Final Results for the year ended 30 June 2019

Barratt Developments PLC

Annual Results Announcement for the year ended 30 June 2019

Another year of strong performance, continued good progress against medium term targets

£m unless otherwise stated1,2,3	Year ended 30 June 2019	Year ended 30 June 2018	Change
Total completions (homes)4	17,856	17,579	1.6%
Revenue	4,763.1	4,874.8	(2.3%)
Gross margin (%)	22.8	20.7	210 bps
Profit from operations	901.1	862.6	4.5%
Operating margin (%)	18.9	17.7	120 bps
Profit before tax	909.8	835.5	8.9%
Basic earnings per share (pence)	73.2	66.5	10.1%
Total dividend per share (pence)	46.4	43.8	5.9%
ROCE (%)	29.7	29.6	10 bps
Net cash	765.7	791.3	(3.2%)

Highlights

• Strong operational and financial performance with continued good progress against medium term targets
• Operating margin of 18.9% (2018: 17.7%), with a trading improvement of 80 bps, driven mainly by continued strong progress from our margin initiatives
• Profit before tax of £909.8m (2018: £835.5m), driven by margin initiatives, a strong close to the year and additional contribution from joint ventures
• Continue to lead the industry in quality and customer service, achieving more NHBC Pride in the Job Awards than any other housebuilder for the 15th consecutive year and receiving the maximum HBF 5 Star customer satisfaction rating for the tenth year in a row
• Strong cash generation with net cash at 30 June 2019 of £765.7m (2018: £791.3m)
• Final ordinary dividend per share of 19.5p (2018: 17.9p) together with 17.3p (2018: 17.3p) special dividend per share, resulting in a total dividend for the financial year of 46.4p (2018: 43.8p)

Current trading

• Net private reservations per active outlet per average week from 1 July were 0.70 with the prior year benefiting from reservations on two bespoke design and build arrangements (FY19: 0.75, excluding the two bespoke design and build arrangements 0.70)
• Strong total forward sales⁴ as at 1 September 2019 of 12,911 homes (2 September 2018: 12,648 homes) at a value of £2,998.6m (2 September 2018: £3,054.0m).

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

“It has been another outstanding year delivering a strong operational and financial performance. The Group’s long term investment in quality and operational excellence continues to drive margin improvements, alongside our highest number of completions for 11 years. As the only major housebuilder to be awarded a 5 Star rating for customer satisfaction for ten years in a row, we continue to lead the industry in quality and customer service.

Whilst there is increased economic and political uncertainty, we begin the new financial year with a strong forward order book, balance sheet and cash position which we believe provides us with the resilience and flexibility to react to potential changes in the operating environment in FY20 and beyond. We maintain our focus on the delivery of operational improvements across our business, and our commitment to deliver the highest quality homes across the country.”

1. Refer to Glossary for definition of key financial metrics
2. Unless otherwise stated, all numbers quoted exclude JVs throughout this statement
3. In addition to the Group using a variety of statutory performance measures it also measures performance using alternative performance measures (APMs). Definitions of the APMs and reconciliations to the equivalent statutory measures are detailed in the Glossary and Definitions
4. Including JVs 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 8.30am 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 8:30am today. A playback facility will be available shortly after the presentation has finished.

Dial in: 0844 571 8892

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

Access code: 1469366

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 Jenny Matthews, Investor Relations	020 7299 4894
Media enquiries Tim Collins, Head of Corporate Communications	020 7299 4874
Brunswick Jonathan Glass/Alison Lea	020 7404 5959

Chairman’s Statement

We have once again performed strongly against our key financial and operational metrics, and we continue to lead the industry in the quantity and just as importantly, the quality of our homes. This year we delivered 17,856¹ high quality new homes across Britain, the highest number for 11 years.

Quality

The Group’s vision is to lead the future of housebuilding by putting our customers at the heart of everything we do. This year we once again demonstrated our industry leading credentials for quality and service.

