Interim Results for the 6 months ended 31 December 2011

Results for the half year ended 31 December 2011

Barratt Developments PLC (the ‘Company’) is today issuing the results for the Company and its subsidiary undertakings (the ‘Group’) in respect of the half year ended 31 December 2011 (‘the period’).

Substantial increase in profits

Highlights:

• Revenues for the half year to 31 December 2011 increased by 8.6% to £952.8m (2010: £877.6m)
• Average selling price increased by 3.1% to £181,200 (2010: £175,800), with private average selling price increasing by 4.2% to £199,900 (2010: £191,900) driven by further positive mix changes
• Profit from operations was £61.1m (2010: £43.5m), a 40.5% increase, with operating margin increasing to 6.4% (2010: 5.0%)
• Profit before tax of £21.6m (2010: loss before tax of £4.6m)
• Recently acquired higher margin land continues to be brought into production and is expected to contribute more than one third of this financial year’s completions
• 98% (2010: 97%) of customers would recommend us to a friend
• Net debt as at 31 December 2011 was £542.2m (31 December 2010: £537.0m) and is forecast to be lower than previously expected at around £350m at 30 June 2012 (30 June 2011: £322.6m)
• Strong start to the second half with the Group delivering 246 (FY 2010/11 equivalent period: 202) private sales per week, up 21.8% in the seven weeks to 19 February driven by both an improved sales rate of 0.61 (FY 2010/11 equivalent period: 0.55) private sales per active site per week and new site openings. Overall underlying prices remain stable
• Private forward sales as at 19 February 2012 were up by 24.3% to £693.2m (20 February 2011:

£557.9m)

• Second half gross margin and operating profit expected to increase from the prior year equivalent period

Commenting on the results Mark Clare, Group Chief Executive of Barratt Developments said:

“Over the last six months we have continued to improve the performance of the business, despite the wider economic uncertainty. We have delivered a further substantial increase in profits and recently acquired high margin land is now driving further recovery. We have again brought debt and land creditors in below expected levels. We have seen a strong start to 2012 and over the first seven weeks private reservations are running 21.8% ahead of this time last year.”

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The Interim Management Report contains certain forward-looking statements about the future outlook for the Group. Although the Directors believe that these statements are based on reasonable assumptions, any such statements should be treated with caution as future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

There will be an analyst and investor meeting at 8:30am today at UBS, Ground Floor, 1 Finsbury Avenue, London, EC2M 2PP. The meeting will be broadcast live on the Barratt Developments corporate website, www.barrattdevelopments.co.uk from 8:30am today. A listen only function will also be available.

Please dial: +44(0) 1452 565 124

Conference ID: 45738881

The Interim Management Report for the six months ended 31 December 2011 is available from today, 22 February 2012, on the Barratt Developments corporate website, www.barrattdevelopments.co.uk via the following link: www.barrattdevelopments.co.uk/ir/reports/.

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

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

For further information please contact:

Barratt Developments PLC

David Thomas, Group Finance Director 020 7299 4896

Susie Bell, Head of Investor Relations 020 7299 4880

For media enquiries, please contact:

Barratt Developments PLC

Patrick Law, Group Corporate Affairs Director 020 7299 4892

Maitland

Liz Morley 020 7379 5151

Neil Bennett

Results

The Group’s performance in the half year reflects both the greater stability of the market over the last 12 months and the delivery of our objective to rebuild profitability.

The Group made a profit before tax for the first half to 31 December 2011 of £21.6m (2010: loss before tax £4.6m) driven by a continued improvement in operating performance, with an increase in both average selling prices and operating margin and a reduction in interest costs.

The Group’s profit from operations was £61.1m (2010: £43.5m), with an operating margin of 6.4% (2010: 5.0%). The Group’s earnings per share were 1.3p (2010: loss per share 0.9p).

The Group’s net debt as at 31 December 2011 was £542.2m (31 December 2010: £537.0m), lower than previous expectations, reflecting higher than anticipated completions in the period, ongoing control of working capital and the timing of land payments. In line with expected cash generation and normal seasonal trends, net debt is forecast to reduce to around £350m as at 30 June 2012 (30 June 2011: £322.6m).

