Annual Results for the year ended 30 June 2010

Barratt Developments PLC Annual Results Announcement

Results for the year ended 30 June 2010

Mark Clare, Group Chief Executive commented:

“During the year we have seen a very significant improvement in the performance of the business - operating margin in the second half increasing to 5.9%, returning us to profitability and gearing falling to 18%. Whilst the outlook for the UK housing market is still challenging, our priority remains optimising prices rather than volume and securing high quality land that will continue to drive our margin recovery.”

Highlights

• Net private reservations up 4.2% for the full year at 0.50 per active site per week.
• Total completions, including joint ventures, were 11,377 (2009: 13,277).
• Average selling price (excluding joint ventures) up by 10.9% for the full year to £174,300 (2009:

£157,200) and by 17.8% in the second half on the prior year equivalent period mainly due to changes in mix.

• Profit from operations before operating exceptional items was £90.1m (2009: £34.2m) at a full year operating margin of 4.4% (2009: 1.5%), with the second half operating margin at 5.9% (2009: 1.8%).
• Loss before tax and exceptional items of £33.0m (2009: £144.1m) with a profit before tax and exceptional items of £15.5m in the second half. Loss before tax for the year of £162.9m (2009:

£678.9m).

• Agreed terms on £527.2m of land purchases (equivalent to 13,359 plots) since re-entering the land market in mid-2009.
• Net debt reduced by £910.0m since 30 June 2009 to £366.9m (2009: £1,276.9m).
• Tangible net assets, excluding intangible assets, per share 208p (net assets per share 300p).
• Forward sales at 30 June 2010 were up by 27% at £591.7m (2009: £464.3m) representing 3,889 plots (2009: 3,328 plots). At 5 September 2010 forward sales had increased to £847.1m (2009: £696.3m).
• Over the 10 weeks since the financial year end net private reservations have averaged 0.48 per active site per week (2009: 0.51). Cancellation rates have remained low at an average of 11.0% (2009: 12.3%) for the year to date.

-ends -

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 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 8.45am today at UBS, Ground Floor Presentation Suite, 1 Finsbury Avenue, London, EC2M 2PP. The presentation will be broadcast live on the Barratt Developments corporate website, www.barrattdevelopments.co.uk, from 8.45am 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, this morning.

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

Barratt Developments PLC, Barratt House, Leicestershire, LE67 1UF.	Cartwright	Way,	Forest	Business Park, Bardon Hill, Coalville,
For further information please contact:
Barratt Developments PLC Mark Clare, Group Chief Executive				020 7299 4898
David Thomas, Group Finance Director				020 7299 4896
Analyst / investor enquiries Susie Bell, Head of Investor Relations				020 7299 4880
Media enquiries Dan Bridgett, Head of External Affairs				020 7299 4873
The Maitland Consultancy Liz Morley				020 7379 5151
Neil Bennett

Chairman’s statement

This has been an important year for the Group: the recovery of the housing market continued, we recapitalised the business and started to see the benefits of a much improved operational performance. As a result we achieved a profit after tax in the second half of the year and significant improvements in quality and customer service.

Market conditions

During the year conditions in the housing market in Britain steadily improved. Nevertheless, by historic standards the market remained difficult and activity levels continued to be extremely low in terms of the number of house buyers and sellers.

The key restriction on the industry remains the availability of mortgage finance. Whilst there was some improvement during the year, the lack of availability of suitable higher loan to value products continued to restrict the new build sector where customer deposits have traditionally been lower.

With demand continuing to be constrained, the industry responded by opening fewer sites and controlling stock better. Whilst the improved balance between supply and demand has stabilised prices, it has done little to address the nation’s fundamental housing shortage which in the longer term will underpin the sector’s growth.

Our response

Our response to the restrictions that the current market conditions impose has been very clear. Our priorities have been driving efficiency and optimising selling price growth. As a result, we have reduced volumes but have driven significant margin improvement, especially in the second half of the year.

A vital component of our response to market conditions has been to overhaul many operational aspects of our business. This has lowered costs and has also driven far-reaching improvements in the quality of our business.

The quality of our homes has never been higher. For the first time in the Group’s history we have achieved Home Builders Federation Five Star status, the highest achievable level, in terms of customer satisfaction and whether we would be recommended to a friend. Additionally, under the NHBC ‘Pride in the Job’ scheme our site managers have won more quality awards than ever before and more than any one of our competitors for the sixth year running.