We achieved a 5 Star rating in the HBF customer satisfaction survey for the tenth year in a row, a record that is unprecedented for a major housebuilder. Our 5 Star rating means that over 90% of our customers would recommend us to their family and friends, and is the leading industry benchmark of quality and service. In addition, our site managers achieved 84 NHBC Pride in the Job Awards for excellence in site management this year - more than any other housebuilder for 15 years in a row, and our highest number of awards for five years.

Political and economic environment

Despite increased political uncertainty, the prevailing economic and political backdrop for the industry is positive. Home ownership is still the tenure of choice for the majority of people, and this combined with the long term undersupply of new housing means that underlying demand remains strong.

The Government continues to support new housebuilding. We welcome the extension of Help to Buy until 2023, albeit subject to restrictions from 2021 onwards. We believe Help to Buy is a successful scheme that has supported new development whilst helping over 221,000² families to buy a new home. The Government’s stamp duty cut has also assisted over 340,000³ first-time buyers since its inception in November 2017.

The revised National Planning Policy Framework published last year has provided additional clarity for housebuilders, and the majority of local authorities now have an up-to-date, adopted local plan. In total over 369,0004 units secured planning permission in England in 2018, demonstrating that the planning system continues to facilitate new development.

Low interest rates continue to keep mortgages at historically affordable levels and there is increased competition amongst lenders. This robust mortgage market makes demand more effective and further strengthens the backdrop for the housebuilding sector.

Our employees

The Group’s continued good progress is only possible because of the dedication and ability of our management team and all of our employees. I would like to take this opportunity to thank everyone in our business for their contribution over the last year. We aim to recruit the best talent available from within our industry and beyond, and the Board believes that this approach provides a solid foundation from which we can grow our business and continue to provide our customers with outstanding quality and service.

The views of our employees are important to the Board. They are the ones that shape the culture of the business and are at the heart of our operations. Our Workforce Forum, established in 2018, met three times during the course of this year to discuss a variety of topics including enhancing workforce engagement, health and wellbeing strategy, benefits, charitable giving, diversity and inclusion.

To enhance the Board’s engagement with its employees further, the Board has appointed Richard Akers, the Chair of the Remuneration Committee and our Senior Independent Director, as the designated Non-Executive Director for workforce engagement. Richard will attend at least one Workforce Forum meeting a year to discuss matters relating to working at Barratt. Richard and the Group HR Director will update the Board in respect of any key issues raised at meetings.

Culture

The success of our business is rooted in our culture. This is based on the values and the behaviours exhibited by our people across our business who are working towards our vision to lead the future of housebuilding by putting customers at the heart of everything we do. It’s important to examine the culture of an organisation to make sure that it is encouraging the right behaviours, providing the right incentives and leading by example. Consequently the Board will be undertaking a review of the Group’s culture later this year.

Safety, health and the environment

The safety and health of all individuals on and around our sites and in our offices is a fundamental priority. We were therefore deeply saddened that a sub-contractor working on one of our sites was fatally injured in June 2019. Our thoughts are with the family, friends and colleagues of the individual concerned. We are cooperating fully with the Health and Safety Executive during its ongoing investigation and await the outcome.

We continuously reinforce the importance of safety and health to our workforce. Our injury incidence rate for reportable injuries per 100,000 employees and contractors decreased during FY19 to 297 (2018: 462).

Our social and environmental impact is an important concern for the Board. To identify those issues that matter most to our stakeholders we undertook a materiality review process in 2019. This review reconfirmed that the issues that we are focusing on remain key to our stakeholders. We have also embraced the UN SDGs. We updated our sustainability framework, which sets out the areas of priority in terms of sustainability and how we will deliver against these, to reflect the feedback received from the materiality process and the UN SDGs that we will be focussing on. We will monitor progress against this throughout FY20.

Acquisition and disposals

In June 2019, we announced the acquisition of Oregon, a supplier of timber frames. This acquisition was in line with our strategy to progress construction through the use of MMC. We are excited to work with the team at Oregon and welcome each and every one of them into the Barratt family. Throughout FY20, we will focus on integrating the Oregon business into the Group.