The Board is committed to improving the profitability and strengthening the financial position of the Group whilst continuing to invest both in its existing land bank as well as new sites that meet the Group’s required hurdle rates. In this context, the Board does not consider it appropriate to pay an interim dividend (2010: nil). The Board will continue to review appropriate uses of the free cashflow of the business.

Group objectives

The Group’s overriding objective is to rebuild profitability and we have set out three clear priorities to achieve this:

• optimising average selling prices;
• improving operational efficiency; and
• targeted land buying.

The reduction of our net debt is also a key objective. Going forward we expect that increased operating profit and our target to lower average investment per site will reduce our overall indebtedness.

Improving business performance

Group profit from operations increased by 40.5% year on year to £61.1m (2010: £43.5m), with operating margin improving to 6.4% (2010: 5.0%). This reflects the significant progress made on the Group’s objectives in the first half of the year.

Average selling price (‘ASP’) for the period increased by 3.1% to £181,200 (2010: £175,800). Whilst overall, underlying prices in the period were stable, we continue to see regional variation with greater robustness in the South East. Private ASP increased by 4.2% to £199,900 (2010: £191,900) driven by further positive changes in mix. Social ASP declined by 9.5% to £111,800 (2010: £123,500), largely due to a lower social content in London in the period versus the prior year equivalent period.

We have continued to implement further operational efficiencies to reduce our build costs and increase the effectiveness of our operations. We have maintained a firm control on direct costs despite upward price pressures on certain materials and overheads are in line with the prior half year. Going forward, it is likely that some raw material prices will rise due to underlying commodity prices and increased demand, however we will continue to work to mitigate these increases.

We are focused on bringing our recently acquired higher margin land into production as quickly as possible. In the current financial year as a whole we continue to expect more than one third of completions to come from this land, increasing to more than a half of completions in FY 2012/13 and around two thirds in FY 2013/14. Also, we continue to actively trade through our old sites.

Housebuilding operations

In the first six months of the financial year the Group operated across an average of 382 (2010: 352) active sites, up 8.5% on the same period last year. During the half year, the Group opened 80 sites and completed 57 sites, resulting in a net increase in active sites to 400 as at 31 December 2011 (31 December 2010: 366). Based on our current organisational structure, we believe that we have the capacity to go to around 460 active outlets as a maximum, but this will only happen if market demand supports it.

The Group averaged 184 (2010: 138) net private reservations per week during the first half, which was

0.48 (2010: 0.39) net private reservations per active site per week, an increase of 23.1%. The prior year equivalent period was adversely affected by a decline in consumer confidence, particularly in the weeks around the Government’s Comprehensive Spending Review in October 2010 and the extreme weather conditions in December 2010. The cancellation rate for the first half was lower than the prior year equivalent period at 17.7% (2010: 20.1%).

Housebuilding completions for the first half were 5,117 (2010: 4,796) with private completions of 4,028 (2010: 3,669)

and social housing completions of 1,089 (2010: 1,127).

Overall 68.6% (2010: 65.1%) of the Group’s first half completions were houses. Outside central London, houses accounted for 75.2% (2010: 72.4%) of completions.

The continued constraints on mortgage finance and, in particular, the limited availability of higher loan to value products, has meant shared equity remains an important selling tool. In the half year, 972 (2010: 1,342) completions utilised shared equity, representing 19.0% (2010: 28.0%) of completions. Of these, 545 (2010: 537) completions used the Government FirstBuy or HomeBuy Direct initiatives (these are jointly funded by the Homes and Communities Agency and the housebuilder), with the remainder using the Group’s own schemes.

During the period we have targeted and achieved an increased use of part-exchange as a selling tool, with 16.8% (2010: 12.7%) of our completions supported by this incentive in the period. We continue to manage our commitment to part-exchange stock carefully and at 31 December 2011 had 355 unreserved part-exchange properties (31 December 2010: 364).

Social housing accounted for 21.3% (2010: 23.5%) of completions. We continue to expect social housing completions to represent c. 20% of completions for the financial year.

