Final Results

RNS Number : 5108Z

Barratt Developments PLC

23 September 2009

BARRATT DEVELOPMENTS PLC

Annual Results Announcement

Results for the year ended 30 June 2009

Mark Clare, Group Chief Executive of Barratt Developments, commented:

'This has been an intensely difficult year for the Group following the sharp decline in the UK housing market. In the first half, as prices fell, we drove sales and reduced stock and debt levels. In the second half we have been able to maintain price levels and increase our reservation rates, with these encouraging trends continuing through the summer into the autumn.'

'The Board has therefore decided it is now an appropriate time to substantially strengthen the Company's balance sheet and reduce its debt levels via a Placing and a Rights Issue. This will also enable the Group to develop a number of its existing sites and to take advantage of land purchasing opportunities as they arise.'

Highlights:

Net private reservations per site per week were up 10.5% compared with the 2008 financial year, 6.0% down for the first half and 28.6% up in the second half.
Completions for the full year were 13,202 (2008: 18,588), a decrease of 29.0%, at an average selling price of £157,200 (2008: £183,100). Group revenue decreased by 35.7% to £2,285.2m (2008: £3,554.7m).
Operating profit before exceptional items was £34.2m (2008: £550.2m) at a margin of 1.5% (2008: 15.5%).
Operating exceptional items totalled £519.5m (2008: £255.0m) including £499.5m (2008: £208.4m) impairment of inventories of which £494.9m (2008: £nil) was recognised at the half year. Exceptional items charged after operating profit totalled £15.3m (2008: £nil).
The Group made a loss before tax and exceptional items of £144.1m (2008: £392.3m profit) and a loss before tax of £678.9m (2008: £137.3m profit).
Adjusted basic loss per share before exceptional items was 23.8 pence (2008: 79.6 pence earnings). Basic loss per share was 135.8 pence (2008: 25.0 pence earnings).
Net debt has reduced by £373.7m since 30 June 2008 (£145.9m since 31 December 2008) to £1,276.9m (2008: £1,650.6m).
The Group continues to comply with the financial covenants in its existing financing arrangements.
As previously announced no dividend will be payable for the year ended 30 June 2009 (2008: 12.23 pence per share).
At 30 June 2009 net asset value per share was 672 pence (2008: 827 pence) and net tangible asset value per share was 415 pence (2008: 570 pence).
Forward sales at 30 June 2009 were £464.3m (2008: £697.6m) representing 3,328 plots (2008: 4,586 plots). At 13 September 2009 forward sales had increased to £733.4m.
Over the eleven weeks since the financial year end the Group has delivered 2,152 net private reservations (2008: 1,857). This represents an average of 0.46 net private reservations per site per week, up 53.3% on the equivalent period in the last financial year.
The Board has today announced a fully underwritten Placing and Rights Issue to raise gross proceeds of approximately £720m, together with amended financing arrangements which will come into effect upon successful completion of the Placing and the Rights Issue.

-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 future. Accordingly undue reliance should not be placed on forward looking statements.

There will be an analyst and investor meeting at 10.00am 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/ir/equityraise/, from 10.00am today. A playback facility will be available shortly after the presentation has finished.

The financial analysts' presentation slides will be available on the Barratt Developments corporate website, www.barrattdevelopments.co.uk/ir/equityraise/, this morning.

Further copies of this 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.

The 2009 Annual Report and Accounts is available from today, 23 September 2009, on the Barratt Developments PLC website www.barrattdevelopments.co.uk on the following link: www.barrattdevelopments.co.uk/ir/reports/

Copies of the 2009 Annual Report and Accounts are being submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at: The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS.

Telephone number: 020 7066 1000.

For further information please contact:

Barratt Developments PLC
Mark Clare, Group Chief Executive	020 7299 4898
David Thomas, Group Finance Director	020 7299 4896
Philip Bowcock, Group Financial Controller	020 7299 4882

For media enquiries, please contact:

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

Maitland
Liz Morley	020 7379 5151
Neil Bennett

Chairman's statement

This has been an immensely difficult year for the housebuilding sector with the industry experiencing a material and sudden fall off in customer demand driven by a structural change in the availability and terms of mortgage finance, decline in house prices and a loss of consumer confidence in light of the prevailing economic uncertainty. As a result, the Group, along with other housebuilders, experienced a significant fall in both the volume and value of the homes that it sold.

Against this backdrop, the Group has continued to focus on the clear set of priorities already established of driving sales, reducing costs and generating cash with the objective of reducing debt. The Group has made good progress in all these areas.

At the same time, the Group has sought to ensure that it has the capability to respond to any recovery in the market. The initial signs of stabilisation seen at the start of 2009 have continued, underpinned by a greater degree of price stabilisation and improved customer sentiment. The Group has seen higher sales rates, fewer cancellations and levelling of prices. The Group does not, however, expect to see a sustained improvement in trading conditions until the availability of mortgage finance improves further.

The housing market

During the financial year the magnitude of the economic downturn became apparent. What started as a sharp contraction in the availability of financial credit quickly became a full scale international recession.

The housing market in Britain was particularly hard hit during the first half of the Group's financial year as deteriorating economic conditions were coupled with rapidly declining customer confidence and severe constraints on the availability of mortgage finance. In particular, the withdrawal by lenders of many higher loan to value mortgages has significantly affected the first time buyer market.

House prices across Britain, including for the new build sector, fell sharply. For the Group, this was most acutely felt towards the end of the 2008 calendar year as it sought to reduce stock levels in a difficult market.

During the second half of the financial year, sales prices began to show some signs of stabilisation reflecting historically low interest rates and a more limited supply of housing in both the second hand and new build market. The position, however, remains fragile with limited visibility; a sustained recovery of volumes and prices will depend on the improved availability of mortgage finance.

The Group's response

Responding to the dramatic decline of the market has been an immense challenge for the Group. In July and August 2008, the Group arranged a refinancing and amended its financial covenants. Sharp reductions in selling prices in the autumn led to an impairment of £499.5m against the value of land and work in progress during the year, of which £494.9m was recognised at the half year.

With prices reset across the business in January 2009, the Group has been able to improve sales rates to reduce stock levels further, enabling it to manage its working capital more efficiently.

The combination of this tight control of work in progress and sales generation has contributed to the reduction in the Group's net debt by £373.7m over the course of the financial year to £1,276.9m at 30 June 2009.

Cost reduction has also continued to be a priority. Whilst many of the savings the Group has generated have come through reductions in supplier and employee costs, structural changes in the Group's cost base have also been achieved through actions such as the closure of operating divisions. The Group is now a more efficient organisation, positioning it better to respond when customer demand increases.

I recognise that many of the decisions that the Group has made in the year have adversely affected its employees; whilst that is something I very much regret it was necessary to ensure that the Group protected its core business during the downturn.

I remain immensely impressed by the Group's people who are dedicated to achieving excellence in the housebuilding industry. Their determination during these exceptionally difficult economic circumstances is a great credit to them. The Board is hugely appreciative that the Group's employees have worked so hard to meet the demands placed upon them in these challenging times.

Corporate responsibility

The Board remains committed to the principles of corporate responsibility and despite the downturn in the market, it remains convinced that responsible business practices are fundamental to the future success of the Group. The Group is pleased that it has been able to progress its corporate responsibility strategies in the key areas of health and safety, the environment, customer care, employees and the communities where it works as part of the normal day-to-day business operations of the Group, and expects that this will position the Group better to respond to any recovery in the market.

Board

It was with regret that, in January this year, the Group announced that Mark Pain, the Group Finance Director, had decided to step down from the Board. Mark served the Company with distinction and the Board wish him well with his future career.

His successor, David Thomas, who joined the Group in July 2009 from his combined role as Deputy Chief Executive and Finance Director at The GAME Group plc, is an extremely able replacement and I am delighted that the Company has been able to attract a Group Finance Director of his calibre.

After seven years on the Board, Michael Pescod stepped down in December 2008 and the Board is particularly grateful for his wise counsel during his tenure, latterly as the Senior Independent Director. This role has been assumed by Bob Davies who originally joined the Board in May 2004. The Company is also pleased to welcome to the Board Tessa Bamford whose appointment as a NonߛExecutive Director was announced on 30 June 2009. The Board expects her experience in finance and business development to be a great asset to the Group.

Dividend

The Board suspended dividend payments in June 2008 as part of its cash conservation policy. The Board remains focused on strengthening the balance sheet and conserving cash. The existing terms of the Group's committed bank facilities and private placement notes impose certain restrictions on the payment of dividends. In light of these restrictions no final dividend will be paid in respect of the financial year ended 30 June 2009.

The Board is committed to reinstating the payment of dividends and will do so when it becomes appropriate and permissible to do so.

Priorities

Barratt Developments PLC aspires to be the leading housebuilder in Britain with a focus on efficient production, sales and marketing, land and planning, becoming the partner of choice and the quality of its people.

Despite the difficult economic backdrop the Group is continuing to invest in these key areas. There are tangible results being achieved most notably that the Group is the only national volume housebuilder to be credited as Four Star in the Home Builders Federation 4th annual customer satisfaction survey. In terms of construction excellence, the Group had another year of outstanding achievement in the National House-Building Council 'Pride In The Job' quality awards.

Whilst the timing and extent of any market recovery remain uncertain, these strengths and the reduced cost base now in place will enhance the Group's ability to take advantage of any such recovery.

Proposed Placing and Rights Issue

The Board is today announcing a fully underwritten Placing and Rights Issue to raise gross proceeds of approximately £720m together with amended financing arrangements which will come into effect upon successful completion of the Placing and Rights Issue. The Directors expect the Placing and Rights Issue will substantially strengthen the Group's balance sheet and reduce financial indebtedness. The proceeds raised will enable the Group to develop its existing sites and better position it to take advantage of appropriate land purchasing opportunities. The amended financing arrangements are expected to allow the Group to take advantage of opportunities that may arise in a recovering market, as well as to provide an appropriate alternative framework, should a further downturn arise.

Bob Lawson

Chairman

23 September 2009

Group Chief Executive's statement

Overall performance of the business during the financial year was dominated by the significant decline in customer demand for new housing. In response, the Group reduced the scale of its business, cut costs, sold at acceptable rates and reduced debt.

The first half of the year was particularly challenging for the Group. Conditions became immensely difficult as a result of the deteriorating economic outlook and the resulting contraction in the availability of mortgage finance, and decline in customer confidence levels. Sales were only achievable at substantially reduced prices. In the second half of the year, the Group started to achieve some pricing stability, albeit at reduced levels. This combined with acceptable sales rates at planned selling prices allowed the Group to achieve its cash targets.

Declining volumes and prices have had a significant impact on the profitability of the Group. Group profit from operations before exceptional items fell from £550.2m to £34.2m. Operating margins before exceptional items were 1.5% (2008: 15.5%). As a result of inventory write-downs and other operating exceptional items of £519.5m (2008: £255.0m), the Group's loss from operations was £485.3m (2008: £295.2m profit).

Tight control of land spend and work in progress and disposal of commercial development assets helped to reduce net debt to £1,276.9m at 30 June 2009 (2008: £1,650.6m).

Total completions for the year decreased to 13,202 (2008: 18,588). The overall mix of completions also changed. The proportion of social housing fell to 15.7% (2008: 20.4%) as the Group reduced the number of new sites. During the year houses represented 50.5% (2008: 54.9%) of the Group's completions, excluding central London, and the Group expects site replans to increase the proportion of houses available on its sites in future. Properties sold to investors rose to 20.9% of total completions compared with 14.1% in 2008.

Net private reservations per site per week were up 10.5% compared with the 2008 financial year, 6.0% down for the first half and 28.6% up in the second half. A return to more normal seasonal selling patterns emerged, with second half net private reservations 15.4% above the first half levels on a per site per week basis.

A lack of customer confidence, in particular the perception of falling house prices, led to a sharp decline in sales. This contributed to a lower forward order book of £464.3m (2008: £697.6m) at the year end, of which £286.4m (2008: £538.7m) was contracted.

The average selling price measured over all completions reduced by 14.1% to £157,200 (2008: £183,100). The underlying reduction, excluding the impact of mix changes, was approximately 22%. During the second half of the year, the Group experienced improved price stabilisation across the housebuilding business. Prices are now approximately 27% lower than at their peak in the summer of 2007. Following the resetting of prices from January 2009 and as a result of increased visitor numbers in the second half and reduced stock levels, the Group was able to reduce the level of sales incentives being offered.

Driving business performance

During the year the Group has focused on improving its operating efficiency. It has continued to prioritise driving sales, reducing costs and generating cash to reduce debt. These objectives were pursued whilst seeking to preserve the capability of the organisation to respond to any market recovery.

Maximising sales

The effectiveness of the Group's sales channels has continued to improve. The Group has moved increasingly towards online and new technology to support sales.

A range of products has been used effectively to address different market sectors and the barriers to house purchasers in the current market. Shared equity has been important in addressing the first time buyer market where the lack of higher loan to value mortgage finance has become a particularly difficult issue. 11.4% of the Group's completions during the year depended on shared equity. HomeBuy Direct, the Government scheme, is now in operation and the Group reserved around 24 homes per week during the fourth quarter of the financial year using this scheme.

Part-exchange has been used to address the customer sector that has had difficulty finding purchasers for its existing homes. During the year 11.8% of completions (2008: 12.3%) were supported by part-exchange incentives. The Group's ability to sell second hand properties, and thus manage its working capital, has enabled it to continue to use this mechanism as an effective sales support tool throughout the year.

Part-exchange stock levels have also continued to fall. At 30 June 2009, we had 150 unreserved part-exchange units, down 78% over the last twelve months (2008: 677).

Stock of completed units continues to reduce. We had 822 unreserved stock units at 30 June 2009, 3.9 weeks' supply at current sales rates, down 55% from the holding of 1,821 units at 30 June 2008.

Cost reductions

Cost reduction programmes are well established and embedded in the Group's operations. During the year the number of divisional offices was reduced from 32 to 25, whilst seeking to ensure that the core infrastructure of the Group and its brands have been preserved.

The programme to reduce supply and build costs has continued to deliver substantial benefits for the Group. For example, since June 2007, the Group has reduced the basic housebuild costs of a standard house type by approximately 15%. Material prices and subcontractor rates have been reduced significantly to reflect the current conditions in the market. Whilst it is unlikely that these reductions will be permanent, other cost reduction programmes including technical design changes and replans from apartments to houses are expected to yield longer-term efficiency improvements.

Managing cash

During the year the Group has continued to focus on generating cash. Having reduced excess stock in the first half, it carefully controlled work in progress, closely matching new build starts to sales. Site openings have been tightly managed, in particular by deferring investment on sites with significant upfront infrastructure requirements. The average number of sites during the 2009 financial year was 503 (2008: 594). In addition, the progress made in disposing of certain commercial development assets from the Wilson Bowden Developments portfolio generated cash for the Group.

Land spend during the year was largely restricted to fulfilment of pre-existing contractual commitments which could not be cancelled or deferred, although there was limited expenditure where the Group could source attractively priced opportunities on deferred terms. Land spend totalled £263.7m, a significant reduction on the spend of approximately £1.0 billion in 2008.

Although the Group's net debt has been reduced significantly during the year, future cash flows remain vulnerable given continued market uncertainty. Nevertheless, the Group has operated within its financial covenants throughout the last twelve months and, as explained in the basis of preparation on page 28, expects to continue to do so in the absence of a further downturn.

Driving up quality

The Group has continued to focus on the quality of the products it builds and on customer support during and after the sales process. The Group recently became, for the first time in its history, a Four Star builder in the Home Builders Federation 4th annual customer satisfaction survey. In addition, the Group has achieved 76 (2008: 73) National House-Building Council 'Pride in the Job' quality awards.

The Group continues to make progress to improve the design of its products, internally, externally and for the development as a whole. The Group has been awarded its first ever Building for Life award for the development at City Point in Brighton and Building for Life standard for the development at Tachbrook Triangle in Pimlico, London, by The Commission for Architecture and the Built Environment ('CABE'). The Building for Life awards are the National Standard for well-designed homes and neighbourhoods. The Group is continuing to improve the quality of design in its developments and has produced new internal design guidelines which seek to promote examples of good practice across the business.

Product innovation

Customer demand, economics and regulation continue to influence the nature of the Group's products. Houses made up 50.5% of Group completions, excluding central London (2008: 54.9%). As the Group replans sites, this proportion will rise further as apartments are replaced by new house types.

Design innovation will be particularly important in meeting environmental challenges of the future at the most economical cost. The Group's zero carbon house at the Building Research Establishment ('BRE') continues to be tested and management are pleased with its performance to date. Planning permission has been granted for the flagship zero carbon development at Hanham Hall and it is expected that work will start on site later this year.

Building on experience, the Group is currently developing a range of houses designed to meet the requirements of various aspects of the Code for Sustainable Homes. The Group believes that this work will provide both cost and reputational advantages for its products.

Commercial developments

Good progress has been made in the disposal of commercial developments assets from the Wilson Bowden Developments portfolio, with total cash proceeds of £181.1m received in the financial year ended 30 June 2009. Investments and development opportunities, with a net asset value of £55.9m as at 30 June 2009, have been retained and are being managed by a dedicated team with a view to realising value when the market improves. This team will also seek opportunities to create value from the wider Group portfolio including where there are mixed-use sites.

Government initiatives

The Government has put in place a number of measures during the year to support the housebuilding industry. On the demand side, HomeBuy Direct, after a slow start, is now making a significant difference to the Group's sales of shared equity products. Whilst Government support to the banking sector has been welcome, the Group has yet to see a material improvement in the availability of mortgage finance, in particular for the higher loan to value sector. Addressing this issue remains a priority to drive recovery.

On the supply side, the Government's commitment of £400m of funding, announced in the 2009 Budget, and the additional resources that have since been made available to the Kickstart programme were a welcome development for the industry and the Group. Final funding for the Group under the scheme will be determined later in the year.

Health and Safety

The Group considers health and safety to be of paramount importance. A Health and Safety Committee, including members of the Board, has been formed in order to provide further focus to the Group's strategy for improvement and to review overall Group performance. During the financial year the Group's commitment to health and safety resulted in an improvement to its reportable Injury Incidence Rate to 522 per 100,000 persons employed, a 20.4% decrease on the prior financial year. The Group is pleased to have achieved its objective to reduce the Injury Incidence Rate below 560 per 100,000 by 2010 one year ahead of target.

Planning for recovery

In addition to the measures to improve the short-term performance of the organisation, the Group is continuing to focus on the action needed to drive the longer-term performance of the business which will enable it to recover more quickly from the downturn when the market begins to improve - land and planning; sales and marketing; people; and efficient production.

Land and planning

If build activity scales back up in order to satisfy increased demand, it will be necessary to identify and secure investment opportunities in the land market, including strategic land, on appropriate terms to replenish the land bank to meet more normalised build levels. The Group intends to exploit fully its planning capabilities in order to extract maximum value from both existing and newly acquired sites.

Sales and marketing

The sales function is expected to benefit in an improving market from the efficiencies achieved during the downturn. A combination of a step up in training support and deployment of new technology on site will enable the Group to improve conversion rates. In addition, a shift in marketing focus away from deal-led advertising should support an improvement in sales performance.