During the year, we disposed of our property management company, Barratt Residential Asset Management. We also sold our remaining 50% interest in the Aldgate Place joint venture to our joint venture partner, in line with our strategy to trade out of central London.

The New Code

In July 2018, the Financial Reporting Council published the new UK Corporate Governance Code and Guidance on Board Effectiveness. Whilst these provisions do not apply to the Company for FY19, we have decided to early adopt those relating to Section 172 of the Companies Act: Duty to promote the long term success of the Company; Stakeholder engagement; CEO pay ratio; malus and clawback and pension contributions.

Board appointments and succession

The Nomination Committee continues to oversee Board appointments and succession of Board members. It annually assesses the composition of the Board and its Committees. No new appointments were made to the Board or any of the Committees during the year. The Board effectiveness review, which was this year externally facilitated by Linstock, supported the view that the Board currently comprises the appropriate skills and experience to drive our strategy forward. It did however highlight the need to consider what skills any new Non-Executive Director would need to possess to support our succession plan for Non-Executive Directors and continuous refresh of the Board.

Delivering returns to our shareholders

In line with the Group’s extended Capital Return Plan announced in February 2019, I am pleased to confirm that the Board will be recommending a final dividend of 19.5 pence per share (2018: 17.9 pence per share) and a special dividend of £175.0m (17.3 pence per share) for approval by shareholders at the 2019 AGM. The total proposed dividend for FY19, including the interim dividend of 9.6 pence per share paid in May 2019, is therefore 46.4 pence per share (2018: 43.8 pence per share).

Summary

We continue to have an experienced and committed Board who are focused on promoting the success and long term sustainable value of the Group. We will continue to review our composition and ensure that it aligns with our strategy as we move forward.

Our performance this year has put us in a strong position to progress our medium term targets of increasing volume, improving margin and improving ROCE over the forthcoming years. We will continue to focus on the quality of the homes that we build and putting the customer at the heart of everything we do.

On behalf of the Board, I thank you for your continued support and look forward to welcoming you to our AGM on 16 October 2019.

John Allan

Chairman

3 September 2019

1. Including JVs in which the Group has an interest
2. MHCLG, Help to Buy (Equity Loan Scheme) Data to 31 March 2019, England, July 2019
3. HMRC Quarterly Stamp Duty Land Tax Statistics, July 2019
4. HBF New Housing Pipeline report, p5 www.hbf.co.uk/documents/8440/HPL_REPORT_2018_Q4_FINAL.pdf

Chief Executive’s statement Overview

We have delivered a strong operational and financial performance this year and are making good progress against our medium term targets.

Primary operational targets
	Medium term targets	Progress in the year
Home completions	3 - 5% growth per annum in wholly owned completions Present business capacity of 20,000 per annum	2.6% increase in wholly owned home completions to 17,111 with total home completions of 17,8561
Gross margin	New land acquisitions at minimum 23% gross margin	210 bps increase in gross margin to 22.8%, resulting in 120 bps improvement in operating margin to 18.9%
ROCE	Minimum of 25%	Strong ROCE of 29.7% for the 12 months to 30 June 2019

We are very proud to be Britain’s largest housebuilder and to lead the industry in both build quality and customer service. Quality and customer service has been a long term commitment for us, and we strive to meet our customers’ expectations. We believe that high quality homes and excellent customer service are fundamental to our ongoing success. We are building homes the country needs, creating jobs and supporting economic growth whilst also delivering both operationally and financially for our shareholders.

We are operating across England, Scotland and Wales through our three brands: Barratt Homes, David Wilson Homes and Barratt London. We remain committed to playing our part in addressing the housing shortage. We continue to increase volumes whilst maintaining our industry leading quality. In line with expectations, we saw 2.6% growth in our wholly owned completions to 17,111 homes (2018: 16,680 homes) and delivered 745 homes through our joint ventures (2018: 899 homes), making our total completions including JVs 17,856 homes (2018: 17,579 homes) for the year.