The high level of quality has also helped to underpin our pricing policy. We are determined to get the best possible price for the outstanding homes that we build and we have the right sales and marketing capabilities to achieve this.

Average selling price increased by 10.9% during the year and by 17.8% between 1 January and 30 June 2010 compared with the same period in 2009. This partly reflected price inflation but was mainly driven by the changing profile of what we build. Customer demand and mortgage availability have both driven a change in our product mix away from flats towards houses. This change in mix will continue as we start to build on the many sites we have successfully replanned, working together with local authorities.

A stronger financial position

During the year we substantially improved our financial position and reduced our debt levels. We strengthened our balance sheet through the Placing and the Rights Issue which raised gross proceeds of

£720.5m. We also amended our financing arrangements. This was an important strategic move for us, enabling us to develop existing sites and to take advantage of attractive new land purchasing opportunities. Our improved operational performance and strong cash management also contributed to a further reduction in debt levels by the year end.

As previously indicated and in accordance with the terms of our financing arrangements, no dividend will be paid in respect of the 2010 financial year. However, the Board is committed to reinstating the payment of dividends when it is appropriate to do so.

Securing land for the future

The foundation of our future business and margin growth is the land we buy. We have worked hard to maintain our long-term relationships with land sellers throughout a very difficult period for the industry and have benefited from this during the year along with our stronger financial position. This enabled us to expand successfully our presence in the land market, securing a strong flow of potentially high margin

sites, with a view to growing margin further. We have maintained a disciplined approach. Wherever possible we are acquiring land on deferred terms and we have recently increased our hurdle rates to ensure that we secure only the best opportunities.

Our employees

As Chairman, I spend a considerable amount of time with our employees at all levels. We have in place an exceptionally able and experienced senior management team. They are supported by our employees who are I believe amongst the very best in the industry. These have been difficult times for our people and their families and they should take a great deal of pride from the strength of the business’s recovery. We are now operating more efficiently but also at far higher quality levels and that would not have been possible without their commitment, skill and resilience.

The future

Whilst economic uncertainty may influence the Company’s future, the capabilities of the Group are strong and continuing to develop. We have a skilled work-force, a strong land bank and an improving financial position. We are at the forefront of many of the changes that will dominate the industry in future years: evolving customer demand, design and environmental standards and changes in planning. We are therefore well equipped to compete now and in the future.

Bob Lawson

Chairman

Group Chief Executive’s review

We have delivered a much improved operating performance in a slowly recovering housing market. We have strengthened the balance sheet, significantly improved the efficiency of the business, enhanced the quality and value of our housing and secured a strong supply of high value land. Whilst the housing market is likely to remain challenging, we are now well placed to secure further margin growth.

Performance

We increased profit from operations before exceptional items by £55.9m to £90.1m with a significant improvement in operating margin before exceptional items to 4.4% (2009: 1.5%). Operating margin before exceptional items increased to 5.9% (2009: 1.8%) in the second half of the financial year and in the same period we achieved a profit after tax of £9.0m. Operating exceptional items of £15.8m (2009: £519.5m) reduced profit from operations to £74.3m (2009: £485.3m loss) for the financial year.

Our Placing and Rights Issue coupled with continuing tight control of working capital enabled us to reduce net debt by £910.0m to £366.9m.

Our priorities

Our overriding objective is to rebuild profitability and we have set out three clear priorities to achieve this: optimising margin, improving operational efficiency and securing high value future land. We have made considerable progress in each of these areas and by doing so have started to rebuild the profitability of the Group.

Maximising value

During the year we have focused on securing the maximum price for every sale. As a Group we are prepared to accept lower sales volumes to preserve value. Procedures are in place to ensure strict pricing discipline in every region and across every development.

Average selling price rose by 10.9% to £174,300, with average private selling prices increasing by 11.2% to £185,200. In the second half, we saw average selling price increasing by 17.8% to £180,700 on the prior year equivalent period. These increases were mainly as a result of changes in mix.

At the same time private reservation rates per active site per week during the year increased by 4.2% from an average of 0.48 to an average of 0.50. We have achieved this through a better mix of product, improvement in our sales and marketing and a focus on the quality of our homes.

We are building more houses to satisfy customer demand. Excluding the London market where the majority of completions are flats, 65.9% of completions were houses compared with 50.5% during the prior year. The mix of buyers has also changed as the proportion of investor sales has fallen to 10.1% compared with 24.8% last year.