Housebuilding revenues for the half year were £930.5m (2010: £847.2m). Housebuilding gross margin was 10.3% (2010: 9.2%) with the improvement mainly resulting from the increased completions being achieved from recently acquired higher margin land and continued margin improvements from cost reduction and replanning on older sites.

Housebuilding operations saw a significant increase in profit from operations to £59.1m (2010: £43.2m). As a result the operating margin increased to 6.4% up from 5.1% in the prior year equivalent period. This increased profitability was driven by a substantial improvement in gross margin coupled with tight overhead cost control.

As at 31 December 2011, total forward sales for the Group were up 8.1% at £698.1m (31 December 2010: £645.7m), equating to 4,710 plots (31 December 2010: 4,353). Private forward sales as at 31 December 2011 increased by 29.8% to £415.3m (31 December 2010: £319.9m), reflecting the Group’s stronger sales performance during the autumn selling season.

Commercial development operations

Our commercial development revenue was £22.3m (2010: £30.4m) with a profit from operations of £2.0m (2010:

£0.3m). This included revenue from the design and build of a 40,000 sq. ft. foodstore in Warrington, which is scheduled to complete in the second half of the financial year, and the disposal of 41 acres of land at our site in Rochdale to a food retailer.

Our commercial business, Wilson Bowden Developments, currently has preferred developer status on six shopping centre developments and continues to progress these opportunities whilst seeking to create best value available from the Group’s portfolio of other commercial assets.

Land and planning

Land

We are focused on bringing our recently acquired higher margin land into production as quickly as possible. In the current financial year as a whole we continue to expect more than one third of completions to come from this land, increasing to more than half of completions in FY2012/13 and around two thirds in FY2013/14.

This recently acquired land continues to perform in line with, or above, our hurdle rates on acquisition which include a gross margin of at least 20% and a return on capital employed (based on operating profit) of at least 25%.

Since we returned to land buying in mid 2009 we have approved terms on 13,359 plots to 30 June 2010, 8,861 plots in FY2010/11 and we anticipate approving terms on around 8,000 plots in FY2011/12. The reduction in approvals reflects our earlier land buying success and our strategy to reduce the depth of our landbank. As a national housebuilder, we continue to acquire land across all of our operating regions and seek to ensure that our land acquisition strategy is not unduly weighted to any geographic area. We are now driving to accelerate the reduction in our owned landbank to around 4 year’s supply (based on prior year completions) by 30 June 2012 and maintain conditional land at c. 1 year’s supply.

In the first half the Group agreed terms on £178.1m (2010: £318.0m) of land purchases equating to 4,671 plots (2010: 6,078 plots). By plots 85% (2010: 81%) was for houses and by value 58% (2010: 59%) was located in our southern area.

Total cash expenditure on land in the first half was £261m (2010: £142m). The Group anticipates that total cash expenditure on land for the full financial year will be between £500m to £550m (FY2010/11: £261m).

Land creditors as at 31 December 2011 were £627.3m (31 December 2010: £588.1m). The year on year increase in land creditors reflects the significant proportion of newly acquired land that has been acquired on deferred terms. Land

creditors due within the next 12 months total £297.9m (2010: £321.6m), with £329.4m (2010: £266.5m) due thereafter. In the second half to 30 June 2012, we expect land creditors will increase to c. £700m to £750m, however this is dependent upon the timing of planning consents and land contracts.

At 31 December 2011, the Group’s owned land bank stood at 46,294 plots (2010: 50,587 plots) with an additional 12,065 plots (2010: 13,555 plots) under conditional contract, giving a total of 58,359 plots (2010: 64,142 total plots). This equates to approximately 4.2 years of owned land based on the prior year’s completion volumes.

Of the Group’s owned and unconditional plots (46,294 plots), less than 20% (30 June 2011: 24%) by value is made up of impaired land. 42% (30 June 2011: 47%) by value consists of non-impaired land where the average gross margin is

c. 9% and the remaining 38% (30 June 2011: 29%) consists of land acquired since re-entering the land market in mid- 2009 with an average gross margin of c. 20% based on current house prices.