We have grown margin significantly over the last five years and this year delivered a gross margin of 22.8% (2018: 20.7%). Operating margin increased by 120 bps to 18.9% (2018: 17.7%) for the year with profit from operations of £901.1m (2018: £862.6m). We delivered 80 bps of operating margin improvements from trading driven mainly by sites purchased at higher gross margins and the benefits of the new product range delivery, partly offset by an increase in administration expenses. We also benefited from a further net 40 bps of operating margin from non- recurring items, being the disposal of a legacy commercial asset and net reversal of inventory provisions offset by costs associated with legacy properties. Our operational improvements, including new product ranges, underpin our land acquisition at a minimum of 23% gross margin.

In addition, we delivered a strong performance from our joint ventures at £37.5m (2018: £18.6m). As a result we delivered a record profit before tax for the year of £909.8m (2018: £835.5m).

ROCE has grown from 23.9% in the 12 months to June 2015 to 29.7% in the 12 months to June 2019, and our target is for it to be a minimum of 25% over the medium term.

Our balance sheet remains robust, with year end net cash of £765.7m (2018: £791.3m), net tangible assets of £3,960.8m (2018: £3,705.5m) and minimal total gearing (including land creditors) of 4.9% (2018: 5.5%).

Our disciplined approach combined with our financial strength enables us to keep investing in our business and the future of housebuilding.

Strong housing market fundamentals

The housing market fundamentals remain attractive. The Government has set a target of 300,000 homes to be built per year by the mid-2020s to meet existing demand and in July 2018, Ministers released an updated National Planning Policy Framework to ensure that local authorities plan positively for housing and will be held accountable for under-delivery.

The lending environment also remains positive with greater competition in the mortgage market and a broad spread of lenders supporting homebuyers. We continue to see strong Government support for the new build industry and to help people to get onto the housing ladder. In October 2018, the Government announced that Help to Buy will continue in its current form until March 2021, and thereafter will be in place for two further years, limited to first-time buyers with regional price caps. Up to March 2019, over 221,000 homes had been bought using the scheme, 81% by first-time buyers2.

The land market remains stable and we continue to see excellent land opportunities that exceed our minimum hurdle rates.

Committed to building more high quality homes

As Britain’s largest housebuilder we remain committed to playing our part in addressing the housing shortage. We design attractive developments that meet our high quality standards and will enhance local communities for years to come. We continue to increase volumes whilst maintaining our industry leading quality, and remain committed to investing in the future of housebuilding.

Leadership in quality and customer service

We have an absolute and long term commitment to quality and customer service and we believe our industry leadership in this is fundamental to business resilience. Our quality is recognised through the NHBC Pride in the Job Awards for site management. In June 2019 our site managers were awarded 84 awards, more than any other housebuilder for the 15th consecutive year. We are also the only major housebuilder to be awarded the maximum 5 Star rating by our customers in the HBF customer satisfaction survey for ten years in a row which means that our customer satisfaction rating is consistently over 90%.

Investing in our people

We are committed to the development of our people in order to drive our success. A shortage of skilled workers in our sector means that attracting and retaining the best people is an important priority for the business. We are building a diverse and inclusive workforce that reflects the communities in which we operate, delivering excellence for our customers by drawing on a broad range of talents, skills and experience. Employee engagement remains a key measure of our success and we are pleased to have maintained upper quartile performance in our engagement survey for the sixth consecutive year. Our focus on retention has resulted in a reduction in employee turnover this year.

We are investing for the future and continue to develop award winning schemes including those for graduates, apprentices, ex-Armed Forces personnel and our own Degree Apprenticeship in Residential Development and Construction, run in conjunction with Sheffield Hallam University. Building on the success of our programme, we have created a fast track bricklaying apprenticeship, which has attracted more candidates and reduced the programme duration by six months. We currently have 470 apprentices, graduates and trainees on programmes, which is 7.2% of our workforce. We have recruited a further 269 apprentices, trainees and graduates for our FY20 intake.

We also continue to collaborate with the wider housebuilding industry. We actively participate in the Home Building Skills Partnership, the aims of which include attracting new entrants to the industry, providing the skills for today and the future, and supporting the supply chain in attracting and developing the skills they need to support our industry.