Improvements in our marketing capability have been an important factor. New leads generated from our websites have continued to increase and we have a new centralised inbound call centre. At the point of sale, further resources have been invested in improving conversion rates through the enhanced presentation of our sales centres and on-site sales technology via the roll-out of our I-Sales system.

In addition to the record amount of awards the Group has received for quality during the year, we are the only volume housebuilder to have introduced a five-year warranty. This covers fixtures and fittings and is additional to the ten-year National House-Building Council warranty on the fabric of the building. During the year this has been working effectively as a point of sale incentive for the customer.

The combination of product marketing and on-site sales capability has been particularly important in driving sales of the Government backed HomeBuy Direct product during the year. We sold 1,735 homes (2009: 138 homes) under this scheme.

Cost reduction

Driving operational efficiency has remained a significant focus for the organisation. During the year we saw a reduction in build costs reflecting the actions we had already taken.

Our material supply contracts have continued to be renegotiated. However, it is likely that some pressure will be felt in future as raw material prices rise in-line with the recovery of the economy.

Longer term efficiency savings have been identified and implemented in a number of areas. By reviewing our purchasing we have consolidated a number of our supply chains. Standard house-type construction costs have been reduced and we have increased our focus on delivering further reductions wherever possible. Standard house-type costs are benchmarked across the Group every six months to ensure the lowest cost is achieved whilst maintaining the quality of our homes. Overall, we have seen housebuilding total build costs (including infrastructure) reducing by 4.7% per square foot.

Further efficiency savings and reductions in operating costs have been achieved through the roll-out of our Quality and Cost programme which promotes and shares best practice in the build process across the Group and has been supported by the introduction of new hand held terminal technology to all of our sites.

Land and planning

Our strategy has been to replan existing sites and to secure appropriate future land to seek to ensure margin growth.

In the last twelve months we have replanned a number of sites. In particular we have been successful at replacing flats with new purpose-designed house-types. This ensures that we are building the right mix of products for our customers in particular given the lending restrictions that still favour houses over flats.

Longer term margin growth will be influenced by the quality of the land we are able to secure and bring into production. We have been able to take advantage of highly attractive land opportunities in targeted areas. In the latter half of the year we have seen competition to buy land increasing, but given the early success of our land buying teams, we have maintained a disciplined approach and have continued to secure opportunities above our hurdle rates.

Since re-entering the land market in mid-2009 until 30 June 2010 we had agreed terms on £527.2m of land purchases, the majority of which were on deferred terms. This equates to 96 sites and 13,359 plots with an expected average selling price of c. £197,000. Of the 13,359 plots, 51% are located in the South of England.

Commercial Developments

In November 2009, we disposed of Atlantic Quay 5 for £25.0m with an exceptional impairment of £4.8m. This sale completed the planned divestment of legacy assets from the Wilson Bowden Developments portfolio for a total of around £200m.

Government policy

It is likely that there will be significant changes to Government housing policy as the new Government is committed to moving from a policy based on central targets to a more devolved framework and also implementing significant cuts in expenditure. Whilst there is some uncertainty surrounding planning and funding for social housing, the short-term impact on our business is likely to be limited. We have detailed planning consent in respect of 95% of forecast completions for the year ending June 2011, outline consent in respect of an additional 3%, and a high level of contracted Government funding.

We are committed to working closely with local communities and local councils to ensure that we can provide the housing that is required to high environmental and design standards. This will require genuine partnerships and new ways of collaborating, many of which are already emerging. We are determined to be at the forefront of these changes.

Partner of choice

During the year we have also made progress in securing land through innovative arrangements and partnerships, particularly with the public sector. Our specialist Urban Regeneration team, working with our divisions, secured 1,614 units on six sites through public sector partnerships with a gross development value of £200m. In Newcastle we have formed a public/private partnership with the council to regenerate the Scotswood area of the city over a 15 year period.

The Homes and Communities Agency (‘HCA’) has selected the Group for each of its three area based Delivery Partner Panels (‘DPP’). We are now working with the HCA in bidding for projects on HCA and local authority land across the country. Our first contract under this arrangement has now been awarded in Plymouth where we have been selected for Phase 1 which includes 247 new homes and a new mixed-use community hub. We are pleased to see that the DPP framework is being used by a significantly greater number of local authorities than we originally envisaged.

