Annual Report and Accounts 2017
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About Us
Contents
About Us
Governance
Accounts
IFC Contents and Financial Highlights
01
Introduction and Non-Financial
Highlights
02 Bellway at a glance
Strategic Report
04 Chairman’s Statement
05 Principal KPIs
06 Business Model
14
Strategy
16 Risk Management
21 Going Concern and Long-Term
Viability Statements
22 Operating Review
26 Financial Review
28 Corporate Responsibility
36 Board of Directors and Group General
Counsel and Company Secretary
38 Chairman’s Statement
on Corporate Governance
40 Corporate Governance Report
44 Nomination Committee Report
46 Audit Committee Report
51 Report of the Board on Directors’
71
75
Remuneration
Report of the Directors
Independent Auditor’s Report to the
Members of Bellway p.l.c.
80 Group Income Statement
80 Statements of Comprehensive Income
81
Statements of Changes in Equity
83 Balance Sheets
84 Cash Flow Statements
85 Accounting Policies
90 Notes to the Accounts
Other Information
110 Five Year Record
111 Alternative Performance Measures
114 Glossary
116 Shareholder Information
IBC Advisers and Group General Counsel
and Company Secretary
IBC Financial Calendar
Financial Highlights
Group revenue (£m)
2,558.6
+14.2%
Operating profit (£m)
571.6
+16.2%
Profit before taxation (£m)
Earnings per ordinary share (p)
560.7
+12.6%
370.6
+12.7%
Net asset value per ordinary share (p)(~)
Return on capital employed (%)(~)
1,785
+17.3%
Note:
27.6
-60bps
Operating margin (%)
22.3
+30bps
Proposed total dividend per
ordinary share (p)
122.0
+13.0%
~ Bellway uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group
against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures can be found
on pages 111 to 113. Throughout this report ‘~’ refers to alternative performance measures.
Bellway p.l.c. Annual Report and Accounts 2017
About Us
Introduction
Bellway has over 70 years of homebuilding
experience, growing from a local north
east of England family-owned business to a
national FTSE 250 housebuilder.
It has been another record year, during
which we have increased the number of
homes sold by 10.6%. We are proud to have
been awarded 5 star homebuilder status by
the Home Builders Federation (‘HBF’), which
proves our commitment to customer service.
We are Building Homes, Building Value.
For further details on our
business please visit:
www.bellway.co.uk
Non-Financial Highlights
Number of homes sold (homes)
Average selling price (£)
9,644
+10.6%
260,354
+3.0%
Owned and controlled
land bank (plots)
37,855(1)
+8.2%
Order book value at 31 July (£m)
Plots contracted in the year (plots)
1,296.3
+16.0%
11,613
+21.5%
Note:
1. Excluding joint ventures.
1.
2.
3.
5.
6.
7.
9.
4.
10.
12.
14.
15.
17.
11.
13.
16.
8.
18.
19.
Front cover images: Developments by each of our operating divisions
1. Yorkshire – Wyvern Grange, Dore,
South Yorkshire.
2. North London – Kingswood Park,
High Wycombe, Buckinghamshire.
6. Thames Gateway – The Residence, Nine
Elms, London Borough of Wandsworth.
7. Scotland – Manor Park, Cumbernauld,
Glasgow.
3. North West – Damson Grove, Sandbach,
8. Northern Home Counties – Hanwell View,
Cheshire.
Banbury, Oxfordshire.
4. North East – Stephenson Park, Killingworth,
9. Wessex – Holmwood Park, Ferndown,
North Tyneside.
Dorset.
5. Essex – Arunbrook, Colchester, Essex.
Back cover images: Developments by each of our operating divisions
10. Durham – Elwick Grove, Hartlepool,
15. South Midlands – The Brambles, Coventry,
Teesside.
Warwickshire.
11. Manchester – The Works, Eccles,
16. Wales – Monks Meadow, Llanwern,
Greater Manchester.
Newport.
12. East Midlands – Milldale, Chellaston,
Derbyshire.
13. South London – St George’s Gate,
Tooting, London Borough of Wandsworth.
14. Kent – Portland Gardens, Wouldham, Kent.
17. West Midlands – Ashtree Gardens,
Ashby de la Zouch, Leicestershire.
18. South West – Westlea Rise, Swindon,
Wiltshire.
19. Thames Valley – Sun Park, Farnborough,
Hampshire.
01
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information
About Us
Bellway at a glance
Building value at a local and national level –
our Group structure
We are proud of our heritage in the north east of England
and our base in Newcastle upon Tyne, where the business
was founded over 70 years ago. It is from our headquarters
in Newcastle upon Tyne that we currently operate through
19 divisions covering the main population centres across
England, Scotland and Wales, as shown on the map to
the right.
Our divisional structure allows local management teams to
respond to specific demands in their area and, through their
detailed local knowledge, acquire land on which to design
and build homes that meet or exceed the expectations
of our customers and contribute to creating strong local
communities. The divisional teams are supported by our
Regional Chairmen and by our specialist Head Office teams.
Building value locally – our product
and customer mix
We build high quality homes designed to complement
the style of existing local housing in developments that
meet local demand and enhance the community. With a
range that extends from one-bedroom apartments to six-
bedroom family homes, we offer an extensive choice from
which customers can choose a property that fits their
particular requirements. We also provide homes to housing
associations for social housing.
Our focus is to provide desirable, traditional family housing
across our divisions outside London and apartments
within the London boroughs, with our activity in London
predominantly in zone 2 and beyond.
Results for 2016/17
During the 2016/17 year we sold 9,644 homes, paid
£136.6 million in dividends and employed an average of
2,544 employees.
We continue to focus on our growth strategy to help us build
on our success in 2017/18 and beyond.
Thames Gateway – Dockside, Canary Wharf, London Borough of Tower Hamlets.
02
Bellway p.l.c. Annual Report and Accounts 2017
Our office locations
11
North London – Crossways, Slough, Berkshire.
Our capacity for growth
We believe our long-term growth prospects
remain compelling:
• 19 divisions provide capacity of c.11,000 homes p.a.
• strong balance sheet and operating capacity
provides ability to progress further divisional
expansion and volume growth.
• a diverse range of product allows divisions to
acquire a wide range of sites.
• experienced high rise London developer with
an affordable price point.
For more information on our
strategy see pages 14 and 15.
11
1
7
2
11
Scotland
North East
Head Office
20
Durham
9
6
Yorkshire
North West
Manchester
19
3
West Midlands
13
East Midlands
South Midlands
17
Wales
14
Northern Home
Counties
10
South West
Thames Valley
16
Wessex
18
North
London
8
Essex
4
15
Thames Gateway
5
Kent
12
South
London
03
Bellway p.l.c. Annual Report and Accounts 2017
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Chairman’s Statement
“I would like to place
on record the Board’s
gratitude to all those who
have contributed to this
outstanding performance.”
John Watson
Executive Chairman
financial and operational capacity
to capitalise on these investment
opportunities. Whilst the skills shortage
facing the entire construction sector is
a moderator to the industry’s overall
ability to deliver growth, it is not
preventing Bellway from continuing to
increase its output of new homes.
Given the strong market conditions, the
Board continues to see the opportunity
for disciplined volume growth, with
a focus on RoCE, as providing a
significant opportunity to add value
for shareholders.
A long-term approach to
creating shareholder value
The Board believes value generation is
best evaluated through capital growth,
in the form of increased net asset value
per share (‘NAV’), together with the
payment of a regular dividend.
Measured over a medium-term, in
the three years from 31 July 2014, the
strategy has resulted in total growth in
value of 925.5p per share(~), comprising
NAV growth of 667.0p per share(~)
and cumulative dividend payments
of 258.5p per share(~). This represents
an annualised accounting return of
22.3%(~) relative to the 31 July 2014 NAV
of 1,118p per share(~).
For the year ended 31 July 2017, the
strong trading performance has
resulted in NAV rising by 17.3% to
1,785p(~) (2016 – 1,522p). Furthermore,
the growth in earnings has enabled
the Board to recommend a 14.2%
increase in the final dividend to 84.5p
per share (2016 – 74.0p), increasing the
proposed total dividend for the year by
13.0% to 122.0p per share (2016 – 108.0p).
If approved, the total dividend will be
covered by earnings three times(~) (2016
– three times).
Introduction
The Group, comprising nineteen
trading divisions, has delivered another
excellent set of results, surpassing
the records set last year in respect of
volume, operating margin and profit.
Earnings per share has risen by 12.7%
to 370.6p (2016 – 328.7p) and RoCE
remains high at 27.6%(~) (2016 – 28.2%).
At the same time as achieving these
outstanding results and adding further
value for shareholders, Bellway remains
committed to growing the business
in a safe, responsible and sustainable
manner. In doing so, the Group has
increased its contribution to the supply
of much needed new homes whilst
upholding high standards in both
customer care and health and safety.
Bellway has invested significantly in
land, maintaining its rigorous and
disciplined investment criteria and with
a strong balance sheet and focus on
operational delivery, I am confident that
the Group is well positioned to deliver
further growth, this year and beyond.
Strong market parameters
support the growth strategy
The parameters supporting growth
are strong as there continues to be
an imbalance between the supply
and demand for high quality new
homes. Interest rates are low, with the
Bank of England base rate reducing
to 0.25% at the start of the year,
ensuring that financing a new home
remains affordable. The availability of
sustainable mortgage finance is also
good, supported by a responsible
lending environment and the
government’s Help to Buy scheme.
The land market remains attractive,
providing good quality opportunities
at attractive rates of return and the
planning environment is generally
favourable. Bellway has both the
04
Bellway p.l.c. Annual Report and Accounts 2017
For the foreseeable future, and
assuming the opportunity for growth
remains unchanged, Bellway will
continue to re-invest earnings into
financially attractive land opportunities
and maintain a dividend cover of
around three times earnings.
The compounding effect of additional
NAV and dividend growth will facilitate
further long-term value creation
for shareholders.
Board changes
As previously announced, Jason
Honeyman was appointed to the
Board as Chief Operating Officer on
1 September 2017. Jason commenced
employment with Bellway in January
2005 as Managing Director of the
Thames Gateway division, becoming
Southern Regional Chairman in
December 2011.
Jason has considerable experience
in the housebuilding sector, having
overseen the successful management
of our southern divisions since 2011.
Given the expansion of the Group,
his appointment to this new role adds
further strength to the operational
management team and will support
the delivery of the ongoing, disciplined
growth strategy.
In addition to Jason’s appointment,
I have temporarily taken the position
of Executive Chairman during Ted
Ayres’ period of absence from the
organisation due to illness.
People and supply chain
A responsible and long-term approach
to managing the business is enabling
Bellway to increase the number of
homes sold, whilst maintaining a focus
on both build quality and customer
care. It is the hard work, dedication
and efforts of both those who work for,
and with Bellway that has enabled the
Group to do this, whilst also achieving
this record set of results. I would like to
place on record the Board’s gratitude
to all those who have contributed to
this outstanding performance.
John Watson
Executive Chairman
16 October 2017
Strategic Report
Principal KPIs
The Group has six principal KPIs which are
shown below. Our secondary performance
measures, which support these KPIs, are shown
on pages 8 to 13.
Number of homes sold (homes)
Operating margin (%)
Return on capital employed (%)(~)
9,644
+10.6%
9,644
8,721
7,752
22.3
+30bps
22.0
22.3
20.4(1)
27.6
-60bps
28.2
27.6
23.9(1)
2015
2016
2017
2015
2016
2017
2015
2016
2017
This KPI demonstrates how well the business
model is able to support the Group’s strategy of
delivering volume growth.
Operating margin demonstrates how efficiently the
business is being operated.
Return on capital employed (‘RoCE’) is a key
indicator of how we are delivering our strategy of
building shareholder value which is reliant on land
acquisition and the subsequent performance of
our developments.
Earnings per ordinary share (p)
Net asset value per
ordinary share (p)(~)
Proposed total dividend
per ordinary share (p)
370.6
+12.7%
231.5
370.6
328.7
1,785
+17.3%
1,785
1,522
1,286
122.0
+13.0%
122.0
108.0
77.0
2015
2016
2017
2015
2016
2017
2015
2016
2017
Earnings per ordinary share (‘EPS’) is a useful
measure of how profitable Bellway is, year on year.
The directors consider net asset value per ordinary
share (‘NAV’) to be a useful proxy when reviewing
whether shareholder value, on a share by share
basis, has increased or decreased in the period.
This is another useful indicator of how the
directors are delivering the strategy of generating
shareholder value, particularly when combined
with NAV per ordinary share.
Note:
1. Stated before exceptional item (note 5).
05
Bellway p.l.c. Annual Report and Accounts 2017
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Business Model
Selecting the
right land
Managing the
planning process
Constructing the
right product
What we do
• Land opportunities are identified
What we do
• Our land bank is comprised of
three tiers:
i) owned or unconditionally
contracted land with DPP.
ii) pipeline plots of land
owned or controlled by the
Group pending DPP, with
development expected to
commence within the next
three years.
iii) strategic long-term land (either
owned or under option) which
has the benefit of a positive
planning status and is generally
held under option.
• Our divisional and Head Office
planning teams work closely with
local authorities and communities
to obtain DPP to construct
homes which reflect planning
and vernacular requirements.
The divisional and Head Office
planning teams progress a
combination of medium-term
‘pipeline’ land and land from our
strategic land bank throughout the
planning system.
by our divisional land and
planning teams and the Head
Office strategic land team using
their local knowledge and
contacts. A viability assessment
and appraisal is prepared by the
division, which is assessed in detail
at regional and then Group level,
where the final decision is taken to
purchase the site. Board approval
may also be required depending
upon the value and nature of the
proposed acquisition.
• Land acquisitions are considered
against a number of criteria,
including gross margin, RoCE,
capital requirements, forecast sales
rates and planning prognosis.
• The number of large, long-term
sites we own is strictly controlled
to avoid having too much capital
tied up or concentrated in
one location.
• We often secure land without
the benefit of an implementable
detailed planning permission
(‘DPP’), typically brownfield sites
with an outline planning consent
or on a ‘subject to planning’ basis.
We use the expertise of our land
and planning teams to obtain a
DPP which thereby adds value
and enables higher returns.
06
Bellway p.l.c. Annual Report and Accounts 2017
What we do
• We construct a wide range
of homes to suit a variety of
budgets and lifestyles. Our homes
are built to specific building,
technical and health and safety
regulations and other regulatory
requirements as well as to our
own quality standards.
• We take the health and safety of
our employees, sub-contractors
and visitors to any of our locations
very seriously.
• We strive to maintain long-
term working relationships with
reputable sub-contractors to
reduce health and safety risks
and to ensure the availability and
quality of materials and labour.
We seek to ensure that we
have suitable building materials
available at competitive prices to
enable us to construct homes to
the high standards expected of us
by our customers, within budget
and on time.
• We are signatories to the Prompt
Payment Code and ensure that
our sub-contractors and suppliers
are paid in accordance with
contractual requirements.
• We closely monitor work in
progress to ensure that build rates
are consistent with sales rates.
Investing in
our people
Our outputs
What we do
• Our people are key to the success
of our business and we aim to
provide them with a rewarding
and fulfilling career.
• We aim to continue hiring top
quality people to complement our
existing employees.
• Re-invest profit.
• Earnings for employees.
• Payments to sub-contractors
and suppliers.
• Investment in communities.
• Payments to national and
local government.
• Dividends to shareholders.
Delivering an
excellent customer
experience
What we do
• We aspire to sell homes that are
desirable and affordable for our
customers. The satisfaction of
our customers is of the utmost
importance and ultimately this
will determine the success or
otherwise of our business.
• We aim to deliver an excellent
experience to our customers,
both before and after occupation
of their homes, building upon
our reputation as a quality
national housebuilder.
• We aim to increase the number
of homes sold through continued
investment in appropriate land
and our divisional teams.
07
Bellway p.l.c. Annual Report and Accounts 2017
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Strategic Report
Business Model continued
Selecting the
right land
What we rely on
• Where sites require planning consent
it may take many months to progress
a parcel of land through the planning
consent process before we can
start building and selling homes.
We therefore require our land teams
to purchase sufficient sites to ensure
that we have the necessary amount
of land to meet our short-term
volume growth targets as well as a
pipeline of land for subsequent years.
Our impact
• By building quality homes on
predominantly brownfield land we
are contributing to the regeneration
of areas in mainly urban locations.
• By collaborating with local
communities we are delivering
high quality sustainable
housing developments.
• By paying section 106 and
Community Infrastructure Levy
(‘CIL’) contributions we provide
local authorities with revenue for
community investment.
• By building homes, local authorities
benefit from additional revenue
under the New Homes Bonus.
For more information see pages
28 to 35.
REM
The risk we mitigate
• The inability to source suitable
land at our minimum gross margin
and RoCE hurdle rates. There has
been no change to this risk during
the year.
For more information see pages
16 to 20.
RoCE (%)(~)
27.6
-60bps
08
Bellway p.l.c. Annual Report and Accounts 2017
KPIs
Failure to have an adequate supply of
land would put our ability to achieve
our volume growth targets under
pressure. We therefore link part of
the executive directors’ bonuses
to the delivery of a sufficient land
bank to meet our growth aspirations.
RoCE is a key indicator of how we
are delivering our strategy of building
shareholder value which is reliant on
land acquisition and the subsequent
performance of our developments.