We have also remained focused on maximising the value from our historic land holdings and continue to expect to deliver c. 25% of total completions from impaired land in this financial year. Where appropriate, we will accelerate the disposal of impaired land through land sales or swaps.

Our underlying assumptions for impairment calculation purposes are for low single digit selling price and cost inflation. In the past year, we have only seen a small improvement in underlying prices, but we have continued to deliver further cost reductions. We recognise that the Group is not immune to future pricing trends in the wider housing market and we will continue to review the trading environment and our impairment assumptions during the year to 30 June 2012.

Strategic land

In addition, we have c. 11,200 acres of strategic land the value of which is regularly reassessed until the necessary planning consents are obtained. In line with our operational land portfolio, this land is carried at the lower of cost and net realisable value. Strategic land is expected to produce an increasing proportion of our operational land in future years. In the next few years planning consents are expected on sites consisting of around 15,000 units.

Planning

In the first half we received detailed planning consents on 53 sites and we now have detailed planning consents for all of our expected FY 2011/12 completions. Looking forward, we have detailed consents for 84% of our expected FY 2012/13 completions and outline consents on a further 7%.

There is currently some uncertainty over how the future planning regime will operate as the Government has recently been consulting on a draft National Planning Policy Framework (‘NPPF’). We have broadly supported the Government's proposed changes as we believe that the right balance has been achieved in the draft between the views of local people and the need for local housing. It is expected that the Government will announce the outcome of their consultation later in the spring.

Balance sheet

The net assets of the Group decreased by £18.2m to £2,911.9m between 30 June and 31 December 2011, primarily reflecting the Group’s profit after tax of £12.1m offset by actuarial losses on the Group’s defined benefit pension scheme of £30.6m.

Net tangible asset value decreased by 0.9% to £2,019.7m (30 June 2011: £2,037.9m) and net tangible asset value per share at 31 December 2011 was £2.09 (30 June 2011: £2.11 per share).

Significant balance sheet movements since 30 June 2011 include:

• Land holdings reduced by £27.6m to £2,162.1m. This decrease reflects net land additions of £183.9m offset by land usage.
• Work in progress increased by £95.8m to £1,119.0m due to the increase in the Group’s site numbers. The Group maintains tight control over its work in progress and at 31 December 2011 the Group had 2.2 (30 June 2011: 2.2) unreserved stock units per active site.
• Available for sale financial assets increased by £8.1m to £177.5m reflecting the 972 completions that used FirstBuy, HomeBuy Direct or the Group’s own similar products during the half year.
• Group net debt increased by £219.6m to £542.2m reflecting normal operational trends.
• Trade and other payables decreased by £166.2m to £1,213.5m mainly reflecting the net reduction in trade payables to £255.2m and a reduction in land payables to £627.3m.
• The deficit on the Barratt Developments defined benefit pension scheme increased by £23.3m in the half year to

£35.1m reflecting a decrease in corporate bond yields and worse than expected asset returns partially offset by the Group’s deficit reduction contributions.

• Goodwill and intangible assets remained at £892.2m as the impairment review of the housebuilding business and brand indicated that no impairment was required.
• Deferred tax assets increased by £1.6m to £144.8m mainly due to the impact of the increase in the pension scheme deficit and the movement in the value of the Group’s derivative financial instruments, partially offset by the impact of tax rate changes and the current year tax charge.

Borrowings and cash flow

Group net debt at 31 December 2011 was £542.2m (31 December 2010: £537.0m) with gearing at 26.8% (2010: 26.7%) both of which were lower than previous expectations reflecting higher than anticipated completions in the period, ongoing control of working capital, and the timing of land payments. In line with expected cash generation and normal seasonal trends, net debt is expected to reduce to around £350m by 30 June 2012.

The Group’s net finance charge in the first half was £38.9m (2010: £48.2m). This includes a net non-cash finance charge of £9.5m (2010: £12.9m). The Group expects that its full year net finance charge will be around £80m (2011 financial year: £92.4m before exceptional items, £138.9m including exceptional items), consisting of cash interest of around £60m on net debt (including term debt) and around £20m of non-cash finance charges. We will continue to focus on reducing net debt and associated interest costs.