Health, safety and the environment

Finding the lowest cost solution to meet increasingly demanding building regulations is an important workstream for the Group. Our objective is to secure a position as the lowest cost provider complying with the Code for Sustainable Homes (the ‘Code’). During the year we built 1,765 homes to Code Level 3 or above and we are already starting to build developments at higher Code levels where required.

We have started on site at Hanham Hall, the UK’s first large-scale zero carbon housing development and are well advanced with research to identify ways of building a Code Level 4 house without the need for renewable sources of power. As well as seeking technological solutions, we will continue to discuss with Government the most cost-effective way of meeting the environmental challenges facing the industry.

We continue to place the highest priority on the safety of our employees, contractors, customers and the wider community within which we operate. During the financial year our Injury Incidence Rate (‘IIR’) was 582 (2009: 571 (restated)) per 100,000 persons employed which is a 2% increase on last year’s figure. This increase can be largely attributed to additional slip and trip incidents due to the bad weather in the first quarter of the 2010 calendar year. We are committed to improving health and safety and have established an Executive Health and Safety Committee, which reports to the Board, to drive improvement.

Outlook

The outlook for new housing remains challenging as a result of continuing constraints on the availability of mortgage finance and overall economic concerns.

Against this background we will remain focused on improving profitability by achieving full value for the homes we build and maintaining tight control of costs.

In-line with normal seasonal trends we have seen a slow-down in trading following the end of the spring selling season. Over the 10 weeks since the financial year end, net private reservations have averaged

0.48 (2009: 0.51) per active site per week. This is slightly down on the prior year, when sales rates for the traditionally quieter period were stronger than normal, but is in-line with the rate required to achieve our projected volumes for the current financial year. Cancellation rates have remained low at an average of 11.0% (2009: 12.3%) for the year to date.

We are targeting total completions for this financial year at 5-10% higher than 2010, driven by increasing our numbers of outlets rather than higher sales rates. Our focus continues to be on optimising selling prices rather than pursuing volumes. We expect to see a further shift in product mix, with houses likely to represent at least 65% of total volumes, resulting in a modest increase in average selling price.

Mark Clare

Group Chief Executive

Business review

Our performance

Whilst there has been some recovery in the housing market during the year, the environment in which we operate has remained challenging, with mortgage finance still constrained for many of our potential customers.

We delivered a profit from operations before operating exceptional items of £90.1m (2009: £34.2m) at a margin of 4.4% (2009: 1.5%). After exceptional items of £15.8m (2009: £519.5m), our profit from operations was £74.3m (2009: £485.3m loss).

The increase in operating margin before exceptional items can be explained by a number of factors. We achieved a 3.6% improvement upon revenue per square foot on housebuilding completions and a 4.7% reduction per square foot on housebuilding build costs (including infrastructure). These coupled with other items resulted in a gross margin before exceptional items of 9.1%, a 3.4% increase on the prior year. Although administrative costs reduced year-on-year from £95.2m to £94.7m, this reduced operating margin by 0.5%. Overall there was a 2.9% improvement in operating margin before exceptional items in the year.

Housebuilding

During the year, we operated from an average of 360 (2009: 436) active sites. Visitor numbers were lower than in the prior year at 1.82 (2009: 1.95) per active site per week but our sales conversion rate was higher with an average of 0.50 (2009: 0.48) net private reservations per active site per week.

Total completions were 11,377 (2009: 13,277) including 52 (2009: 75) from joint ventures in which we have a share. Housebuilding completions totalled 11,325 (2009: 13,202), a decrease of 14.2% reflecting fewer active sites during the year. Housebuilding revenue totalled £2,000.1m (2009: £2,095.8m). Of the housebuilding completions, private were 9,455 (2009: 11,133), and social were 1,870 (2009: 2,069). Social housing completions represented 16.5% of completions in the year, versus 15.7% in the prior year.

Our average selling price increased by 10.9% to £174,300 (2009: £157,200) mainly as a result of changes in mix but also reflecting some underlying sales price inflation.

Private average selling prices increased by 11.2% to £185,200 (2009: £166,500) primarily due to a number of mix changes including an increased proportion of houses compared to flats, a 1.8% increase due to our development at Rochester Row in London with a private average selling price of £1,022,900 and geographical mix changes. Achieving the optimum sales price upon every plot that we sell has remained a key focus for the business during the year. The average revenue that we achieved upon private completions per square foot increased by 3.6% to £191.7 (2009: £185.0).