Gross margin enables us to monitor
the robustness of our land purchasing
process and the level of profit on
land purchases.
The RoCE remains strong, but has
reduced slightly by 60 bps to 27.6%.
Gross margin has increased and the
land bank remains appropriate.
Sufficient land bank of plots with DPP
Gross margin (%)
Achieved
Achieved
25.9
+20bps
25.7
25.9
2016
2017
2016
2017
REM
Link to remuneration
– see pages 51 to 70.
28.2
27.6
2016
2017
Strategic Report
Managing the
planning process
What we rely on
• Our planning teams build
collaborative relationships with
local councils, residents and interest
groups so that our completed
developments benefit the
communities in which they are built
and reflect local needs. We also rely
on government support to make
improvements to the planning
process such as the continuation
of the National Planning Policy
Framework (‘NPPF’).
Our impact
• We consult with local residents as
part of the planning process to help
us build the homes our customers
desire locally.
• We make contributions to local
communities through section 106
and CIL payments and through the
provision of the New Homes Bonus.
For more information see pages
28 to 35.
The risk we mitigate
• Delays and increasing complexity
in the planning process. There has
been no change to this risk during
the year.
For more information see pages
16 to 20.
KPIs
These KPIs enable us to monitor the
number of plots in each tier of our
land bank to ensure they remain
sufficient to help us deliver our
strategy of volume growth. At the end
of the year we had an appropriate
number of plots in each land
bank tier.
Number of plots owned and controlled
with DPP (plots)(1)
Number of plots acquired with DPP
(plots)(1)
25,655
+3.1%
24,879
25,655
5,327
+8.2%
5,327
4,924
2016
2017
2016
2017
Number of plots converted from
medium-term ‘pipeline’ (plots)(1)
Number of plots in ‘pipeline’ (plots)(1)
5,093
-29.9%
7,265
5,093
12,200
+20.8%
12,200
10,100
2016
2017
2016
2017
Number of plots in strategic land bank with
positive planning status (plots)(1)
6,900
+9.5%
6,900
6,300
2016
2017
Note:
1. Excluding joint ventures.
09
Bellway p.l.c. Annual Report and Accounts 2017
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Business Model continued
Constructing
the right product
What we rely on
• Experienced construction people,
strong relationships with skilled sub-
contractors and consultants together
with Group purchasing arrangements
with suppliers and manufacturers are
key to enabling us to deliver homes
built to the right standard, at the right
time and at the right price.
Our impact
• The health and safety of everyone
who works on and visits any of our
locations is paramount.
• Reducing waste on site delivers cost
savings for the business and reduces
the amount of waste sent to landfill.
• Building strong long-term
relationships with sub-contractors,
consultants and suppliers and
manufacturers of materials generates
benefits for us, those we do business
with and the communities in which
we operate.
• Adhering to the commitments we
have signed up to in the Prompt
Payment Code is consistent with our
aim to be regarded as a responsible
and reliable national housebuilder.
For more information see pages
28 to 35.
The risks we mitigate
• Shortage of appropriately skilled
construction people and sub-
contractors.
• Shortage of building materials at
competitive prices.
There has been no change to these
risks during the year.
• Significant health and safety risks
inherent in the construction process.
This risk has increased during the year
as a result of increased complexity in
regulations and build programmes.
For more information see pages
16 to 20.
10
Bellway p.l.c. Annual Report and Accounts 2017
KPIs
The health and safety of our
employees, sub-contractors and
visitors on site is paramount.
We therefore include the Group’s
health and safety performance as part
of the executive directors’ potential
bonus payment. Improvements in
health and safety performance are
indicated by a lower NHBC health
and safety incident rate and by a
reduction in the number of RIDDOR
lost time accidents.
All of these KPIs improved during
the year.
NHBC health and safety incident rate
Number of NHBC Pride in the Job Awards
(awards)
0.690
-9.9%
REM
0.766
0.690
49
+14.0%
49
43
2016
2017
2016
2017
Number of RIDDOR seven-day lost time
accidents per 100,000 site operatives (accidents)
Number of NHBC Health and Safety Awards
(awards)
426.36
-4.2%
10
+100.0%
445.19
426.36
2016
2017
10
5
2016
2017
REM
Link to remuneration
– see pages 51 to 70.
11
Bellway p.l.c. Annual Report and Accounts 2017
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Business Model continued
Delivering an
excellent
customer
experience
What we rely on
• Sales and customer care teams
who are well trained, have the right
attitude and the resources available
to them to deliver excellent service to
our customers both before and after
occupation of their home.
• Well trained Site Managers who are
responsible for, and take genuine
pride in, the quality of each finished
home that we build.
Our impact
• We continue to improve energy
efficiency by building homes
which are, on average, more
energy efficient than is required by
building regulations.
• Customer handover folders contain
information on sustainable travel,
local recycling centres and energy
efficiency advice.
• For every completed customer
survey we make a donation
to our national charity partner.
This donation has increased by 100%
per survey this year.
KPIs
We have chosen the following
KPIs as they demonstrate progress
made in delivering our strategy of
volume growth. We believe that
customer satisfaction plays a very
important part in achieving this
volume growth and part of the bonus
available to the executive directors is
based upon improvements made in
customer service.
All of these KPIs have improved during
the year with the exception of customer
care satisfaction which has reduced
slightly, but has remained high.
Customer care satisfaction (%)
Number of homes sold (homes)
85.2
-50bps
85.7
85.2
9,644
+10.6%
9,644
8,721
For more information see pages
28 to 35.
REM
2016
2017
2016
2017
The risks we mitigate
• There are a number of risks, which
if not appropriately mitigated,
will negatively impact customer
experience. Our risk management
processes seek to reduce the impact
of all risks, thus trying to maintain
an excellent level of customer
experience. There has been no
change to these risks during the year.
For more information see pages
16 to 20.
Reservation rate (number)
HBF homebuilder status (star)
187
+10.7%
187
169
5
+1
5
4
2016
2017
2016
2017
Order book value at 31 July (£m)
REM
Link to remuneration
– see pages 51 to 70.
1,296.3
+16.0%
1,296.3
1,117.1
2016
2017
12
Bellway p.l.c. Annual Report and Accounts 2017
Strategic Report
Investing in
our people
What we rely on
• Our skilled, professional and
dedicated employees are provided
with the right level of training,
support and resources.
Our impact
• Further improvements in training
and development.
For more information see pages
28 to 35.
The risk we mitigate
• The inability to attract and retain
appropriate people remains a
significant risk to the business.
There has been no change to this
risk during the year.
For more information see pages
16 to 20.
KPIs
We use the following KPIs as
indicators of how successful we have
been during the year in managing
and developing our people.
All of these KPIs have improved
during the year, apart from the
percentage of employees who
have worked for the Company for
ten years or more, which has fallen,
and the percentage of NVQ Level 6
qualified Site Managers and Assistant
Site Managers which has remained
the same.
We have replaced our KPI on hours
of customer care training with
the number of training days per
employee. As this is a new KPI no
prior year comparator is provided
Employees who have worked for the
Group for ten years or more (%)
18
-300bps
21
18
2016
2017
Site Managers and Assistant Site
Managers with NVQ Level 6 or above (%)
Graduates and apprentices (number)
48.0
No change
48.0
48.0
92
+10.8%
92
83
2016
2017
2016
2017
Training days per employee (days)
Employee turnover (%)
4.2
4.2
2017
21.2
-220bps
23.4
21.2
2016
2017
13
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Strategic Report
Strategy
Our strategy enables us to maximise the value that our business model creates,
so for this reason, our strategy is closely aligned to our business model.
Selecting the
right land
Overview
Managing the
planning process
Constructing the
right product
Delivering an excellent
Investing in our
customer experience
people
Acquiring high quality sustainable sites
in areas of strong customer demand that
meet or exceed both our financial and
non-financial acquisition criteria is key to
the success of the business.
Working with local planning authorities and
communities in compliance with the NPPF
in order to deliver effective and sufficient
planning consents for the business.
Providing an appropriate product range on
housing and apartment developments, at
prices that are affordable for our customers
and which are built efficiently and to a
high quality.
Making sure that our customers receive
Providing our people with a rewarding and
an excellent experience when purchasing
fulfilling career, enabling them to achieve
a new home, both prior to and following
their full potential and deliver high levels of
moving in.
performance, contributing to the success
of the business.
How we performed in 2016/17
• We have continued to focus our land
buying in areas of strong customer
demand and in sustainable locations.
• We secured DPP on sufficient
land during the year to meet our
requirements for 2017/18.
• We only acquired land which met or
exceeded our minimum acquisition
criteria.
• During the previous year we appointed
three strategic land directors to secure
longer-term land interests across
the country and secure planning on
strategic land. During the year we
entered into option agreements to
purchase 26 sites which fall into this
category (2016 – 9 sites).
• We increased the number of plots
we own or that are unconditionally
contracted with DPP by 776 plots
to 25,655 plots, and the number of
‘pipeline’ plots (owned and controlled
awaiting implementable DPP) by 2,100
plots to 12,200 plots. We have an interest
in a number of long-term strategic land
holdings, of which 6,900 plots (2016 –
6,300) have been identified as benefiting
from a positive planning status.
• The number of plots that were converted
from our medium-term ‘pipeline’ land
bank to land with DPP in 2016/17 was
5,093 plots (2016 – 7,265 plots).
• We invested in sufficient ‘pipeline’ land
to provide plots to progress through the
planning process.
• Group house types are now being used
in seven divisions in the north. We will
consider further roll-out after receiving
more feedback from the business and
our customers.
• New, more comprehensive
assessment processes are in place for
Group suppliers.
• NHBC now undertake an annual in-
depth construction quality audit on each
site in addition to their routine more
frequent inspections.
• Inspection of our sites by both internal
and external specialists ensured
maintenance of high standards of health
and safety compliance and performance.
• Focused site briefings on how to
reduce slips, trips and falls reduced
the number of RIDDOR seven-day lost
time accidents.
• The Board paid close attention to our
health and safety performance at each
Board meeting, monitoring performance
against pre-determined targets
and objectives.
Our plans for 2017/18
• We aim to ensure that plots in our owned
or unconditionally contracted land bank
with DPP at the year end are sufficient
to meet the following year’s growth
targets and to progress land through the
planning system to contribute towards
subsequent years’ growth targets.
• We will continue to acquire land which
meets or exceeds our acquisition criteria.
• We aim to have sufficient plots with
DPP at 31 July 2018 to meet our 2018/19
volume growth aspirations.
• The Board will continue to monitor the
health and safety performance at each
Board meeting.
• We aim to invest in sufficient ‘pipeline’
land to provide plots which can be
reliably progressed through the planning
process and replenish land being
actively developed without tying up
excess capital.
• Our sites will continue to be regularly
inspected by both internal and external
specialists to ensure high standards
of health and safety compliance and
performance are maintained.
• We will have focused site briefings on
fire stopping and the quality issues that
are most commonly reported back to us
by our customers.
• We will continue to focus our land
• We aim to increase the number of
buying in areas of high demand and
in sustainable locations at or above
our minimum gross margin and RoCE
hurdle rates.
strategic option sites to complement the
other tiers of the land bank.
14
Bellway p.l.c. Annual Report and Accounts 2017
• We regained our HBF 5 star homebuilder
• We have developed a structured
status (one of only two national
housebuilders to do so).
• We have continuously refreshed
our training for all customer-facing
employees and are pleased to report
that our independent customer
satisfaction score is 85.2%.
• We have doubled the charitable
Bellway induction programme.
• We have created a suite of mandatory
and developmental e-learning courses
and have increased the number of
training days per employee.
• We have reviewed, benchmarked and
improved some of our core benefits,
including holiday entitlement and
donation for every completed customer
company car scheme.
survey from £5 to £10.
• We have developed an employee well-
• Our expanding national network of
being plan.
divisions, together with the development
of attractive, affordable homes has
helped to increase both the number
of homes sold and the average selling
price to record levels for the Group.
• We successfully opened a new division
in County Durham which will help
augment our sales performance.
• We have developed a succession
planning framework and begun the
process of reviewing the talent in
our business.
• We have developed a series of
structured apprenticeship programmes,
which are due to launch in the current
financial year.
• We have increased the number of
graduates and apprentices we recruit
and train by 11%.
• We will continue to sell a wide range
• We will launch new apprenticeship
of high quality homes to suit a variety
of budgets in locations sought after by
programmes and increase the number
of apprentices recruited.
our customers.
• We will continuously refresh our training
apprenticeship development programme.
• We will create a new Bellway Site Manager
for all customer-facing employees.
• We aim to increase the number of
new homes we bring to the market
and increase our sales outlets whilst
maintaining our high standards of quality
and service levels.
• We will seek to retain our HBF 5 star
homebuilder status.
• We will create management development
training, guidance and tools.
• We will implement initiatives to tackle
skills shortage.
• We will make further improvements
to core benefits and delivery of well-
being plan.
The metrics we use to measure our performance are on pages 8 to 13. We also have
a number of additional areas of focus which can be seen on the right of this page.
Selecting the
right land
Overview
Managing the
planning process
Constructing the
right product
Delivering an excellent
customer experience
Investing in our
people
Acquiring high quality sustainable sites
Working with local planning authorities and
Providing an appropriate product range on
in areas of strong customer demand that
communities in compliance with the NPPF
housing and apartment developments, at
meet or exceed both our financial and
in order to deliver effective and sufficient
prices that are affordable for our customers
non-financial acquisition criteria is key to
planning consents for the business.
and which are built efficiently and to a
the success of the business.
high quality.
Making sure that our customers receive
an excellent experience when purchasing
a new home, both prior to and following
moving in.
Providing our people with a rewarding and
fulfilling career, enabling them to achieve
their full potential and deliver high levels of
performance, contributing to the success
of the business.
How we performed in 2016/17
• We have continued to focus our land
• We increased the number of plots
• Group house types are now being used
buying in areas of strong customer
demand and in sustainable locations.
• We secured DPP on sufficient
land during the year to meet our
requirements for 2017/18.
• We only acquired land which met or
exceeded our minimum acquisition
criteria.
• During the previous year we appointed
three strategic land directors to secure
longer-term land interests across
the country and secure planning on
strategic land. During the year we
entered into option agreements to
purchase 26 sites which fall into this
category (2016 – 9 sites).
we own or that are unconditionally
contracted with DPP by 776 plots
to 25,655 plots, and the number of
‘pipeline’ plots (owned and controlled
awaiting implementable DPP) by 2,100
plots to 12,200 plots. We have an interest
in a number of long-term strategic land
holdings, of which 6,900 plots (2016 –
6,300) have been identified as benefiting
from a positive planning status.
• The number of plots that were converted
from our medium-term ‘pipeline’ land
bank to land with DPP in 2016/17 was
5,093 plots (2016 – 7,265 plots).
• We invested in sufficient ‘pipeline’ land
to provide plots to progress through the
planning process.
in seven divisions in the north. We will
consider further roll-out after receiving
more feedback from the business and
our customers.
• New, more comprehensive
assessment processes are in place for
Group suppliers.
• NHBC now undertake an annual in-
depth construction quality audit on each
site in addition to their routine more
frequent inspections.
• Inspection of our sites by both internal
and external specialists ensured
maintenance of high standards of health
and safety compliance and performance.
• Focused site briefings on how to
reduce slips, trips and falls reduced
the number of RIDDOR seven-day lost
time accidents.
• The Board paid close attention to our
health and safety performance at each
Board meeting, monitoring performance
against pre-determined targets
and objectives.
Our plans for 2017/18
• We aim to ensure that plots in our owned
• We aim to have sufficient plots with
• The Board will continue to monitor the
or unconditionally contracted land bank
DPP at 31 July 2018 to meet our 2018/19
health and safety performance at each
with DPP at the year end are sufficient
to meet the following year’s growth
targets and to progress land through the
planning system to contribute towards
subsequent years’ growth targets.
volume growth aspirations.
Board meeting.
• We aim to invest in sufficient ‘pipeline’
• Our sites will continue to be regularly
land to provide plots which can be
inspected by both internal and external
reliably progressed through the planning
specialists to ensure high standards
process and replenish land being
of health and safety compliance and
• We will continue to acquire land which
actively developed without tying up
performance are maintained.
meets or exceeds our acquisition criteria.
excess capital.
• We will continue to focus our land
• We aim to increase the number of
• We will have focused site briefings on
fire stopping and the quality issues that
strategic option sites to complement the
are most commonly reported back to us
other tiers of the land bank.
by our customers.
buying in areas of high demand and
in sustainable locations at or above
our minimum gross margin and RoCE
hurdle rates.
• We regained our HBF 5 star homebuilder
status (one of only two national
housebuilders to do so).
• We have continuously refreshed
our training for all customer-facing
employees and are pleased to report
that our independent customer
satisfaction score is 85.2%.
• We have doubled the charitable
donation for every completed customer
survey from £5 to £10.
• We have developed a structured
Bellway induction programme.
• We have created a suite of mandatory
and developmental e-learning courses
and have increased the number of
training days per employee.
• We have reviewed, benchmarked and
improved some of our core benefits,
including holiday entitlement and
company car scheme.
• We have developed an employee well-
• Our expanding national network of
being plan.
divisions, together with the development
of attractive, affordable homes has
helped to increase both the number
of homes sold and the average selling
price to record levels for the Group.
• We successfully opened a new division
in County Durham which will help
augment our sales performance.