The Group has around £1 billion of committed facilities and private placement notes to May 2015, with some of the Group’s arrangements extending as far as 2021, which provides us with appropriate funding.

Quality, service and the environment

The Group continued to make good progress in improving customer service and our most recent customer survey indicated that 98% (2010: 97%) of customers would recommend us to a friend.

Our five-year warranty on fixtures and fittings continues to be a product that is unique to the Group, providing a point of difference compared to other housebuilders.

Our commitment to delivering the highest quality product is not only acknowledged by our customers but is also widely recognised through third party accreditation and awards. In November 2011, we were named ‘Housebuilder of the Year’ at the industry’s most prestigious annual awards organised in conjunction with the official industry body, the Homebuilders Federation (‘HBF’). We have also been awarded HBF Five Star housebuilder status for the second consecutive year and have won 80 NHBC ‘Pride in the Job’ Quality Awards, 31 Seal of Excellence Awards and 2 Regional Awards.

Government housing strategy

The publication of the Government’s housing strategy in November 2011 was a welcome development for the industry. The New Build Indemnity scheme, NewBuy, is potentially the most important aspect, as it focuses on enabling customers to secure up to 95% loan to value mortgages which is significantly above current limits available for the new build sector. If the scheme is successfully implemented, it will substantially reduce the customer deposit required and be more cost and cashflow efficient than shared equity products. Good progress is being made in establishing NewBuy and it is likely to see first completions in the late spring.

However, whilst NewBuy is being established, FirstBuy, the Government backed equity share product, will remain an important sales tool. We have made good progress in using our initial allocation of £24.9m (1,400 units) and this success has been recognised by the Homes and Communities Agency through additional allocations totalling £9.5m (620 units).

The housing strategy is also expected to result in a substantial release of surplus Government land for housing through the ‘build now pay later’ initiative. The Group is well positioned to capitalise on this programme, as a result of its track record in successfully securing public land that has been released through the Delivery Partner Panel. To date, the Group has won seven bids for more than 1,900 units with a gross development value of c. £490m and is also at an advanced stage of tendering for a further four projects.

Government initiatives to address housing supply include the Get Britain Building Fund of £420m. This is targeting sites where there is an implementable planning permission but where activity has either stalled or has not started for economic reasons. We have submitted our bid for an allocation of this funding.

Current trading and outlook

The Group has delivered an improved performance in the first half of the financial year and we have significantly strengthened our forward order book going into the second half. Our strategy of optimising selling prices, improving operational efficiency and investing in and bringing into production higher margin land, is delivering significant improvements in profitability.

In the first seven weeks of the second half of the current financial year, the sales performance across the Group has been strong. Net private reservations have averaged 0.61 (FY 2010/11 equivalent period: 0.55) per active site per week. Combined with an increase in active sites we have seen private reservations increase by 21.8% compared to the prior year equivalent period. Overall underlying selling prices have remained stable. Cancellation rates have remained low at an average of 13.8% (FY 2010/11 equivalent period: 11.8%) for the first seven weeks of the second half.

As at 19 February 2012, total forward sales for the Group were up 7.8% at £962.8m (20 February 2011: £893.5m), equating to 5,958 plots (20 February 2011: 5,722 plots). Private forward sales as at 19 February 2012 increased by

24.3% to £693.2m (20 February 2011: £557.9m).

Whilst there remains considerable uncertainty surrounding the outlook for the economy, we have had an encouraging start to the second half and we welcome the Government’s new housing strategy and believe it will have a positive impact on the industry.

In the second half of our financial year, in line with the same period last year, we expect a greater contribution from completions on recently acquired higher margin land and also a greater contribution from our London business where the margins on older sites are substantially higher than the Group average. The combination of these two factors coupled with a greater second half weighting of completion volumes is expected to result in an increase in gross margin and operating profit performance compared to the same period last year.

Mark Clare

Group Chief Executive 21 February 2012

The Group’s financial and operational performance and reputation is subject to a number of risks. The Board seeks to ensure that appropriate processes are put in place to manage, monitor and mitigate these risks of which the principal risks are identified in the table below. The Group recognises that the management of risk is fundamental to the achievement of Group targets. As such management throughout the Group is involved in this process.