Our social average selling price increased by 11.6% to £119,500 (2009: £107,100) due to changes in mix including an increase in the average square footage of our social completions of 6.1% to 799 square feet.

The availability of mortgage finance at higher loan to value ratios remains constrained and accordingly 27.0% (2009: 11.4%) of our completions this year have used shared equity products. Of these completions, 1,735 (15.3%) (2009: 138 (1.0%)) have used HomeBuy Direct and the remainder have used our own Headstart or Dreamstart schemes. The option of part-exchange also remains an effective selling tool, with 9.6% (2009: 11.8%) of our completions in the year supported by this. We continue to manage carefully our commitment and exposure to part-exchange properties.

During the year we have continued to focus upon driving operational efficiency. We have reduced our standard house-type construction costs and have increased the use of these wherever possible. We benchmark our standard house-type costs across the Group every six months. Overall, we have seen a reduction in total build costs (including infrastructure) with the cost per square foot reducing by 4.7%. We will continue to drive other cost savings and operational efficiency during the current financial year. However in future, it is likely that some pressure will be felt as raw material prices rise in-line with the recovery of the economy.

The benefit of our strategies of optimising the sales price of every plot and controlling our costs can be seen in the year with a significant improvement in our housebuilding operating margin before exceptional items to 4.6% (2009: 1.9%) and 5.9% (2009: 2.7%) for the second half of the financial year. Our housebuilding profit from operations before exceptional items for the year was £91.4m (2009: £38.8m). After operating exceptional items of £11.0m (2009: £446.4m), the housebuilding profit from operations was

£80.4m (2009: £407.6m loss).

Commercial Developments

Conditions in the commercial property market remain challenging. Whilst investor demand for well located prime stock came back strongly in the final quarter of 2009, this demand had stabilised by the second quarter of 2010. Revenue from the commercial developments business totalled £35.1m (2009: £189.4m) with a loss from operations before exceptional items of £1.3m (2009: £4.6m). After exceptional items of

£4.8m (2009: £73.1m), the loss from operations was £6.1m (2009: £77.7m).

During the year, we disposed of Atlantic Quay 5, a commercial property in Glasgow for £25.0m with an exceptional impairment of £4.8m, completed a 70,000 square feet warehouse and office facility at the Kingsway site in Rochdale and also completed a number of land disposals at positive margins. We have also recently exchanged contracts with JD Sports to complete an 866,000 square feet warehouse and distribution centre in Rochdale, which is scheduled for completion in spring 2011.

The disposal of Atlantic Quay 5 during the financial year completed the planned sale of legacy assets from the Wilson Bowden Developments portfolio for a total of around £200m.

The homes we build

Our aim is to be recognised as the nation’s leading housebuilder creating communities where people aspire to live.

Geographic and product diversity

We operate throughout Britain under the Barratt Homes and David Wilson Homes brands and in Kent and the South East under the local Ward Homes brand. At 30 June 2010, we were selling from 339 (2009: 376) active sites across 25 divisions.

We continue to serve all sectors of the market, creating homes for sale, shared ownership and affordable rental and work with Government agencies and housing associations on a broad range of urban regeneration schemes. Our wide product range varies from homes for first time buyers, family homes and high rise flats to social housing and commercial development. Private selling prices during the financial year ranged from £46,500 to £2.1m, with a private average selling price for the year of £185,200 (2009:

£166,500).

During the year, we completed 1,735 (2009: 138) homes under the HomeBuy Direct scheme including 1,679 from the initial allocation of HomeBuy Direct, which has to be completed by the end of September 2010. Our HomeBuy Direct funding from Kickstart 1 and Kickstart 2 for c. 510 units has been secured together with c. £31.1m of other Government funding. In addition to the Government supported HomeBuy Direct scheme, we also supported 1,325 (2009: 1,369) purchasers with our own shared equity schemes.

The provision of social housing remains a key component of our activities with 1,870 (2009: 2,069) homes completed during the financial year ended 30 June 2010 at an average selling price of £119,500 (2009:

£107,100).

The Homes and Communities Agency (‘HCA’) has established a Delivery Partner Panel (‘DPP’) framework to develop its sites, which can also be used by local authority partners for developing their land. The DPP framework will exist for three years and is split into three regional clusters - Northern, Central and Southern panels. As one of only two national housebuilders appointed to all three panels, we are able to work closely with the HCA in bidding for projects on HCA and local authority-owned land across the country. We are pleased to see the DPP framework being used by a significantly greater number of local authorities than we originally envisaged.