People

The Group has continued to develop and invest in its people and their expertise, despite the downturn, in order to ensure appropriate and adequate resources are available to meet future demand. Increased professional and skilled resources, including in areas such as land buying, will be required and the Group's successful graduate and apprenticeship programmes will need to be relaunched.

Efficient production

The competition for suppliers and contractors is expected to intensify when activity levels increase and shortages of labour, appropriate skills and materials, as well as cost pressures, may result. Whilst the Group's strong procurement function and existing national procurement agreements with major suppliers will provide a firm base, it is committed to strengthening these relationships to ensure the support it needs as the market recovers.

Current outlook

The second half of the 2009 financial year has seen a degree of stability return to the UK housing market. The Company was able to maintain price levels after significant falls in the first half year, whilst achieving improved reservation rates per outlet.

This trend has continued since the start of the new financial year with reservation rates in the first eleven weeks both above budget and those in the same period of the previous year. Overall reservation prices are running ahead of internal expectations.

Forward sales at 30 June 2009 were £464.3m (2008: £697.6m) representing 3,328 plots (2008: 4,586 plots). As at 13 September 2009 forward sales had increased to £733.4m.

Total completions for the 2010 financial year are currently expected to be approximately 12,000, with a similar mix between social and private completions, but consistent with the replanning and build programme undertaken since the second half of the 2009 financial year, a shift in product mix towards a higher proportion of houses. The Group anticipates this shift will slightly improve average selling prices for the period.

Nevertheless, the encouraging signs being experienced are subject to continued uncertainty in the wider economic climate. There is unlikely to be a sustained recovery in the UK housing market until mortgage finance is more readily available particularly in the higher loan to value segment and consumer confidence is more fully restored.

Proposed Placing and Rights Issue

The Firm Placing and Rights Issue will:

substantially strengthen the Group's balance sheet and reduce its financial indebtedness;
allow the Group to develop its existing sites; and
improve the Group's competitive positioning and enable it to take advantage of land purchasing opportunities as and when they arise in a period of market recovery.

The amended financing arrangements will enable the Group to take advantage of opportunities that may arise in a recovering market, as well as to provide an appropriate alternative framework, should a further downturn arise.

Mark Clare

Group Chief Executive

23 September 2009

Business review

The Group has been operating in an extremely difficult market throughout the year. The deteriorating economic outlook and customer confidence coupled with constrained mortgage availability led to acceleration in the fall of house prices during the first half of the year. Whilst overall house prices remained relatively stable in the second half, mortgage finance remained difficult to obtain for many customers.

The Group delivered a profit from operations before exceptional items of £34.2m (2008: £550.2m). After inventory impairments of £499.5m (2008: £208.4m) and other net operating exceptional items of £20.0m (2008: £46.6m), the Group's loss from operations was £485.3m (2008: £295.2m profit).

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

Key performance indicator	Description	2009	Movement
Operational
Residential completion numbers	Number of residential units legally completed	13,202 (2008: 18,588)	(29.0%)	Discussed in the section entitled 'Housebuilding'
Average selling price	Revenue generated from the sale of homes divided by the number of completions	£157,200 (2008: £183,100)	(14.1%)	Discussed in the section entitled 'Housebuilding'
Land bank plots	Number of residential plots owned and controlled	68,000 (2008: 78,700)	(13.6%)	Discussed in the section entitled 'Land'
Customer satisfaction levels	The percentage of customers who would 'recommend us to a friend'	96% (2008: 88%)	9.1%	Discussed in the section entitled 'Quality and service'
Financial
Revenue		£2,285.2m (2008: £3,554.7m)	(35.7%)	Discussed in the Group Finance Director's review
(Loss)/profit from operations		(£485.3m) (2008: £295.2m)	(264.4%)	Discussed in the Group Finance Director's review
(Loss)/profit before tax		(£678.9m) (2008: £137.3m)	(594.5%)	Discussed in the Group Finance Director's review
(Loss)/earnings per share	(Loss)/profit after tax divided by the weighted average number of ordinary shares in issue	(135.8p) (2008: 25.0p)	(643.2%)	Discussed in the Group Finance Director's review
Net debt		£1,276.9m (2008: £1,650.6m)	(22.6%)	Discussed in the Group Finance Director's review
Corporate responsibility
Injury Incidence Rate ('IIR') reportable under The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 ('RIDDOR')	The number of accidents reportable under RIDDOR regulations per 100,000 persons employed	522 (2008: 656)	(20.4%)	Discussed in the section entitled 'Health and Safety'
Construction Skills Certification Scheme ('CSCS') carded workforce	Percentage of the workforce that are fully CSCS carded and qualified	95.4% (2008: 90%)	6.0%	Discussed in the section entitled 'People and expertise'
Carbon Dioxide Emission - Construction Process	Average kilogramme carbon dioxide emitted per unit legally completed	1,782 kgCO2/Unit (2008: 1,792 kgCO2/Unit)	(0.6%)	Discussed in the section entitled 'Environment and supply chain'
Brownfield development	Percentage of completions on brownfield land	70% (2008: 68%)	2.9%	Discussed in the section entitled 'Environment and supply chain'

Housebuilding

The immensely difficult market in which the housebuilding business was operating significantly affected the results for the year. Market conditions meant that fewer new sites were opened and accordingly the average number of sites from which the Group was operating fell by 15.3% to 503 (2008: 594). Across housebuilding sites visitor numbers per site per week were down 4.0% from the prior year at 1.69 (2008: 1.76). Against the backdrop of decreasing site and visitor numbers, the private reservation rate per site per week increased by 10.5% from 0.38 to 0.42.

Total housebuilding completions were 13,202 homes, a decrease of 29.0% on the prior year (2008: 18,588), and housebuilding revenue was £2,095.8m (2008: £3,414.2m). Of the total completions, private completions were 11,133, 24.8% lower than the prior year (2008: 14,803), and social completions were 2,069, 45.3% lower than the prior year (2008: 3,785). Social housing completions represented 15.7% of completions in the year, versus 20.4% in the prior year, predominantly due to the decline in the number of new sites being opened.

Over the year, total average selling price decreased by 14.1% to £157,200 (2008: £183,100). Private average selling prices decreased by 18.9% to £166,500 (2008: £205,400). The decrease in private average selling prices reflects the significant fall in realisable sales values in the first half partially offset by a change in site and product mix. Social average selling prices increased, as a result of mix changes, by 11.7% to £107,100 (2008: £95,900).

Housebuilding profit from operations before exceptional items was £38.8m (2008: £530.0m), giving an operating margin before exceptional items of 1.9% (2008: 15.5%). After inventory impairments of £431.5m (2008: £157.2m) and other operating exceptional items of £14.9m (2008: £15.9m), housebuilding loss from operations was £407.6m (2008: £356.9m profit).

The decrease in operating margin before exceptional items can be explained by a number of factors. First, underlying average selling prices, which exclude the impact of mix changes, have decreased by around 22%, which has also reduced margins by approximately 22%, reflecting the significant fall in sales prices, particularly during the second quarter. In addition, selling costs reduced margin by around 0.6%. Cost reduction programmes, the reversal of land impairments, mix changes, land sales and other income benefited margins by approximately 9.0%.

Throughout the year there has been a focus on build costs. The housebuilding business has continued to reduce build costs through changing specifications, improving build and technical processes, renegotiating subcontractor rates and reducing the cost of materials.

In addition to reductions in construction costs, there has been focus upon reducing the number of stock units held by the business and tight control of work in progress. Unreserved roof to complete units reduced by 61.1% to 2,008 (2008: 5,157) and unreserved completed properties reduced by 54.9% to 822 (2008: 1,821).

The option of part-exchange remains an effective selling tool, with 11.8% (2008: 12.3%) of the Group's completions in the year supported by the use of part-exchange incentives, but the housebuilding business continues to manage carefully its commitment to part-exchange properties. The number of unreserved part-exchange properties fell from 677 at 30 June 2008 to 150 on 30 June 2009, a reduction of 77.8%.

The housebuilding business has continued to reduce its overhead cost base throughout the year. Central functions and certain operating divisions have been re-organised, and seven operating divisions have either been closed or merged. During the year, restructuring costs of £22.0m have been incurred (2008: £15.9m).

Commercial developments

Conditions in the commercial property market continue to be extremely challenging, with pressure on rental incomes and, in turn, yields. Revenue from the commercial property business in the year totalled £189.4m (2008: £140.5m) and loss from operations before exceptional items was £4.6m (2008: £20.2m profit). Exceptional items were £73.1m (2008: £81.9m), consisting of £68.0m (2008: £51.2m) impairment of inventories and restructuring costs of £5.1m (2008: £nil) and impairment of goodwill and intangible assets of £nil (2008: £30.7m).

During the year ended 30 June 2009, the commercial developments business completed and sold the Eagles Meadow shopping centre in Wrexham, comprising 392,600 square feet of prime retail space, having secured lettings or offers for 90% of the scheme.

On industrial sites, the commercial developments business completed the sale of a portfolio of land and commercial property on nine sites in central England and the sales of 73,300 square feet to Terex Pegson and 19,400 square feet to Volvo at the Interlink development in Leicestershire.

With regard to the office portfolio, in February the commercial developments business completed construction of a forward-sold 102,700 square feet development in the heart of Manchester.

Following the sales made during the year, the commercial developments business, which includes Wilson Bowden Developments as well as a number of commercial properties in Scotland, retains investment and development opportunities, including certain town centre retail schemes and certain city centre office opportunities, with a net asset value of £55.9m with a view to realising value when the market improves.

Land

The Group land bank consists of both owned and controlled plots. At 30 June 2009, the Group had 68,000 (2008: 78,700) owned and controlled plots.

Land additions during the year were £219m (2008: £922m). At financial year 2009 completion rates, the Group's owned and controlled land bank is sufficient for 5.2 years (2008: 6.0 years). The Group has continued to invest in new land where contractually committed to do so or, more recently, where it has been able to secure attractively priced opportunities on deferred terms.

The average cost per plot in the Group's land bank was £44,000 at 30 June 2009 (2008: £44,400).

At 30 June 2009, detailed planning consents were in place on over 96.0% of land required to meet forecast activity for the next year (2008: 97.2%). In addition, the Group has 10,400 acres of strategic land (2008: 10,900 acres) which, until the necessary planning consents are obtained, is carried at current use value minimising the Group's exposure to risk from its strategic land holdings.

During the year, the Group has impaired its inventories by £499.5m (2008: £208.4m), of which £494.9m arose in the first half, further details of which are provided in the Group Finance Director's review on pages 19 and 20. Net of impairment, the Group's land bank has a carrying-value of £2,453.2m (2008: £3,117.5m).

Core strengths

The Group's core strengths of geographic and product diversity, quality and service and people and expertise remain robust, despite the more challenging operating environment.

Geographic and product diversity

The Group's housebuilding business operates throughout Britain, trading nationally under the Barratt Homes and David Wilson Homes brands and in the South East under the local Ward Homes brand. At 30 June 2009, the Group was selling from 434 sites (2008: 585 sites). Following divisional closures and mergers during the year, the Group now operates from 25 divisions. The Group, despite the cost reduction programme, has been careful to maintain both its product range and geographical reach throughout the year in order to spread its risks.

Each division has a dedicated land buying team with local knowledge and experience. These teams identify land suitable for development and secure planning permission to enable new homes to be built. This capability, combined with the Group's strategic land portfolio, is designed to ensure that the Group has sufficient land to meet customer demand now and in the future as and when the market improves.

The Group serves all sectors of the market, creating homes for sale and shared ownership and works with Government agencies, housing associations, and other agencies on a broad range of urban regeneration schemes. The Group's wide product range varies from homes for first time buyers, large family homes and high rise apartments to social housing and commercial development. Private selling prices during the 2009 financial year ranged from £47,500 to £2.3m, with an average selling price for the year of £166,500.

Throughout the year, there was a reduction in the demand for apartments, particularly in areas outside of London and the South East. The Group is currently replanning a number of sites replacing apartments with houses, which require less initial capital investment, to cater for this change. During the year, houses represented 50.5% (2008: 54.9%) of the Group's completions, excluding central London, although the Group expects site replans to increase the proportion of houses available on its sites in future.

The provision of social housing remains a key component of the Group's activities with 2,069 homes (2008: 3,785 homes) completed during the financial year ended 30 June 2009 at an average selling price of £107,100 (2008: £95,900). In December 2008, the Group was allocated approximately 3,000 units under the HomeBuy Direct scheme with an anticipated sales value of approximately £500m. As at 30 June 2009, 138 units had been legally completed, a further 172 had been reserved and there were 118 pending reservation. The Group is also pursuing other Government initiatives such as the Kickstart Housing Delivery programme announced in the 2009 Budget.

Quality and service

The Group is committed to offering the highest standards of quality and customer service. The Group seeks to develop its quality and service standards by listening to its customers, monitoring its performance and adopting best practice throughout the organisation. The Group continues to make progress in improving customer service and during the year, 96% of customers independently surveyed said they would recommend the Group to a friend, a satisfactory achievement against a backdrop of considerable change in the business and the market.

The Group's high quality homes have been recognised independently by the recent achievement of Four Star builder status in the Home Builders Federation 4th annual customer satisfaction survey and 76 'Pride in the Job' quality awards from the National House-Building Council.

The Directors believe that it is important to build high quality products which meet the needs of the Group's customers in order to make it a housebuilder of choice. The Group's sales and marketing teams continue to promote the Barratt Homes and David Wilson Homes brand names as brands which customers will associate with homes that they would want to live in, through the use of a variety of media channels.

The sales and marketing team have increased their efforts to promote the Group's brands in response to the economic downturn. More focused marketing campaigns have been introduced through various media channels (internet, radio and direct mail), targeted incentives and discounts have been offered to customers and tools such as shared equity products, part-exchange and other innovative offers have been utilised to support sales.

The Group also introduced new sales technology, I-Sales, in 90 of its sales centres across Britain during the 2009 financial year. I-Sales combines website capability with the Group's computerised customer database to allow sales staff to communicate with customers directly via e-mail. IߛSales is expected to be extended to all sales outlets during the current financial year.

The Group continues to use part-exchange as a selling tool for those customers who are finding it difficult to find a purchaser for their existing home. The Group's ability to sell part-exchange units is demonstrated by the reduction in the number of unreserved part-exchange properties from 677 as at 30 June 2008 to 150 as at 30 June 2009.

The Group also recognises the importance of assisting customers to find suitable financial assistance to purchase their new homes. The Group's Lender Relations Manager works closely with mortgage lenders in order to assure them that the homes built by the Group are of a high quality which they can confidently lend on and to gain their support for affordable housing schemes such as the HomeBuy Direct scheme. The Group has also introduced a transparency policy which requires all sales staff to determine the 'true' identity of potential customers and to identify the true net price of properties sold to mitigate its and the mortgage lenders' risk of inadvertently becoming involved in mortgage fraud.

The Group's procurement team negotiates national procurement agreements with all major suppliers and, as a result, it made further progress with its cost reduction programmes during the 2009 financial year, with improved efficiency and reductions in build costs, particularly in terms of technical specification. The Group has also made progress by renegotiating terms and pricing with its subcontractors at a local level.

People and expertise

The Group recognises that one of its key strengths is its people and that despite the current economic environment it is important to continue to develop and invest in its people and their expertise. The Group has a Personal Development Review process, which involves one-to-one formal reviews every six months with regular informal review meetings taking place in between. These meetings are used to deal with any issues that individuals may have as well as identifying any training and development requirements and setting individual achievement targets for the year ahead.

The Group runs a Graduate Recruitment and Development Programme consisting of a two year multi-disciplinary programme of both on-job and off-job modules. Thirty graduates have recently completed the first two year programme and have all secured full-time roles within the business. Five graduates are currently entering their second year programme. On account of the downturn in the sector, the Group decided not to increase the number of graduates in the programme in the 2009 financial year but aims to recruit further graduates under the programme as and when the sector recovers.

Succession planning is in place across the Group and there are currently four leadership development programmes in place to assist with the development of individuals as part of the succession plan.

The Group conducts an engagement survey on an annual basis in order to gauge staff perception of working for the Group. The survey, consisting of a number of questions on a variety of work-related topics (such as work-life balance, support from line managers and communication), is circulated to all members of staff who complete the survey anonymously. The Group's HR team prepare an engagement index based on the percentage of questions achieving the highest score. For the year ended 30 June 2009 the engagement index increased by 59% compared to the previous year.

'Get Recognised', the Group's motivational recognition programme, was developed and launched across the Group in late September 2008. The scheme retains the best aspects of previous awards schemes whilst adding new elements such as instant and peer group recognition. Instant recognition enables peers as well as managers to nominate a colleague or team member who has performed above and beyond expectations, and successful nominations result in individuals winning experiences up to £1,000 in value.

The Group has also set key performance indicators to measure the efficiency and effectiveness of the Group's people strategies and enable it to take appropriate action on staff turnover, retention, sickness, absence and capability.

The Group continues to make progress towards its target of a fully carded CSCS (Construction Skills Certification Scheme) workforce, including its subcontractors, by 2010. At present, 95.4% (2008: 90%) of the Group's workforce, including subcontractors, has achieved this target.

Corporate Responsibility

The Group is committed to the principles of Corporate Responsibility ('CR') and has publicly stated this commitment in its CR policy which is available on the Group's website, www.barrattdevelopments.co.uk.

The Group has established a CR steering group to oversee the development and implementation of CR objectives and targets. The steering group has identified and assessed the key CR risks facing the business, which include Environmental, Social and Governance ('ESG') risks facing the business and has developed six charters that will be used to manage these risks and deliver the Group's strategic CR objectives. The six charters are based around Environment, Health and Safety, Customers and People, Supply Chain and Communities. Operational functions within the business are responsible for each charter and integrate the Group's CR strategy into normal business operations. 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 on pages 15 to 18.

The Group publishes a CR report each year that explains its approach to CR and its management of CR governance and risk, and reports on the actions taken by the Group during the year to improve CR performance. CR disclosures in the Annual Report and Accounts and CR report, including disclosures on ESG matters, are based on information collected annually from the business and from regular management information. This information is independently reviewed internally and sample information is checked through the internal audit process.

The Group's CR reports are available on its website, www.barrattdevelopments.co.uk.

Environment and supply chain

The Group operates in a regulatory environment which is continuously changing, especially in respect of building regulations, planning requirements and environmental and sustainability requirements. The Government recently set a target for housebuilders to build all new homes with zero carbon emissions by 2016. In response to this the Group has established and follows a strong environmental agenda which emphasises the provision of low cost solutions to meet increasing environmental standards.

The Group has also been selected as the preferred developer of the Carbon Challenge Development at Hanham Hall near Bristol. This development, which is expected to be completed in 2013, will become one of the first large scale zero carbon communities in Britain and is being built in partnership with the Homes and Communities Agency. Each of the 195 units will also meet Level Six of the Government's Code for Sustainable Homes.