Market

Mitigation

Relevance to strategy

Risk and description

Changes in the macroeconomic environment including unemployment, buyer confidence, availability of mortgage finance, the ability of purchasers to repay shared equity loans, interest rates, competitor pricing, falls in house prices or land values or a failure of the housing market to recover, may lead to a fall in the demand for houses which in turn could result in impairments of the Group’s inventories, goodwill and intangible assets.

Cost reduction measures may adversely affect the Group’s business or its ability to respond to future improvements in market conditions.

The majority of homes built by the Group are purchased by individuals who rely on the availability of mortgages. The confidence of buyers and their ability to obtain mortgages or other forms of financing and pay down debt are impacted by the macroeconomic environment. Accordingly customer demand is sensitive to changes in economic conditions.

The Group and Company’s ability to grow its business partly depends on securing land or options over sites and having adequate resources to build sufficient homes to meet demand. The Company’s ability to do this can be impacted by cash and profit constraints (see also the liquidity, land and construction risks sections below).

A weekly review is undertaken of key trading indicators, including reservations, sales rates, Group shared equity balances, part-exchange volumes, visitor levels, incentives, competitor activity and cash flow projections and, where possible, appropriate management action is taken.

The Group’s internal systems clearly identify the impact of sales price changes on the margins achievable and as a minimum the Group performs asset impairment reviews twice a year.

The Group works with key mortgage lenders to ensure that products are appropriate wherever possible for its customers.

The Group has Driving Profitable Sales and Commercial Action initiatives in place to seek to enhance the effectiveness and efficiency of our sales processes and keep the cost base tightly controlled and cost reduction measures are managed via the stewardship of the Executive.

Liquidity

Unavailability of sufficient borrowing facilities to enable the servicing of liabilities (including pension funding) and the inability to refinance facilities as they fall due, obtain surety bonds, or comply with borrowing covenants. Furthermore there are risks to management of working capital such as conditional contracts, build costs, joint ventures and the cash flows related to them.

The Group maintains committed facilities of different duration that are designed to ensure that it has sufficient available funds for operations. The Group’s borrowings are cyclical during the financial year and peak around April/May and October/November each year as, due to seasonal trends in income, these are the calendar points when the Group has the highest working capital requirements.

The Group maintains sufficient facility committed debt headroom and in addition has a number of trade finance and surety facilities that are designed to ensure that the Group has sufficient bonds available.

The Group agreed its debt refinancing which provides around £1 billion of committed facilities and private placement notes to May 2015.

The Group has in place a comprehensive regular forecasting process encompassing profitability, working capital and cash flow that is fully embedded in the business. These forecasts are regularly stress tested to ensure that adequate headroom within facilities and banking covenants is maintained. On a normal operating basis the Group has a policy of maintaining facility headroom of up to £150m.

The Group has a comprehensive regular forecasting process for surety bond requirements.

The Group is in compliance with its borrowing covenants and at the date of approval of the 2011 half yearly financial statements, the Group’s internal forecasts indicate that it will remain in compliance with these covenants for the foreseeable future being at least twelve months from the date of signing of the 2011 half year financial statements.

People

Mitigation

Relevance to strategy

Risk and description

Inability to recruit and/or retain employees with appropriate skill sets or sufficient numbers of such employees.

The Group aims to attract, retain and develop a sufficiently skilled and experienced workforce in order to maintain high standards of quality and customer service.

The Group has a comprehensive Human Resources policy which includes apprentice schemes, a graduate programme, succession planning and training schemes tailored to each discipline. The Group continues to target a fully Construction Skills Certification Scheme carded and qualified workforce.

Availability of raw materials, subcontractors and suppliers

Shortages or increased costs of materials and skilled labour, the failure of a key supplier or the inability to secure supplies upon appropriate credit terms could increase costs and delay construction.

The Group relies upon affordable supplies of building materials from multiple sources and subcontractors to perform the majority of work on sites. This retains flexibility to commence work on new sites and enhances the Group’s build cost efficiency.