People and expertise

We believe that one of our key strengths is our people and that despite the current economic environment it is important to continue to develop and invest in them and their expertise. Accordingly, we have continued to invest in our vocational and leadership training programmes as well as employee development, engagement and recognition.

During the year we have launched the Barratt Academy, which combines professional training (on-site and in the classroom) with industry-recognised qualifications. The Academy will deliver trade specialists, site managers and commercial and technical specialists. Since its launch, 48 Site Managers and 48 Assistant Site Managers have joined the programme and 100 apprentices are being recruited for the first intake of the Apprenticeship Programme in September 2010. In addition, we have four leadership development programmes in place to assist with the development of managers identified within our succession plan.

We also have a Graduate Recruitment and Development Programme consisting of a two-year multi- disciplinary programme. Due to the downturn in the sector, we decided not to increase the number of graduates in the programme in the year to 30 June 2010. However, we have recruited 30 graduates under the programme who joined the business in August 2010.

During the year, we have remained focused on employee engagement with our third annual engagement survey seeing an increase in participation to 71% and a 3% improvement in our employee engagement score compared with 2009. We have also continued to reward our employees giving over 1,400 individual experience prizes or additional holiday. Our structured recognition programme is ongoing with quarterly and annual divisional awards and annual national awards for Site Managers, Sales Advisers, Apprentices, Individual Excellence and Team Excellence.

The expertise of our construction teams has again been recognised externally, with 82 (2009: 76) of our Site Managers winning ‘Pride in the Job’ quality awards from the National House-Building Council. This is more than any other housebuilder for an unprecedented sixth consecutive year.

Our target was to have a fully carded Construction Skills Certification Scheme (‘CSCS’) workforce, including subcontractors, by 2010. At 30 June 2010, 97% (2009: 95%) of the Group’s workforce, including subcontractors, was fully CSCS carded and we continue to target a 100% CSCS carded workforce.

Corporate responsibility

We are committed to the principles of Corporate Responsibility (‘CR’) as stated in our CR policy which is available at www.barrattdevelopments.co.uk. We have identified and assessed the key CR risks facing the business, which include Environmental, Social and Governance (‘ESG’) risks, and have grouped these into four key philosophies so that we can manage them effectively. The four philosophies: People, Partners, Planet and Customers are underpinned by our commitment to financial performance and Health and Safety. These are each led by a member of the Executive Committee who is responsible for developing and implementing CR related objectives and targets to achieve the overall CR strategy set by the Board. This ensures that CR issues are embedded in the normal course of business and decisions affecting CR issues can be implemented swiftly at an operational level. This process ensures that adequate information in relation to ESG matters is available to the Board. Significant ESG risks that could impact on the future of the business are included in the Principal risks and uncertainties section.

We publish a CR report each year that explains our approach and our management of CR governance and risk, and includes the actions we have taken during the year to improve CR performance. CR disclosures in the Annual Report and CR Report, including disclosures on ESG matters, are based on information collected annually and from regular management information. This information is subject to external independent review and internal audit.

Environment

Our development activities have the potential to impact significantly on the environment and we are subject to extensive and complex regulations and an increasingly stringent regulatory environment including planning and technical requirements, such as a requirement for all new homes to achieve zero carbon emissions by 2016. In response to these challenges we follow a strong environmental agenda which focuses on managing our environmental impact, helping our customers to improve the environment, improving the environmental standards of what we build and making our supply chain more sustainable.

We are committed to undertaking research and development that will enable us to respond to the increasingly demanding design criteria for new housing. In 2008 we were the first major housebuilder to build a prototype home to Level 6 of the Code for Sustainable Homes (the ‘Code’), the highest level attainable. We are currently building one of the first large scale zero carbon communities in Britain, in partnership with the HCA, at Hanham Hall near Bristol. The development includes 185 new homes built to Code Level 6 and the total refurbishment of the hall itself.

The key performance indicator that we use to monitor environmental performance is the average amount of carbon dioxide emitted during the construction process per legal completion. This metric reduced slightly this year to 1,787 KgCO_2e/unit (2009: 1,804 KgCO_2e/unit (restated)). We are targeting a reduction in energy use of 20% over three years and are looking at ways to improve this reduction. During the year we carried out energy audits on sample developments to understand energy usage in more detail and the opportunities for increasing energy efficiency.