• We have developed a succession
planning framework and begun the
process of reviewing the talent in
our business.
• We have developed a series of
structured apprenticeship programmes,
which are due to launch in the current
financial year.
• We have increased the number of
graduates and apprentices we recruit
and train by 11%.
• We will continue to sell a wide range
of high quality homes to suit a variety
of budgets in locations sought after by
our customers.
• We will continuously refresh our training
for all customer-facing employees.
• We aim to increase the number of
new homes we bring to the market
and increase our sales outlets whilst
maintaining our high standards of quality
and service levels.
• We will seek to retain our HBF 5 star
homebuilder status.
• We will launch new apprenticeship
programmes and increase the number
of apprentices recruited.
• We will create a new Bellway Site Manager
apprenticeship development programme.
• We will create management development
training, guidance and tools.
• We will implement initiatives to tackle
skills shortage.
• We will make further improvements
to core benefits and delivery of well-
being plan.
Additional areas
of focus
Expand and enhance
geographic coverage by
opening new divisions
principally in conurbations
where demand is high.
Investing further in our
existing operational
divisional structure.
Proactively manage our
balance sheet.
Ensure sufficient resources
are available in our
specialist Head Office
teams.
Ensure that robust Group-
wide systems are in place
to support our expanding
divisional network in
delivering our growth
strategy.
15
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Strategic Report
Risk Management
We have a well-established and
effective framework in place for
managing risks. That said, due to
continuing changes both inside and
outside of our business, we have
reviewed and updated our framework
as deemed appropriate during the
year. The introduction of an in-house
risk and internal audit function now
adds further strength to our risk
management framework.
It is the responsibility of management to
implement the Board’s policies on risk
management and internal control.
Our risk management objectives are to:
• assess risks against an agreed
appetite for risk, which is
regularly reviewed.
• ensure risk management roles
and responsibilities are defined,
communicated and understood.
• improve the balance of risk and
return through developing and
maintaining a proactive, risk
aware culture.
• ensure there is a consistent approach
for the identification, assessment,
control, monitoring, follow up and
reporting of risks.
• develop and implement action
plans to ensure that risks are
mitigated where required, are within
our agreed risk appetite and that
improvements are made to our
control environment.
• ensure the approach to risk
management meets the needs of the
business, senior management and all
key stakeholders.
Risk management roles and
responsibilities
Within any business, the management
of risk is the responsibility of every
employee. In undertaking individual
roles and responsibilities, employees
are assisting in identifying, assessing
and managing risks. Specific roles
and responsibilities as set out in our
risk management framework and
corresponding policy are:
The
Board
• Overall responsibility for
risk management.
• Review, challenge and approve
the risk management framework
and corresponding policy, processes
and annual risk plan.
• Review and agree risk appetite.
• Review and challenge
risk reports.
Audit
Committee
• Oversee risk management
framework, policy and processes.
• Review routine risk reports and utilise
risk information to review and approve
assurance plans and priorities.
• Provide assurance over risk
management to the Board.
• Monitor the progress of risk
mitigating actions and
recommendations.
Executive
Management
• Review, challenge and approve the
risk management framework and
corresponding policy and processes.
• Review and challenge risk information
against stated business objectives.
• Approve risk treatments and actions.
• Approve risk reports for the Board.
• Review and agree
risk appetite.
Key
Head
of Risk
• Design and implement the risk
management framework and
corresponding policy and processes.
• Facilitate and implement the risk
management framework, policy
and processes.
• Undertake risk management
activities and produce reports
in accordance with risk
management policy.
16
Bellway p.l.c. Annual Report and Accounts 2017
Reports to
Direct and monitor
Risk management process
A detailed risk register is maintained
of all of our potential risks, including
strategic, operational, financial and
compliance risks. The risk management
processes are set up to ensure all
aspects of the business are considered,
from strategy through to business
execution. Specialist areas are also
incorporated into the risk processes, for
example, corporate responsibility and
joint ventures.
The risk register is reviewed on
a regular basis as part of the
management reporting process
resulting in the regular assessment of
each risk, its severity and any required
mitigating actions. The severity of risk
is determined based on a defined
scoring system assessing risk impact
and likelihood.
Derived from the detailed risk register,
a summary of principal risks is reported
to management, the Audit Committee
and the Board. This summary is mainly,
but not exclusively, comprised of risks
scoring above our risk appetite after
mitigation. This summary is reviewed
throughout the year, with the Board
systematically considering the risks
taking into account any changes which
may have occurred. Once a year,
via the Audit Committee, the Board
determines whether the system of risk
management is appropriately designed
and operating effectively.
More information on risk management
and internal controls is included within
the Audit Committee Report on pages
46 to 50.
Identify
all business
areas
Evaluate
severity
of risks
Treat
to bring within
risk appetite
Action
mitigate risks
(where needed)
Report
monitor risks and
report progress
of mitigation
17
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Strategic Report
Risk Management continued
Principal risks
Through our regular risk management programme of activities, we have
identified the following principal risks to our business:
Risk and
description
Strategic
relevance
KPIs
Mitigation
Land
Inability to source
suitable land at
appropriate gross
margins and RoCE.
- Insufficient land would
- Land bank (with DPP).
- Budgeting and forecasting of
affect our volume growth
targets.
- Failure to buy land at the
right margin would have
a detrimental effect on
future returns.
- Number of homes sold.
- RoCE.
- Gross margin.
- EPS.
growth targets to ensure land bank
supports strategic target.
- Thorough pre-purchase due
diligence and viabilities on
all proposed land purchases.
These are kept under regular
review to ensure capital is invested
appropriately.
- Authorisation of all land purchases
in accordance with Group
procedures at Head Office.
Change
in year
No change.
Planning
Delays and complexity
in the planning process.
- Failure to obtain planning
within appropriate, pre-
planned timescales would
have a detrimental impact
on our growth prospects
and have an adverse
effect on returns.
- Centralised and divisional planning
specialists provide advice and
support to the divisions to assist
with securing planning permissions.
- Management of immediate,
medium-term and strategic land to
maintain an appropriate balance
of land in terms of quantity and
location.
No change.
- EPS.
- RoCE.
- Number of plots
acquired directly in
land bank with an
implementable DPP.
- Number of plots
converted from
medium-term pipeline
to land with DPP.
- Number of plots in our
pipeline land bank.
- Number of plots
identified in our strategic
land bank with a
positive planning status.
Construction resources
Shortage of
appropriately skilled
sub-contractors
and shortages of
building materials at
competitive prices.
- Failure to secure required
resources causes delays
in construction, impacting
the ability to deliver
volume growth targets.
- Pricing pressure would
impact returns.
- Number of homes sold.
- Customer care
satisfaction.
- Employee turnover.
- EPS.
- Systems are in place to select,
appoint, monitor, manage and
build long-term relationships with
our sub-contractors.
- Competitive rates and prompt
payment for our sub-contractors.
- Group purchasing arrangements
are in place.
- Continued review and monitoring
of supplier performance.
No change.
Health and safety
There are significant
health and safety
risks inherent in the
construction process.
- In addition to the moral
obligation and the
requirement to act in
a responsible manner,
injuries to any individual
while at one of our
business locations could
delay construction
and result in criminal
prosecution, civil litigation
and reputational damage.
- Number of RIDDOR
seven-day lost time
accidents.
- NHBC Health and Safety
Awards.
- NHBC health and safety
benchmark.
- The Board considers health and
safety issues at every meeting.
- Regular visits to sites by senior
management (independent of our
divisions) and external consultants
to monitor health and safety
standards and performance against
the health and safety policies and
procedures.
This risk has increased
slightly during the
year as a result of
increased complexity
in regulations and
build programmes.
18
Bellway p.l.c. Annual Report and Accounts 2017
Risk and
description
Strategic
relevance
Sales and external factors
- The ultimate impact of
these external factors
would be on the ability
to sell houses and
apartments and on
returns.
There are a number
of external factors that
could affect our ability to
generate sales, including
but not limited to:
- economic factors,
especially house price
inflation and interest
rates.
- mortgage availability.
- government housing
policy.
Human resources
Inability to
attract and retain
appropriate people.
- Failure to attract and
retain people with
appropriate skills will
affect our ability to
perform and deliver our
volume growth target.
KPIs
Mitigation
Change
in year
- Number of homes sold.
- Ongoing monitoring of key
- Forward order book.
- Reservation rate.
- Customer care
satisfaction.
- EPS.
- RoCE.
business metrics and development
of action plans as necessary.
- Product range and pricing strategy
No change.
determined based on regional
market conditions.
- Use of sales incentives, such as
part-exchange, to encourage the
selling process.
- Use of government-backed
schemes to encourage home
ownership.
- Employee turnover.
- Continued development of the
- Number of graduates
and apprentices.
- Number of people who
have worked for the
Group for ten years or
more.
IT and security
Failure to have suitable
systems in place and
appropriate back up,
contingency plans and
security policies.
- Poor performance of our
systems would affect
operational efficiency,
profitability and our
control environment.
- EPS.
Group Human Resources function
and implementation of our people
strategy.
- Competitive salary and benefits
packages which are regularly
reviewed.
- Succession plans in place and key
person dependencies identified
and mitigated.
- Graduate and apprentice training
programmes in place.
- Group-wide systems are in
operation which are centrally
controlled with an outsourced
support function in place.
- Continued investment in systems.
- Regular review and testing of our
security measures, contingency
plans and IT security policies.
No change.
This risk has increased
due to growing
complexity of our
business, together
with continued
external exposure
to ever-changing
security threats.
Legal and regulatory compliance
Failure to comply
with legislation and
regulatory requirements.
- Lack of appropriate
procedures and
compliance would
result in delays in land
development and
construction, have a
detrimental impact on
profitability and reputation
and potentially lead
to financial penalties
and other regulatory
consequences.
- Volume growth.
- Central Secretariat, Legal, Health
- EPS.
and Safety and Technical functions
advise and support divisions on
compliance and regulatory matters.
- Group-wide policies, procedures
and training for key regulatory
matters.
No change.
The previously reported principal risk relating to the environment remains under constant review, but mitigating actions
during the year and our current control environment have reduced potential exposure from this risk and it has thus been
removed from our principal risks.
19
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Interest rate risk
Interest rate risk reflects the Group’s
exposure to fluctuations in interest
rates. The risk arises because the
Group’s overdraft and floating rate bank
loans bear interest based on LIBOR.
The Group’s attitude to interest rate
risk and forecast debt is influenced by
the existing and forecast conditions
prevailing at the time that each new
interest-bearing instrument is entered
into. This will determine, amongst other
things, the term and whether a fixed or
floating interest rate is obtained.
During the year ended 31 July 2017, it
is estimated that an increase of 1% in
interest rates applying to the full year
would have decreased the Group’s
profit before taxation by £1.708 million
(2016 – £0.986 million).
Housing market risk
The Group is affected by movements
in UK house prices. These in turn
are affected by factors such as credit
availability, employment levels, interest
rates, consumer confidence and supply
of land with planning.
While it is not possible for the Group
to fully mitigate housing market
risk on a national macroeconomic
basis, the Group does continually
monitor its geographical spread
within the UK, seeking to balance
investment in areas offering the best
immediate returns with a long-term
spread of its operations throughout
the UK to minimise the effect of local
microeconomic fluctuations.
Strategic Report
Risk Management continued
Financial risk management
The Group’s financial instruments
comprise cash, bank loans and
overdrafts and various items such
as trade receivables and trade
payables that arise directly from its
operations. The main objective of
the Group’s policy towards financial
instruments is to maximise returns
on the Group’s cash balances,
manage the Group’s working capital
requirements and finance the Group’s
ongoing operations.
Capital management
The Board’s policy is to maintain a
strong capital base to underpin the
future development of the business in
order to deliver value to shareholders.
The Group finances its operations
through re-invested profits, bank
borrowings, cash in hand and the
management of working capital.
The Board expects to maintain a
dividend cover of around three
times earnings.
Management of financial risk
The main risks associated with the
Group’s financial instruments held
during the year have been identified as
credit risk, liquidity risk, interest rate risk
and housing market risk. The Board is
responsible for managing these risks
and the policies adopted, which have
remained unchanged during the year
and are set out below.
Credit risk
The Group’s exposure to credit risk is
largely mitigated as the vast majority
of the Group’s sales are made on
completion of a legal contract, at which
point monies are received in exchange
for transfer of legal title.
There is no specific concentration of
credit risk in respect of home sales as
the exposure is spread over a number
of customers. In respect of trade
receivables, the amounts presented
in the balance sheet are stated after
adjusting for any doubtful receivables,
based on the judgement of the Group’s
management through using both
previous experience and knowledge of
the current position (note 14).
20
Bellway p.l.c. Annual Report and Accounts 2017
In managing risk, the Group assesses
the credit risk of its counterparties
before entering into a transaction.
As part of the disposal of the Group’s
interest in Barking Riverside Limited,
as set out in note 5 to the accounts,
the Group has a receivable with a
fair value of £11.984 million due from
L&Q New Homes Limited. The credit
risk associated with this receivable
is considered to be low as it is a
reputable counterparty.
No credit limits were exceeded during
the reporting period or subsequently
and the Group does not anticipate
any losses from non-performance by
these counterparties.
The Board considers the Group’s
exposure to credit risk to be acceptable
and normal for an entity of its size, in
the industry in which it operates.
Liquidity risk
The Group finances its operations
through a mixture of equity (comprising
share capital, reserves and re-invested
profit) and debt (comprising bank
overdraft facilities and borrowings).
The Group manages its liquidity risk by
monitoring existing facilities and cash
flows against forecast requirements
based on a three-year rolling
cash forecast.
The Group’s Treasury Policy has, as its
principal objective, the maintenance of
flexible bank facilities in order to meet
anticipated borrowing requirements.
The Group’s banking arrangements
outlined in note 17 to the accounts
are considered to be adequate in
terms of flexibility and liquidity for
its medium-term cash flow needs.
Relationships with banks and overall
cash management are co-ordinated
centrally. The Group is operating well
within its financial covenants and
available bank facilities.
Short-term cash surpluses are placed
on deposit at competitive rates with
high quality counterparties. Other than
those disclosed, there are no financial
instruments or derivative contracts.
The Board therefore considers the
Group’s liquidity risk to be mitigated.
In relation to land payables, certain
payables are secured on the respective
land asset held (note 16). No other
security is held against any other
financial assets of the Group.
Strategic Report
Going Concern and Long-Term Viability Statements
The land bank consists of land with
DPP to meet our land requirements
for the short and medium-term
needs of the business bolstered
by a further pipeline of sites which
are being progressed through the
planning process.
In addition, the Group has for the
last eight consecutive financial years
achieved year on year growth in
legal completions, revenue and
operating margin.
Although the triggering of Article 50 is a
potential risk for the UK housebuilding
sector the reservation rate seems to be
unaffected so far.
Having considered all of the factors
described above, the directors have
a reasonable expectation that the
Group will be able to continue in
operation and meet its liabilities as they
fall due over the three-year period of
their assessment.
Going Concern Statement
After conducting a full review,
the directors have a reasonable
expectation that the Group has
adequate resources to fund its
operations for at least the next
12 months. For this reason, they
continue to adopt the going concern
basis in preparing the accounts as
discussed further on page 85.
Long-Term Viability
Statement
As required by provision C.2.2 of the
UK Corporate Governance Code, the
directors have assessed the prospects
of the Group over a three-year
period, taking account of the Group’s
current position and principal risks.
The directors consider that a three-
year period is appropriate as this is the
period covered by the Group’s near-
term business plan.
To assess the Group’s prospects the
directors conduct an annual strategic
review of the Group’s business model
and strategy, to ensure it remains fit
for purpose. A robust assessment was
also carried out of the principal risks
facing the business that would have an
adverse impact on the Group’s viability
over the three-year period.
The Group has in place considerable
flexible bank facilities with three lenders,
which provides access to finance
in tranches until November 2020.
In advance of each of these facilities
expiring, a review will be undertaken
to determine whether a facility needs
to be renewed based on the strategy,
cash forecast and pricing.
21
Bellway p.l.c. Annual Report and Accounts 2017
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Operating Review
“ Bellway has significant capacity
for further volume growth,
both from its existing divisional
structure and as a result of its
ability to open new divisions in
areas of strong demand.”
Jason Honeyman
Chief Operating Officer
Trading performance
Demand for new housing remained
strong across the country, with the
Group taking an average of 187
reservations per week (2016 – 169), an
increase of 10.7%. Site visitor numbers
were ahead of the prior year and
website traffic continued to rise.
As is normally the case, sales were
strongest in the second half of the
year, with the usually robust spring
market boosted further by new site
openings and investment in work
in progress. Accordingly, the weekly
reservation rate for the second half
of the year increased by 14.8% to 209
(2016 – 182), seemingly unaffected by
the General Election and the wider
uncertainty arising from the ongoing
EU negotiations. The cancellation rate
remained low, at just 11% for the full year
(2016 – 11%), reflecting strong underlying
customer confidence.
The government’s Help to Buy scheme
continued to be an important selling
tool, used widely across the Group
in 35% (2016 – 30%) of completions.
In London, where the maximum equity
loan percentage can be up to 40% of
the property value, Help to Buy was
used in 32% of completions.
The pricing environment remained
positive, with modest low, single digit
house price inflation benefiting the
average selling price on most sites
across the country.
The table below shows the number
of and average selling price of homes
completed in the year, analysed
geographically, between private and
social homes.