The Group is committed to undertaking research and development that will enable it to respond to the increasingly stringent design criteria for modern housing. In 2008, the Group was the first major housebuilder to build a home at the Building Research Establishment in Watford, the Green House, to Level Six, the highest level attainable, of the UK Government's Code for Sustainable Homes. The Green House is currently being scientifically tested in order to provide valuable information as to how the Group can design and construct zero carbon homes successfully and cost effectively.

The Group has an environmental charter in place which is reviewed and updated on an annual basis. The charter sets targets for the Group to manage its own environmental impacts, including energy and waste reduction, help its customers to improve the environment and improve the environmental standards of the homes that it builds.

The Group continues to build the majority of its developments on brownfield sites, with 70% (2008: 68%) of its completions in the year being built on brownfield land, which significantly exceeds the Government's target of 60%.

The Group assesses its performance against its environmental objectives by monitoring several performance indicators. The key performance indicator that the Group has chosen to monitor environmental performance is the average amount of carbon dioxide the Group emits during the construction process per unit completed. This metric increased from 1,429 kgCO2/unit in 2007 to 1,792 kgCO2/unit in 2008 as data collection methods were refined and has now reduced to 1,782 kgCO2/unit which provides a stable baseline from which to set targets for reduction. The Group also monitors the proportion of construction waste segregated for recycling on site, which this year improved to 73% (2008: 58%). In addition, the Group continually seeks to monitor the numbers of environmental complaints logged through its environmental management system and the number of developments with biodiversity action plans and flood risk assessments.

Health and Safety

The Group considers health and safety to be of paramount importance for its employees, customers and the public and has implemented a comprehensive Safety, Health and Environmental Management System across its business.

The Group has strategies and programmes, not only to raise awareness, but also to ensure that it is applying effective systems to reduce injury and ill health across the business. A Health and Safety Committee, including members of the Board, has been formed in order to provide further focus to the improvement strategy and to review overall Group performance. During the financial year ended 30 June 2009, the Group's commitment to health and safety reduced its reportable Injury Incidence Rate ('IIR') to 522 per 100,000 persons employed which is a 20.4% decrease on the rate of 656 per 100,000 reported last year. The IIR is a key performance indicator which the business uses to measure health and safety performance on a monthly and annual basis. The Group is pleased to have achieved a long-term objective to reduce the IIR below 560 per 100,000 by 2010, one year ahead of target, and remains committed to reducing the IIR year on year.

Injury Incidence Rate (per 100,000 persons employed)
2007	857*
2008	656
2009	522

*Reported as 643 in 2007. Restated to include all Wilson Bowden reportable incidents.

All divisions within the Group are certified to the health and safety standard OHSAS 18001 which is verified by a programme of internal and external auditing. This demonstrates the commitment to have consistent and appropriate standards in place and is complemented by the Group's own Safety, Health and Environmental Management System which has been fully reviewed during the year. The Group's in-house team of advisers has carried out over 4,000 monitoring visits to its developments and this has contributed to a significant increase in standards and the awareness of the Group's site teams. In the year ended 30 June 2009, divisions achieved an average of 96% compliance with the Safety, Health and Environmental Management System. In addition, a majority of the Group's Safety, Health and Environment managers are now certified to the Institute of Environmental Management and Assessment standard and are able to undertake regular environmental audits on the Group's sites.

During the financial year ended 30 June 2009, the Group continued to review and update management systems to mitigate certain key risks previously identified, being fire in high rise buildings, the integrity of reinforced concrete structures and the operation of tower cranes.

The investigation by the police and the Health and Safety Executive into the incident at Bedfont in February 2008, where carbon monoxide poisoning from a gas heating installation caused the death of one person and left another seriously ill, continues. The Group is working closely with the authorities during the investigation and awaits the outcome.

Communities

The Group aims to ensure that the developments it builds have a positive social and environmental impact on the people that live in and around them, and has committed through the Community Charter to improve its relationship with local people affected by new developments through consultation and engagement, tackling the issues around housing affordability and aims to ensure that standards of design are as high as possible.

The Group serves all sectors of the market, creating homes for sale and shared ownership and works with Government agencies, housing associations and other agencies on a broad range of urban regeneration schemes and completed 2,069 social homes during the year. In addition, in December 2008, the Group was allocated approximately 3,000 units under the HomeBuy Direct scheme, where the purchaser pays 70% or more of the value of the home and the Government and the Group pay the balance. During the year the Group has also provided its own shared equity products, which includes Dreamstart and Headstart, for 1,369 homes.

Customers and people

The Group's progress on customer and people related corporate responsibility areas has been covered in the relevant sections earlier in this review on pages 12 and 13.

Principal risks and uncertainties

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

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


Risk	Mitigation
Market
Response to changes in the macroeconomic environment including unemployment, buyer confidence, availability of mortgage finance for purchasers, interest rates and the impact of competitor pricing.	A weekly review is undertaken of key trading indicators, including reservations, sales rates, visitor levels, levels of incentives, competitor activity and cash flow projections. The Group seeks to provide mortgage providers with complete transparency regarding house purchase prices alongside any discounts or other incentives in order that they have appropriate information upon which to base their lending decision. The Group works with key mortgage lenders to ensure that products are appropriate wherever possible for its customers.
Design and construction defects may lead to cost overruns including remedial costs, and may reduce selling prices and adversely impact the Group's reputation.	The Group has a comprehensive approach to quality, service and customer care encapsulated in the 'Forward through Quality' initiative and customer care code of practice.
Liquidity
Availability of sufficient borrowing facilities to enable the servicing of liabilities as they fall due.	The Group actively maintains a mixture of long-term and medium-term committed facilities that are designed to ensure that it has sufficient available funds for operations. The Group's borrowings are typically cyclical throughout the financial year and peak in April and May and October and November of each year, as these are the points in the year when the Group has the highest working capital requirements. Accordingly, the Group maintains sufficient headroom to cover these requirements. On a normal operating basis the Group has a policy of maintaining headroom of £250m of available committed facilities. The Group has in place a comprehensive detailed regular forecasting process encompassing profitability, working capital and cash flow that is fully embedded in the business. These forecasts are further stress tested at a Group level on a regular basis to ensure that adequate headroom within facilities and banking covenants is maintained.
Inability to obtain surety bonds.	The Group actively maintains a number of surety facilities that are designed to ensure that it has sufficient bonds available. The Group has a comprehensive detailed regular forecasting process for surety bond requirements.
Inability of the Group to refinance its facilities as they fall due.	The Group has a policy that the maturity of its committed facilities and private placement notes in aggregate is at least two years on average with a target of three years.
Inability of the Group to comply with its borrowing covenants.	The Group is in compliance with its borrowing covenants and at the date of approval of the 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 the financial statements. The Board is today announcing a fully underwritten Placing and Rights Issue to raise gross proceeds of approximately £720m, together with amended financing arrangements which will come into effect upon successful completion of the Placing and Rights Issue. The amended financing arrangements will enable the Group to take advantage of opportunities that may arise in a recovering market, as well as to provide an appropriate alternative framework, should a further downturn arise. As explained on pages 28 and 29, while the existing financing arrangements apply, if conditions in the wider UK economy, as they relate to the housebuilding sector, were to decline below that which has been assumed in the Group's forecasts during the current financial year (and notwithstanding further management actions to both conserve and generate cash, including, if necessary, by making land sales) then there is a risk that the Group might generate lower than anticipated revenues, or cash, or require further write-downs in the value of the Group's assets. This risk may result in the Group being unable to comply with its existing covenant package during the current financial year. If the amended financing arrangements do not come into effect, the Group will need to renegotiate the terms of its existing financing arrangements during the current financial year in order to secure revolving credit facilities of an appropriate duration so as to give the Directors increased confidence that they will be able to prepare the accounts in respect of such a period on a going concern basis and also to secure a covenant package across all its financing arrangements that provides greater flexibility.
People
Ability of the Group to attract, retain and develop a sufficiently skilled and experienced workforce.	The Group has a comprehensive Human Resources policy in place which includes apprentice schemes, a Graduate Recruitment Programme, succession planning and training schemes tailored to each discipline. The Group has set itself the target of having a fully CSCS carded and qualified workforce by 2010.
Underfunding of the Group's obligations in respect of the defined benefit pension scheme.	An actuarial valuation is conducted every three years. The Group reviews this and considers what additional contributions are necessary to make good this shortfall. To limit the risk further, with effect from 30 June 2009, the scheme ceased to offer future accrual of defined benefit pensions for current employees and the link between accrued benefits and future salary increases was removed.
Subcontractors and suppliers
Shortages or increased costs of materials and skilled labour could increase costs and delay construction.	The Group adopts a professional approach to site management and seeks to partner with its supply chain.
Failure of a key supplier or inability to secure supplies upon appropriate credit terms.	The Group has a policy of having multiple suppliers for both labour contracts and material supplies and contingency plans should key suppliers fail.
Land
Securing sufficient land of appropriate size and quality to provide profitable growth subject to the available borrowing facilities.	Each division produces a detailed site-by-site monthly analysis of the amount of land currently owned, committed and identified. These are consolidated for regular review at Board level. In addition, each operating division holds weekly land meetings. Every land acquisition is subject to a formal appraisal procedure and is required to achieve an overall Group defined hurdle rate of return.
The timing of conditional land purchase contracts becoming unconditional is uncertain. Unexpected changes in contract status may result in additional cash outflow for the Group.	Each division has a site-by-site detailed short-term and medium-term forecasting process including sensitivity scenarios.
Falls in house prices or land values or a failure of the housing market to recover could lead to further impairments of the Group's inventories, goodwill and intangible assets.	The Group's internal systems clearly identify the impact of sales price changes on the margin achievable. Biannual asset impairment reviews are performed.
The market for land can be illiquid and therefore it may be difficult to sell or trade land if required. Where land is sold, there is a risk that the proceeds may not be received from the counterparty.	The Group's internal forecasting process is able to identify the impact of these sensitivities explicitly.
Government regulation
Changes in Government policy towards the housebuilding industry.	The Group consults with the UK Government both directly and through industry bodies to highlight potential issues.
The housebuilding industry is subject to extensive and complex regulations and an increasingly stringent regulatory environment including planning and technical requirements.	The Group has considerable in-house technical and planning expertise devoted to complying with regulations and achieving implementable planning consents.
Consequence of changes in tax legislation.	The Group has adopted a low risk strategy to tax planning and potential and actual changes in tax legislation are monitored by both industry experienced in-house finance teams and external tax advisers.
Construction
Failure to identify and achieve key construction milestones, including the impact of adverse weather conditions, could delay construction or increase costs.	The Group's weekly reporting identifies the number of properties at key stages of construction. Projected construction rates are evaluated as part of the monthly forecasting cycle.
Large development projects, including commercial developments are complex and capital intensive and changes may negatively impact upon cash flows or returns.	Development projects, including returns and cash flows, are monitored regularly by divisional management teams.
Failure to promptly identify cost overruns.	The total costs on every site in progress are evaluated at least quarterly and reviewed by the divisional management teams.
Cost reduction measures may adversely affect the Group's business or its ability to respond to future improvements in market conditions.	In parallel to reducing costs during the downturn a Main Board level committee has developed a 'Planning for Recovery' programme.
Exposure to environmental liabilities and consideration of the impact of construction schemes upon the environment and social surroundings.	The Group regularly monitors a number of environmental impact indicators. The results of this will appear in the Group's Corporate Social Responsibility Report.
Litigation and uninsured losses.	The Group has an in-house legal department and consults with external lawyers as appropriate. The Group maintains insurance cover for all main risks of the Group.
Health and safety
Health and safety.	The Group has a dedicated health and safety audit department which is independent of the management of the operating divisions.
IT
Failure of the Group's IT systems, in particular those relating to surveying and valuation, could adversely impact the performance of the Group.	The Group has a fully tested disaster recovery programme in place.

Details of the Group's management of liquidity risk, market risk, credit risk and capital risk in relation to financial instruments is provided in note 15 on pages 49 to 52.

Group Finance Director's review

Results

It has been a very challenging year for the Group. During the first half, conditions became immensely difficult as a result of the deteriorating economic outlook and the resulting contraction in the availability of mortgage finance and decline in customer confidence levels. Sales were only achievable at substantially reduced prices. In the second half, the Group started to experience some pricing stability, albeit at reduced levels, and more acceptable sales rates allowing the Group to achieve its cash targets. Against this backdrop, the Group has had to balance the priorities of delivering sales, reducing costs and generating cash. Overall, the Group made a pre-tax loss for the year after exceptional items of £678.9m (2008: £137.3m profit).

Performance metrics are as follows:

Revenue decreased by 35.7% to £2,285.2m (2008: £3,554.7m).
Total completions decreased by 29.0% to 13,202 (2008: 18,588).
Profit from operations before operating exceptional items(1) decreased by 93.8% to £34.2m (2008: £550.2m).
Operating exceptional items(1) comprised an impairment of inventories of £499.5m (2008: £208.4m), a pension curtailment gain of £7.1m (2008: £nil) and reorganisation costs of £27.1m (2008: £15.9m plus impairments of goodwill and intangibles of £30.7m)
Loss from operations was £485.3m (2008: £295.2m profit).
Operating margin before operating exceptional items(1) was 1.5% (2008: 15.5%).
Adjusted loss per share before exceptional items(2) was 23.8p (2008: 79.6p earnings).
Basic loss per share was 135.8p (2008: 25.0p earnings).

Segmental analysis

The Group's operations comprise two segments, housebuilding and commercial developments. These segments reflect the different product offerings and market risks facing the business.

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

		Commercial
	Housebuilding	developments	Total
	£m	£m	£m
Revenue	2,095.8	189.4	2,285.2
Profit/(loss) from operations before operating exceptional items(1)	38.8	(4.6)	34.2
Loss from operations	(407.6)	(77.7)	(485.3)

An analysis of the operational performance of these segments is provided within the Business review on pages 9 to 11.

(1) Operating exceptional items, comprising impairment of inventories, pension curtailment gain and restructuring costs were £519.5m (2008: £255.0m including £30.7m impairment of goodwill and intangible assets) of which £446.4m (2008: £173.1m) related to the housebuilding business and £73.1m (2008: £81.9m) related to the commercial developments business.

(2) Exceptional items comprise operating exceptional items of £519.5m (2008: £255.0m), make-whole fees on redemption of private placement notes of £13.3m (2008: £nil) and impairment of inventories relating to investments accounted for using the equity method of £2.0m (2008: £nil).

Exceptional items

Operating exceptional items

i) Impairment of land and work in progress

The Group recognised a total impairment of land and work in progress of £499.5m (2008: £208.4m) during the year. This impairment comprised £431.5m (2008: £157.2m) related to the housebuilding business and £68.0m (2008: £51.2m) related to the commercial developments business.

The Group completed site-by-site impairment reviews using valuations incorporating forecast sales rates and average selling prices that reflected both current and anticipated trading conditions during both the first and second half. At 31 December, the impairment of £494.9m reflected difficult trading conditions that the Group experienced during the second quarter. During the second half, average selling prices across the Group's developments were in line with those incorporated into the impairment review at 31 December and therefore overall no further impairment was required in the housebuilding business, although there were gross impairment reversals and charges of £120.9m due to performance variations across housebuilding sites. An additional impairment of £4.6m was made against an office development within the commercial developments business.

ii) Restructuring costs

During the year, the Group closed seven trading divisions, restructured Wilson Bowden Developments and continued to adjust the size of its operations in light of the difficult trading conditions resulting in £27.1m (2008: £15.9m plus impairments of goodwill and intangibles of £30.7m) of restructuring costs predominantly related to redundancies and office closures.

iii) Pension curtailment

The Group has recognised a curtailment gain in the income statement of £7.1m (2008: £nil) related to the defined benefit pension scheme. This arose due to the cessation of future accrual of defined benefit pensions for current employees and the associated removal of the link between accrued benefits and future salary increases and redundancies made during the year.

Financing exceptional item

During the year the Group incurred charges of £13.3m in respect of the make-whole fee which was triggered on the repayment of £36.7m of private placement notes.

Impairment of inventories relating to joint venture investments

At 30 June 2009, the Group conducted an impairment review of its share of the inventories included within its investments accounted for using the equity method. This resulted in an impairment charge for the year of £2.8m with a related deferred tax credit of £0.8m.

Tax impact of exceptional items

The tax impact of the operating and financing exceptional items is £148.3m (2008: £66.8m).

Tax

The Group's tax credit for the year was £210.3m (2008: £50.9m charge), an effective rate of 31.0% (2008: 37.1%). This is higher than the standard rate of 28% mainly due to adjustments in respect of previous years, which include a review of the Group's historical contaminated land relief claims.

During the year, the Group received tax refunds totalling £51.3m mainly related to tax overpaid for 2008 due to the inventory impairments required at 30 June 2008. Since the year end, the Group has received repayments of over £40m of corporation tax related to the carry back of losses from the current year.

Dividend

The Board suspended dividend payments in June 2008 as part of its cash conservation policy. The Board remains focused on strengthening the balance sheet and conserving cash. The existing terms of the Group's committed bank facilities and private placement notes also impose certain restrictions on the payment of dividends. In light of these restrictions, no final dividend will be paid in respect of the financial year ended 30 June 2009.

The Board is committed to reinstating the payment of dividends and will do so when it becomes appropriate and permissible to do so.

Losses recognised in equity

During the year £70.4m of losses have been recognised in equity (2008: £4.0m) predominantly relating to losses on interest rate swaps.

Balance sheet

The net assets of the Group decreased by £536.2m to £2,331.6m reflecting the loss after tax for the year of £468.6m.

Significant movements in the balance sheet include:

The Group's book value of land was £2,453.2m (2008: £3,117.5m), a decrease of £664.3m. This decrease includes land additions of £219m offset by land usage and the impairment of land explained above. During the current year, the Group reduced its actual expenditure on land following the deterioration in the market to £263.7m from the expenditure of approximately £1.0 billion in the prior year.
Work in progress of the Group at 30 June 2009 was £1,044.2m (2008: £1,569.3m). The fall of £525.1m reflects the Group's strategy of decreasing stock holdings and generating cash to reduce debt. At 30 June 2009, unreserved completed units were down 54.9% from 1,821 units in the prior year to 822 units.
Part-exchange properties and other inventories were £43.4m (2008: £143.2m) with the decrease reflecting the increased focus upon managing the working capital impact of this highly effective sales tool. At 30 June 2009, owned unreserved units had fallen to 150 units from 677 in the prior year.
Group net debt decreased by £373.7m to £1,276.9m over the full year. Due to the renewal of the Group's borrowing facilities during the year only £8.5m (2008: £653.7m) is classified as a current liability at 30 June 2009.
Goodwill and intangible assets remained at £892.2m as the annual impairment review of the entire housebuilding business indicated that no impairment was required.
The pension fund deficit on the Barratt Developments defined benefit pension scheme reduced by £5.7m in the year to £31.5m after adjusting for the impact of the Group's change of accounting policy to recognise immediately actuarial gains and losses following the curtailment of the scheme. The closure of the scheme with effect from 30 June 2009 with the resulting cessation of future accrual of defined benefit pensions for current employees and the associated removal of the link between accrued benefits and future salary increases contributed £7.1m to this reduction.
The Group has recognised a corporation tax asset of £50.6m and a deferred tax asset of £127.3m. The Group's deferred tax asset has increased by £159.4m in the year including £130.1m due to trading losses that will be carried forward to offset the tax liabilities arising from future trading profits.
Trade and other payables decreased by £298.1m to £1,107.8m reflecting the decreased activity of the Group.