We aim to create an open, honest and fair working environment that embraces diversity and inclusion and we are committed to delivering our Diversity and Inclusion Strategy. We have identified targets in areas such as gender and ethnicity and our aim is to improve in all areas over the next two years. We have introduced flexible working which can help us retain talented employees and can be particularly beneficial for those with family and caring responsibilities. Over 1,600 managers have now completed our diversity and inclusion training programme, and a diversity and inclusion e-learning module has been rolled out to all employees. During the year we have also launched a career development programme, Catalyst, for high potential female employees.

In celebration of us achieving the maximum 5 Star rating in the HBF Customer Satisfaction Survey for the tenth year in a row and to recognise the hard work and dedication of our teams, in July 2019 we awarded all employees below Senior Management level a special award of 200 shares.

MMC

We are committed to increasing the number of homes we build using MMC to increase efficiency and to help mitigate the challenges posed by the shortage of skilled workers within the industry. We continue to develop, trial and implement MMC, building and selling 2,626 homes using timber frame, large format block and light gauge steel frame. We also use offsite manufactured ground floor solutions and roof cassettes. We have achieved our 2020 target of 20% of home completions using MMC a year ahead of schedule. Our new target is to use MMC to build 25% of our homes by 2025.

Over the last three years, we have built 5,274 homes using timber frame with the majority in Scotland and we are also increasing its use across England and Wales. Timber frame construction is a sustainable, low energy method of build manufacture from the world’s most renewable building material and is built in factories to high standards. In June 2019, we acquired Oregon, a manufacturer of timber frames. Oregon was already one of our key timber frame suppliers providing high quality products and excellent customer service. The experienced Oregon management team continue to lead our timber frame business.

Our financial performance

Full year results

The Group has delivered a strong performance with good customer demand for high quality new homes supported by a stable market backdrop. Overall our net private reservation rate was 0.70 (2018: 0.72) per active outlet per week and 0.76 (2018: 0.77) in the second half of the year.

During the year, we operated from an average of 379 active outlets (2018: 380 active outlets) including JVs. We made good progress on new site openings, launching 163 new outlets (2018: 142 new outlets) including JVs in the year. In FY20 we expect to operate from a similar number of active outlets and to legally complete a similar proportion of affordable homes.

Completions (homes)	FY19	FY18	Change
Private	13,533	13,439	0.7%
Affordable	3,578	3,241	10.4%
Wholly owned	17,111	16,680	2.6%
JV	745	899	(17.1%)
Total (including JVs)	17,856	17,579	1.6%

Our total ASP for the year was £274,400 (2018: £288,900), with private ASP at £312,000 (2018: £328,800), reflecting changes in our mix and our trade out of central London, partly offset by some underlying house price inflation.

Outside of London, our private ASP reduced by 1.7% to £297,200 (2018: £302,400), driven by an increase in the proportion of two and three bedroom homes offset by some underlying house price inflation. Affordable ASP increased by 6.9% to £132,200 (2018: £123,700) reflecting changes in mix.

We have made good progress in our strategy to trade out of central London, delivering 127 wholly owned central London completions in the year, resulting in 18 private homes being left to legally complete. We also have 262 units left to complete in our two remaining active central London JVs, of which 85% are now forward sold. We continue to focus on the strong growth opportunities that exist in outer London.

We have grown margin significantly over the last five years. Our gross margin improved to 22.8% (2018: 20.7%) mainly reflecting the benefit of our new product ranges and sites that we have purchased at improved margins.

We delivered an operating margin of 18.9% (2018: 17.7%) in the year. Operating margin improvements from trading of 80 bps were driven mainly by sites purchased at higher gross margins and the benefits of the new product range delivery, partly offset by an increase in administration expenses. We also benefited from a further net 40 bps of operating margin from non-recurring items being the disposal of a legacy commercial asset (10 bps) and reversal of inventory provisions (40 bps) offset by additional costs associated with legacy properties (10 bps) related to cladding.