The number of homes sold increased
by 10.6% to 9,644 (2016 – 8,721), with
the proportion of social completions
increasing to 21.5% of the total
(2016 – 15.8%), as previously guided
and in accordance with planned
construction programmes.
The average selling price rose by 3.0%
to £260,354 (2016 – £252,793) and the
private average selling price rose by
6.3% to £296,018 (2016 – £278,403), with
this increase attributable to previous
investment in higher value locations,
together with the benefit of some
modest house price inflation.
The northern divisions increased
output by 11.2% to 4,655 homes (2016
– 4,187 homes), benefiting from strong
market conditions and completions
from developments in good quality
locations, where demand is higher.
This was particularly the case in
our Yorkshire division, which has
increased its output by over 75% to
467 homes (2016 – 266 homes), as a
result of a strong operational focus
and investment in land and work
in progress.
Growth is also being achieved from
our newer, fledgling divisions, such as
those located in Coventry and County
Durham, opened in February 2016 and
August 2016 respectively. Previous,
controlled investment in these areas,
enabled these two new divisions to
contribute a combined output of 327
homes, whilst retaining significant
capacity to add further volume and
profit growth in the years ahead.
Homes sold (number)
Private
Social
Total
2017
2016
3,897 3,651
2017
758
2016
2017
2016
536 4,655
4,187
3,670 3,694 1,319
840 4,989 4,534
7,567 7,345 2,077
1,376 9,644 8,721
Average selling price (£000)
Private
Social
Total
2017
2016
2017
2016
2017
2016
233.3 220.6
97.9
92.2 211.3 204.2
362.6 335.6 149.1
131.3 306.2 297.7
296.0 278.4 130.4
116.1 260.4 252.8
North
South
Group total
North
South
Group average
22
Bellway p.l.c. Annual Report and Accounts 2017
Output in the south grew by 10% to
4,989 homes (2016 – 4,534 homes),
with strong anchor divisions such as
Thames Gateway and Essex, both with
a presence in London, delivering over
800 completions each.
London continues to make a
meaningful contribution to the Group’s
performance, representing 10% of
completions (2016 – 14%) and 14% of
housing revenue (2016 – 21%). It has,
however, formed a lower proportion
of the Group’s overall output, reflecting
timing of construction programmes
and investment in land elsewhere in
the country.
The Residence, Bellway’s relatively high
value, flagship development located in
Battersea is trading well, contributing
137 completions. The outlook on this
development is positive, with 72% of
the apartments in this scheme either
exchanged or completed at prices
in line with or above the most recent
site appraisal.
In general, Bellway prefers to acquire
land in more affordable locations within
the capital, where market conditions
remain attractive. Sites such as Barking
Riverside, where the Group still has a
retained interest in some 2,800 plots,
have performed particularly well,
contributing 182 completions in the
year at an average selling price of
£245,204.
Overall, the Group retains its ability
to be flexible in its approach to land
acquisition, investing in those areas
around the country where returns are
strongest and most resilient.
Construction and
material costs
Growth in output in the construction
sector and the wider industry
skills shortage continued to place
upward pressure on sub-contractor
costs, particularly for trades such as
bricklayers and scaffolders. Whilst there
is some reliance upon overseas labour,
predominantly in the south east and
London, there is no evidence that this
valuable resource has diminished as
negotiations to leave the EU progress.
The availability of building materials
is generally good, however, there are
often localised incidences of under
supply of certain products, such as roof
tiles and particular facing bricks.
The Group is deploying a number
of initiatives to counter the effect
of cost increases, sub-contract
and supply chain constraints and
to improve overall operational
efficiency. These include regularly
reviewing construction schedules,
lead-in times and build progress
whilst forming strong partnerships
with our sub-contractors and supply
chain. In addition, a greater degree of
product standardisation, with additional
emphasis on design, should result in
future cost savings, with Group house
types now being plotted on most
new sites in seven of our divisions.
An independent quality review has also
helped re-emphasise the importance
of achieving quality standards on
the first attempt, thereby reducing
costly remedial work, and improved
benchmarking between sites and
divisions is resulting in added focus
being placed on cost control.
Planning and investing
in land for growth
Although the satisfaction of pre-
commencement conditions presents
challenges to the industry, in general,
the planning backdrop is positive and
the number of planning permissions
granted across the UK continues to rise.
The National Planning Policy
Framework still has a positive effect
in relation to encouraging local
authorities to prepare a local plan
and provide land for housing supply.
In addition, whilst the detail is still
outstanding, the Housing White
Paper, published in February, includes
proposals to ensure ‘ambitious’ local
plans are put in place across England,
to help prioritise brownfield land for
development and to standardise the
method for calculating housing need.
These measures, amongst others,
should improve the efficiency of the
planning process and increase the
delivery of new homes.
In the context of this supportive
planning environment, the availability
of good quality land remains strong,
with key financial metrics in respect
of gross margin and return on capital
employed being met or exceeded.
Set against this backdrop, Bellway
has continued to invest in land
opportunities located in sustainable
locations where there is strong local
demand. The Group has entered
into land contracts with a value of
£767 million (2016 – £641 million) in
order to acquire 11,613 plots (2016 –
9,555 plots) across 97 sites (2016 – 79
sites). Geographically, 43% of those
sites contracted were in the north
of the country and 57% were in the
south, with this balanced approach to
investment helping to spread risk.
The table below analyses the Group’s land holdings at 31 July:
Owned and controlled plots
Comprising:
DPP: plots with implementable detailed planning
permission
'Pipeline': plots pending an implementable DPP
Strategic plots with a positive planning status
2017
37,855
2016
34,979
25,655
12,200
6,900
24,879
10,100
6,300
23
Bellway p.l.c. Annual Report and Accounts 2017
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Operating Review continued
As a result of this land buying activity
and the ability of our land teams to
progress sites through the planning
system, the Group has 25,655 plots
with the benefit of an implementable
detailed planning permission (‘DPP’).
The Group now has all land in place
with the benefit of DPP in order to meet
this year’s planned growth target.
As a result of this activity, the number
of plots in the strategic land bank
has increased to 6,900 (2016 – 6,300),
with those reported representing only
those that have a positive planning
prognosis, being either identified
for residential development in an
emerging local plan or subject to a
current planning application.
The increase in the number of plots
in part reflects the success the Group
has had at converting plots from the
Group’s land ‘pipeline’, by obtaining
DPP on land in which the Group
already had a contractual interest.
The Group acquired or obtained a
DPP on 10,420 plots during the year,
of which 5,093 originated from this
‘pipeline’ section of the land bank.
The Group has an interest in 12,200
plots within the ‘pipeline’, on owned or
contracted sites, which already have
the benefit of an outline planning
permission, or where DPP is expected
to be obtained within the next three
years. A typical example includes
a former commercial site in Hemel
Hempstead, close to good transport
links into the centre of London,
contracted on an unconditional basis
by our North London division in May
2017. Bellway is actively seeking to
obtain DPP on a 184 unit scheme which
should deliver a RoCE(~) in excess of
20%. Brownfield sites acquired in this
manner help to secure a medium-term
source of land for the Group and are
often able to deliver attractive returns.
Overall, the Group’s owned and
controlled land bank, including those
plots with DPP and those within the
‘pipeline’, comprises 37,855 plots
(2016 – 34,979 plots), representing a
notional land supply of 3.9 years (2016
– 4.0 years).
As well as investing in land that meets
the Group’s immediate needs, Bellway
is benefiting from the appointment
of three strategic land directors in the
prior year, not only securing longer-
term land interests throughout the
country, but also successfully obtaining
DPP during the year on 1,843 plots
(2016 – 676 plots) that originated in the
strategic land bank. Furthermore, the
Group entered into option agreements
to purchase an additional 26 sites
(2016 – 9 sites), helping to replenish the
strategic land bank, with this longer-
term source of land supply providing a
particularly useful ‘top up’ as the Group
continues to grow in size.
24
Bellway p.l.c. Annual Report and Accounts 2017
Taking pride in customer care
We aim to ensure that customers
enjoy a positive experience when
purchasing a new Bellway home and
that their expectations with regards to
build quality and service are at least
met, if not exceeded. All new homes
undergo a thorough quality inspection
procedure before handover, thereby
minimising the likelihood of subsequent
issues and disruption to customers.
In addition, our Site Managers undergo
regular training, with 48% of individuals
in these roles having achieved NVQ
Level 6 qualification or above. Many of
our sub-contractors also participate
in ongoing briefing sessions in order
to maintain the ongoing focus with
regards to quality.
As a result of this approach, we are
delighted that 49 of our Site Managers
received NHBC Pride in the Job
Awards (2016 – 43), recognising their
commitment in this area. Not only
is this an increase on the prior year,
but proportionate to volume output,
this record performance represents
the highest number of awards of any
national housebuilder, reflecting the
quality and high standards that these
valued employees have achieved.
We continually review our processes
not only to ensure that new homes
are built to a high standard, but also to
make sure that our product design and
layout evolves to meet expectations
arising from modern living trends.
We regularly seek feedback from our
customers to assess our performance
and, in the independent Home Builders
Federation Customer Satisfaction
survey, Bellway was awarded a 5
star builder status(1), one of only two
mainstream national housebuilders
to achieve this accolade. In addition,
we assess our performance against
a number of key measures including
build quality, standard of finish and
home condition. We use the results of
these surveys to calculate an average
overall customer care score which has
remained consistently high at 85.2%
(2016 – 85.7%).
We recognise the continuing
importance of customer care and that
further improvements can always be
made. Notwithstanding our recognition
as a 5 star builder(1), we have recently
created a new Customer Experience
Committee, the remit of which is to
identify initiatives and drive further
improvements in both build quality and
service in the years ahead.
Building new homes safely
Construction works can be inherently
risky and hence ensuring the health
and safety of both operatives and
members of the public is of the
utmost importance to the Group.
Sites are audited frequently by both
our in-house safety team and external
consultants to ensure that we maintain
the highest of standards. We measure
the number of reportable incidents
arising from these inspections and as
a result of our continued focus in this
area, our NHBC reportable incident
rate has fallen by 9.9% to 0.690 (2016
– 0.766), with a low score reflecting
fewer reportable health and safety
contraventions. There has also been
a reduction in the lost time arising
from accidents, with the seven-day
reportable incident rate reducing by
4.2% to 426.36 incidents per 100,000
site operatives (2016 – 445.19).
Our efforts in this area of the business
have been recognised with ten of our
Site Managers receiving NHBC Health
and Safety Awards (2016 – five), with this
strong performance representing 18%
of the total awards issued across the
industry. Five of these Site Managers
have also gone on to win highly
commended awards, including a
national ‘best site’ award.
Investing in our people
Given the opportunity for growth,
Bellway has continued to expand its
workforce, employing an average
of 2,544 employees during the year
(2016 – 2,366), an increase of 7.5%.
Housebuilding has a positive net effect
on the economy and we estimate that
we supported 26,000 to 28,000 jobs,
both directly and indirectly through
sub-contract labour and the Group’s
supply chain.
This strong forward sales position,
together with investment in land and
work in progress and plans to open
a new, twentieth trading division in
the north of the country this financial
year, should enable Bellway to deliver
further growth in volume in the year
ahead. The Board therefore expects
that subject to market conditions, the
Group will grow volume by at least 5%
and complete the sale of around an
additional 500 homes, equivalent to
the output of an established operating
division. In addition, anticipated
completions from higher value
developments such as The Residence
in Battersea, should enable the Group
to deliver additional revenue growth by
further increases in the average selling
price, which depending upon the
progress of construction programmes,
is expected to rise to around £280,000.
Bellway has significant capacity for
further volume growth, both from
its existing divisional structure and
as a result of its ability to open new
divisions in areas of strong demand.
This capacity, together with a strong
balance sheet, is enabling the Group
to continue its disciplined growth
strategy and deliver further value
for shareholders.
Jason Honeyman
Chief Operating Officer
16 October 2017
Note:
1. As measured by the Home Builders’ Federation
Customer Satisfaction survey.
Notwithstanding this growth in
employee numbers, the industry
continues to face a skills shortage, with
the demand for labour exacerbated
by ongoing growth in the sector.
We implemented a number of
initiatives during the year to assist
with the attraction and retention
of talent, including an enhanced
Bellway induction programme and
improvements to our core benefits.
In addition, recognising the longer-
term skills shortage, we have created
a set of structured apprenticeship
programmes which are due to launch
in the current financial year and have
continued to increase the number of
apprentices and graduates within the
business by 11% to 92 people (2016 –
83). We have also taken steps to not
only increase the number of training
hours undertaken, but to better capture
and report all types of training across
the Group. As a result, the average
training days per employee has risen to
a record 4.2 days.
Bellway4Good
Bellway is committed to being a
responsible homebuilder and we have
continued to develop our approach
to corporate responsibility (‘CR’) under
the Bellway4Good banner, with the
primary focus on our three pillars of the
environment, construction and society
& economy.
This is the third year that we have set
ourselves a range of CR targets to
drive forward performance across the
business and we are pleased to report
some key successes. We continued
our energy efficiency work and
have increased the percentage
of construction compounds fitted
with energy saving devices to 94%
(2016 – 84%), whilst also launching
a trial energy saving campaign for
divisional offices. We also continued
our focus on removing waste from
landfill by further improving the waste
diversion rate to 97.8% (2016 – 95.9%).
We remain committed to ensuring
timber purchased by Bellway is from
sustainable sources and we are very
pleased to report that we achieved the
top rank in the World Wild Fund for
Nature’s (‘WWF’) Timber Scorecard 2017.
We have continued to refocus our
charitable activity towards supporting
the fundraising efforts of our
employees. Along with the selection
of Cancer Research UK as our national
charity partner, we committed to
matching every £1 raised by our
employees with a Bellway donation
of £2. We are delighted with how
successful the partnership has proved,
allowing Bellway and our employees to
raise and donate £385,913 to help fund
the search for a cure to cancer. We also
top-up employee fundraising for other
charities and good causes and across
our wider charitable activity, Bellway’s
total donations, including those to
our national charity partner, made
through a combination of employee
fundraising, matched funding and
direct donations amounted to £521,920
(2016 – £284,704), of which £229,047
(2016 – £74,704) was raised by our
employees and colleagues in our
supply chain.
We have also taken the next step in
quantifying the wider benefits that
our business delivers, both locally in
our operating divisions and also in
the wider UK economy, through the
publication of Bellway’s first Economic
and Social Impact Report. As a result
of this work, we estimate that we
have committed to invest £118 million
in community infrastructure projects
over the past year, in addition to
our contribution to public finances
through direct and indirect taxation and
significant spend on local and national
supply chains.
Current trading and outlook
In addition to achieving volume
growth of 10.6%, the Group ended
the financial year with an order book
of 4,749 homes (2016 – 4,644 homes),
with a value of £1,296.3 million (2016 –
£1,117.1 million). In the first nine weeks
of the new financial year, trading has
remained strong, with the Group
achieving 171 reservations per week
(2016 – 162), an increase of 5.6%. As a
result, the order book at 1 October rose
by 17.4% to £1,361.5 million (2 October
2016 – £1,159.3 million), representing
5,034 homes (2 October 2016 –
4,701 homes).
25
Bellway p.l.c. Annual Report and Accounts 2017
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Financial Review
“ Continued focus on RoCE and
the ongoing re-investment of
earnings back into the business,
... continues to deliver ongoing
value for shareholders.”
Keith Adey
Group Finance Director
Operating performance
The continued delivery of the Group’s
disciplined growth strategy has
resulted in housing revenue increasing
by 13.9% to £2,510.9 million (2016 –
£2,204.6 million), driven principally by
the number of housing completions
rising by 10.6% to 9,644 homes
(2016 – 8,721 homes). This, together
with other revenue of £47.7 million
(2016 – £36.1 million), has resulted
in total revenue rising by 14.2% to
£2,558.6 million (2016 – £2,240.7 million).
The ongoing focus on growth has had
a compounding effect on revenue.
Over the past three years, the number
of legal completions has increased
by almost 41% and this, together with
improvements in the average selling
price, has resulted in revenue rising by
over 72%, thereby demonstrating the
effect that the strategy is having on the
performance of the Group.
The gross margin has risen slightly to
25.9% (2016 – 25.7%), with good quality
land opportunities, a strong focus on
operations and the benefit of historical
house price inflation assisting the
Group in maintaining this high level.
In order to boost its operational
capability and support continued
growth, Bellway has invested
significantly in its regional structure
over recent years, both in new
divisions and by strengthening teams
within more established divisions.
Notwithstanding this planned
investment, administrative expenses
have fallen to under 3.6%(~) of revenue
(2016 – 3.7%), reflecting improved
absorption of the overhead base as
the Group delivers more output and
maintains its culture of cost control.
Overall, administrative expenses
have risen more slowly than revenue,
by 8.7% to £90.0 million (2016 –
£82.8 million).
The strong trading performance has
resulted in operating profit increasing
by 16.2% to £571.6 million (2016 –
£492.0 million) and the operating
margin improving by a further 30
basis points to 22.3% (2016 – 22.0%),
surpassing last year’s record.
Net finance expense
The net finance expense of
£11.2 million(~) (2016 – £11.1 million)
principally includes notional interest on
land acquired on deferred terms, which
has increased slightly to £7.7 million
(2016 – £7.6 million). The remaining
net interest expense primarily relates
to bank interest, comprising interest
on drawn monies, commitment fees
and refinancing costs on the Group’s
£430 million banking facilities. This has
increased slightly to £4.5 million (2016 –
£4.3 million), reflecting higher average
net bank borrowings throughout
the year.