Cash flow

Group net debt at the year end was £1,276.9m (2008: £1,650.6m). The decrease in net debt is explained by the tables below.

		Half year	Half year		Half year	Half year
	Year ended	ended	ended	Year ended	ended	ended
	30 June	31 December	30 June	30 June	31 December	30 June
	2009	2008	2009	2008	2007	2008
	£m	£m	£m	£m	£m	£m
Net debt at start of period	(1,650.6)	(1,650.6)	(1,422.8)	(1,301.2)	(1,301.2)	(1,738.5)

Operating cash flow	511.8	307.8	204.0	86.7	(248.2)	334.9
Tax and net interest paid	(100.3)	(53.0)	(47.3)	(245.4)	(102.0)	(143.4)
Free cash flow	411.5	254.8	156.7	(158.7)	(350.2)	191.5

Acquisitions	(4.0)	(3.9)	(0.1)	(31.0)	1.1	(32.1)
Investments in joint ventures	(20.7)	(24.5)	3.8	(47.2)	(6.9)	(40.3)
Net fixed asset proceeds/(purchases)	0.2	1.4	(1.2)	16.9	2.0	14.9
Make-whole fee on redemption of private placement notes	(13.3)	-	(13.3)	-	-	-
Dividends	-	-	-	(126.0)	(83.8)	(42.2)
Share issue and disposals	-	-	-	0.5	0.5	-
Cancelled swaps	-	-	-	(3.6)	-	(3.6)
Purchase of shares for LTPP awards	-	-	-	(0.3)	-	(0.3)

Net debt at end of period	(1,276.9)	(1,422.8)	(1,276.9)	(1,650.6)	(1,738.5)	(1,650.6)

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

		Half year	Half year		Half year	Half year
	Year ended	ended	ended	Year ended	ended	ended
	30 June	31 December	30 June	30 June	31 December	30 June
	2009	2008	2009	2008	2007	2008
	£m	£m	£m	£m	£m	£m
Operating profit before exceptional items1	34.2	16.6	17.6	550.2	274.9	275.3
Operating exceptional items1	(519.5)	(512.4)	(7.1)	(255.0)	(7.2)	(247.8)
Total non-cash items	503.0	512.4	(9.4)	225.8	(10.8)	236.6
Land, work in progress and other inventories	795.5	516.3	279.2	(230.5)	(432.0)	201.5
Other working capital	(301.4)	(225.1)	(76.3)	(203.8)	(73.1)	(130.7)
Operating cash flow	511.8	307.8	204.0	86.7	(248.2)	334.9
Net interest paid	(151.6)	(84.3)	(67.3)	(130.6)	(46.6)	(84.0)
Taxation	51.3	31.3	20.0	(114.8)	(55.4)	(59.4)
Free cash flow	411.5	254.8	156.7	(158.7)	(350.2)	191.5

1. Operating exceptional items, comprising impairment of inventories, pension curtailment gain and restructuring costs were £519.5m (2008: £255.0m including £30.7m impairment of goodwill and intangible assets) of which £446.4m (2008: £173.1m) related to the housebuilding business and £73.1m (2008: £81.9m) related to the commercial developments business.

The decrease in net debt of £373.7m during the year is made up of inflows of £227.8m in the first half and £145.9m in the second half. The inflows reflect the disposal of assets from the Wilson Bowden Developments portfolio, tax refunds and reduced expenditure on land and work in progress which offset declining revenues.

The Group continues to be committed to reducing net debt over the short-term and has focused the business upon maximising cash generation whilst ensuring that it maintains an appropriate balance between volume and margin.

Treasury

The Board approves treasury policies and certain day-to-day treasury activities have been delegated to a Treasury Operating Committee that in turn regularly reports to the Board. The Group operates a centralised treasury function which operates within guidelines established by the Board and the Treasury Operating Committee.

The Group has a conservative treasury risk management strategy which includes a target that 60-80% of the Group's median gross borrowings calculated on the latest three-year plan should be at fixed rates of interest. At 30 June 2009, 68.4% of the Group borrowings were fixed (2008: 61.6%). Group interest rates are fixed using both swaps and fixed rate debt instruments.

Borrowing facilities

In July 2008, the Group entered into a new £400m three-year committed revolving credit facility agreement. Around the same time, the Group also agreed an amendment to the Group's existing £400m committed revolving credit facility agreement which extended the maturity date of £350m of the total commitments under that facility to 8 July 2011 to correspond to the expiry date of the new facilities (with £50m of commitments still scheduled to expire in February 2010). The Group redeemed £600m of its existing term loan facilities during the first half of which £200m was ahead of schedule due to the Group's strong cash generation. The Group also repaid £36.7m of private placement notes on 12 January 2009. At this time, £13.3m of additional private placement notes were issued due to the make-whole requirements that apply under the private placement agreements.

In August 2008, the Group agreed to amend the financial covenants that apply under all of the Group's committed bank facilities and private placement notes. The amendments suspended the application of the interest cover test and introduced a cash flow cover test that would apply in its place. Amendments were also made to the tangible net worth and gearing covenants. The average net debt during the year to 30 June 2009 was approximately £1.8 billion, with net finance costs of 9.4%. Net finance costs following the amended financing arrangements coming into effect are currently expected to be around 8% of average net debt for the 2010 financial year.

Capital requirements

The financial performance of the Group is dependent upon the wider economic environment in which the Group operates in particular changes in the macroeconomic climate including buyer confidence, availability of mortgage finance for our purchasers, interest rates and the impact of competitor pricing. At 30 June 2009, the net debt position of the Group was £1,276.9m with headroom of £800.0m under the Group's committed facilities. The Group is in compliance with its loan covenants and at the date of approval of the 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 the financial statements.

The Board is today announcing a fully underwritten Placing and Rights Issue to raise gross proceeds of approximately £720m, together with amended financing arrangements which will come into effect upon successful completion of the Placing and Rights Issue. The amended financing arrangements will enable the Group to take advantage of opportunities that may arise in a recovering market, as well as to provide an appropriate alternative framework, should a further downturn arise.

However, as explained on pages 28 and 29, while the existing financing arrangements apply, if conditions in the wider UK economy, as they relate to the housebuilding sector, were to decline below that which has been assumed in the Group's forecasts during the current financial year (and notwithstanding further management actions both to conserve and generate cash, including, if necessary, by making land sales) then there is a risk that the Group might generate lower than anticipated revenues, or cash, or require further write-downs in the value of the Group's assets. This risk may result in the Group being unable to comply with its existing covenant package during the current financial year. If the amended financing arrangements do not come into effect, the Group will need to renegotiate the terms of its existing financing arrangements during the current financial year in order to secure revolving credit facilities of an appropriate duration so as to give the Directors increased confidence that they will be able to prepare the accounts in respect of such a period on a going concern basis and also to secure a covenant package across all its financing arrangements that provides greater flexibility.

In conclusion

During the year, the Group has had to balance its priorities of maximising sales, reducing costs and managing cash to reduce debt. These were achieved despite the difficult conditions in the wider UK economy and net debt was decreased by £373.7m. The Group is committed to reducing net debt further and remains focused on maximising cash generation whilst ensuring that it maintains an appropriate balance between volume and margin.

David Thomas

Group Finance Director

23 September 2009

Condensed consolidated income statement

for the year ended 30 June 2009

		2009	2009	2009	2008	2008	2008
		Before	Exceptional		Before	Exceptional
		exceptional	items		exceptional	items
		items	(note 6)		items	(note 6)
	Note	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	5	2,285.2	-	2,285.2	3,554.7	-	3,554.7
Cost of sales		(2,155.8)	(499.5)	(2,655.3)	(2,872.5)	(208.4)	(3,080.9)
Gross profit/(loss)		129.4	(499.5)	(370.1)	682.2	(208.4)	473.8
Administrative expenses		(95.2)	(20.0)	(115.2)	(132.0)	(46.6)	(178.6)
Profit/(loss) from operations	5	34.2	(519.5)	(485.3)	550.2	(255.0)	295.2
Finance income	7	18.0	-	18.0	12.8	-	12.8
Finance costs	7	(195.3)	(13.3)	(208.6)	(168.1)	-	(168.1)
Net finance costs	7	(177.3)	(13.3)	(190.6)	(155.3)	-	(155.3)
Share of post-tax loss from joint ventures		(1.0)	(2.0)	(3.0)	(2.6)	-	(2.6)
(Loss)/profit before tax		(144.1)	(534.8)	(678.9)	392.3	(255.0)	137.3
Tax	8	62.0	148.3	210.3	(117.7)	66.8	(50.9)
(Loss)/profit for the year from continuing operations		(82.1)	(386.5)	(468.6)	274.6	(188.2)	86.4

(Loss)/profit for the year attributable to equity shareholders		(82.1)	(386.5)	(468.6)	274.6	(188.2)	86.4

(Loss)/earnings per share from continuing operations
Basic	10			(135.8)p			25.0p
Diluted	10			(135.8)p			24.9p

Condensed consolidated statement of recognised income and expense

for the year ended 30 June 2009

		2009	2008
			(restated*)
	Note	£m	£m
(Loss)/profit for the year		(468.6)	86.4
Losses on revaluation of available for sale financial assets	18	-	(4.6)
Losses on cash flow hedges	18	(62.8)	(11.7)
Actuarial (losses)/gains on defined benefit pension schemes1	18	(14.1)	20.1
Losses on cancelled interest rate swaps deferred in equity	18	-	(3.6)
Tax credit/(charge) on items taken directly to equity1	18	21.8	(3.0)
Net loss recognised directly in equity		(55.1)	(2.8)
Amortisation of losses on cancelled interest rate swaps deferred in equity	18	0.4	0.1
Transfer to income statement on cash flow hedges	18	(21.7)	(1.8)
Tax credit on items taken directly to equity	18	6.0	0.5
Net loss transferred		(15.3)	(1.2)
Total (expense)/income recognised for the year attributable to equity shareholders	18	(539.0)	82.4
Effects of changes in accounting policy attributable to equity shareholders		(10.1)	14.5

1Due to a change in accounting policy, actuarial gains related to the defined benefit plan were recognised directly in retained earnings with prior periods adjusted as indicated in the Accounting policies note. Included in tax on items taken directly to equity are a deferred tax charge of £5.6m and credit of £4.0m for the years ended 2008 and 2009 respectively.

* The results for the year ended 30 June 2008 have been restated as explained in note 3.

Condensed consolidated balance sheet

at 30 June 2009

		2009	2008
			(restated*)
	Note	£m	£m
Assets Non-current assets
Other intangible assets		100.0	100.0
Goodwill	11	792.2	792.2
Property, plant and equipment		9.9	15.9
Investments accounted for using the equity method		83.2	65.5
Available for sale financial assets		86.5	66.9
Trade and other receivables		1.5	2.8
Deferred tax assets		127.3	-
Derivative financial instruments - swaps	14	31.9	10.1
		1,232.5	1,053.4
Current assets
Inventories	12	3,540.8	4,830.0
Trade and other receivables		41.5	100.9
Cash and cash equivalents	13	178.8	32.8
Current tax assets		50.6	20.6
		3,811.7	4,984.3
Total assets		5,044.2	6,037.7

Liabilities
Non-current liabilities
Loans and borrowings	13	(1,475.6)	(1,031.5)
Trade and other payables		(245.4)	(242.1)
Retirement benefit obligations	16	(31.5)	(37.2)
Deferred tax liabilities		-	(32.1)
Derivative financial instruments - swaps	14	(89.2)	(9.5)
		(1,841.7)	(1,352.4)
Current liabilities
Loans and borrowings	13	(8.5)	(653.7)
Trade and other payables		(862.4)	(1,163.8)
		(870.9)	(1,817.5)
Total liabilities		(2,712.6)	(3,169.9)

Net assets		2,331.6	2,867.8

Equity
Share capital	17	34.7	34.7
Share premium		206.6	206.6
Merger reserve		1,109.0	1,109.0
Hedging reserve		(63.9)	(3.4)
Retained earnings		1,045.2	1,520.9
Total equity	18	2,331.6	2,867.8

*The results for the year ended 30 June 2008 have been restated as explained in note 3.

Condensed consolidated cash flow statement

for the year ended 30 June 2009

		2009	2008
			(restated*)
	Note	£m	£m
Net cash inflow/(outflow) from operating activities	19	407.8	(168.6)

Cash flows from investing activities Purchase of property, plant and equipment		(2.1)	(5.4)
Proceeds from sale of property, plant and equipment		2.3	22.3
Acquisition of subsidiaries net of cash acquired	20	(4.0)	(31.0)
Investments accounted for using the equity method		(20.7)	(47.2)
Make-whole fee on redemption of private placement notes		(13.3)	-
Interest received		3.7	9.9
Net cash outflow from investing activities		(34.1)	(51.4)

Cash flows from financing activities
Proceeds from issue of share capital		-	0.5
Dividends paid	9	-	(126.0)
Cancelled swaps		-	(3.6)
Purchase of shares for LTPP awards		-	(0.3)
Loan (repayments)/drawdowns		(227.7)	200.1
Net cash (outflow)/inflow from financing activities		(227.7)	70.7

Net increase/(decrease) in cash and cash equivalents		146.0	(149.3)

Cash and cash equivalents at beginning of year		32.8	182.1

Cash and cash equivalents at end of year		178.8	32.8

*The categorisation of various items within the cash flow statement for the year ended 30 June 2008 has been reclassified for consistency of presentation with the year ended 30 June 2009 as described in note 19.

Notes to the condensed consolidated financial statements

for the year ended 30 June 2009

1. Cautionary statement

The Chairman's statement, Group Chief Executive's statement, Business review and Group Finance Director's review contained in this Annual Results Announcement, including the principal risks and uncertainties set out on pages 3 to 23 have been prepared by the Directors in good faith based on the information available to them up to the time of their approval of this report solely for the Company's shareholders as a body, so as to assist them in assessing the Group's strategies and the potential for those strategies to succeed and accordingly should not be relied on by any other party or for any other purpose and the Company hereby disclaims any liability to any such other party or for reliance on such information for any such other purpose.

This Annual Results Announcement has been prepared in respect of the Group as a whole and accordingly matters identified as being significant or material are so identified in the context of Barratt Developments PLC and its undertakings in the consolidation taken as a whole.

2. Basis of preparation

Whilst the financial information included in this Annual Results Announcement has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS'), this announcement does not itself contain sufficient information to comply with IFRS. Full financial statements that comply with IFRS are included in the 2009 Annual Report and Accounts which are available at www.barrattdevelopments.co.uk.

The accounting policies adopted are consistent with those followed in the preparation of the Group's 2009 Annual Report and Accounts which, with the exception of the change in pensions accounting policy (see note 3) are unchanged from those adopted in the Group's 2008 Annual Report and Accounts. A summary of the more significant Group accounting policies is set out below.

These condensed consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of available for sale financial assets, derivative financial instruments and share-based payments. The preparation of condensed financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of the amounts, actual results may ultimately differ from those estimates. The most significant estimates made by the Directors in these condensed financial statements are set out in 'Critical accounting judgements and key sources of estimation uncertainty'.

Going concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

The Group's business activities, together with factors which the Directors consider are likely to affect its future development, financial performance and financial position are set out in the Group Chief Executive's statement on pages 5 to 8 and the Business review on pages 9 to 18. The material financial and operational risks and uncertainties that may impact the Group's performance and their mitigation are outlined on pages 15 to 18 and financial risks including liquidity risk, market risk, credit risk and capital risk are outlined in note 15.

The financial performance of the Group is dependent upon the wider economic environment in which the Group operates. As explained in the Principal risks on pages 15 to 18, factors that particularly impact upon the performance of the Group include changes in the macroeconomic environment including buyer confidence, availability of mortgage finance for our purchasers, and interest rates. At 30 June 2009, the net debt position of the Group (as shown in note 13) was £1,276.9m, with loans and borrowings of £1,484.1m with headroom of £800.0m to the Group's committed facilities. The Group remains in compliance with its financial covenants and at the date of approval of the 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 the financial statements.

As noted in note 23, on 23 September 2009, the Company entered into an agreement with UBS Limited, Credit Suisse Securities (Europe) Limited, HSBC Bank plc, Barclays Bank plc, Lloyds TSB Bank plc and RBS Hoare Govett Limited to fully underwrite a £720.5m equity issue, to be structured as a Placing and a Rights Issue, to strengthen the Group's balance sheet and reduce its financial indebtedness. In conjunction with the Placing and Rights Issue, the Company has negotiated certain amendments to the terms of the Group's existing financing arrangements. The amended financing arrangements will only come into effect if a minimum of £450m total gross proceeds are raised pursuant to the Placing and Rights Issue and, before 31 December 2009, the Company reduces its borrowings under the Wilson Bowden acquisition facilities and the Group's private placement notes by 40% such that the total amount of indebtedness thereunder does not exceed £900m (excluding any indebtedness under make-whole notes that are issued as a consequence of the prepayment). The Company has put in place arrangements to effect such prepayments following it becoming entitled to the net proceeds of the Placing and Rights Issue. Upon such prepayments being made, £50m of undrawn commitments under both of its Revolving Credit Facilities will automatically be cancelled so that they do not exceed £700m. The Directors expect the amended financing arrangements will enable the Group to take advantage of opportunities that may arise in a recovering market, as well as provide an appropriate alternative framework, should a further downturn arise.

Completion of the Placing and Rights Issue is conditional upon shareholder approval at the General Meeting scheduled to be held on 19 October 2009, listing of the shares to be issued pursuant to the Placing and Rights Issue and upon the underwriting agreement not being terminated in accordance with its terms prior to the General Meeting. If the Placing and Rights Issue do not proceed the amended financing arrangements will not come into effect. Until such time as any subsequent renegotiation is concluded, the existing financing arrangements will continue to apply. While the existing financing arrangements apply, if conditions in the wider UK economy, as they relate to the housebuilding sector, were to decline below that which has been assumed in the Group's forecasts during the current financial year (and notwithstanding further management actions to both conserve and generate cash, including, if necessary, by making land sales) then there is a risk that the Group might generate lower than anticipated revenues, or cash, or require further write-downs in the value of the Group's assets. This risk may result in the Group being unable to comply with its existing covenant package during the current financial year. If the amended financing arrangements do not come into effect, the Group will need to renegotiate the terms of its existing financing arrangements during the current financial year in order to secure revolving credit facilities of an appropriate duration so as to give the Directors increased confidence that they will be able to prepare the accounts in respect of such a period on a going concern basis and also to secure a covenant package across all its financing arrangements that provides greater flexibility.

