September 2018