Profitability
Profit before taxation (‘PBT’) rose
by 12.6% to £560.7 million (2016 –
£497.9 million), lower than the rate
of operating profit growth, primarily
as the PBT reported in the prior year
benefited from the one-off exceptional
and non-trading related profit of
£17.3 million, arising on the disposal of
the Group’s interest in Barking Riverside
Limited. The corporation tax charge
was £106.7 million (2016 – £95.0 million),
reflecting an effective tax rate of 19.0%
(2016 – 19.1%). The effective tax rate is
below the standard rate of corporation
tax of 19.7% (2016 – 20.0%), primarily
due to an enhanced tax deduction
for remediating previously developed,
brownfield land.
Investing cash for growth
The Group invested significantly in land
and work in progress throughout the
year in order to achieve future growth.
As a result, the capital invested in
land, net of land creditors and work in
progress, increased by £331.6 million(~)
(2016 – £289.4 million). Before taking
this investment into account, cash
generated from operations was
£588.1 million(~) (2016 – £538.8 million),
thereby demonstrating the substantial
cash generative ability of the Group.
After accounting for this investment in
growth assets, cash generated from
operations was £256.5 million (2016 –
£249.4 million).
26
Bellway p.l.c. Annual Report and Accounts 2017
A sustainable approach to
value creation
RoCE continues to be a key metric
used across the Group when
appraising land opportunities and
managing divisions’ performance.
As a result of this approach, and
notwithstanding the significant
investment in land and work in
progress in order to secure future
growth, Bellway achieved a strong
RoCE of 27.6%(~) (2016 – 28.2%).
Recognising that land creditors are
a source of long-term funding, an
adjusted measure including land
creditors as part of the capital base,
resulted in a RoCE of 23.9%(~) (2016 –
24.6%).
Post tax return on equity was 22.6%(~)
(2016 – 23.5%), a strong result from a
conservatively managed and lowly
geared balance sheet.
This focus on returns has resulted in
NAV increasing by 17.3% to 1,785p(~)
(2016 – 1,522p), with this being achieved
after paying out 111.5p per share
in dividends.
The disciplined growth strategy, with
a continued focus on RoCE and the
ongoing re-investment of earnings
back into the business to achieve future
growth, continues to deliver ongoing
value for shareholders.
Keith Adey
Group Finance Director
16 October 2017
After expending £98.8 million on tax,
paying a dividend of £136.6 million,
providing joint venture funding
of £29.4 million and taking into
consideration other minor cash
outflows of £2.2 million, the Group
ended the year with net cash of
£16.0 million(~) (2016 – £26.5 million),
reflecting an ungeared(~) balance sheet
(2016 – ungeared).
Land creditors, which are considered
to be a source of longer-term debt
finance, stood at £366.8 million (2016
– £304.2 million) and continue to be
used only when it is cost effective to
do so. Including land creditors, total
debt stood at £350.8 million (2016 –
£277.7 million), representing adjusted
gearing of 16.0%(~) (2016 – 14.9%).
A strong balance sheet to
secure future growth
Net tangible assets were £2,191.3 million
(2016 – £1,867.0 million), of which
inventory totalled £2,968.2 million
(2016 – £2,548.3 million). Bellway has
continued to invest in a controlled
manner, securing land and sometimes
limited production resource in order to
establish a strong foundation to help
achieve future growth targets.
The net amount invested in land
has increased by £212.6 million to
£1,838.2 million (2016 – £1,625.6 million)
and work in progress has risen by
£181.6 million to £1,017.7 million (2016 –
£836.1 million). Bellway now has 10,251
units in production (2016 – 9,621 units)
at a variety of stages across the Group,
which will support future growth.
Other than land creditors and the
use of net bank debt during the year,
there are limited sources of long-
term liabilities on the balance sheet.
The pension scheme deficit remains
modest at only £4.0 million (2016 –
£8.0 million) and is unlikely to be a
significant cash drain on the business
in the years ahead.
Group revenue (£m)
2,558.6
+14.2%
1,765.4
2,558.6
2,240.7
2015
2016
2017
Operating profit (£m)
571.6
+16.2%
360.4(1)
571.6
492.0
2015
2016
2017
Operating margin (%)
22.3
+30bps
22.0
22.3
20.4(1)
2015
2016
2017
Profit before taxation (£m)
560.7
+12.6%
354.2
560.7
497.9
2015
2016
2017
Earnings per ordinary share (p)
370.6
+12.7%
231.5
370.6
328.7
2015
2016
2017
Proposed total dividend
per ordinary share (p)
122.0
+13.0%
77.0
122.0
108.0
2015
2016
2017
Note:
1. Stated before exceptional item.
27
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Strategic Report
Corporate Responsibility
Bellway is committed to being a responsible housebuilder. We aim to have a
positive impact on all those who live in and around our developments while
at the same time delivering high quality homes, in desirable surroundings,
in areas where housing demand is strong.
This year we have continued
to develop our approach to
corporate responsibility (‘CR’).
Branded as Bellway4Good, we operate
our CR activity under three core
‘pillars’. By integrating CR practices
into our business we are able to build
better homes and communities, and
create a stronger company for the
long-term that delivers benefits to our
shareholders, customers, employees
and other stakeholders.
While ultimate responsibility for our
CR programme rests with our Chief
Executive, our CR Committee is chaired
by the Group Finance Director and
includes the Head of Sustainability
and functional heads. This committee
meets at least four times a year and
is responsible for setting strategy and
monitoring progress against targets
and objectives.
Our key achievements
in 2017
For 2017 we set the business a range
of targets under each of our CR pillars.
A total of 15 targets were set with 11
achieved in 2017. The remaining four
are multi-year targets – substantial
progress has been made against
three of these targets this year and we
are well on track to achieving them
within the pre-agreed timeframes.
The final target (around rationalising
the number of waste management
contractors we have across the
Group) has been curtailed early after
analysis demonstrated that negligible
improvements to waste management
could be achieved. The focus in 2017/18
in this area will switch to using existing
waste management best practice to
drive further improvements across
the Group.
11
targets achieved
3
0
1
targets in progress and will
be rolled over into 2017/18
targets missed
target curtailed early
A full summary of our performance
as well as our 2018 targets is set out
on our website www.bellway.co.uk/
corporate-responsibility. Some of our
key achievements are outlined below:
Environment
• increased the proportion of our
construction compounds fitted with
energy saving devices to 94%
(2016 – 84%).
• increased the percentage of our
forklift fleet fitted with energy efficient
engines to 83.5% (2016 – 68.9%).
ment,
d safety, Stakeholders
ustomers, Economic develop
ociety and
ployees, Health an
econom
harities, C
S
y
Em
C
E
B
c
i
o
o
l
d
o
i
v
g
e
y
,
r
E
s
i
t
E
n
y
e
,
r
C
g
n
a
v
i
r
o
n
m
e
n
t
y
r
,
b
T
r
o
a
n
n
e
s
p
m
o
i
s
r
t
,
s
i
o
W
n
a
s
,
t
e
r
Construction
Planning, Procurement, Research and development,
Site management, Sustainability, Waste
28
Bellway p.l.c. Annual Report and Accounts 2017
Construction
• improved our waste diversion rate to
97.8% (2016 – 95.9%).
• secured 100% of our timber from
sustainable sources (2016 – 100%).
• achieved the highest rank in the
WWF’s Timber Scorecard 2017, one
of only two national housebuilders
to do so.
Society and economy
• regained our 5 star homebuilder
status from the HBF, one of only
two national housebuilders to have
achieved this rating (2016 – 4 star).
• achieved an improved NHBC health
and safety reportable incident rate of
0.690 (2016 – 0.766).
• delivered 4.2 training days
per employee.
• donated a total of £385,913 (2016
– £159,228) to our charity of the
year (including money raised by
our employees, sub-contractors
and suppliers).
We continue to participate in the
Carbon Disclosure Project’s (‘CDP’)
‘Climate Change’ and ‘Forests’
programmes. In November 2016 we
improved our ‘Climate Change’ score
to ‘Awareness – C’ and maintained
our ‘Forests’ grade at ‘Management
– B’. Both of these scores are in line
with our industry group average
and the CDP programme average.
Unfortunately towards the end of 2017
we were informed that Bellway was no
longer a constituent of the FTSE4Good
Index Series. The index has recently
revised its scoring criteria and while
we improved our score from 2.2 to 2.3,
this was below the new 2.5 threshold
required to remain a member of
the index.
Thames Gateway – The Residence, Nine Elms, London Borough of Wandsworth.
29
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Strategic Report
Corporate Responsibility continued
Environment
As the demand for new housing increases, we
recognise the need to enshrine climate change
and the protection of the wider environment at
the core of our Bellway4Good activities.
E
n
v
i
r
o
n
m
e
n
t
Energy
We will increase the proportion of construction compounds with energy saving devices
to at least 90%.
We will limit the engine size of forklifts to 55 watts on all sites by 2019, delivering fuel and
carbon savings.
We will develop a ‘best practice’ energy saving campaign, implement in one division
and assess its impact prior to considering roll-out across the wider business.
We will introduce metered supplies for construction water usage at 90% of new
developments, building up an accurate picture of Bellway’s water usage.
We will develop quarterly carbon reporting with a view to establishing carbon reduction
targets in future years.
Water
Carbon
4 targets achieved
1
target in progress and will
be rolled over into 2017/18
0 targets missed
Our construction activities impact
on the environment in a number of
ways. As a responsible housebuilder
we have a duty to create sustainable
communities for both now and the
future, ensuring that we protect,
conserve and enhance the
environments in which we operate.
Biodiversity and ecology
We continue to carry out biodiversity
and ecology risk assessments as part
of the site planning process, ensuring
that the full impact of the development
is fully understood and associated
mitigation measures implemented
if necessary. Examples of recent
measures include the provision of
bat boxes, relocation of badger sets,
migration of protected species to
new habitats and the construction
of on-site and off-site ponds for
both drainage and to support and
promote biodiversity.
30
Bellway p.l.c. Annual Report and Accounts 2017
In total 198 (65.8%) of our developments
had Sustainable Urban Drainage
Systems implemented (2016 – 129,
60.0%) and we planted over 277,000
trees and shrubs this year (2016 –
over 195,000). We continue to invest
in and develop brownfield sites
which are acknowledged to support
ecological, community and economic
regeneration. During the year 59.0% of
our new homes were built on land that
had already been developed (2016 –
62.0%) and this strategy will continue to
be important in our future plans, with
brownfield sites making up 50.0% of
the owned and controlled plots in our
land bank.
Energy
Work on reducing our energy usage
has continued across all aspects of our
business. On our construction sites, the
programme for installing energy saving
technology in compounds continues
and we estimate that this can save
up to £500 per compound per year
in energy costs. We now have 94.0%
(2016 – 84.3%) of compounds fitted with
this type of technology and we plan to
reach 100% within the next few years.
This year has also seen a focus on the
energy efficiency of our forklift vehicles
on sites. We are changing to more
energy efficient engines and already
83.5% of the machines used on our
sites have been upgraded (2016 –
68.9%). We expect this to rise in 2018 as
energy efficient engines become more
readily available for the larger vehicles.
We continue to deliver energy saving
benefits to our customers through
the design of our homes. In 2017 the
energy efficiency of our new homes,
measured by their Dwelling Emission
Rates, was 6.0% better than the relevant
building regulations (2016 – 5.6%
better). Some form of renewal energy
technology was fitted in 38.6% of
homes (2016 – 38.4%) while 48.2% of
homes were fitted with waste recycling
facilities (2016 – 49.3%).
We have also turned our attention to
the sustainability performance of our
offices this year with an environmental
awareness campaign developed and
introduced in three of our divisions.
Focusing on issues such as energy
saving, waste recycling and reduced
paper usage, employee feedback and
environmental performance will be
monitored over the coming months
prior to a potential roll-out across the
entire Group.
Carbon reporting
In accordance with the Companies Act
2006 (Strategic Report and Directors’
Reports) Regulations 2013, we report on
our greenhouse gas (‘GHG’) emissions
as part of the annual Strategic Report.
Our GHG reporting year is the same
as our financial year, 1 August 2016
to 31 July 2017, and the previous
year’s figures have been provided
as comparators.
The methodology used to calculate
our emissions is based on the UK
government’s Environmental Reporting
Guidelines (2013) and emission factors
from the 2016 government GHG
Conversion Factors for Company
Reporting. The reported emission
sources includes those which we are
responsible for, as required under the
Companies Act 2006 (Strategic Report
and Directors’ Reports) Regulations
2013, with the exception of the
following which were excluded from
this report:
• gas and electricity from part-
exchange properties due to
immateriality and difficulty in
accurately reporting and recording
this data.
• emissions from site-based combined
heat and power units for which we
do not have operational control.
An element of carbon estimation is
undertaken in the following areas:
• diesel fuel usage on a small number
of sites where fuel is provided by our
groundworks contractors. Bellway’s
share of the usage is estimated based
on forklift usage.
• divisional offices where gas and
electricity usage is included within
landlord charges. Bellway’s usage is
estimated using a kwh per square
meter of occupied floor space figure
derived from other divisional offices
with utility billing in place.
Our overall carbon emissions have
increased by 11.5% to 24,909 tonnes
CO2e (2016 – 22,334). This has largely
been driven by an increase in
construction activity, with the number
of homes sold increasing by 10.6% to
9,644 (2016 – 8,721). Using our chosen
business metrics, carbon emissions per
home sold has remained consistent
with the previous year at 2.6 (2016 – 2.6)
and carbon emissions per employee
have risen by 4.3% to 9.8 (2016 – 9.4).
Both the 2016 and 2017 emissions have
been externally verified by Zeco Energy
to a ‘reasonable assurance level’ as part
of a review of our carbon footprint.
In addition to recording carbon on a
quarterly basis, 2018 will see further
analysis of our carbon output to
establish a ‘cost of carbon’ measure,
identifying opportunities for savings,
roll-out best practice and consider
potential carbon reduction targets for
the business.
Greenhouse gas emissions (tonnes of CO2e)(1)
Scope 1 – Combustion of fuel and operation of facilities (including diesel and petrol used on
site and in company cars on Group business).
Scope 2 – Electricity purchased for our own use.(2)
Total emissions
Emissions intensity:
tCO2e per Bellway home sold.
tCO2e per Bellway employee.(3)
Notes:
1. Carbon dioxide equivalent as per the meaning given in section 93(2) of the Climate Change Act 2008.
2. Scope 2 emissions have been reported using a location based emission factor.
3. Based on the average number of employees during the year.
2017
2016
18,844
6,065
24,909
16,362
5,972
22,334
2.6
9.8
2.6
9.4
31
Bellway p.l.c. Annual Report and Accounts 2017
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Corporate Responsibility continued
Construction
The construction process is the most visible
impact we have on local communities, society and
the wider environment. Working in partnership
with local authorities, communities, suppliers and
our sub-contractors is critical to our success.
Construction
Construction waste
management
We will continue work to introduce a maximum number of waste management
contractors across all divisions, aiming for 100% compliance by 2018 and work to identify
key waste reduction opportunities.
Construction waste We will maintain the proportion of waste diverted from landfill on construction sites at
95% or above.
Planning
We will pilot ‘Building for Life 12’ on a minimum of one site and assess the impact on
planning, construction costs and development desirability over the next three years.
Construction R&D We will continue to investigate new commercially available sustainable building
products/techniques/materials to assess their design and build performance.
Supply chain
management
We will continue to source 100% of timber from sustainable supplies.
3
targets achieved
1
target in progress and will
be rolled over into 2017/18
0 targets missed
1
target curtailed early
Communities
The creation of attractive and
sustainable communities remains
key to our strategy. We continue to
consult through tailored planning and
community engagement strategies
for each site. We aim to reach a
representative range of stakeholders
from existing communities, including
property owners, local authorities,
businesses, schools, residents’
associations and other groups and
where possible we incorporate
feedback into our plans.
32
Bellway p.l.c. Annual Report and Accounts 2017
This year we began an assessment
process to understand the benefits of
utilising the ‘Building for Life 12’ industry
standard for the design of new housing
developments. This will include an
impact assessment with the pre-existing
community as well as post completion
assessments undertaken with new
home owners on the sites. The findings
will help shape our evolving approach
to delivering homes and communities
that are attractive, functional
and sustainable.
We contribute to local economies in a
wider way other than the employment
opportunities we offer and the new
homes and communities we create.
Through local consultation processes
we make certain commitments
relating to the sites we have acquired.
These commitments vary from
development to development, based
on local need. These may include
investments in local communities,
such as education, healthcare facilities,
sports facilities, transport infrastructure
improvements and the creation of
recreational space. During the year
we committed to spend £118.2 million
via section 106, affordable housing
contributions and CIL payments (2016 –
£147.9 million).
Waste
As the fourth largest national
housebuilder by volume, we recognise
our responsibility to minimise our
impact on the environment through
reducing waste. While we have
continued to improve the Group’s
waste diversion rate to 97.8% (2016
– 95.9%), contributing to a 36.9%
reduction in the amount of waste sent
to landfill, during 2017 our construction
waste per home sold increased by 7.1%
to 9.25 tonnes (2016 – 8.64).