The above risks, that the amended financing arrangements do not become effective because the conditions to the Placing and Rights Issue are not satisfied, and that whilst the existing financial covenants remain in place the impact of a decline in the housebuilding sector may result in the Group not being able to comply with such covenants, represent a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern such that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

Nevertheless, based upon the Group's expectation that the conditions to the Placing and the Rights Issue will be satisfied, in addition to the Group's current trading, forecasts, and the further management actions which could be taken whilst the existing financial covenants remain in place referred to above, the Directors believe that the Group will continue to comply with its financial covenants and accordingly have formed a judgement that it is appropriate to prepare the financial statements upon a going concern basis. Therefore, these condensed financial statements do not include any adjustments that would result if the going concern basis of preparation is inappropriate.

3. Accounting policies

Adoption of new and revised standards

In the year ended 30 June 2009, the Group has adopted:

Amendment to IAS39 and IFRS7 'Reclassification of Financial Instruments';
IFRIC12 'Service Concession Agreements'; and
IFRIC13 'Customer Loyalty Programmes'.

The adoption of these interpretations and amendments to standards has not had any impact upon the profit or net assets of the Group in either the current or comparative year and has not required any additional disclosures.

Changes in accounting policies - defined benefit pension scheme

During the fourth quarter, as a consequence of the Group curtailing its defined benefit pension scheme during the year ended 30 June 2009, the Group changed its accounting policy for the recognition of actuarial gains and losses related to post-employment benefits for defined benefit pension schemes. The Group elected to voluntarily change its accounting policy from the corridor approach (under which actuarial gains and losses greater than 10% of the future obligation were recognised in the income statement over the average remaining working lives of the employees) to immediate recognition of actuarial gains and losses in shareholders' equity in the period in which they arise. This change in policy was also considered appropriate with consideration to the expectation that the corridor method will be phased out by IFRS by 2013 and to bring the Group in line with prevailing practice in the UK.

The change in accounting policy has been recognised retrospectively and the 2008 comparatives have been adjusted. The retrospective adjustments had an impact on the consolidated balance sheet and the consolidated statement of recognised income and expense but not on the consolidated income statement or consolidated cash flow statement as follows:

	Year ended	At
	30 June	1 July
	2008	2007
Consolidated balance sheet	£m	£m
Retirement benefit obligations	33.5	13.4
Deferred tax liabilities	(9.4)	(3.8)
Non-current liabilities	24.1	9.6

Equity
Retained profits at the start of the period	9.6	9.6
Increase in retained earnings	14.5	-
Equity	24.1	9.6

Consolidated statement of recognised income and expense	£m
Cumulative actuarial gains on defined benefit pension schemes	20.1
Tax on items taken directly to equity	(5.6)
Net gain recognised directly in equity	14.5

As a result, the Group's retirement benefit obligation decreased by £33.5m from £70.7m to £37.2m at 30 June 2008 and its deferred tax liability increased by £9.4m from £22.7m to £32.1m.

Basis of consolidation

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

Business combinations

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

Jointly controlled entities

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

Jointly controlled operations

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

Revenue

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

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

Construction contracts

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

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

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

Exceptional items

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

Restructuring costs

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

Profit/(loss) from operations

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

Dividends

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

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

Segmental reporting

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

Goodwill

Goodwill arising on consolidation represents the excess of the fair value of the consideration over the fair value of the separately identifiable net assets and liabilities acquired.

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

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

Intangible assets

Brands

Internally generated brands are not capitalised. The Group has capitalised as intangible assets brands that have been acquired. Acquired brand values are calculated using discounted cash flows. Where a brand is considered to have a finite life, it is amortised over its useful life on a straight-line basis. Where a brand is capitalised with an indefinite life, it is not amortised. The factors that result in the durability of brands capitalised are that there are no material legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of these intangible assets.

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

Investments

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

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

Property, plant and equipment

Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation is provided to write off the cost of the assets on a straight-line basis to their residual value over their estimated useful lives. Residual values and asset lives are reviewed annually.

Freehold properties are depreciated on a straight-line basis over 25 years. Freehold land is not depreciated. Plant is depreciated on a straight-line basis over its expected useful life, which ranges from one to seven years.

Inventories

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

Land held for development, including land in the course of development, is initially recorded at discounted cost. Where, through deferred purchase credit terms, the fair value differs from the amount that will ultimately be paid in settling the liability, this difference is charged as a finance cost in the income statement over the period of settlement.

Due to the scale of the Group's developments, the Group has to allocate site-wide development costs between units built in the current year and in future years. It also has to estimate costs to complete on such developments. In making these assessments there is a degree of inherent uncertainty. The Group has developed internal controls to assess and review carrying-values and the appropriateness of estimates made.

Leases as lessee

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

Leases as lessor

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

Share-based payments

The Group issues both equity-settled and cash-settled share-based payments to certain employees. In accordance with the transitional provisions, IFRS2 'Share-based Payments' has been applied to all grants of equity instruments after 7 November 2002 that had not vested at 1 January 2005.

Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured either using Black-Scholes, Present-Economic Value models or Monte Carlo models dependent upon the characteristics of the scheme. The fair value is expensed in the income statement on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest where non-market vesting conditions apply.

Cash-settled share-based payments are measured at fair value at the date of grant and are re-measured both at the end of each reporting period and at the date of settlement with any changes in fair value being recognised in the income statement for the period. Fair value is measured initially and at the end of each reporting period using a Black-Scholes model and at the date of settlement as cash paid.

Tax

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

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

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

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

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when they relate to taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Pensions

Defined contribution

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

Defined benefit

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside profit or loss and presented in the statement of recognised income and expense.

Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of the scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.

Borrowing costs

The Group does not capitalise borrowing costs and expenses them in the period to which they relate through the income statement.

Financial instruments

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

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

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

Financial assets

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

Available for sale financial assets

Zero coupon loans granted as part of sales transactions that are secured by way of a second legal charge on the respective property are classified as being available for sale and are stated at fair value.

Revenue from transactions involving available for sale financial assets is recognised at the fair value of consideration receivable.

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

Trade and other receivables

Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than twelve months after the balance sheet date, which are classified as non-current assets and are measured at amortised cost less an allowance for any uncollectable amounts. The net of these balances are classified as 'trade and other receivables' in the balance sheet.

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

Impairment of financial assets

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

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

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

For financial assets classified as available for sale, a significant or prolonged decline in the value of the property underpinning the value of the loan or increased risk of default are considered to be objective evidence of impairment.

In respect of debt instruments classified as available for sale financial assets, increases in the fair value of assets previously subject to impairment, which can be objectively related to an event occurring after recognition of the impairment loss are recognised in the income statement to the extent that they reverse the impairment loss.

Cash and cash equivalents

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

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

Financial liabilities and equity

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

Equity instruments

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

Financial liabilities

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

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

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

Trade and other payables

Trade and other payables on normal terms are not interest bearing and are stated at amortised cost.

Trade and other payables on extended terms, particularly in respect of land, are recorded at their fair value at the date of acquisition of the asset to which they relate by discounting at prevailing market interest rates at the date of recognition. The discount to nominal value, which will be paid in settling the deferred purchase terms liability, is amortised over the period of the credit term and charged to finance costs using the 'effective interest rate' method.

Bank borrowings

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

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

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

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

Derivative financial instruments

The Group has entered into derivative financial instruments in the form of interest rate swaps, basis rate swaps and cross currency swaps to manage the interest rate and foreign exchange rate risk arising from the Group's operations and sources of finance. The use of financial derivatives is governed by the Group's policies approved by the Board of Directors as detailed in notes 14 and 15.

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

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

Hedge accounting

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

Details of the fair values of the interest rate and cross currency swaps are provided in notes 13, 14 and 15. Movements on the hedging reserve in equity are detailed in note 18.

Cash flow hedge

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

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

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

Government grants

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

4. Critical accounting judgements and key sources of estimation uncertainty

In accordance with the requirements of IFRS, the Group has detailed below the critical accounting judgements made and the key sources of estimation uncertainty within the 2009 Annual Report and Accounts.

a) Critical accounting judgements

In the process of applying the Group's accounting policies, which are described in the accounting policies note, the Directors have made no individual judgements that have a significant impact upon the financial statements, apart from those involving estimations, which are dealt with below.

b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet dates are discussed below.

Carrying-value of land and work in progress

The Group's principal activity is housebuilding and commercial development. Due to the nature of this activity, much of the development entered into by the Group is speculative in nature. Accordingly, the Group has in its balance sheet at 30 June 2009 current assets that are not covered by a forward sale. The Group's internal controls are designed to identify any developments where the carrying-value of land and work in progress is more than the lower of cost or net realisable value.

In respect of the half years ended 31 December 2008 and 30 June 2009, the Group conducted reviews of the net realisable value of its land and work in progress carrying-values of its sites in the light of the deterioration in the UK housing market. Where the estimated net realisable value of the site was less than its current carrying-value within the balance sheet, the Group impaired the land and work in progress value. This resulted in an exceptional impairment of £499.5m being £494.9m at 31 December 2008 and a net impairment of £4.6m at 30 June 2009 as shown in note 6. These reviews were conducted on a site-by-site basis using valuations incorporating forecast sales rates, average selling prices and estimated costs to complete that reflect both current and anticipated trading conditions. These are key judgements in the impairment calculation. Should there be further significant movements in UK house prices then further impairments/ reversal of previous gross impairments of land and work in progress may be necessary.

Estimation of costs to complete

In order to determine the profit that the Group is able to recognise on its developments in a specific period, the Group has to allocate site-wide development costs between units built in the current year and in future years. It also has to estimate costs to complete on such developments. In making these assessments there is a degree of inherent uncertainty. The Group has developed internal controls to assess and review carrying-values and appropriateness of estimates made.

Recognition of profit where developments are accounted for under IAS11 'Construction Contracts'

The Group applies its policy on contract accounting when recognising revenue and profit on partially completed contracts. The application of this policy requires judgements to be made in respect of the total expected costs to complete each site. The Group has in place established internal control processes to ensure that the evaluation of costs and revenues are based upon appropriate estimates.

Impairment of goodwill

The determination of the impairment of goodwill of the housebuilding business requires an estimation of the value-in-use of the housebuilding cash-generating unit as defined in note 11. The value-in-use calculation requires an estimate of the future cash flows expected from the housebuilding business, including the anticipated growth rate of revenue and costs, and requires the determination of a suitable discount rate to calculate the present value of the cash flows. The discount rate used is one applicable to the existing capital structure of the Group at the balance sheet date as explained in note 23 there is a proposed change to the Group's capital structure which may impact the Group's discount rate for future periods. The carrying amount of goodwill at 30 June 2009 was £792.2m with no impairment recognised during the year ended 30 June 2009.

Impairment of brands

The determination of the impairment calculation for the Group's indefinite life brand, David Wilson Homes, requires an estimation of the value-in-use of the brand. The value-in-use calculation requires an estimate of the future cash flows expected from this brand, including the anticipated growth rate of revenue and costs, and requires the determination of a suitable discount rate to calculate the present value of the cash flows. The discount rate used is one applicable to the existing capital structure which may impact on the Group's discount rate in future periods. The carrying amount of indefinite life brands at 30 June 2009 was £100.0m with no impairment recognised during the year ended 30 June 2009.

Deferred tax assets

At 30 June 2009 the Group recognised a net deferred tax asset of £127.3m, of which £130.1m related to trading losses that arose during the year that are to be carried forward and relieved against profits arising in future periods. The judgement to recognise the deferred tax asset is dependent upon the Group's expectations regarding future profitability based upon site revenue and cost forecasts for future years which contain a degree of inherent uncertainty.

Defined benefit pension

The Directors engage a qualified independent actuary to calculate the Group's liability in respect of its defined benefit pension scheme. In calculating this liability it is necessary for actuarial assumptions to be made, which include discount rates, salary and pension increases, price inflation, the long-term rate of return upon scheme assets and mortality. As actual rates of increase and mortality may differ from those assumed, the pension liability may differ from that included in these financial statements.

Hedge accounting

The majority of the Group's facilities are floating rate, which exposes the Group to increased interest rate risk. The Group has therefore taken out £765.0m (note 14) of floating-to-fixed interest rate swaps. The Group has adopted hedge accounting for these swaps on the basis that it is highly probable that there is sufficient forecast debt to match with the period of swaps. If the highly probable criterion was not met in future then any changes in fair value of the swaps would be recognised in the income statement, rather than in equity. During the year ended 30 June 2009, there was a loss of £81.0m (2008: £19.1m) included in equity related to these swaps.

In addition, the Group has entered into $271.6m of cross currency swaps to manage the cash flow risks related to foreign exchange, arising from the Group's sources of US Dollar denominated finance. These swaps are designated as a cash flow hedge against future foreign exchange rate movements. If the hedges ceased to be highly effective then any changes in fair value of the swaps would be recognised in the income statement, rather than equity. During the year ended 30 June 2009, there was a gain of £30.3m (2008: £7.4m) included in equity related to these swaps. £7.2m (2008: £nil) of this gain was realised upon cancellation of $40.5m of foreign exchange swaps following repayment of $40.5m US Dollar private placement notes on 12 January 2009.

Available for sale financial assets

The Group holds available for sale financial assets principally comprising interest free loans granted as part of sales transactions that are secured by way of a second legal charge on the respective property. The loans are held at the present value of expected future cash flows taking into account the estimated market value of the property at the estimated time of repayment. At 30 June 2009 the asset recognised on the balance sheet was £86.5m (2008: £66.9m).

5. Segmental analysis

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

			2009			2008
	Housebuilding	Commercial	Total	Housebuilding	Commercial	Total
		developments			developments
	Units	Units	Units	Units	Units	Units
Residential completions	13,202	-	13,202	18,588	-	18,588
	£m	£m	£m	£m	£m	£m
Revenue	2,095.8	189.4	2,285.2	3,414.2	140.5	3,554.7

Result
Profit/(loss) from operations before restructuring costs and pension curtailment and impairment of goodwill, intangible assets and inventories	38.8	(4.6)	34.2	530.0	20.2	550.2
Impairment of goodwill and intangible assets	-	-	-	-	(30.7)	(30.7)
Impairment of inventories	(431.5)	(68.0)	(499.5)	(157.2)	(51.2)	(208.4)
Restructuring costs and pension curtailment	(14.9)	(5.1)	(20.0)	(15.9)	-	(15.9)
(Loss)/profit from operations	(407.6)	(77.7)	(485.3)	356.9	(61.7)	295.2
Share of post-tax loss from joint ventures	(3.0)	-	(3.0)	(2.2)	(0.4)	(2.6)
(Loss)/profit from operations including post-tax loss from joint ventures	(410.6)	(77.7)	(488.3)	354.7	(62.1)	292.6
Finance income			18.0			12.8
Finance costs			(208.6)			(168.1)
(Loss)/profit before tax			(678.9)			137.3
Tax			210.3			(50.9)
(Loss)/profit for the year from continuing operations			(468.6)			86.4

Other information	£m	£m	£m	£m	£m	£m
Capital additions	2.1	-	2.1	5.0	0.4	5.4
Amortisation of intangible assets	-	-	-	-	0.8	0.8
Impairment of goodwill	-	-	-	-	24.5	24.5
Impairment of intangible assets	-	-	-	-	6.2	6.2
Depreciation	5.0	0.1	5.1	6.4	0.3	6.7

			2009			2008
	Housebuilding	Commercial	Total	Housebuilding	Commercial	Total
		developments			developments
				(restated*)		(restated*)
Balance sheet	£m	£m	£m	£m	£m	£m
Segment assets	4,625.3	173.9	4,799.2	5,787.5	329.1	6,116.6
Elimination of inter-company balances			(111.7)			(132.3)
			4,687.5			5,984.3
Deferred tax assets			127.3			-
Current tax assets			50.6			20.6
Cash and cash equivalents			178.8			32.8
Consolidated total assets			5,044.2			6,037.7

Segment liabilities	(1,272.9)	(67.3)	(1,340.2)	(1,496.2)	(88.7)	(1,584.9)
Elimination of inter-company balances			111.7			132.3
			(1,228.5)			(1,452.6)
Deferred tax liabilities			-			(32.1)
Loans and borrowings			(1,484.1)			(1,685.2)
Consolidated total liabilities			(2,712.6)			(3,169.9)

* The results for the year ended 30 June 2008 have been restated as explained in the Accounting policies note.

6. Exceptional items

Impairment of inventories

During the half year ended 31 December 2008, in light of deteriorations in market conditions upon certain commercial and housebuilding sites that the Group had specifically targeted for sale and realised in the period, a net realisable value write-down of £62.6m was recognised against the land and work in progress value. In addition, the Group also conducted a review of the net realisable value of its land and work in progress carrying-values of its sites during the period in light of the continued deterioration in the UK housing market. Where the estimated net realisable value of the site was less than its carrying-value within the balance sheet, the Group impaired the land and work in progress value. This resulted in an impairment of £432.3m. The total impairment of inventories recognised as an exceptional cost during the half year ended 31 December 2008 was £494.9m.

During the half year ended 30 June 2009, the Group conducted a further review of the net realisable value of its land and work in progress carrying-values of its sites. Where the estimated net realisable value of the site was less than its carrying-value within the balance sheet, the Group impaired the land and work in progress value. This resulted in a further impairment of inventories for the year which was recognised as an exceptional cost of £nil for the housebuilding business although there were gross impairment reversals and charges of £120.9m due to performance variations upon housebuilding sites and £4.6m for the commercial developments business.

The total impairment of inventories recognised as an exceptional cost during the year ended 30 June 2009 was £499.5m (2008: £208.4m). Further details on this impairment are given in note 12.

Impairment of goodwill

At 30 June 2009, the Group conducted an impairment review of its goodwill as explained in note 11. This resulted in no impairment charge for the year (2008: £24.5m).

Impairment of intangible assets

At 30 June 2009, the Group conducted an impairment review of its brands. This resulted in no impairment charge for the year (2008: £6.2m).

Restructuring costs

During the year ended 30 June 2009, the Group incurred £27.1m (2008: £15.9m) of costs in relation to reorganising and restructuring the business, including redundancy costs of £17.6m (2008: £3.7m).

Pension curtailment gain

During the year ended 30 June 2009, the Group recognised curtailment gains of £7.1m (2008: £nil) in respect of the cessation of future accrual of defined benefit pensions for current employees and the associated removal of the link between accrued benefits and future salary increases and redundancies made during the year. Further details are given in note 16.

Make-whole fee on redemption of private placement notes

During the year ended 30 June 2009, the Group incurred charges of £13.3m (2008: £nil) in respect of the make-whole fee which was triggered on the redemption of £36.7m of private placement notes. Further details are given in note 13.