The Group adopts a professional approach to site management and seeks to partner with its supply chain. The Group has a policy of having multiple suppliers for both labour contracts and material supplies and contingency plans should any key supplier fail.

Land

Inability to secure sufficient consented land at appropriate cost and quality to provide profitable growth.

The Group needs to purchase sufficient quantities of good quality consented land at attractive prices, in order to be in a position to commence construction and enhance the Group’s ability to deliver strong profit growth as the housing markets recover.

Potential land acquisitions are subject to formal appraisal, with those approved required to achieve an overall Group defined hurdle rate of return and to meet the Group and Company’s strategic criteria for growth. Each division produces a detailed site-by-site monthly analysis of the amount of land currently owned, committed and identified. These are consolidated for regular review at senior management and Board level. In addition, each operating division holds weekly land meetings.

Government regulation

Inability to adhere to the increasingly stringent and complex regulatory environment, including planning and technical requirements affecting the housing market and regulatory requirements more generally.

The Group’s land portfolio consists of land for the short and medium term as well as strategic land.

The Group seeks to meet regulatory and planning requirements to obtain the planning permission required to develop homes and communities.

The Group consults with the Government both directly and through industry bodies to highlight potential issues and has considerable in-house technical and planning expertise devoted to complying with regulations and achieving implementable planning consents.

The Group has appropriate policies and technical guidance manuals in place to assist employees achieve regulatory compliance and the standards of business conduct expected of them.

Risk and description	Relevance to strategy	Mitigation
Construction
Failure to identify and achieve	The Group builds homes and	The Group’s weekly reporting identifies the
key construction milestones,	communities in Britain ranging from	number of properties at key stages of
including: the impact of adverse	houses to large scale flatted	construction. Projected construction rates
weather conditions; the failure to identify cost over runs promptly; design and construction defects; and exposure to environmental liabilities could delay construction, increase costs, reduce selling prices and result in litigation and uninsured losses. Also there are risks associated with the use of new technology in the build process e.g. materials related to carbon reduction.	developments.	are evaluated as part of the monthly forecasting cycle. Development projects, including returns and cash flows, are monitored regularly by divisional management teams and the Group obtains legal and other professional advice when required. Any alternate forms of construction and building technologies and the quality of the materials used by the Group are subject to evaluation by external and internal technical experts including the NHBC to ensure compliance with all
In addition, large development projects, including commercial		building and other regulations. The Group regularly monitors a number of
developments are complex and capital intensive and changes may negatively impact upon cash		environmental impact indicators, the results of which are disclosed in the Group’s Sustainability Report.
flows or returns.		Appropriate insurance cover is maintained for all of the Group’s main risks.
Health and safety
Health and safety breaches can	Health and safety is a key issue in	The Group has a dedicated health and
result in injuries to employees,	the house building sector. Given the	safety audit department which is
sub-contractors and site visitors,	inherent risks associated with it and	independent of the management of the
delays in construction/increased	management of it, it is of paramount	operating divisions. Health and safety
costs, reputational damage,	importance to the Group. Senior	audits are undertaken on a regular basis
criminal prosecution and civil	management and the Board review	and processes are modified as required
litigation.	health and safety matters on a regular basis and aim to reduce its injury incidence rates by implementing policies and procedures aimed at keeping staff and visitors free from injury.	with a view to seeking continuous improvement. Performance is reviewed by the Health, Safety and Environment Committee that meets quarterly. Each month, health and safety reports are cascaded by each division, for review by the Executive Committee and Board, which also receives a direct report every six months from the Safety Health and Environment Director.
IT
Failure of the Group’s IT	The ability to be able to optimise	A dedicated IT team regularly monitors and
systems, in particular those	prices and ensure operational	maintains Group IT systems to ensure
relating to surveying and	efficiency is essential to the Group’s	continued functionality. A fully tested
valuation, could adversely impact the performance of the Group.	performance. The Group’s integrated management systems enable the Group to maintain tight control especially with regards to surveying and valuation.	disaster recovery programme is in place.

Details of the Group’s management of liquidity risk, market risk, credit risk and capital risk in relation to financial instruments are provided in note 13 and details of contingent liabilities including litigation is provided at note 17 (c).