We are therefore committed to
reducing the amount of waste we
generate and in the coming year the
focus will shift to waste elimination as
we seek to reduce both waste tonnage
and costs, rather than only driving an
increase in diversion rates.
We will establish a waste per 1,000
square feet of completed homes
metric and devise a strategy to reduce
waste for implementation in 2018/19.
Work to identify the potential benefits
of rationalising our waste contract
structure has been curtailed early
and the focus will now be on utilising
existing best practice to drive waste
management improvement.
Supply chain
Our aim is to follow a responsible
procurement policy with all of
our supply chain partners. With a
proportion of our procurement through
Group contracts with national suppliers,
this year we undertook a top level risk
analysis and asked these suppliers
to undertake a self-assessment audit
process to identify strengths and
weaknesses in our Group supply chain.
To date the findings have identified no
areas of significant concern.
We also work with many smaller
businesses, including companies that
are local to specific development
sites, who provide materials, labour
and services. The local and regional
economies where we operate
are significant beneficiaries of our
activities. We are committed to paying
our suppliers and sub-contractors
within agreed terms and we remain a
signatory to the Prompt Payment Code.
We continue, where possible, to
procure materials from sustainable
sources and this year we again ensured
that 100% of our directly supplied
timber came from certified sustainable
sources (Category A and Category
B sources). We are pleased that our
stance on sustainable timber has
been recognised in the WWF’s Timber
Scorecard 2017, with Bellway one of
only two national housebuilders to
secure the top score of ‘3 trees’.
We are committed to ensuring that
there is no modern slavery, servitude
and forced compulsory labour or
human trafficking in our supply chains
or in any part of our business and we
act in accordance with the Modern
Slavery Act 2015, publishing a slavery
and human trafficking statement for
the financial year to 31 July 2017 on our
website. We also require all applicable
suppliers and sub-contractors with
a revenue of £36 million or more to
confirm that they either have their own
modern slavery policies in place or that
they adopt the Bellway policy.
Quality
The quality of Bellway construction has
again been recognised in the NHBC
Pride in the Job Awards. These are
the only UK-wide awards dedicated
to recognising Site Managers who
achieve the highest standards in
housebuilding. Bellway Site Managers
achieved a record 49 awards this
year (2016 – 43), with candidates
assessed on a wide range of criteria,
including technical knowledge,
leadership qualities and organisational
skills. We are extremely proud of this
achievement and their success is a
testament to the quality and high
standards they deliver on a daily basis.
Research and development
We are continually refining the
design of our homes, both to meet
the needs of evolving building
regulations and also, where possible,
to deliver sustainability benefits to
both the Group and the customer.
This year we have investigated five new
processes, materials and products to
understand how they can influence
and improve the design of our homes.
Overlaying this, our initiative to increase
standardisation of our house types will
deliver improvements in quality and
reductions in waste.
33
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Strategic Report
Corporate Responsibility continued
Society and economy
With housing as the fifth priority of the
electorate(1) and the estimate that around 250,000
new homes are needed each year to keep up with
demand(2), Bellway’s activities deliver a range of
social and economic benefits, both locally and
nationally.
y
ociety and econom
S
Customer
engagement
We will deliver high levels of customer satisfaction and aim to achieve ‘5 star
homebuilder’ status for the 2016/17 year.
Health and safety We will deliver ‘slips, trips & falls’ site briefings at 100% of sites to aid a reduction in our
RIDDOR seven-day reportable incident rate.
Employee
development
Employee
development
We will increase the number of training days per employee compared to 2015/16 levels.
We will develop a more structured and integrated programme for graduates, trainees
and apprentices by 2018.
Charitable giving
We will engage with our employees and Cancer Research UK with the aim of raising
and donating over £100,000 to the charity in the 2016/17 year.
4 targets achieved
1
target in progress and will
be rolled over into 2017/18
0 targets missed
Economy
Investment in new homes is vitally
important for the regional and national
economies. It directly stimulates
growth, supports jobs and ensures
regional economic competitiveness
through access to labour. In addition,
housebuilding as a sector plays an
important role in generating economic
output and the HBF estimate that
housebuilding accounts for 3% of the
UK’s total Gross Domestic Product
(‘GDP’).(3)
This year we produced our first
Economic and Social Impact Report
which can be found on our website.
In total we estimate that overall
economic output as a result of
Bellway’s housebuilding activities in
2015/16 generated £4.7 billion for the
UK economy.
Customers
We have continued our focus on
delivering excellent customer care
across our business, aided by the
delivery of 997 days of customer care
34
Bellway p.l.c. Annual Report and Accounts 2017
training in the year (2016 - 966 days).
We are proud to have regained our
rating as a 5 star homebuilder from
the HBF (2016 – 4 star), meaning that at
least nine out of ten of our customers
would recommend Bellway to a friend.
We are one of only two national
housebuilders who have achieved the
5 star rating for this current period.
first-time buyers (2016 – 11%). For those
requiring additional assistance, the
continuing government’s Help to Buy
schemes have been an important
mechanism to support home
ownership and of the 9,644 homes
sold this year (2016 – 8,721), 35% were
through the various Help to Buy
schemes (2016 – 30%).
Affordability
The government’s recent white paper(2)
highlighted that, in the current market
place, affordability is often a barrier
to people wanting to either take their
first step on the property ladder or to
upsize as their circumstances change.
Therefore supporting the affordability
of new homes is vital to the continuing
success of our business and the UK
housing market as a whole.
We build a comprehensive range
of houses and apartments to
enable customers to select the right
property for their needs and budget.
Our average selling price this year was
£260,354 (2016 – £252,793) and 8% of
our homes were sold to unassisted
In total around 43% of our homes were
sold to first-time and deposit-assisted
buyers (2016 – 41%), representing 4,123
homeowners whom Bellway have
helped to get their foot on the property
ladder this year (2016 – 3,534).
Another 22% (2016 – 16%) of our
homes were sold to affordable housing
providers (mostly housing associations)
and local councils, representing an
important contribution to meeting
local housing need. These affordable
homes are either let by the affordable
housing provider at below market
rents or provide the opportunity of
affordable home ownership through
‘shared ownership’ and other
intermediate products.
Employees
The quality of our developments, the
standard of our customer service,
the strength of our business strategy
and the value we deliver for our
stakeholders are all a result of the
people who make up Bellway.
We believe in treating all of our
employees and sub-contractors fairly
and responsibly. We have a range
of policies and procedures in place
to ensure that equal opportunities
are provided to all existing and
prospective employees of Bellway
and we act in accordance with the
Modern Slavery Act 2015. We will be
updating our slavery and human
trafficking statement for the financial
year to 31 July 2017 on our website.
We offer competitive salary and
benefits packages, including pension,
life assurance, a private medical
scheme and a save as you earn share
option scheme.
Safety
The well-being of all who interact
with our sites remains our highest
priority and we continue to actively
promote safe working through the use
of training, site briefings, informal and
formal inspections and best practice
forums to ensure all our developments
operate in a safe manner.
This year we have successfully reduced
our RIDDOR seven-day reportable
incident rate to 426.36 incidents per
100,000 site operatives (2016 – 445.19).
This is a direct result of various safety
initiatives undertaken, including a
campaign addressing slips, trips and
falls, which are a major cause of
accidents on site. For the fourth year
running, our NHBC health and safety
incident rate improved to 0.690 (2016 –
0.766). Bellway Site Managers won ten
awards at the 2017 NHBC Health and
Safety Awards (2016 – five), including
the national award in the large builder
category and the national runner up
award in the multi-storey category.
Charitable engagement
As a responsible business we continue
to support local and national charities,
as well as the communities in which
we develop.
We have improved our Charity of the
Year programme with the focus now
on support for a single cause, Cancer
Research UK, and a commitment for
the Group to ‘double match’ every
pound raised by employees.
We are extremely pleased with how
successful the partnership has proved,
allowing us to raise and donate an
amazing £385,913 to the charity in just
12 months – this is a 142% increase
on the total donated in the previous
year (2016 – £159,228). Our employees,
sub-contractors and suppliers raised
£184,793 of this total.
We have decided to extend the
partnership for at least another year
and we look forward to working with
our employees to try and make 2018
just as successful.
Each of our divisions also operates
their own budget for donations to
local charities and community groups.
In the past year we have supported
employee fundraising by topping-
up amounts raised by 50%. In 2017
employees raised a total of £44,254 for
various charities and causes of their
choice (2016 – £40,058).
Across our wider charitable activity,
Bellway’s total donations (through a
combination of employee fundraising,
matched funding and direct donations)
amounted to £521,920 (2016 –
£284,704), an 83% increase on last
year. Of this total, £229,047 was raised
by employees from their colleagues,
friends, family, our suppliers and sub-
contractors, a huge 207% increase on
last year (2016 – £74,704).
Looking forward
In 2018 we will undertake further work
on our existing multi-year targets and
have set additional single and multi-
year targets to further develop our
Bellway4Good agenda.
All 2018 targets can be viewed on our
website and some of our key aims are
outlined below:
• ensure 100% of our compounds are
fitted with energy saving devices
by 2020.
• roll-out an energy saving campaign
to all divisional offices to reduce
office energy use.
• devise a strategy to set a longer-term
carbon reduction target for 2018/19.
• establish a rolling average
measurement of tonnes of waste
per 1,000 square feet of completed
homes to shape a strategy to reduce
waste in 2018/19.
• retain our 5 star homebuilder status.
• increase total donation to Cancer
Research UK to at least £600,000.
In summary, 2017 has been another
successful year in the development of
our Bellway4Good programme, with
our CR strategy now better understood
across the business.
We remain committed to operating
Bellway in a sustainable manner,
one which delivers benefits for the
environment, our shareholders,
customers, employees and the local
communities in which we operate.
Approval of the Strategic
Report
The Strategic Report was approved by
the Board and signed on its behalf by:
John Watson
Executive Chairman
16 October 2017
Director and employee profile
The following table shows the gender split in the Group as at 31 July 2017:
Board of directors
Senior managers
Other employees
Total
Notes:
Male
No.
6
108
1,739
1,853
Male
%
86
86
71
71
Female
No.
1
18
723
742
Female
%
14
14
29
29
Total
No.
7
126
2,462
2,595
Workforce
%
<1
5
95
100
1.
‘No Place Like Home’ (October 2016), Confederation of British Industry.
2. ‘Fixing our Broken Housing Market’ (February 2017), Department for Communities and Local Government.
3. ‘The Economic Footprint of UK House Building’ (2015), Home Builders Federation.
35
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Governance
Board of Directors and
Group General Counsel and Company Secretary
John Watson
Ted Ayres
Keith Adey
Executive Chairman (interim)
Chief Executive
Group Finance Director
Committee N
Appointed to the Board in 1995, becoming
non-executive Chairman on 1 February
2013 and Executive Chairman on 14 August
2017 on an interim basis for the duration of
the Chief Executive’s leave of absence.
Background and experience
John, a Chartered Surveyor, joined Bellway in 1978
and was later appointed Managing Director of
the North East division, a position which he held
for 12 years. John joined the Board as Technical
Director in 1995 and became Chief Executive on
1 November 1999. On 31 January 2013 he stepped
down as Chief Executive to become Chairman.
Committee NR*
Appointed to the Board on
1 August 2011.
Committee NR
Appointed to the Board on
1 February 2012.
Background and experience
Ted joined Bellway in January 2002 as a divisional
Managing Director, becoming Southern Regional
Chairman in 2006. Ted was appointed to the
Board as Operations Director on 1 August 2011 and
succeeded John Watson as Chief Executive on
1 February 2013.
Background and experience
Keith, a Chartered Accountant, joined Bellway
in December 2008 as Group Chief Accountant,
becoming Group Finance Director on 1 February
2012. Prior to joining Bellway he worked at KPMG
and Grainger plc.
Other appointments
Bellway p.l.c. 1972 Pension Scheme – Trustee.
John Cuthbert OBE DL
Senior independent
non-executive director
Mike Toms
Denise Jagger
Non-executive director
Non-executive director
Committees A N* R
Committees A N R*
Committees A N R
Appointed to the Board on
1 November 2009.
Appointed to the Board on
1 February 2009.
Appointed to the Board on
1 August 2013.
Background and experience
John, a Chartered Accountant, worked in the
water industry from 1991 to 2010, when he retired
as Managing Director of Northumbrian Water
Group plc, having formerly been Managing
Director of North East Water plc and Managing
Director of Essex and Suffolk Water plc. John
became senior independent non-executive
director on 1 February 2014.
Other appointments
North Music Trust – Trustee.
Amazing Media Group Limited – Board Member.
Let’s Grow Investment Panel – Chair.
Sunderland University Development Committee
– Chair.
Newcastle College Group – Governor and Audit
Committee Chair.
36
Bellway p.l.c. Annual Report and Accounts 2017
Background and experience
Mike was formerly an executive director of BAA
plc. He has also been a non-executive Chairman
of Northern Ireland Electricity plc, a non-executive
director of Viridian Group PLC and of UK Coal
PLC. He is a member of the Royal Institution of
Chartered Surveyors (‘MRICS’) and a member of
the Royal Town Planning Institute (‘MRTPI’).
Other appointments
Birmingham Airport Holdings Limited – non-
executive director.
J Murphy & Sons Limited – non-executive director.
Oxera Consulting LLP – director (non-statutory).
Background and experience
Denise, a solicitor, has been a partner at Eversheds
LLP (now Eversheds Sutherland LLP) since
2004. Previously she was Company Secretary
and General Counsel at ASDA Group plc, later
part of Wal-Mart, from 1993 to 2004. Prior to this
she worked in the City in corporate finance
with Slaughter and May. Denise’s previous
non-executive directorships include The British
Olympic Association, Redrow plc, SCS Upholstery
plc and Scarborough Building Society.
Other appointments
Pool Reinsurance Limited – non-executive director
and Chair of Remuneration, Nominations and
Conflicts Committees.
University of York – pro Chancellor.
St Giles Trust – Chairman.
Y2019 Limited – independent director.
Eversheds Sutherland LLP – partner.
A Audit Committee
N Nomination Committee
R Board Committee on Executive Directors’
Remuneration
NR Board Committee on Non-Executive
Directors’ Remuneration
* Denotes Committee Chairman
Jason Honeyman
Chief Operating Officer
Simon Scougall
Group General Counsel and
Company Secretary
Committee NR
Appointed to the Board on
1 September 2017.
Appointed on 1 February 2016.
Background and experience
Jason commenced employment with the
Company in January 2005 as Managing Director
of the Thames Gateway division, becoming
Southern Regional Chairman in December 2011.
Background and experience
Simon, a solicitor, was appointed Group General
Counsel and Company Secretary in February
2016. Simon joined Bellway in March 2011 and has
held senior positions within the Group including
that of Group Commercial Director. He has over
15 years’ experience in the housebuilding sector,
working either in-house or for clients in private
practice.
Paul Hampden Smith
Jill Caseberry
Non-executive director
Non-executive director
Committees A* N R
Committees A N R
Appointed to the Board on
1 August 2013.
Appointed to the Board on
1 October 2017.
Background and experience
Paul is a Chartered Accountant and was Group
Finance Director of Travis Perkins plc from 1996
until his retirement in February 2013, having
worked for Travis Perkins since 1988. He was
previously senior independent non-executive
director and Chairman of the Audit Committee
of Clipper Logistics plc and a non-executive
director and Chairman of the Audit Committee of
Pendragon PLC and Redrow plc.
Other appointments
Grafton Group plc – senior independent non-
executive director, Chairman of the Audit & Risk
Committee and a member of the Nomination
and Remuneration Committees.
Delapre Abbey Preservation Trust – Chairman.
Cumberland Lodge, Windsor Great Park –
Chairman of the Audit Committee.
Background and experience
Jill has extensive sales, marketing and general
management experience across a number of
blue chip companies including Mars, PepsiCo
and Premier Foods.
Other appointments
Northgate plc – non-executive director,
Remuneration Committee Chair and a member of
the Audit and Risk and Nominations Committees.
She also currently runs her own sales and
marketing consultancy.
37
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information
Governance
Chairman’s Statement on Corporate Governance
We also host informal Chairman’s
dinners where senior management
meet members of the Board.
The Chairman meets with individual
directors on a regular basis outside of
Board meetings. This process allows
for two-way discussion enabling
the Chairman to act as necessary
to deal with any issues relating to
Board effectiveness.
Board effectiveness
There were no changes to the
Board during the year but the
Nomination Committee continue to
review succession planning and the
composition of the Board with regard
to the balance of relevant skills.
The Board has been strengthened
by the appointment of an additional
executive director and two new
non-executive directors who join
the business during the 2017/18
financial year.
Mike Toms will be stepping down
from the Board at the conclusion of
the Annual General Meeting (‘AGM’).
I would like to place on record
my thanks, and that of the whole
Board, to Mike for his hard work and
commitment both as a non-executive
director and Chairman of the Board
Committee on Executive Directors’
Remuneration.
All directors have access to the advice
and services of the Group General
Counsel and Company Secretary
and his department who ensure that
directors take independent professional
advice when judged necessary in
order to discharge their responsibilities.
During the year an externally
facilitated evaluation of the Board
and its committees was conducted
with the assistance of Lintstock
Limited. These evaluations concluded
that the Board and committees
were well run and continued to be
operating effectively.
“ I am responsible for
ensuring that the
correct cultural tone
is set from the top.”