Impairment of inventories relating to investments accounted for using the equity method

7. Net finance costs

	2009	2008
Recognised in the income statement	£m	£m
Finance income on short-term bank deposits	(0.9)	(2.3)
Imputed interest on available for sale financial assets	(11.2)	(2.9)
Interest receivable on swaps	-	(3.3)
Other interest	(5.9)	(4.3)
Finance income	(18.0)	(12.8)
Interest on bank overdrafts and loans	141.8	135.8
Amortisation of losses on cancelled interest rate swaps	0.4	0.1
Imputed interest on deferred term land payables	19.8	20.7
Finance costs related to employee benefits	0.3	1.7
Transfer from equity on cash flow hedges	(21.7)	(1.8)
Foreign exchange loss on US Dollar debt	33.8	1.8
Amortisation of facility fees	17.4	6.5
Other interest payable	3.5	3.3
Finance costs before exceptional items	195.3	168.1
Make-whole fee on redemption of private placement notes	13.3	-
Total finance costs	208.6	168.1
Net finance costs	190.6	155.3

8. Tax

	2009	2008
Analysis of the tax (credit)/charge for the year	£m	£m
Current tax
UK corporation tax on (losses)/profits for the year	(43.6)	56.6
Adjustment in respect of previous years	(37.7)	(20.6)
	(81.3)	36.0
Deferred tax
Origination and reversal of temporary differences	(148.0)	(2.9)
Adjustment in respect of previous years	19.0	17.8
	(129.0)	14.9
Tax (credit)/charge for the year	(210.3)	50.9

In addition to the amount credited to the income statement, deferred tax of £27.8m (2008: £2.5m charged) was credited directly to equity.

Factors affecting the tax (credit)/charge for the year

The tax rate assessed for the year is higher (2008: higher) than the standard rate of corporation tax in the UK for the period of 28.0% (2008: 29.5%). The differences are explained below:

	2009	2008
	£m	£m
(Loss)/profit before tax	(678.9)	137.3
(Loss)/profit before tax multiplied by the standard rate of corporation tax of 28.0% (2008: 29.5%)	(190.1)	40.5
Effects of:
Goodwill impairment not deductible for tax purposes	-	7.2
Other expenses not deductible for tax purposes	2.1	7.1
Additional tax relief for land remediation costs	(2.7)	(1.9)
Adjustment in respect of previous years	(18.7)	(2.8)
Tax in respect of joint ventures	0.8	0.8
Tax rate difference on losses carried back	(2.2)	-
Tax on share-based payments	0.5	-
Tax (credit)/charge for the year	(210.3)	50.9

Legislation on the taxation of foreign profits received Royal Assent on 21 July 2009. These rules include provisions to restrict interest deduction on intra-group loans, which will apply to accounting periods starting on or after 1 January 2010. Where interest deductions are restricted under these new rules in one Group company, the legislation includes the scope to claim an adjustment in the corresponding company and the flexibility to allocate the interest deductions across the Group in order to prevent losses becoming trapped. As a result it is not envisaged that these rules will impact on the Group's future tax charge.

9. Dividends

	2009	2008
	£m	£m
Prior year final dividend of nil per share (2007: 24.30p)	-	83.8
Interim dividend nil per share (2008: 12.23p)	-	42.2
	-	126.0
Proposed final dividend for the year ended 30 June 2009 of nil (2008: nil) per share	-	-

10. (Loss)/earnings per share

Basic earnings per share is calculated by dividing the loss for the year attributable to ordinary shareholders of £468.6m (2008: £86.4m profit) by the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Benefit Trust which are treated as cancelled, which were 345.0m (2008: 345.0m).

Diluted earnings per share is calculated by dividing the loss for the year attributable to ordinary shareholders of £468.6m (2008: £86.4m profit) by the weighted average number of ordinary shares in issue adjusted to assume conversion of all potentially dilutive ordinary shares from the start of the year, giving a figure of 345.0m (2008: 346.7m).

The (loss)/earnings per share from continuing operations were as follows:

	2009	2008
	pence	pence
Basic (loss)/earnings per share	(135.8)	25.0
Adjusted basic (loss)/earnings per share	(23.8)	79.6
Diluted (loss)/earnings per share	(135.8)	24.9
Adjusted diluted (loss)/earnings per share	(23.8)	79.2

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

		2009		2008
	£m	pence	£m	pence
(Loss)/earnings for basic and diluted earnings per share	(468.6)	(135.8)	86.4	25.0
Add: restructuring costs and pension curtailment gain	20.0	5.8	15.9	4.6
Add: impairment of goodwill and intangible assets	-	-	30.7	8.9
Add: impairment of inventories	499.5	144.8	208.4	60.4
Add: make-whole fee on redemption of private placement notes	13.3	3.8	-	-
Less: tax effect of above items	(148.3)	(43.0)	(66.8)	(19.3)
Add: post-tax impairment of inventories relating to investments accounted for using the equity method	2.0	0.6	-	-
(Loss)/earnings for adjusted basic and adjusted diluted (loss)/earnings per share	(82.1)	(23.8)	274.6	79.6

Earnings are adjusted, removing restructuring costs, pension curtailment, impairments of goodwill, intangible assets, inventories and investments, make-whole fees and the related tax, to reflect the Group's underlying profits.

11. Goodwill

	2009	2008
	£m	£m
Cost
At 30 June and 1 July	816.7	816.7
Accumulated impairment losses
At 1 July	24.5	-
Impairment losses for the year	-	24.5
At 30 June	24.5	24.5
Carrying amount
At 1 July	792.2	816.7
At 30 June	792.2	792.2

Goodwill cost of £816.7m consists of £792.2m relating to the housebuilding segment and £24.5m relating to the commercial developments segment. The goodwill of the commercial developments business was fully impaired in the year ended 30 June 2008.

The Group conducts its annual impairment review of goodwill and intangibles together for both the housebuilding and commercial developments segments. The impairment review was performed at 30 June 2009 and compared the value-in-use of the housebuilding segment with the carrying-value of its tangible and intangible assets and allocated goodwill. The Group allocates any identified impairment first to goodwill and then to assets on a pro-rata basis, which in the case of the Group is its intangible assets and property, plant and equipment.

The value-in-use was determined by discounting the expected future cash flows of the housebuilding segment. The first three years of cash flows were determined using the Group's approved detailed site-by-site business plan. The cash flows for the fourth and fifth years were determined using Group level internal forecasted cash flows based upon expected volumes, selling prices and margins, considering available land purchases and work in progress levels. The cash flows for year six onwards were extrapolated in perpetuity using an estimated growth rate of 2.5%, which was based upon the expected long-term growth rate of the UK economy.

The key assumptions for the value-in-use calculations were:

Discount rate: this is a pre-tax rate reflecting current market assessments of the time value of money and risks appropriate to the Group's housebuilding business. Accordingly the rate of 8.9% is considered by the Directors to be the appropriate pre-tax risk adjusted discount rate being the Group's estimated long-term pre-tax weighted average cost of capital. This rate is calculated using the current capital structure of the Group at the balance sheet date.
Expected changes in selling prices for completed houses and the related impact upon operating margin: these are determined on a site-by-site basis for the first three years dependent upon local market conditions and product type. For years four and five these have been estimated at a Group level based upon past experience and expectations of future changes in the market taking into account external market forecasts.
Sales volumes: these are determined on a site-by-site basis for the first three years dependent upon local market conditions, land availability and planning permissions. For years four and five these have been estimated at a Group level based upon past experience and expectations of future changes in the market taking into account external market forecasts.
Expected changes in site costs to complete: these are determined on a site-by-site basis for the first three years dependent upon the expected costs of completing all aspects of each individual development including any additional costs that are expected to occur due to the business being on an individual development site for longer due to current market conditions. For years four and five these have been estimated at a Group level based upon past experience and expectations of future changes in the market taking into account external market forecasts.

The conclusion of this impairment review was that the Group's goodwill was not impaired.

The impairment review of goodwill and intangible assets at 30 June 2009 was based upon current expectations regarding sales volumes, expected changes in selling prices and site costs to complete in the difficult conditions within the UK housing market and used a discount rate appropriate to the position and risks of the Group. The result of the impairment review, which was based upon the capital structure of the Group at the balance sheet date, was that the recoverable value of goodwill and intangible assets exceeded its carrying-value by £2,932.7m. As explained in note 23 there is a proposed change to the Group's capital structure which may impact the Group's discount rate for future periods. If the UK housing market and expectations regarding its future were to deteriorate further reducing operating margins by 7.8% per annum or the appropriate discount rate were to increase by 4.7% and all other variables were held constant then the recoverable value of goodwill and intangible assets would equal its carrying-value.

12. Inventories

	2009	2008
	£m	£m
Land held for development	2,453.2	3,117.5
Construction work in progress	1,044.2	1,569.3
Part-exchange properties	36.7	137.9
Other inventories	6.7	5.3
	3,540.8	4,830.0

a) Nature of inventories

The Directors consider all inventories to be essentially current in nature although the Group's operational cycle is such that a proportion of inventories will not be realised within twelve months. It is not possible to determine with accuracy when specific inventory will be realised as this will be subject to a number of issues such as consumer demand and planning permission delays.

b) Impairment of inventories

At 30 June 2008, the Group conducted a net realisable value review of its land and work in progress which resulted in an impairment of £208.4m.

During the half year ended 31 December 2008, the Group provided £62.6m for a reduction in net realisable value upon certain commercial and housebuilding sites that it had specifically targeted for sale and realised.

The Group also conducted a further review of the net realisable value of its land and work in progress portfolio during the period. This review compared the estimated net realisable value of each of the Group's development sites with its balance sheet carrying-value and where the estimated net realisable value of an individual site was less than its carrying-value within the balance sheet, the Group impaired the land and work in progress value of the site. The result of this further site-by-site net realisable value review was an exceptional impairment of £432.3m.

The total impairment of land and work in progress recognised during the half year ended 31 December 2008 was £494.9m.

A further impairment review was conducted during the half year ended 30 June 2009. This also compared the estimated net realisable value of each of the Group's development sites with its balance sheet carrying-value and where the estimated net realisable value of an individual site was less than its carrying-value within the balance sheet, the Group impaired the land and work in progress value of the site. The result of this further site-by-site net realisable value review was a net exceptional impairment of £nil for the housebuilding business, although there were gross impairment reversals and charges of £120.9m due to performance variations upon housebuilding sites and £4.6m for the commercial developments business.

The total impairment of land and work in progress recognised during the year ended 30 June 2009 was £499.5m included in exceptional items (note 6).

The key judgement in estimating the net realisable value of a site was the estimation of likely sales prices and estimated costs to complete. Sales prices were estimated on a site-by-site basis based upon local market conditions and considered the current prices being achieved upon each site for each product type.

Although the impairment of land and work in progress was based upon the current prices being achieved by the Group in the difficult conditions within the UK housing market, if the UK housing market were to deteriorate or improve beyond management expectations in the future then further adjustments to the carrying-value of land and work in progress may be required.

Following these impairments £1,460.5m (2008: £557.0m) of inventories are valued at fair value less costs to sell rather than at historical cost.

c) Expensed inventories

The value of inventories expensed in 2009 and included in cost of sales was £2,009.8m (2008: £2,714.2m) including £0.1m (2008: £10.4m) of inventory write-downs incurred in the course of normal trading and a reversal of £nil (2008: £5.4m) on inventories that were written down in a previous accounting period, but excluding the £499.5m (2008: £208.4m) exceptional impairment. The reversal of £5.4m in the prior year arose mainly due to obtaining planning approval on strategic land and other interests that had previously been written down to net realisable value.

During the second half, average selling prices across the Group's developments were in line with those incorporated into the impairment review at 31 December 2008 and therefore overall no further impairment was required in the housebuilding business, although there were gross impairment reversals and charges of £120.9m due to performance variations upon housebuilding sites.

The value of inventories written down and recognised as an expense in 2009 totalled £499.6m (2008: £218.8m), being the £499.5m (2008: £208.4m) classified as an exceptional cost and the remaining £0.1m (2008: £10.4m) incurred in the normal course of trading.

13. Loans and borrowings

a) Net debt

Net debt at the year end is shown below:

	2009	2008
		(restated*)
	£m	£m
Cash and cash equivalents	178.8	32.8

Non-current borrowings
Bank loans	(1,200.9)	(755.5)
Private placement notes	(274.7)	(276.0)
Total non-current borrowings	(1,475.6)	(1,031.5)
Current borrowings
Bank overdrafts	(7.4)	(7.5)
Loan notes	(1.1)	(46.4)
Bank loans	-	(599.8)
Total current borrowings	(8.5)	(653.7)
Total borrowings	(1,484.1)	(1,685.2)

Derivative financial instruments
Foreign exchange swaps	28.4	1.8

Net debt	(1,276.9)	(1,650.6)

* Net debt has been restated in the year ended 30 June 2008 to include a net presentation of foreign exchange swaps for consistency of presentation with the year ended 30 June 2009.

Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

Net debt is defined as cash and cash equivalents, bank overdrafts, interest bearing borrowings and foreign exchange swaps. The Group includes foreign exchange swaps within net debt as these swaps were entered into to hedge the foreign exchange exposure upon the Group's US Dollar denominated private placement notes. The Group's foreign exchange swaps have both an interest rate and an exchange rate element and only the exchange rate element on the notional amount of the swap is included within the net debt note above. The Group's derivative financial instruments at the year end are shown below:

	2009	2008
	£m	£m
Foreign exchange swap - exchange rate element	28.4	1.8
Foreign exchange swap - interest rate element	2.1	5.6
	30.5	7.4
Interest rate swaps	(87.8)	(6.8)
Net derivative financial instruments	(57.3)	0.6

b) Drawn debt facilities

The drawn debt at 30 June comprises:

	2009	2008
	£m	£m
Non-current
Bank loans	1,200.9	755.5
Private placement notes	274.7	276.0
Total non-current	1,475.6	1,031.5
Current
Bank overdrafts	7.4	7.5
Loan notes	1.1	46.4
Bank loans	-	599.8
Total current	8.5	653.7
Total borrowings	1,484.1	1,685.2

The weighted average interest rates, including fees, paid in the year were as follows:

	2009	2008
	%	%
Bank loans net of swap interest	8.9	7.0
Loan notes	7.8	6.1
Private placement notes	11.7	6.7

The principal features of the Group's drawn debt facilities at 30 June 2009 were as follows:

i) Committed facilities

A committed £484.1m five-year term facility, of which £483.0m was drawn at 30 June 2009 and £1.1m was utilised by way of a bank guarantee to support the loan notes, made available under a credit agreement dated 5 February 2007 (as amended from time to time and most recently with effect from 6 August 2008). At 30 June 2008, the facility was £529.4m but during the year £45.3m of the loan notes were repaid and the relevant proportion of the facility cancelled.
A committed £750.0m five-year revolving credit facility of which £750.0m was drawn at 30 June 2009, also available under a credit agreement dated 5 February 2007 (as amended from time to time and most recently with effect from 6 August 2008). As part of the August 2008 amendments, the revolving credit facility was fully drawn and now operates as a term facility.
A committed £400.0m revolving credit facility of which £nil was drawn at 30 June 2009, made available under a facility agreement dated 2 February 2005 (as amended from time to time and most recently with effect from 6 August 2008). In August 2008 the maturity date for £350.0m of commitments available under this facility was extended to 8 July 2011. The remaining £50.0m of commitments under this facility expires on 1 February 2010.
A committed £400.0m three-year revolving credit facility of which £nil was drawn at 30 June 2009, made available under a facility agreement dated 9 July 2008.

The Group suspended dividend payments in June 2008 as part of its cash conservation policy. The Board remains focused on strengthening the balance sheet and conserving cash. In addition, the Group's existing financing arrangements also impose certain restrictions on the payment of dividends. The Board is committed to reinstating the payment of dividends and will do so when it becomes appropriate and permissible to do so.

ii) Fixed rate Sterling private placement notes

The Group has £114.2m of Sterling fixed rate private placement notes. £18.2m of these are carried at their fair value (fair value uplift £0.3m (2008: £0.5m)) as at the date of acquisition of Wilson Bowden and expire on 15 October 2010. The remaining £96.0m of fixed rate Sterling private placement notes expire between 23 April 2018 and 23 April 2020. At 30 June 2008, there were £125.5m of Sterling fixed rate private placement notes but on 12 January 2009, the Company repaid £16.6m of Sterling fixed rate private placement notes and issued £5.5m of Sterling fixed rate private placement notes due to the make-whole clause within each of these agreements which was triggered on repayment.

iii) Fixed rate US Dollar private placement notes

US Dollar ten-year private placement notes of $59.8m and effective from 23 April 2008 and as amended on 6 August 2008. At 30 June 2008, there were $65.0m of US Dollar ten-year private placement notes but on 12 January 2009, the Company repaid $8.8m of US Dollar ten-year private placement notes and issued $3.6m of US Dollar ten-year private placement notes due to the make-whole clause within these agreements which was triggered on repayment.
US Dollar five-year private placement notes of $31.3m effective from 23 April 2008 and as amended on 6 August 2008. At 30 June 2008, there were $35.0m of US Dollar five-year private placement notes but on 12 January 2009, the Company repaid $4.7m of US Dollar five-year private placement notes and issued $1.0m of US Dollar five-year private placement notes due to the make-whole clause within these agreements which was triggered on repayment.
A US Dollar ten-year private placement note of $180.5m effective from 23 August 2007 and as amended on 6 August 2008. At 30 June 2008, there were $200.0m of US Dollar ten-year private placement notes but on 12 January 2009, the Company repaid $27.0m of US Dollar ten-year private placement notes and issued $7.5m of US Dollar ten-year private placement notes due to the make-whole clause within these agreements which was triggered on repayment.

iv) Floating rate Sterling loan notes

The Group had £1.1m (2008: £46.4m) Sterling loan notes at 30 June 2009 having repaid £0.3m on that date and £45.0m previously. These loan notes are repayable at 30 June or 31 December each year at the option of the note holder or are due in December 2012, and are subject to floating rates of interest linked to LIBOR.

v) Bank overdrafts and uncommitted money market facilities

The Group also uses various bank overdrafts and uncommitted borrowing facilities that are subject to floating interest rates linked to UK bank rate, LIBOR and money market rates as applicable.

All debt is unsecured.

14. Derivative financial instruments - swaps

The Group has entered into derivative financial instruments to manage interest rate and foreign exchange risks as explained in note 15. The Group does not enter into any derivatives for speculative purposes.

		2009		2008
	Asset	Liability	Asset	Liability
	£m	£m	£m	£m
Designated as cash flow hedges
Non-current
Interest rate swaps	-	(87.8)	2.4	(9.2)
Foreign exchange swaps	31.9	(1.4)	7.7	(0.3)
Total derivative financial instruments	31.9	(89.2)	10.1	(9.5)

a) Interest rate swaps

The Group enters into derivative transactions in the form of swap arrangements to manage the cash flow risks, related to interest rates, arising from the Group's sources of finance. All of the Group's interest rate swap arrangements contain a clause that allows the Group or the issuer to cancel the swap in May 2012 at fair value.

As at 30 June 2009 the Group had outstanding floating rate Sterling debt and overdrafts of £1,209.4m (2008: £1,409.2m). In obtaining this funding the Group sought to achieve certainty as to both the availability of, and income statement charge related to, a designated proportion of anticipated future debt requirements.