Administration expenses reduced operating margin by 80 bps, largely reflecting a reduction in other income. As a result of our operating margin improvement, Group operating profit increased by 4.5% to £901.1m (2018: £862.6m).

Net finance charges were £28.8m (2018: £45.1m), £16.3m lower than prior year, mainly due to a reduction in the imputed interest on land creditors, as land creditors as a proportion of our owned land bank reduced in line with our operating framework. In FY20, finance costs are expected to increase to c.£35m, due to non-cash charges arising from the new lease accounting standard and lower interest income as we expect a lower average net cash holding in the year as we move towards our operating framework of 25 - 30% land creditors.

JVs delivered a better than expected profit for the year of £37.5m (2018: £18.6m) mainly as a result of profit generated from land sales and additional home completions. In FY20, we expect to deliver around 750 JV completions and c.£30m of profit based on expected build programmes.

Reflecting our strong performance, profit before tax for the year was up 8.9% to £909.8m (2018: £835.5m). The tax charge for the year was £170.4m (2018: £164.0m) at an effective rate of 18.7% (2018: 19.6%). Basic earnings per share increased by 10.1% to 73.2 pence per share (2018: 66.5 pence per share).

Operating framework and capital structure

We will continue to maintain an appropriate capital structure and a sustainable operating framework, with shareholders’ funds and land creditors funding the longer term requirements of the business and with term loans and bank debt funding shorter term requirements for working capital. On 22 November 2018, we amended and extended our £700m RCF to 22 November 2023.

In order to preserve a resilient balance sheet, we maintain a modest average net cash position over the financial year and are cash positive at year end. As at 30 June 2019, the Group had a net cash balance of £765.7m (2018:

£791.3m). We expect a net cash balance of around £450m - £500m at 30 June 2020, with the expected reduction from 30 June 2019 due to: an increase in corporation tax payable in the year of around £80m following changes in corporation tax payment dates announced by the Government in 2017 for all very large companies; additional land investment; and the reduction of land creditors as we move towards 25 - 30% of the owned land bank in line with our operating framework.

As at 30 June 2019 the Group had reduced land creditors to 31.3% (2018: 33.6%) of the owned land bank in line with guidance. Whilst we continue to seek to defer payment for some land purchases to drive a higher ROCE, we expect to reduce land creditors to our targeted level of 25 - 30% of the owned land bank in FY20. Our total gearing including land creditors has reduced from 28.8% at 30 June 2015 to 4.9% at 30 June 2019.

We continue to tightly control work in progress which has appropriately increased to £1,632.8m at 30 June 2019 (2018: £1,463.1m) reflecting an expected increase in volume delivery in the next six months, whilst maintaining our high standard of quality and service and recognising safety and health needs. It also reflects associated infrastructure requirements and an increase in owned show homes following our decision to cease our leaseback programme as one of our margin initiatives. Our ROCE has remained strong at 29.7% for the 12 months to 30 June 2019 (2018: 29.6%) as a result of our focus on delivery of progress on our medium term targets, maintaining an appropriate capital structure and focus on our operating framework. Our operating framework has remained consistent throughout the year and is as follows:

	Operating framework	Progress in the year
Land bank	c.3.5 years owned and c.1.0 year controlled	3.9 years owned and 0.8 years controlled (2018: 3.7 years owned and 1.1 years controlled)
Land creditors	Reduce to 25 - 30% of the land bank over the medium term	Reduced to 31.3% (2018: 33.6%)
Net cash	Modest average net cash over the financial year	Average net cash of £298.3m (2018: £127.4m)
	Year-end net cash	£765.7m (2018: £791.3m)
Treasury	Appropriate financing facilities	£700m RCF extended to November 2023
Capital Return Plan	2.5 x ordinary dividend cover Ordinary dividend supplemented by special returns when market conditions allow	Total proposed dividend, including special dividend, of 46.4p (2018: 43.8p) per share and Capital Return Plan extended to November 2020

Net tangible assets were £3,960.8m (389 pence per share) (2018: £3,705.5m, 366 pence per share) of which land, net of land creditors, and work in progress totalled £3,743.7m (368 pence per share) (2018: £3,429.8m, 339 pence per share).