John Watson
Executive Chairman
Dear Shareholder
As Chairman of the Board I am
responsible for leading the Board
and ensuring that we play a full and
constructive part in the development
and delivery of the Group’s strategy
and overall commercial objectives.
I am also responsible for promoting the
highest standards of integrity, probity
and corporate governance throughout
the Group and particularly at Board
level including ensuring that the
correct cultural tone is set from the top.
The Board believes that instilling high
standards of corporate governance
throughout all areas of our operations
will help to deliver our strategy of
building shareholder value as well as
benefiting other stakeholders.
Main activities of the Board
during the year
The Board meets formally and
informally during the year to consider
strategy, performance, risk, major
land acquisitions, potential conflicts
of interest and reports from senior
employees and external advisers.
One meeting a year is devoted entirely
to the consideration of strategy where
the Board agrees the way forward and
ensures that the necessary financial,
human, land and other resources
are in place to meet its objectives.
Areas focused on during the strategy
day were the opening of new divisions,
integration of new Head Office
functions, house building efficiency
savings, dividend policy, government
policy and succession planning.
The non-executive directors meet
to review the performance of
management and they also meet
without me being present to appraise
my performance. These meetings are
chaired by the senior independent
non-executive director.
Throughout the year the Board visited
seven divisions and also received
regular reports from the Regional
Chairmen and local management on
the opportunities and challenges they
face. The meetings with operational
management ensured that the Board’s
standards and values for integrity and
honesty are disseminated. Each of our
19 divisions has its own management
team and staff who manage and
take pride in the success of their
own operational business within the
strategy set by the Board. In this way
we create a culture that motivates and
rewards our colleagues. We promote
a supportive culture that enables our
employees to develop their talents
and skills.
Each year we also hold separate
annual conferences for the divisional
Managing Directors, Finance Directors,
Sales Directors, Technical and
Commercial Directors and Planning
Managers which are attended by the
executive directors or members of the
Head Office senior management team.
The Board also takes regular reports
from the Group General Counsel
and Company Secretary on legal,
commercial and insurance matters.
During the year we reviewed and
refreshed our Whistleblowing
Procedure and Anti-Bribery and
Corruption Policy and procedures.
38
Bellway p.l.c. Annual Report and Accounts 2017
The whole Board is available for
questions at the AGM, to which
institutional and private investors are
invited to attend. I am pleased to report
that at the last AGM over 92% of the
votes cast were cast in favour of the
resolutions put to shareholders by
the Board.
The Chairman and senior independent
non-executive director are always
available to discuss issues with current
and prospective shareholders and
institutions, as and when required.
In addition, the whole Board is
regularly updated at Board meetings
on shareholder and investor views and
activities by the Chief Executive and the
Group Finance Director.
Further information for shareholders
is available in the Shareholder
Information section of this report on
page 116 and also on our website at
www.bellwaycorporate.com.
John Watson
Executive Chairman
16 October 2017
The main areas highlighted for further
development or improvement were:
• succession planning.
• continue to focus on strategy as a
top priority.
The Board and the Group General
Counsel and Company Secretary
will work with senior management
to develop and improve these areas
during the year and the progress made
will be reported on in next year’s report.
The areas highlighted for improvement
in last year’s Board evaluation and
progress made are set out in the table
at the bottom of this page.
Conflicts of interest
Pursuant to the provisions of the
Companies Act 2006 relating to
conflicts of interest, the Board has put
in place a register to deal with the
notification, authorisation, recording
and monitoring of directors’ interests
and these procedures have operated
throughout the year.
Compliance with the UK
Corporate Governance Code
(the ‘Code’)
I am pleased to confirm that the
Board considers that it has complied
throughout the year with the detailed
provisions of the Code published in
2016. The Code is available, free of
charge, from the Financial Reporting
Council, online at www.frc.org.uk or by
telephoning 020 7492 2300.
Diversity
The Board is committed to making
appointments on merit, against
objective criteria and the Board
strongly supports the principle of
boardroom diversity in all its aspects.
As at 31 July 2017 our female employees
made up 29% (2016 – 28%) of our total
workforce, while 14% (2016 – 14%) of
the Board and 14% (2016 – 13%) of our
senior management were women.
Following the appointment of two new
directors since 31 July 2017, women
now make up 22% of the Board.
Shareholder engagement
The Company encourages active
dialogue with its private and
institutional shareholders, both current
and prospective, and the directors
communicate with both existing and
prospective institutional shareholders
on a regular basis and as requested.
During the year our executive directors
hosted a presentation attended by a
number of institutional investors as well
as meeting analysts and shareholders
after our results announcements,
with other members of the senior
management team. The Board receives
regular updates from our advisers
on investors’ and analysts’ views on
the Company.
Shareholders are also kept up-to-date
with our progress throughout the
year through the Annual Report and
announcements to the Stock Exchange
for the full year and half year results and
trading updates.
Board evaluation 2015/16 update
Action
Progress
Greater prominence and discussion
in relation to KPIs.
Further evolution in relation to the
management of risk.
Board papers/agendas to be more
forward-looking and strategy focused.
- This is now a standing item for discussion at each Board meeting.
- The KPIs Schedule has been updated and continues to evolve.
- Risk is now a standing item in the Group Finance Director’s Report.
- A full Board discussion on risk takes place once a year.
- Board agendas have been reorganised to give more focus on strategy or areas where decisions
are required.
- Board papers have been refreshed and management reports have improved significantly.
Greater clarity on the Group’s culture.
- Work on this area is ongoing in conjunction with Group Human Resources. The Board recognises
its importance in setting the Group’s culture from the top.
Succession planning at and below
Board level.
- An immediate disaster plan has been agreed and the finalisation of a detailed longer-term
succession plan at and below Board level is underway.
39
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Governance
Corporate Governance Report
1.
2.
3.
4.
5.
6.
7.
8.
The Board and Group General Counsel and Company Secretary at the strategy day in July 2017.
1. Denise Jagger
2. Keith Adey
3. Simon Scougall
4. Ted Ayres
5. John Cuthbert OBE DL
6. Paul Hampden Smith
7. John Watson
8. Mike Toms
BOARD OF DIRECTORS
AUDIT
COMMITTEE
NOMINATION
COMMITTEE
BOARD COMMITTEE
ON EXECUTIVE
DIRECTORS'
REMUNERATION
BOARD COMMITTEE
ON NON-EXECUTIVE
DIRECTORS'
REMUNERATION
Pages
46 – 50
Pages
44 – 45
Pages
51 – 70
Page
43
EXECUTIVE DIRECTORS
GROUP GENERAL
COUNSEL AND
COMPANY SECRETARY
HEAD OFFICE
MANAGEMENT TEAM
REGIONAL
CHAIRMEN
DIVISIONAL BOARDS
40
Bellway p.l.c. Annual Report and Accounts 2017
Statement about applying
the Principles of good
governance
The Board acknowledges the
importance of, and is committed to the
principle of, achieving and maintaining
a high standard of corporate
governance and in promoting a
positive culture within the Group.
We have applied the Principles of
good governance, including both the
Main Principles and the Supporting
Principles, by complying with the Code.
Further explanations of how the Main
Principles and Supporting Principles
have been applied are set out below
and in the Report of the Board on
Directors’ Remuneration.
Leadership
At the date of this report the Board
consists of nine directors whose names,
responsibilities and other details appear
on pages 36 to 37. Currently four of
the directors are executive and five
are non-executive. The Chairman
was, until 14 August 2017, a non-
executive Chairman but is temporarily
acting as Executive Chairman while
the Chief Executive is absent on
medical grounds.
There have been and will be over the
coming months a number of further
changes to the membership of the
Board. I am pleased to welcome
three new directors to the Board.
Jason Honeyman was appointed on
1 September 2017 as Chief Operating
Officer. To prepare for the retirement
of Mike Toms and John Cuthbert
we have appointed two new non-
executive directors. Jill Caseberry
joined the Board on 1 October 2017
and Ian McHoul will join the Board on
1 February 2018. Mike Toms will step
down from the Board at the conclusion
of the AGM on 13 December 2017,
and John Cuthbert will step down
during 2018.
The Board sets the strategic aims,
ensures that the necessary resources
(including finances, people and
materials) are in place for the Company
to meet these objectives and also
reviews management performance.
It defines the Company’s values
and standards and ensures that its
obligations to its shareholders are
understood and met.
The Board has put in place the
following structure which allows it to
provide entrepreneurial leadership of
the Group and to delegate authority
for operational matters through a
framework of prudent and effective
controls, which enable risk to be
assessed and managed.
Chairman
• promoting the highest standards
of integrity, probity and corporate
governance throughout the Group
and particularly at Board level
including ensuring that the correct
cultural tone is set from the top.
in the day-to-day running of the
Group’s business.
• ensuring the effective
implementation of Board decisions.
• reviewing the Group’s organisational
structure and recommending
changes as appropriate.
• together with the Chairman,
providing coherent leadership of the
Company, including representing
the Group to customers, suppliers,
government, shareholders,
financial institutions, employees,
the media, the community and the
general public.
• ensuring that the Company complies
• keeping the Chairman informed of all
with the requirements of the UK
Corporate Governance Code and
adheres to the highest standards
of governance.
• leading the Board and ensuring
its effectiveness.
• setting the Board’s agenda.
• ensuring the directors
receive accurate, timely and
clear information.
• ensuring effective communication
with shareholders.
• ensuring the effective conduct of
Board meetings and facilitating the
effective contribution of all directors
and the Group General Counsel and
Company Secretary.
• leading the evaluation of the
performance of the Board, its
committees and individual directors.
• overseeing the induction of any new
directors and the development of
existing directors.
• ensuring that the views of
shareholders are communicated to
the Board as a whole.
• encouraging constructive
relations between the executive
and non-executive directors and
the Group General Counsel and
Company Secretary.
important matters.
• approving the purchase of all
strategic land.
• overseeing the health and
safety, sales and marketing and
technical departments.
During the Chief Executive’s absence
on medical leave his responsibilities
have been shared between the
Executive Chairman, executive
directors and the Group General
Counsel and Company Secretary.
Group Finance Director
• devising and implementing the
financial strategy and policies of the
Group including treasury and tax.
• developing budgets and
financial plans.
• responsible for the Group’s investor
relations activities.
• overseeing the CR, finance, IT and
risk departments.
Chief Operating Officer
• supervising the activities of
the Regional Chairmen and
divisional senior management,
overseeing their development and
succession planning.
• overseeing Group operations.
• approves land purchases over
specified limits.
• overseeing the activities of
subsidiary companies.
Chief Executive
• implementing the strategy agreed by
the Board.
• leading the executive directors
and the senior management team
• approving land purchases within
specified limits.
• overseeing divisional
expansion plans.
41
Bellway p.l.c. Annual Report and Accounts 2017
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Corporate Governance Report continued
Senior independent
non-executive director
• acting as a sounding board for the
Chairman, executive directors and
the Group General Counsel and
Company Secretary.
• being available to shareholders.
• leading the annual appraisal of
the Chairman.
• holding meetings with the non-
executive directors without the
Chairman present.
Non-executive directors
• constructively challenging
management.
• contributing to the development
of strategy.
• scrutinising the performance
of management.
• ensuring integrity of financial
information and financial controls
and ensuring systems of risk
management are robust.
• determining appropriate levels
of executive director and Group
General Counsel and Company
Secretary remuneration.
• appointing and removing executive
directors and succession planning.
• serving on Board committees.
Group General Counsel and
Company Secretary
• supporting the Chairman and Chief
Executive in fulfilling their duties.
• keeping the Board regularly updated
on corporate governance matters.
• responsible for legal compliance
throughout the Group including
ensuring policies and procedures
are maintained and updated on a
regular basis.
• providing support to the Board
and committees.
• overseeing the legal, company
secretarial, HR and Head Office land
and planning departments.
The Board has adopted a schedule of
matters which are specifically reserved
for its decision, which includes strategy
and management, structure and
capital, financial reporting and controls,
internal controls covering both financial
and operational areas of the business,
42
Bellway p.l.c. Annual Report and Accounts 2017
land acquisition, contracts and
agreements, communication, Board
membership and other appointments,
remuneration, delegation of authority,
corporate governance matters, Group
policies and other miscellaneous items.
In addition, it has a series of matters
that are dealt with at regular Board
meetings including both an operational
and a strategic review, a financial
review, major land acquisitions, major
projects, risk, health and safety, HR,
reporting requirements, corporate
governance and internal control
(including any whistleblowing issues).
Board effectiveness
All directors have access to the advice
and services of the Group General
Counsel and Company Secretary and
his department. All of the directors may
take independent professional advice
at the Group’s expense where they
judge it necessary to discharge their
responsibilities as directors.
In accordance with the Code, all of
the directors will retire from the Board
and offer themselves for re-election or
election at the forthcoming AGM, apart
from Mike Toms who is stepping down
at the conclusion of the AGM and will
therefore not be seeking re-election.
None of the executive directors hold
external directorships.
The Board, its committees and the
individual directors are subject to
annual performance evaluation and
all directors are subject to annual re-
election by shareholders. The Board
regularly reviews the directors’ other
interests and appointments to ensure
that there are no conflicts of interest.
The Chairman is responsible for leading
the Board and ensuring it operates
effectively. The directors possess
an appropriate balance of skills and
experience to meet the requirements
of the business.
During the year there were seven
Board meetings, three Audit Committee
meetings, four meetings of the Board
Committee on Executive Directors’
Remuneration, one meeting of the
Board Committee on Non-Executive
Directors’ Remuneration and three
Nomination Committee meetings.
The Board normally holds a separate
meeting at least once a year dedicated
almost entirely to strategy.
The non-executive directors met twice
during the year, including once without
the Chairman present.
Paul Hampden Smith was unable to
attend one Board meeting during
the year and there were no other
absences from any other Board or
committee meetings.
Board activity during
the year
The Board visited our divisions in
Durham, East Midlands, South Midlands
and West Midlands to engage directly
with the divisional teams. They also
visited our Nine Elms, Highgate and
Greenwich sites in London as well as
meeting with senior management from
our North London, South London and
Thames Gateway divisions.
We have a schedule of matters which
are considered at each Board meeting
and also receive presentations and
reports from Head Office, regional and
divisional management and external
advisers throughout the year.
In-between Board meetings the
directors receive updates from the
Chairman or the Group General
Counsel and Company Secretary to
advise them of any significant matters
affecting the Group or its performance.
During the year the work carried out by
the Board included:
• strategy.
• considering regular reports on KPIs
from the Chief Executive.
• risk and internal control.
• consideration of recommendations
from the Board committees.
• scrutiny of reports from the Chief
Executive, Group Finance Director,
Group General Counsel and
Company Secretary and senior
management at each Board meeting.
• considering regular reports on
health and safety matters from the
Chief Executive.
• approval of major land purchases.
• Board evaluation.
• approval of bank facility agreements.
• receiving presentations from each of
the three Regional Chairmen on the
performance of the divisions under
their responsibility.
• receiving presentations from
Health and Safety, HR, IT, Sales and
Marketing and Technical Head
Office departments.
• approval of new or updated Group
policies and procedures including
Anti-Bribery and Corruption
Policy, Anti-Slavery Policy, Data
Protection Compliance Policy and
Whistleblowing Procedure.
• approval of revised terms of
reference for Board committees.
• approval of major IT expenditure.
• approval of the Group’s
insurance programme.
• approval of the Group’s Slavery and
Human Trafficking Statement for
2015/16.
• approval of the Annual Report and
Accounts for 2015/16.
• approval of preliminary
announcement, interim results and
trading updates.
• recommending the final dividend
for 2015/16 to be approved by
shareholders and approval of the
interim dividend for 2016/17.
Training and development
The Board receives appropriate
training and updates on various
matters relevant to its role and
responsibilities, as and when required.
Training needs are reviewed as part of
the performance evaluation process
and on an ongoing basis.
Following this year’s evaluation no
specific training needs were identified,
however, the Board does receive
annual training on health and safety
legislation and this year also received
formal site induction health and safety
training at our Nine Elms’ site.
Non-executive directors attend external
training sessions designed specifically
for non-executives and members
of Board committees as and when
required, which this year included
executive remuneration.
Board balance and
independence
The roles of Chairman and Chief
Executive are separate, with a clear
division of responsibilities ensuring a
balance of responsibility and authority
at the head of the Group.
The Chairman is not regarded as
independent as he was formerly
Chief Executive of the Company.
The Company considers all of its other
non-executive directors, excluding
the Chairman, to be independent,
as defined in the Code. Each of the
independent non-executive directors
has, at all times, acted independently of
management and has no relationship
which would materially affect the
exercise of his or her independent
judgement and decision-making.
The senior independent non-executive
director is John Cuthbert, with whom
shareholders may raise any queries or
concerns they may have.
Whenever any director considers that
he or she is interested in any contract
or arrangement to which the Group is
or may be a party, due notice is given
to the Board. No such instances have
arisen during the year.
Board evaluation
This year’s evaluation of the
performance and effectiveness of
the Board and its committees was
externally facilitated by Lintstock
Limited who has no other connection
with the Company.
Each director and the Group General
Counsel and Company Secretary
completed a questionnaire in relation
to the performance of the Board and
any committees of which they were
a member. This was followed by the
Chairman meeting individually with
each director and the Group General
Counsel and Company Secretary to
discuss the points raised.
The Chairman’s performance was
assessed by the senior independent
non-executive director, who
considered the views of the other
directors and the Group General
Counsel and Company Secretary as
part of that process.