The Group has entered into swap arrangements to swap £765.0m (2008: £765.0m) of this debt into fixed rate Sterling debt in accordance with the Group treasury policy outlined in note 15. After taking into account swap arrangements the fixed interest rates applicable to the debt were as follows:

Amount	Fixed rate payable	Maturity
£m	%
142.5	5.79	2012
50.0	5.80	2012
60.0	5.94	2017
60.0	5.99	2017
40.0	5.93	2017
40.0	5.96	2017
32.5	5.64	2017
120.0	5.75	2022
75.0	5.44	2022
65.0	5.43	2022
40.0	5.72	2022
40.0	5.76	2022
765.0

The swap arrangements are designated as a cash flow hedge against future interest rate movements. The fair value of the swap arrangements as at 30 June 2009, which is based on third party valuations, was a liability of £87.8m (2008: £6.8m) with a loss of £81.0m (2008: £19.1m) charged directly to equity in the year. There was no ineffectiveness to be taken through the income statement during the year or the prior year.

Swaps with a notional amount of £95.0m were cancelled during the prior year on the refinancing of part of the Group's Sterling borrowings. Cumulative losses on these swaps of £3.6m were deferred in equity in the prior year as the forecast transaction specified in the hedge relationship is still expected to occur. These losses will be recognised in the income statement over the period the forecast transaction occurs; £0.4m (2008: £0.1m) of the loss was recognised in the income statement in the year, and a balance of £3.1m (2008: £3.5m) remains deferred in equity.

b) Basis rate swaps

During the year, the Group entered into £400.0m of six-month basis rate swaps to swap the interest payable upon some of the Group's borrowings from six-month LIBOR to one-month LIBOR plus a premium. These swaps reduced the cash interest payable by the Group by £1.4m over the six-month life.

There were no basis rate swaps outstanding as at 30 June 2009.

c) Foreign exchange swaps

The Group enters into derivative transactions in the form of swap arrangements to manage the cash flow risks related to foreign exchange arising from the Group's sources of finance denominated in US Dollars.

As at 30 June 2009 the Group had outstanding fixed rate US Dollar loan notes of $271.6m (2008: $300.0m). On 12 January 2009, as part of the US Dollar private placement notes repayment and issue of notes due to the make-whole agreement, the Group cancelled $40.5m of the foreign exchange swaps and entered into $12.1m of US Dollar denominated foreign exchange swaps.

The Group has entered into swap arrangements to swap all of this debt into fixed rate Sterling debt in accordance with the Group treasury policy outlined in note 15. After taking into account swap arrangements the fixed interest rates applicable to the debt were as follows:

Amount	Fixed rate payable	Maturity
$m	%
1.0	10.95	2013
30.3	8.98	2013
7.5	10.55	2017
173.0	6.61	2017
3.6	12.23	2018
56.2	9.24	2018
271.6

The swap arrangements are designated as cash flow hedges against future foreign exchange rate movements. The hedges match the contractual initial receipt, the final settlement, and as a result of refinancing on 9 July 2008 match 73% of the interest payments. The fair value of the swap arrangements as at 30 June 2009, which is based on third party valuations, was an asset of £30.5m (2008: £7.4m) with a gain of £30.3m (2008: £7.4m) credited directly to equity in the year. £7.2m (2008: £nil) of this gain was realised upon cancellation of $40.5m of foreign exchange swaps following repayment of $40.5m US Dollar private placement notes on 12 January 2009. There was no ineffectiveness to be taken through the income statement during the year or the prior year.

15. Financial risk management

The Group's operations and financing arrangements expose it to a variety of financial risks that include the effects of changes in debt market prices, credit risks, liquidity risks and interest rates. The most significant of these to the Group is liquidity risk and, accordingly, there is a regular, detailed system for the reporting and forecasting of cash flows from the operations to Group management with the goal of ensuring that risks are promptly identified and appropriate mitigating actions taken by the central treasury department. These forecasts are further stress tested at a Group level on a regular basis to ensure that adequate headroom within facilities and banking covenants is maintained. In addition, the Group has in place a risk management programme that seeks to limit the adverse effects of the other risks on its financial performance, in particular by using financial instruments, including debt and derivatives, to hedge interest rates and currency rates. The Group does not use derivative financial instruments for speculative purposes. The Board approves treasury policies and certain day-to-day treasury activities have been delegated to a centralised Treasury Operating Committee, which in turn regularly reports to the Board. The treasury department implements guidelines that are established by the Board and the Treasury Operating Committee.

a) Liquidity risk

Liquidity risk is the risk that the Group will be unable to meet its liabilities as they fall due. The Group actively maintains a mixture of long-term and medium-term committed facilities that are designed to ensure that the Group has sufficient available funds for operations. The Group's borrowings are typically cyclical throughout the financial year and peak in April and May, and October and November, of each year, due to seasonal trends in income. Accordingly the Group maintains sufficient headroom under its revolving credit facilities to cover these requirements. On a normal operating basis the Group has a policy of maintaining headroom of £250.0m of available committed bank facilities and identifies and takes appropriate actions based upon its regular, detailed system for the reporting and forecasting of cash flows from its operations. At 30 June 2009, the Group had committed bank facilities of £2,284.4m (2008: £2,555.4m) and total facilities of £2,360.6m (2008: £2,651.6m). At 30 June 2009, the Group's drawn debt was £1,484.1m (2008: £1,685.2m). This represented 65.0% of available committed facilities at 30 June 2009 (2008: 65.9%).

The Group was in compliance with its financial covenants at 30 June 2009. At the date of approval of the 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 the financial statements. Compliance with covenants is also considered on pages 28 and 29.

The Group's objective is to minimise refinancing risk. The Group therefore has a policy that the average maturity of its committed bank facilities and private placement notes is at least two years on average with a target of three years. At 30 June 2009, the average maturity of the Group's committed bank facilities was 3.1 years (2008: 3.3 years).

The Group maintains certain committed floating rate facilities with banks to ensure sufficient liquidity for its operations. The undrawn committed facilities available to the Group, in respect of which all conditions precedent had been met, were as follows:

	2009	2008
Expiry date	£m	£m
In less than one year	50.0	-
In more than one year but not more than two years	-	190.0
In more than two years but not more than five years	750.0	680.0
	800.0	870.0

In addition, the Group had £68.8m of undrawn uncommitted facilities available at 30 June 2009 (2008: £88.7m).

b) Market risk (price risk)

i) UK housing market risk

This section specifically discusses UK housing market risk in the context of the financial instruments in the consolidated balance sheet.

The Group is subject to the prevailing conditions of the UK economy and the Group's earnings are dependent upon the level of UK house prices. UK house prices are determined by the UK economy and economic conditions including employment levels, interest rates, consumer confidence, mortgage availability and competitor pricing. However, the Group does seek to maintain an appropriate geographic spread of operating divisions and an appropriate product mix to mitigate any risks caused by local economic conditions. The Group has detailed procedures to manage its market related operational risks which include:

A weekly review is undertaken of key trading indicators, including reservations, sales rates, visitor levels, levels of incentives, competitor activity and cash flow projections.
The Group seeks to provide mortgage providers with complete transparency regarding house purchase prices alongside any discounts or other incentives in order that they have appropriate information upon which to base their lending decision.
The Group works with key mortgage lenders to ensure that products are appropriate wherever possible for its customers.

The UK housing market affects the valuation of the Group's non-financial assets and liabilities the critical judgements applied by management in these financial statements, including the valuation of land and work in progress, goodwill and brands.

The Group's financial assets and liabilities that are directly linked to the UK housing market are as follows:

	Linked to UK	Not linked to UK
	housing market	housing market	Total
	£m	£m	£m
30 June 2009
Non-derivative financial assets	86.5	195.3	281.8
Non-derivative financial liabilities	-	(2,369.8)	(2,369.8)
Derivatives	-	(57.3)	(57.3)
	86.5	(2,231.8)	(2,145.3)
30 June 2008
Non-derivative financial assets	66.9	84.6	151.5
Non-derivative financial liabilities	-	(2,841.1)	(2,841.1)
Derivatives	-	0.6	0.6
	66.9	(2,755.9)	(2,689.0)

The value of the Group's available for sale financial assets is directly linked to the UK housing market. At 30 June 2009 these were carried at a fair value of £86.5m (2008: £66.9m).

Sensitivity analysis

At 30 June 2009, if UK house prices had been 5% lower and all other variables were held constant, the Group's house price linked financial assets and liabilities, which are solely available for sale financial assets, would decrease in value, excluding the effects of tax, by £6.2m (2008: £14.9m) with a corresponding reduction in both net profit and equity.

ii) Interest rate risk

The Group has both interest bearing assets and interest bearing liabilities. Floating rate borrowings expose the Group to cash flow interest rate risk and fixed rate borrowings expose the Group to fair value interest rate risk.

The Group has a policy of maintaining both long-term fixed rate funding and medium-term floating rate funding so as to ensure that there is appropriate flexibility for the Group's operational requirements. The Group has entered into swap arrangements to hedge cash flow risks relating to interest rate movements on a proportion of its debt and has entered into fixed rate debt in the form of Sterling and US Dollar denominated private placements.

The Group has a policy that 60%-80% of the Group's median gross borrowings calculated on the latest three-year plan (taking into account hedging) is at a fixed rate, with an average minimum duration of five years and an average maximum duration of fifteen years. At 30 June 2009, 68.4% of the Group's borrowings was at a fixed rate (2008: 61.6%).

The exposure of the Group's financial liabilities to interest rate risk is as follows:

			Non-
	Floating	Fixed	interest
	rate	rate	bearing
	financial	financial	financial
	liabilities	liabilities	liabilities	Total
	£m	£m	£m	£m
30 June 2009
Financial liabilities (excluding derivatives)	1,209.4	274.7	885.7	2,369.8
Impact of interest rate swaps	(765.0)	765.0	-	-
Financial liability exposure to interest rate risk	444.4	1,039.7	885.7	2,369.8
30 June 2008
Financial liabilities (excluding derivatives)	1,409.2	276.0	1,155.9	2,841.1
Impact of interest rate swaps	(765.0)	765.0	-	-
Financial liability exposure to interest rate risk	644.2	1,041.0	1,155.9	2,841.1

Floating interest rates on Sterling borrowings are linked to UK bank rate, LIBOR and money market rates. The floating rates are fixed in advance for periods generally ranging from one to six months. Short-term flexibility is achieved through the use of overdraft, committed and uncommitted bank facilities. The weighted average interest rate for floating rate borrowings in 2009 was 6.6% (2008: 6.6%).

Sterling private placement notes of £114.2m (2008: £125.5m) were arranged at fixed interest rates and exposed the Group to fair value interest rate risk. The weighted average interest rate for fixed rate Sterling private placement notes for 2009 was 11.5% (2008: 7.8%) with, at 30 June 2009, a weighted average period of 8.5 years (2008: 9.5 years) for which the rate is fixed.

US Dollar denominated private placement notes of £164.9m (2008: £150.5m) were arranged at fixed interest rates and exposed the Group to fair value interest rate risk. The weighted average interest rate for fixed rate US Dollar denominated private placement notes, after the effect of foreign exchange rate swaps, for 2009 was 11.0% (2008: 6.9%) with, at 30 June 2009, a weighted average period of 7.8 years (2008: 8.8 years) for which the rate is fixed.

Sensitivity analysis

In the year ended 30 June 2009, if UK interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's pre-tax (loss)/profit would increase/decrease by £3.9m (2008: £4.8m), the Group's post-tax (loss)/profit would increase/decrease by £2.8m (2008: £3.4m) and the Group's equity would decrease/increase by £2.8m (2008: £3.4m).

iii) Foreign exchange rate risk

As at 30 June 2009, the Group has fixed rate US Dollar denominated private placement notes of $271.6m (2008: $300.0m). In order to mitigate risks associated with the movement in the foreign exchange rate, the Group has a policy of fully hedging the principal of its US Dollar denominated debt and a significant proportion of the interest payments. The Group therefore entered into foreign exchange swap arrangements on the issue of its US Dollar denominated debt, all of which are designated as cash flow hedges. Accordingly the Group has no net exposure to foreign currency risk on the principal of its US Dollar debt. As a result of the revised financing arrangements implemented in July and August 2008, the foreign exchange swaps match 73% of the interest payments and therefore the Group is subject to foreign exchange rate risk upon the remaining 27%.

Details of the Group's foreign exchange swaps are provided in note 14.

Sensitivity analysis

In the year ended 30 June 2009, if the US Dollar per Pound Sterling exchange rate had been $0.20 higher/lower and all other variables were held constant, the Group's pre-tax (loss)/profit would increase/decrease by £0.7m (2008: £nil), the Group's post-tax (loss)/profit would increase/decrease by £0.5m (2008: £nil) and the Group's equity would decrease/increase by £0.5m (2008: £nil).

c) Credit risk

In the majority of cases, the Group receives cash upon legal completion for private sales and receives advance stage payments from Registered Social Landlords for social housing. The Group has £86.5m (2008: £66.9m) of available for sale financial assets which expose it to credit risk, although this asset is spread over a large number of properties. As such, the Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The Group manages credit risk in the following ways:

The Group has a credit policy that is limited to financial institutions with high credit ratings as set by international credit rating agencies and has a policy determining the maximum permissible exposure to any single counterparty.
The Group only contracts derivative financial instruments with counterparties with which the Group has an International Swaps and Derivatives Association Master Agreement in place. These agreements permit net settlement, thereby reducing the Group's credit exposure to individual counterparties.

The maximum exposure to any counterparty at 30 June 2009 was £31.0m (2008: £8.6m). The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents the Group's maximum exposure to credit risk.

d) Capital risk management (cash flow risk)

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and meet its liabilities as they fall due whilst maintaining an appropriate capital structure.

The Group manages as capital its equity, as set out in note 17, and its bank borrowings (being overdrafts, loan notes and bank loans), as set out in note 15.

The Group is subject to the prevailing conditions of the UK economy and the Group's earnings are dependent upon the level of UK house prices. UK house prices are determined by the UK economy and economic conditions including employment levels, interest rates, consumer confidence, mortgage availability and competitor pricing. The management of these operational risks is set out in the Principal risks and uncertainties on pages 15 to 18.

In addition, the other methods by which the Group can manage its short-term and long-term capital structure include adjusting the level of ordinary dividends paid to shareholders, (assuming the Company is paying a dividend), issuing new share capital, arranging debt to meet liability payments, and selling assets to reduce debt.

16. Retirement benefit obligations

The Group operates defined contribution and defined benefit pension schemes.

Defined contribution schemes

	2009	2008
Contributions during the year	£m	£m
Group defined contribution schemes consolidated income statement charge	3.9	4.9

At the balance sheet date there were outstanding contributions of £0.2m (2008: £0.2m), which were paid on or before the due date.

Defined benefit scheme

The Group operates a funded defined benefit pension scheme in the United Kingdom, the Barratt Group Pension & Life Assurance Scheme (the 'Scheme') which is closed to new entrants. With effect from 30 June 2009, the Scheme ceased to offer future accrual of defined benefit pensions for current employees and the link between accrued benefits and future salary increases was removed. This decision was taken following a detailed consultation process with the Trustees and employee members of the Scheme. Alternative defined contribution pension arrangements are in place for current employees.

A full actuarial valuation was carried out at 30 November 2007 and updated to 30 June 2009 by a qualified independent actuary. The projected unit method has been used to calculate the current service cost. Due to the Scheme ceasing to offer future accrual of defined benefit pensions to employees from 30 June 2009, there will be no current service cost in future years.

Following the completion of the Scheme triennial actuarial valuation for funding purposes, the Group has agreed to make future contributions to the Scheme, in addition to the normal contribution payment, of £13.3m per annum until 30 November 2015 to address the Scheme's deficit and the Group will also meet the Scheme's administration expenses, death in service premiums and Pension Protection Fund levy.

At the balance sheet date there were outstanding contributions of £0.4m (2008: £0.4m).

The assets of the defined benefit scheme have been calculated at fair (bid) value. The liabilities of the Scheme have been calculated at each balance sheet date using the following assumptions:

Principal actuarial assumptions	2009	2008
Weighted average assumptions to determine benefit obligations
Discount rate	6.30%	6.30%
Rate of compensation increase	4.40%	4.70%
Rate of price inflation	3.40%	3.70%
Weighted average assumptions to determine net cost
Discount rate	6.30%	5.80%
Expected long-term rate of return on plan assets	6.82%	6.70%
Rate of compensation increase	4.70%	5.30%
Rate of price inflation	3.70%	3.30%

Members are assumed to exchange 10% of their pension for cash on retirement.

The assumptions have been chosen by the Group following advice from Mercer Limited, the Group's actuarial advisers.

The following table illustrates the life expectancy for an average member on reaching age 65, according to the mortality assumptions used to calculate the scheme liabilities:

	Male	Female
Retired member born in 1935 (life expectancy at age 65)	21.3	24.4
Non-retired member born in 1965 (life expectancy at age 65)	23.1	25.9

The base mortality assumptions are based upon the PA92 mortality tables. The Group has carried out a mortality investigation of the Scheme's membership to ensure that this is an appropriate assumption. Allowance for future increases in life expectancy is made in line with the medium cohort projection.

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

Assumption	Change in assumption	Increase in
		scheme liabilities
Discount rate	Decrease by 0.1%	£4.0m (2.0%)
Rate of inflation	Increase by 0.1%	£2.2m (1.1%)
Life expectancy	Increase by 1 year	£5.3m (2.6%)

The amounts recognised in the consolidated income statement were as follows:

	2009	2008
	£m	£m
Current service cost	2.8	5.1
Exceptional curtailment gain	(7.1)	-
Total pension (gain)/cost recognised in operating expenses in the consolidated income statement	(4.3)	5.1
Interest cost	12.9	13.4
Expected return on scheme assets	(12.6)	(11.7)
Total pension cost recognised in finance costs in the consolidated income statement	0.3	1.7
Total pension (gain)/cost recognised in the consolidated income statement	(4.0)	6.8

The amounts recognised in the consolidated statement of recognised income and expense were as follows:

	2009	2008
		(restated*)
	£m	£m
Expected return less actual return on pension scheme assets	20.5	17.3
Gain arising from changes in the assumptions underlying the present value of benefit obligations	(6.4)	(37.4)
Total pension cost/(gain) recognised in the consolidated statement of recognised income and expense	14.1	(20.1)

* The results for the year ended 30 June 2008 have been restated as explained in the Accounting policies note.

The exceptional curtailment gain of £7.1m arose in respect of the cessation of future accrual of defined benefit pensions for current employees and the associated removal of the link between accrued benefits and future salary increases and redundancies made during the year.

The amount included in the consolidated balance sheet arising from the Group's obligations in respect of its defined benefit pension scheme is as follows:

	2009	2008
		(restated*)
	£m	£m
Present value of funded obligations	201.9	208.8
Fair value of scheme assets	(170.4)	(171.6)
Deficit for funded scheme/net liability recognised in the consolidated balance sheet at 30 June	31.5	37.2

* The results for the year ended 30 June 2008 have been restated as explained in the Accounting policies note.

	2009	2008
		(restated*)
	£m	£m
Net liability for defined benefit obligations at 1 July	37.2	64.9
Contributions received	(15.8)	(14.4)
(Gain)/expense recognised in the consolidated income statement	(4.0)	6.8
Amounts recognised in the consolidated statement of recognised income and expense	14.1	(20.1)
Net liability for defined benefit obligations at 30 June	31.5	37.2

* The results for the year ended 30 June 2008 have been restated as explained in the Accounting policies note.