The key dimensions underpinning delivery of our strategy

Land and planning

In addition to stable market conditions during the year, our successful land investment strategy has helped to drive increased completion volumes and improvements in profitability.

The land market remained attractive throughout the year and we secured excellent opportunities that exceeded our minimum hurdle rates. In the year the Group approved £859.8m (2018: £933.9m) of operational land for purchase, which we expect to equate to 18,448 plots (2018: 20,951 plots). To support our volume growth aspirations we expect to approve between 18,000 - 22,000 plots in FY20. During the year, our cash expenditure on land was £941m (2018: £1,083m) and we expect to invest c.£1.1bn on land during FY20.

We continue to target a regionally balanced land portfolio with a supply of owned land of c.3.5 years and a further c.1.0 year of controlled land. Our target for a shorter than sector average land bank reflects our focus on ROCE and our fast build and sell model. Reflecting the excellent land opportunities we have seen over the year as well as our growth ambitions, at 30 June 2019 we were slightly above this target with a 4.7 years land supply, comprising 3.9 years owned land and 0.8 years of controlled land, with the owned land bank including land with both outline and detailed planning consents.

Our land bank at 30 June comprised:

Our land bank	30 June 2019	30 June 2018
Owned and unconditional (plots)	66,423	61,504
Conditionally contracted (plots)	13,599	17,928
Total owned and controlled (plots)	80,022	79,432
Number of years supply	4.7	4.8
JVs owned and controlled (plots)	5,207	5,137
Strategic land (acres)	11,995	12,435
Land bank carrying value	£3,071.6m	£2,963.4m

At 30 June 2019, the ASP of plots in our owned land bank was £275k (2018: £270k), which is representative of our expected delivery in FY20. During the year 26% (2018: 27%) of our home completions were from strategically sourced land and we are on track to deliver our medium term target of 30% of completions from strategic land, which we believe is an appropriate level for our business. During the year, 7,915 plots (2018: 2,788 plots) of strategic land were converted to our owned land bank.

Following our success with planning over the past 12 months we are very well positioned, with all of our expected FY20 completions (2018: all of FY19 completions) having outline or detailed planning consent.

Improving efficiency and reducing costs

Improving the efficiency of our operations and controlling costs remains a key focus for the Group, as it will further enhance our margin and improve business resilience. We have launched our new cost effective housetype ranges and continue to seek ways to improve efficiencies and reduce costs across our business.

The new housetype ranges maintain our high standards of design whilst being faster to build, help us to reduce build cost and waste and are more suitable for MMC. We continue to roll out our new housing ranges across our regional business as our London business primarily builds apartments. This year we have delivered 6,024 completions (2018: 1,522 completions) from these ranges across the country. Over 70% of our outlets now have the new product ranges. We have made further refinements to our housing range in response to the changing costs of certain trades and materials, without affecting our quality or design standards. Our new housing ranges cover all segments of our market providing us with the flexibility to replan sites to suit market conditions and meet consumer demands should the need arise.

We have a robust and carefully managed supply chain with around 90% of housebuild materials sourced by our centralised procurement function being manufactured or assembled in the UK. We have fixed price agreements in place for all of these materials to December 2019 and 65% to June 2020.

We continue to see some pressure on skilled labour supply with shortages remaining location and trade specific. We are improving construction efficiency and reducing demand on labour through implementing the new housetype ranges, which are easier and quicker to build, and through the use of MMC such as timber frames, large format block and light gauge steel frames. We saw build cost inflation of 3% in the year and anticipate c. 3-4% inflation for FY20.

In FY20 we expect to receive both lower management fees from our joint ventures and less other income. Accordingly, despite carefully controlling our administrative cost base, with expected underlying inflation of c. 3%, we expect administrative expenses for FY20 to be around £195m.