A deferred tax asset of £8.8m (2008: £10.4m) has been recognised in the consolidated balance sheet in relation to the pension liability.

Movements in the present value of defined benefit obligations were as follows:

	2009	2008
	£m	£m
Present value of benefit obligations at 1 July	208.8	232.8
Current service cost	2.8	5.1
Exceptional curtailment gain	(7.1)	-
Interest cost	12.9	13.4
Scheme participants' contributions	1.6	1.8
Actuarial gain	(6.4)	(37.4)
Benefits paid from scheme	(10.5)	(6.7)
Premiums paid	(0.2)	(0.2)
Present value of benefit obligations at 30 June	201.9	208.8

Movements in the fair value of scheme assets were as follows:

	2009	2008
	£m	£m
Fair value of scheme assets at 1 July	171.6	167.9
Expected return on scheme assets	12.6	11.7
Actuarial loss on scheme assets	(20.5)	(17.3)
Employer contributions	15.8	14.4
Scheme participants' contributions	1.6	1.8
Benefits paid from scheme	(10.5)	(6.7)
Premiums paid	(0.2)	(0.2)
Fair value of scheme assets at 30 June	170.4	171.6

The analysis of scheme assets and the expected rate of return at the balance sheet date were as follows:

		2009		2008
		Expected		Expected
	Percentage	return on	Percentage	return on
	of scheme	scheme	of scheme	scheme
	assets	assets	assets	assets
Equity securities	50.3%	7.31%	50.7%	7.70%
Debt securities	49.4%	5.32%	47.3%	5.94%
Other	0.3%	0.50%	2.0%	5.20%
Total	100.0%	6.31%	100.0%	6.82%

To develop the expected long-term rate of return on assets assumption, the Group considered the current level of expected returns on risk free investments (primarily Government bonds), the historical level of risk premium associated with other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the actual asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.

The actual return on scheme assets was as follows:

	2009	2008
	£m	£m
Actual return on assets
Actual return on scheme assets	(7.8)	(5.6)

The five-year history of experience adjustments arising on scheme (liabilities)/assets was as follows:

	2009	2008	2007	2006	2005
		(restated*)	(restated*)
Present value of defined benefit obligations (£m)	(201.9)	(208.8)	(232.8)	(231.8)	(223.9)
Fair value of scheme assets (£m)	170.4	171.6	167.9	141.1	115.5
Deficit in the scheme (£m)	(31.5)	(37.2)	(64.9)	(90.7)	(108.4)
Experience adjustment in scheme liabilities (£m)	-	11.4	(13.2)	-	-
Percentage of scheme liabilities	-	5.5%	(5.7)%	-	-
Experience adjustment in scheme assets (£m)	(20.5)	(17.3)	7.6	8.0	-
Percentage of scheme assets	(12.0)%	(10.1)%	4.5%	5.7%	-
Amount recognised in the consolidated statement of recognised income and expense (£m)	14.1	(20.1)	(13.4)	-	-
Percentage of scheme assets	8.3%	(11.7)%	(8.0)%	-	-

* The results for the year ended 30 June 2008 have been restated as explained in the Accounting policies note. The 2007 disclosure for the amount recognised in the consolidated statement of recognised income and expense is the cumulative amount to 30 June 2007.

The cumulative amount of actuarial gains and losses since 30 June 2004 recognised in the consolidated statement of recognised income and expense is £19.4m.

The expected employer contribution to the defined benefit pension scheme in the year ending 30 June 2010 is £13.3m.

17. Share capital

	2009	2008
	£m	£m
Authorised: 439,460,000 (2008: 439,460,000) ordinary shares of 10p each	43.9	43.9
Allotted and issued ordinary shares of 10p each fully paid: 346,718,019 ordinary shares (2008: 346,718,019)	34.7	34.7

The issued share capital of the Company did not increase during the year. During the prior year the issued share capital of the Company was increased by the issue of:

85,630 ordinary shares of 10p each for a cash consideration of £479,107 in satisfaction of options duly exercised in accordance with the rules of the share option plans.
120,512 ordinary shares as £1,313,581 in exchange for transfer of Wilson Bowden Limited shares arising on exercise of options under legacy Wilson Bowden Limited share option schemes following the acquisition of Wilson Bowden Limited.

The Barratt Developments PLC Employee Benefit Trust (the 'EBT') holds 1,711,046 (2008: 1,711,046) ordinary shares in the Company. The cost of the shares, at an average of 165.9 pence per share (2008: 165.9 pence per share), was £2,838,386 (2008: £2,838,386). The market value of the shares held by the EBT at 30 June 2009, at 147.5 pence per share (2008: 58.0 pence per share), was £2,523,793 (2008: £992,407). The shares are held in the EBT for the purpose of satisfying options that have been granted under The Barratt Developments PLC Executive and Employee Share Option Plans. These ordinary shares do not rank for dividend and do not count in the calculation of the weighted average number of shares used to calculate earnings per share until such time as they are vested to the relevant employee.

18. Reconciliation of movements in consolidated equity

	Total
	(restated*)
	£m
Balance at 1 July 2007	2,907.6
Profit for the year	86.4
Revaluation of available for sale financial assets	(4.6)
Losses on cash flow hedges	(11.7)
Transfer to income statement on cash flow hedges	(1.8)
Losses on cancelled interest rate swaps deferred in equity	(3.6)
Amortisation of losses on cancelled interest rate swaps deferred in equity	0.1
Actuarial gains on pension scheme	20.1
Tax on items taken directly to equity	(2.5)
Total income recognised for the year attributable to equity shareholders	82.4
Dividends	(126.0)
Issue of share capital	1.8
Share-based payments	2.3
Purchase of shares to satisfy LTPPs	(0.3)
Balance at 30 June 2008	2,867.8
Loss for the year	(468.6)
Losses on cash flow hedges	(62.8)
Transfer to income statement on cash flow hedges	(21.7)
Amortisation of losses on cancelled interest rate swaps deferred in equity	0.4
Actuarial losses on pension scheme	(14.1)
Tax on items taken directly to equity	27.8
Total expense recognised for the year attributable to equity shareholders	(539.0)
Share-based payments	2.8
Balance at 30 June 2009	2,331.6

* The results for the year ended 30 June 2008 have been restated as explained in the Accounting policies note. The balance at 1 July 2007 was increased by £9.6m.

Losses on cash flow hedges of £62.8m (2008: £11.7m) relate to losses on interest rate swaps of £81.0m (2008: £19.1m), payments on interest rate swaps of £12.1m (2008: £nil) and gains on cross currency swaps of £30.3m (2008: £7.4m). £7.2m (2008: £nil) of this gain was realised upon cancellation of $40.5m of foreign exchange swaps following repayment of $40.5m US Dollar private placement notes on 12 January 2009. Transfers to income statement on cash flow hedges of £21.7m (2008: £1.8m) relate to payments on interest rate swaps of £12.1m (2008: £nil) and foreign exchange losses of £33.8m (2008: £1.8m). £7.2m (2008: £nil) of this loss was realised following repayment of $40.5m US Dollar private placement notes on 12 January 2009.

19. Cash flows from operating activities

	2009	2008
		(restated*)
	£m	£m
(Loss)/profit for the year from continuing operations	(468.6)	86.4
Tax	(210.3)	50.9
Finance income	(18.0)	(12.8)
Finance costs	208.6	168.1
Share of post-tax loss from joint ventures	3.0	2.6
(Loss)/profit from operations	(485.3)	295.2

Amortisation of deferred loss on swaps	0.4	0.1
Amortisation of intangible assets	-	0.8
Impairment of intangible assets	-	6.2
Depreciation	5.1	6.7
Impairment of goodwill	-	24.5
Impairment of inventories	499.5	208.4
Impairment of available for sale financial assets	23.7	9.5
Share-based payments	4.3	2.3
Imputed interest on deferred term land payables	(19.8)	(20.7)
Imputed interest on available for sale financial assets	11.2	2.9
Amortisation of facility fees	(17.4)	(6.5)
Finance costs related to employee benefits	(0.3)	(1.7)
Revaluation of available for sale financial assets	-	(4.6)
Profit on disposal of property, plant and equipment	(0.4)	(2.1)
Deferred tax on fair value adjustment	(3.3)	-
Total non-cash items	503.0	225.8

Decrease/(increase) in inventories	795.5	(230.5)
Decrease in trade and other receivables	63.8	43.0
Decrease in trade and other payables	(321.9)	(207.7)
Increase in available for sale financial assets	(43.3)	(39.1)
Total movements in working capital	494.1	(434.3)

Interest paid	(155.3)	(140.5)
Tax received/(paid)	51.3	(114.8)

Net cash inflow/(outflow) from operating activities	407.8	(168.6)

*The categorisation of various items in the year ended 30 June 2008 has been revised for consistency of presentation of cash flows with the year ended 30 June 2009. These include separating the impairment of inventories, impairment of available for sale financial assets, amortisation of facility fees and reclassifying the foreign exchange impact on loan repayments/drawdowns.

20. Acquisitions

The Group acquired the entire issued share capital of one entity during the year, being:

Hawkstone (South West) Limited

Acquired on 1 July 2008

The total cash consideration was £4.0m. This company was solely acquired for the land and land options that it holds. The book value of land acquired was £2.5m and the fair value was £4.7m which was offset by a deferred tax creditor of £0.7m (£0.7m at fair value). No goodwill arose on this acquisition. The acquisition did not contribute to the revenue or profit of the Group for the year.

In addition, as a result of a reallocation between the fair value and book value of land acquired as part of the prior year acquisition of Chancerygate (Lionel Road) Limited, a deferred tax credit of £3.3m arises in the year to 30 June 2009.

The Group also received cash contributions under the Wilson Bowden SAYE scheme of £1.3m in the prior year.

21. Contingent liabilities

a) Contingent liabilities related to subsidiaries

The Company has guaranteed certain bank borrowings of its subsidiary undertakings.

Certain subsidiary undertakings have commitments for the purchase of trading stock entered into in the normal course of business.

In the normal course of business the Group has given counter indemnities in respect of performance bonds and financial guarantees. Management estimate that the bonds and guarantees amount to £417.5m (2008: £434.9m), and confirm that the possibility of cash outflow is considered minimal and no provision is required.

b) Contingent liabilities related to joint ventures

The Group has guaranteed certain bank borrowings of its joint ventures, amounting to £3.9m at the year end (2008: £15.4m).

At 30 June 2009, the Group has an obligation to repay £0.9m (2008: £0.9m) of grant monies received by a joint venture upon certain future disposals of land.

The Group also has a number of performance guarantees in respect of its joint ventures, requiring the Group to complete development agreement contractual obligations in the event that the joint ventures do not perform what is expected under the terms of the related contracts.

c) Contingent liabilities related to subsidiaries and joint ventures

Provision is made for the Directors' best estimate of all known legal claims and all legal actions in progress. The Group takes legal advice as to the likelihood of success of claims and actions and no provision is made where the Directors consider, based on that advice, that the action is unlikely to succeed, or a sufficiently reliable estimate of the potential obligations cannot be made.

i) Incident at Battersea Park Road, London

One of the Company's principal subsidiaries is BDW Trading Ltd ('BDW'). On Tuesday 26 September 2006 at Battersea Park Road, London, a tower crane supplied to BDW (with operator) by a third party contractor collapsed. The collapse of the crane was not contained within the boundaries of the site and the crane operator and a member of the public were killed. In addition, significant damage was caused to a neighbouring block of flats and shops which resulted in the evacuation of a number of local residents due to concerns about structural stability. There is an ongoing criminal investigation currently being carried out by the London Metropolitan Police and the Health and Safety Executive to ascertain whether any of the parties involved are criminally liable for manslaughter or under relevant health and safety legislation. Although no assurance can be given, the Board has been advised that on the information available as at 22 September 2009, being the last practicable date prior to the publication of the 2009 Annual Report and Accounts, the risk of a finding of criminal liability against BDW is low. A number of civil claims brought against BDW in connection with the same incident have now been settled. All such claims are covered by the Group's insurance, to the extent not recoverable from the third party contractor's insurers.

ii) Incident at Bedfont Azure Lakes

On 28 February 2008, a resident was found dead and a lodger was found to be in a coma in housing association accommodation at the Bedfont Azure Lakes site developed by BDW. Police and Health and Safety Executive investigations commenced immediately into possible manslaughter/breaches of relevant health and safety legislation. These investigations are ongoing. Claims are being made against BDW by both the housing association and by various residents on the estate where the incident occurred as a result of the disruption caused to them by an evacuation of the surrounding property, by their gas being turned off and by their premises having to be inspected in order to establish whether there was any wider issue with gas installations on the site. Some residents have claimed (retrospectively) that they have suffered some of the symptoms of mild carbon monoxide inhalation, such as headaches and dizziness. Given the nature of these various claims, it is too early to determine the full amount of the damages claimed, which are currently unquantifiable. The Group is undertaking work to ensure all installations at the site are safe and claims are being dealt with by the Group's insurers, although the extent to which these are covered by the Group's insurance or the insurance of other parties cannot, at present, be clearly ascertained.

22. Related party transactions

a) Remuneration of key personnel

Disclosures related to the remuneration of key personnel as defined in IAS24 'Related Party Disclosures' are given in the 2009 Annual Report and Accounts. There is no difference between transactions with key management personnel of the Company and the Group.

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

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

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

At 30 June 2009, there was no outstanding balance (2008: £nil) due to the Group from either Capella Developments Limited or Capella Consultancy Limited.

c) Transactions between the Group and its joint ventures

The Group has principally entered into transactions with its joint ventures in respect of funding, development management services (with charges made based on the utilisation of these services), purchases of land and work in progress and reimbursement of group and consortium tax relief (see note 14 to the 2009 Annual Report and Accounts). These transactions totalled £1.9m (2008: £4.1m), £0.6m (2008: £3.6m), £18.5m (2008: £15.6m) and £nil (2008: £0.2m).

The amount of outstanding loans and interest due to the Group from its joint ventures at 30 June 2009 is disclosed in the 2009 Annual Report and Accounts. The amount of other outstanding payables to the Group from its joint ventures at 30 June 2009 totalled £nil (2008: £nil). The amounts outstanding are unsecured and will be settled in cash. The Group has also provided bank guarantees to the value of £26.0m (2008: £9.3m) to two of its venturers. No provisions have been made for doubtful debts in respect of the amounts owed by the related parties.

23. Post balance sheet events

a) Additional Executive Share Option Scheme

In recognition of his loss of benefit under his previous employer's long-term incentive and share option plans it was agreed with Mr D F Thomas that he would be granted an one-off award that seeks to target benefits equivalent to the options granted under the ESOS in 2008. In order to satisfy this obligation Mr D F Thomas will be granted an option by the trustees of the Employee Benefit Trust which, if and when exercised, will be satisfied from ordinary shares acquired in the market. The option will be over 666,666 ordinary shares at an exercise price per share of 55 pence. The option will be subject to the same performance targets as the options granted under the ESOS in 2008 and will be on substantially the same terms and conditions as those options.

b) Proposed Placing and Rights Issue

On 23 September 2009, the Company entered into an agreement with UBS Limited, Credit Suisse Securities (Europe) Limited, HSBC Bank plc, Barclays Bank plc, Lloyds TSB Bank plc and RBS Hoare Govett Limited to fully underwrite a £720.5m equity issue, to be structured as a Placing and a Rights Issue. The Group has also entered into amended financing arrangements which will come into effect upon successful completion of the Placing and Rights Issue.

Completion of the Placing and Rights Issue is conditional amongst other things upon shareholder approval at a General Meeting expected to be held on 19 October 2009.

24. Seasonality

The Group, in common with the rest of the housebuilding industry, is subject to the two main spring and autumn house selling seasons, which also result in peaks and troughs in the Group's debt profile. Since these seasons fall in separate half years the Group's financial results are not usually subject to significant seasonal variations.

25. Statutory Accounts

The consolidated financial statements for the year ended 30 June 2009 have been approved by the Directors and prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the EU and interpretations of the International Financial Reporting Interpretations Committee ('IFRIC').

Barratt Developments PLC's 2009 Annual Report and Accounts will today be made available on its website www.barrattdevelopments.co.uk on the following link: www.barrattdevelopments.co.uk/ir/reports/. The financial information set out herein does not constitute the Company's statutory accounts for the year ended 30 June 2009 (as defined in Sections 434 and 436 of the Companies Act 2006) but is derived from the 2009 Annual Report and Accounts and the accounts contained therein. Statutory accounts for 2009 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 17 November 2009.

The auditors' report, dated 23 September 2009, on the Group 2009 financial statements contains an emphasis of matter paragraph in relation to the Group's ability to continue as a going concern. Although the opinion contained in the Group 2009 financial statements is not qualified and does not contain statements under Section 498 (2) or (3) of the Companies Act 2006, the auditors considered that certain disclosures in the accounting policies note to the Group 2009 financial statements indicated the existence of a material uncertainty which might cast significant doubt about the Group's ability to continue as a going concern.

The comparative figures for the year ended 30 June 2008 are not the Company's statutory accounts for the financial year but are derived from those accounts which have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

Whilst the financial information included in this Annual Results Announcement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS as adopted for use in the EU.

Directors' responsibility statements

The Directors' responsibility statements have been prepared in connection with the full financial statements, Report of the Directors as included in the 2009 Annual Report and Accounts. Therefore, certain notes and parts of the Report of the Directors reported on are not included within this announcement.

The 2009 Annual Report and Accounts comply with the United Kingdom's Financial Services Authority Disclosure Rules and Transparency Rules in respect of the requirement to produce an annual financial report.

The Directors confirm that to the best of each person's knowledge:

a) the Group and Parent Company financial statements have been prepared in accordance with IFRS as adopted by the EU, International Financial Reporting Interpretations Committee interpretation and those parts of the Companies Act 2006 applicable to companies reporting under IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and of the Group taken as a whole; and

b) the 2009 Annual Report and Accounts includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties they face.

The Directors of Barratt Developments PLC and their functions are listed below:

R A Lawson, Chairman

M S Clare, Group Chief Executive

S J Boyes, Group Board Executive Director

C Fenton, Group Board Executive Director

D F Thomas, Group Finance Director

T E Bamford, Non-Executive Director

R J Davies, Senior Independent Director

R MacEachrane, Non-Executive Director

M E Rolfe, Non-Executive Director

W Shannon, Non-Executive Director

By order of the Board

M S Clare

Group Chief Executive

D F Thomas

Group Finance Director

23 September 2009

Registered office

Barratt Developments PLC,

Barratt House,

Cartwright Way,

Forest Business Park,

Bardon Hill,

Coalville,

Leicestershire,

LE67 1UF

Tel: 01530 278 278

Fax: 01530 278 279

www.barrattdevelopments.co.uk

Corporate office

Barratt Developments PLC,

Kent House,

1st Floor,

14-17 Market Place,

London,

W1W 8AJ

Tel: 020 7299 4898

Fax: 020 7299 4851

Companies

Barratt Redrow (BTRW)

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