Health and safety

A fundamental priority is to provide a safe working environment for all our employees and sub-contractors. We are committed to achieving the highest industry health and safety standard and the wellbeing of our people is paramount to us and everyone across our business is responsible for this. Increased activity levels across the industry in terms of site openings and production volumes combined with shortages of skilled staff has contributed to an increased risk of accidents on sites.

Whilst we recognise that entirely eradicating risk is a challenge, we have stringent standards and a continuous focus on health and safety throughout our business to seek to reduce the number of injuries occurring.

Following the Grenfell Tower tragedy, amendments to the Building Regulations and related guidance have been made. The Group carried out a review of all of its current and legacy buildings where it has used cladding. Approved Inspectors signed off all of our buildings, including the cladding used, as compliant with the relevant Building Regulations during construction and on completion.

However, in line with our commitment to put our customers first, we have incurred and accrued an additional £13.9m (including JVs) of costs for work involved in removing and replacing cladding where otherwise costs are likely to have fallen on leaseholders, many of whom bought their properties from us.

Further to continuing and evolving Government advice on the cladding of multi-storey buildings, we continue to work with building owners and management companies on assessment and review of buildings we have constructed.

We are signatories to the Building Safety Charter and active members of the Early Adopters Group, which is committed to supporting cultural change across the industry to ensure buildings are safe for those living and working in them, now and in the future.

Charitable giving

We are committed to creating a positive legacy in the communities in which we live and work and we aim to be industry leading in our approach to charitable giving and social responsibility. We believe it is important to support charitable causes locally and nationally and we actively promote charitable giving and volunteering amongst our employees. In March 2019, to mark our tenth year as a HBF 5 Star housebuilder, we announced a new £500,000 three-year partnership with St Mungo’s to help improve the lives of those experiencing homelessness. This partnership builds on our work with the RBLI to help them build a Centenary Village to provide crucial housing support to ex-servicemen and women, and our long term commitment to the RSPB to improve the sustainability of our developments, enhancing and improving habitats and supporting wildlife.

Two of the Group’s five principles are ‘Building strong community relationships’ and ‘Being a trusted partner’ and we are committed to partnering with local organisations to support and improve communities and leave a positive legacy in the areas in which we work. In January 2019, we launched the Barratt & David Wilson Community Fund through which each of our operating divisions and Group support functions give £1,000 a month to community groups and charities local to them or their sites.

The Community Fund operates in addition to the divisional charity matching that already takes place across the Group. Each of our operating divisions and Group support functions support local charities and the Group matches the funds raised by our employees. We recently announced that we will also start to match the money raised by individuals for the charities close to their hearts. We also encourage all of our employees to take paid time off work to volunteer in their local communities and ask them to consider using the Give As You Earn scheme.

The Barratt & David Wilson Community Fund is expected to donate around £1m to local charities and organisations over the next three years.

Sustainability

ESG issues are increasingly important to our stakeholders and we believe the right sustainability management approach will deliver sustainable value for them.

We aim to be the leading national sustainable housebuilder. With a commitment to sustainability throughout our business, we believe integrated thinking enables us to make better long term decisions. By focusing on the connection between social, environmental and economic value, we can create long term value for our stakeholders. Since our first sustainability strategy in 2015 we have aligned our organisation around ESG priorities. The Board has overall responsibility for our sustainability framework, with delivery delegated to the Executive Committee to ensure it is embedded into the business.

In 2016 we set out six sustainability issues that matter most to our business and our stakeholders, based on what they had told us. Targets, actions, metrics and accountabilities are assigned within our sustainability framework. Investor, community, local and national Government focus on ESG issues is continuing to accelerate, particularly in relation to climate change, biodiversity and waste. During the year we commissioned an independent consultant to conduct a full materiality assessment and we revised the issues that matter most to our business and stakeholders.

Additional areas we will be including in our future framework to reflect stakeholder views are: the mental health and wellbeing of our employees; diversity and inclusion performance targets; affordability; and an increasing focus on the lifetime environmental performance of the homes we build.

Based on our stakeholders’ views we have adopted a number of the UN SDGs, after researching their relevance to the UK, our sector, and then specifically considering the linkage to the items that matter most to our stakeholders,