The Chairman evaluated the
performance and effectiveness of
each of the directors. Each committee
chairman reviewed the responses to
the committee questionnaires before
reaching their conclusions on how the
committees had performed during the
year. The Board, led by the Chairman,
evaluated its own performance.
The evaluation concluded that,
overall, the Board and its committees
are performing well. The Chairman’s
Statement on Corporate Governance
above provides further information on
this year’s Board evaluation process
and progress made against the areas
for improvement which were identified
in last year’s evaluation process.
The Board committees
The Board has formally constituted
Audit, Remuneration and Nomination
Committees. The terms of reference for
these committees are available either
on request from the Group General
Counsel and Company Secretary,
at the AGM or on our website:
www.bellwaycorporate.com.
Other committees of the Board are
formed to perform certain specific
functions as and when required.
The work carried out by each of the
Board committees during the year
is described in the reports of the
committee chairmen which follow.
Board Committee on
Non-Executive Directors’
Remuneration
The Board Committee on Non-
Executive Directors’ Remuneration
comprises the executive directors and
is chaired by the Chief Executive.
This committee meets at least once a
year to review and recommend the
terms, conditions and remuneration of
the non-executive directors (excluding
the Chairman). Last year it met on one
occasion to review the fees and terms
of appointment of the non-executive
directors and receives advice from the
Group General Counsel and Company
Secretary and external remuneration
consultants when required.
43
Bellway p.l.c. Annual Report and Accounts 2017
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Nomination Committee Report
“ 2016/17 has been largely
about succession. The
steps taken and the plans
put in place should ensure
the continuity needed
to maintain momentum
within the business.”
John Cuthbert
Chairman of the Nomination Committee
Membership
Director
Date appointed to
Committee
Number of meetings
attended during the year
John Cuthbert
(Chairman)
1 November 2009, appointed
Chairman on 1 February 2013
Mike Toms
1 February 2009
John Watson
1 February 2013
Paul Hampden Smith
1 August 2013
Denise Jagger
1 August 2013
Jill Caseberry
1 October 2017
Main focus in 2016/17
3/3
3/3
3/3
3/3
3/3
N/A
• Board succession focusing on changes in the composition of the Board over
the next two years, including a successor to the Chairman when he retires
in 2019.
• Initiate the recruitment process for two new non-executive directors who will
join the Board in 2017/18.
• Approval of the Nomination Committee report for inclusion in the 2015/16
Annual Report.
• Performance evaluation of the Committee.
Focus areas for 2017/18
• To finalise a recommendation on the succession plan for the Chairman.
• To work with management to provide a comprehensive induction for our two
new non-executive colleagues.
• To consider and submit for approval by the Board the Board’s Diversity Policy.
• To continue to develop, with support from the executive directors and
Group Human Resources, the succession plan for those immediately below
Board level.
Responsibilities and terms
of reference
The main areas of the Nomination
Committee’s (the ‘Committee’)
responsibilities are:
• to review the structure, size and
composition of the Board and
recommend to the Board any
changes it considers appropriate.
This encompasses membership
of the Board committees and the
re-appointment, if appropriate, of
non-executive directors at the end of
their term of office.
• to consider succession planning
not only within the Board but also
immediately below Board level
and ensure appropriate plans are
in place.
• to identify candidates to fill Board
vacancies and nominate these to the
Board for approval. Appointments to
the Board are made on merit using
a formal, rigorous and transparent
process against objective criteria
recommended by the Committee.
These criteria take into account the
skills, knowledge and experience
of existing members of the Board
and the importance of diversity,
in all its aspects, within the Board.
The appointment of a non-executive
director is for a specified term and re-
appointment is not automatic, rather
it is made on the recommendation of
the Committee.
• to carry out an annual performance
evaluation of the Committee and
review the results of the Board
performance evaluation in relation
to the composition of the Board.
The Committee meets at least twice
a year and operates under its own
terms of reference. These have been
agreed by the Board and are available
at www.bellwaycorporate.com/
corporateGovernance.
The members of the Committee are
shown in the table to the left.
44
Bellway p.l.c. Annual Report and Accounts 2017
Activities in 2016/17
The main focus for the Committee in
2016/17 has been succession planning
within the Board. There will be a
number of changes in the composition
of the Board over the next eighteen
months as existing Board members
step down. This includes the Chairman
whose term of appointment ends in
early 2019.
Non-executive directors
As part of the planning for these Board
changes the Committee initiated a
recruitment process to identify two new
non-executive directors to replace Mike
Toms and I as we will both reach the
end of our third terms of appointment
during 2018.
We began the recruitment process by
refreshing and reviewing the Board
skills matrix. Following that review the
Committee concluded that candidates
should ideally possess one or more of
the following attributes: have relevant
sector experience, be a current
executive or have been in a recent
executive post, be based in the south
(to reflect the Group’s exposure to the
London market) and enhance diversity
within the Board.
The Committee interviewed a number
of recruitment consultants and
appointed The Zygos Partnership
(‘Zygos’) to provide support in
identifying suitable candidates.
This is the third assignment Zygos
have undertaken on behalf of the
Committee over an eight year period.
The members of the team at Zygos
have developed a good understanding
of both the business and the way the
Board operates.
Following detailed scrutiny of an
initial long-list of candidates, a very
strong short-list was identified and
a series of interviews with the short-
listed candidates concluded in
September 2017.
The Committee recommended
to the Board that Jill Caseberry
and Ian McHoul be appointed
and their appointments were
subsequently approved.
Executive directors
The Committee has also had to
respond to the unfortunate need for
Ted Ayres to take a leave of absence
from the business for a medical
condition. Two specific actions were
taken to ensure momentum within
the business was maintained during
Ted’s absence. The Chairman, who
has a very detailed understanding of
the business from his previous role as
Chief Executive, was asked to take on
the role of Executive Chairman and the
appointment of Jason Honeyman to
the Board as Chief Operating Officer
was brought forward.
The Chairman
The term of office of the Chairman,
John Watson, ends on 31 January 2019
and the Committee started the process
of considering options for succession
during 2016/17.
We took the opportunity to consult
a number of major shareholders on
the options for succession during
the year and will take into account
comments from that consultation in our
deliberations. I am also consulting with
the executive directors.
In reaching a decision the Committee
will need to be mindful of the extent
of change within the Board over
the next eighteen months and of
the importance of continuity within
the Board.
John Cuthbert
Chairman of the Nomination Committee
16 October 2017
45
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Governance
Audit Committee Report
“ The Committee is an
important component
of the governance
framework of
the Group.”
Paul Hampden Smith
Chairman of the
Audit Committee
Membership
Director
Date appointed
to Committee
Number of meetings
attended during the year
3/3
3/3
3/3
3/3
N/A
Paul Hampden Smith
(Chairman)
1 August 2013, appointed
Chairman on 1 February 2014
Mike Toms
1 February 2009
John Cuthbert
15 January 2010
Denise Jagger
1 August 2013
Jill Caseberry
1 October 2017
Main focus in 2016/17
• Financial reporting.
• Internal control and risk management.
• Audit effectiveness and re-appointment.
• Review of Independent Auditor Policy.
• Approval of changes to the Whistleblowing Procedure, Anti-Bribery and
Corruption Policy, Data Protection Compliance Policy and approval of the Anti-
Slavery Policy and human trafficking statement.
Focus areas for 2017/18
• Financial reporting.
• Internal control and risk management.
• Audit effectiveness.
• Approve annual tax strategy statement.
• Assist with the induction of the two new Committee members who join during
2017/18.
46
Bellway p.l.c. Annual Report and Accounts 2017
I am pleased to apprise you of
the work undertaken by the Audit
Committee (the ‘Committee’) during
the year ended 31 July 2017 in relation
to financial reporting, internal control,
risk and external audit. The Committee
is an important component of the
governance framework of the Group,
with its principal activities focused
on the integrity of financial reporting,
the quality and effectiveness of
internal controls, risk management
and reviewing the performance of
the external auditor.
Committee membership
and meetings
The Committee comprises the five
independent non-executive directors
shown in the table to the left. I confirm
that between them they have an
appropriate and relevant combination
of experience and knowledge.
The Code requires that the Committee
has at least one member with recent
and relevant financial experience, and
the Board has confirmed that they
believe that I, as Chair of the Committee,
satisfy these criteria. The Board has
also confirmed that they are confident
that the collective experience of the
Committee members enables them to
act effectively as an audit committee.
Further information on the experience
and knowledge of the Committee
members is included in the directors’
biographies on pages 36 and 37.
In line with the terms of reference, there
were three scheduled meetings of the
Committee during the year and there
were no absences from any meeting.
The Group Finance Director, Group
General Counsel and Company
Secretary, Group Finance Manager
and Head of Risk attend meetings
by invitation and were present
at all meetings during the year.
The Committee is supported by the
Deputy Group Company Secretary who
acts as secretary to the Committee.
Two of the meetings during the year
were also attended by representatives
from the external auditor, KPMG
LLP (‘KPMG’), who also met with
the Committee independently of
management. No issues were raised
during these discussions. I also had
further discussions, independently of
each other, with the Group Finance
Director, Head of Risk and KPMG, and
reported relevant information to other
members of the Committee.
Governance In advance of Committee meetings,
detailed papers are prepared both
by management and KPMG, thereby
allowing informed discussions and
decisions to take place.
Responsibilities and terms
of reference
The main responsibilities of the
Committee are:
Financial reporting
• to monitor the integrity of the
financial statements of the
Group and any other formal
announcements relating to the
Group’s financial performance,
reviewing and reporting to the Board
on significant financial reporting
issues and judgements contained
in them, whilst having regard to
matters communicated by the
external auditor.
• to review and challenge, where
necessary, the actions and
judgements of management,
in relation to the Interim
Announcement and Annual Report
and Accounts, before submission
to the Board.
• where the Committee is not satisfied
with any aspect of the proposed
financial reporting by management, it
shall report its views to the Board.
• where requested by the Board,
the Committee should review the
content of the Annual Report and
Accounts and advise the Board on
whether, taken as a whole, it is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
Group’s performance, business
model and strategy.
Internal control and risk
• to review the Group’s internal
financial controls and, unless
expressly addressed by a separate
board risk committee composed
of independent directors or by the
Board itself, the Group’s internal
control, internal audit and risk
management systems.
• to assess the scope and effectiveness
of the systems established by
management to identify, assess,
manage and monitor financial and
non-financial risks.
• to review the Group’s arrangements
for its employees to raise concerns,
in confidence, about possible
wrong-doing, financial reporting or
other matters through the Group’s
Whistleblowing Procedure and to
ensure that arrangements are in
place for the proportionate and
independent investigation of such
matters and for appropriate follow-
up action.
• to review annually the Group’s
policies and procedures to ensure
compliance with the Bribery Act 2010.
External audit
• to oversee the process for
selecting the external auditor,
including approval of their terms of
engagement and negotiation and
agreement of their remuneration.
• to consider the appointment/re-
appointment of the external auditor
and to assess the independence
of the external auditor, ensuring
that key partners are rotated at
appropriate intervals.
• to make appropriate recommendations
through the Board to the shareholders
for their approval at each annual
general meeting in relation to the
appointment, re-appointment and
removal of the external auditor.
• to agree with the external auditor,
before the audit commences, the
nature and scope of the audit and to
review the auditor’s quality control
procedures and steps taken by the
auditor to respond to changes in
regulatory and other requirements.
• to review the external auditor’s
management letter and
management’s response.
• to consider management’s
response to any major external
audit recommendations.
• to authorise the provision of non-
audit services by the external auditor
and to ensure that the provision of
non-audit services does not impair
the external auditor’s independence
or objectivity.
• to ensure that the audit services
contract is put out to competitive
tender at regular intervals as required
by regulation or best practice; and in
respect of such tender oversee the
selection process and ensure that
all tendering firms have such access
as is necessary to information and
individuals during the duration of the
tender process.
A comprehensive version of the
Committee’s terms of reference is
available on the Group’s website
at www.bellwaycorporate.com/
corporateGovernance.
Main activities during
the year
The main activities performed by
the Committee during the year
in each area of responsibility are
described below:
Financial reporting
• reviewed the final draft of the Annual
Report and Accounts, together with
a report produced by KPMG which
detailed their findings both on areas
of key financial reporting judgement
and other areas of audit focus.
• reviewed the final draft of the 2017
Interim Announcement.
• reviewed and approved the Group’s
proposed new accounting policies
for when IFRS 15 ‘Revenue from
contracts with customers’ and IFRS
16 ‘Leases’ are adopted in future
accounting periods. This included
considering the effect on the
financial statements of the changes
in the policies.
• the audit for the year ended 31 July
2016 was chosen by the Financial
Reporting Council (‘FRC’) for an Audit
Quality Review as part of their routine
processes. As part of the process I
had discussions with the FRC and
provided feedback to other members
of the Committee where relevant.
KPMG produced a report, which
was considered by the Committee,
highlighting the findings of this
review and how they would address
them during the audit for the year
ended 31 July 2017. The Committee
is not aware that any of the findings
have resulted in a significant change
to KPMG’s audit approach.
• the Committee reviewed and
concluded that the 2017 Annual
Report and Accounts present a
fair, balanced and understandable
assessment of the Group’s position
and prospects after considering
guidance from the external
auditor. The Committee made this
recommendation to the Board.
47
Bellway p.l.c. Annual Report and Accounts 2017
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Audit Committee Report continued
• in accordance with section C.2.2.
of the Code and the FRC guidance
on Risk Management, Internal
Control and Related Financial and
Business Reporting, the Committee
considered the viability statement
and going concern basis of
preparation, before recommending
to the Board that the disclosures in
the 2017 Annual Report and Accounts
are appropriate.
• the Committee confirmed that they
believe the significant financial
reporting judgements during the year
continued to be:
— Profit recognition; and
— The carrying value of the Group’s
land and work in progress.
The table below sets out the matters
considered and the action performed
by the Committee during the year
in relation to the significant financial
reporting judgements.
Internal control and risk
management
The Committee is responsible
for reviewing and assessing the
Group’s internal controls and risk
management systems and providing
guidance on these to the Board.
The Board is responsible for reviewing
the effectiveness of the system of
internal controls.
Throughout the year the risk register
for the Group has been reviewed and
updated by management. This review
includes ensuring the completeness
of risks, assessing their likelihood,
their impact and the effectiveness of
the control environment to mitigate
the risks.
Risk is considered at each Board
meeting, with a full review of the
risk register taking place at least
annually. The internal control and risk
management process only reduces
the risk of material misstatement
or loss, and does not eliminate this
risk completely.
During the year a detailed analysis
of the risk register was prepared by
management and was considered by
the Committee. This analysis set out
both the existing controls and included
consideration of additional controls
that could be implemented to further
enhance the control environment.
The principal risks facing the Group,
which are described in the Strategic
Report on pages 18 to 19, are regularly
reviewed and cover all aspects of
Bellway’s operations including land
acquisition, planning, construction,
health and safety, sales, HR, IT and legal
and regulatory compliance.
The continuing role of the Board is,
on a systematic and ongoing basis,
to review the key risks inherent in the
business, the operation of the systems
and controls necessary to manage
such risks and their effectiveness and to
satisfy itself that all reasonable steps are
being taken to mitigate these risks.
Profit recognition
Matters considered
The carrying value of the Group’s land and work in progress
Gross profit of £661.6 million has been recognised on housing and other
revenue. Gross profit for completed housing sales is recognised based on
the latest whole site/phase margin, which is derived as part of the site/phase
valuation process. These valuations are updated frequently throughout the
life of the site/phase and include both actual and forecast selling prices, land
costs and construction costs. The forecast costs and revenues are estimates
and are inherently uncertain due to potential changes in market conditions.
Land and work in progress (including showhomes) are the most significant
assets on the Group’s balance sheet and at 31 July 2017 had a book value of
£2,934.1 million. All inventory is held at the lower of cost and net realisable value,
which is determined by the whole site/phase margin as set out in the ‘profit
recognition’ section. The risk is that for any site/phase, currently trading or not,
the whole site/phase margin may be negative resulting in a net realisable value
that is below cost. Management have reviewed all sites/phases to ensure those
with a forecast negative whole site/phase margin have an appropriate provision,
and this has been re-assessed at regular intervals during the year.
Action performed by the Committee
The Committee understands the Group’s revenue and gross profit recognition
policy and the related systems and controls. Management outlined the existing
systems and controls surrounding revenue recognition, gross profit recognition
and the valuation process. The Committee discussed these controls,
challenging management where appropriate.
The external auditor explained to the Committee the work they have
undertaken in relation to the systems and controls surrounding revenue
recognition, gross profit recognition and the valuation process and provided
an explanation of the detailed substantive testing performed. The Committee
also reviewed a summary prepared by KPMG explaining their findings
from their work testing the design and operational effectiveness of the
Group’s systems and controls pertaining to revenue recognition and the
valuation process.
Following enquiry with management and the external auditor, the
Committee concluded that there are appropriate systems and internal
controls in place to assess and quantify both actual and forecast selling
prices and costs, and that the Group’s profit recognition policy is appropriate
and has been properly applied in these financial statements.
48
Bellway p.l.c. Annual Report and Accounts 2017
The Committee understands the Group’s methodology in reviewing the
carrying value of the Group’s land and work in progress and the surrounding
controls. Management provided a summary of the work undertaken which was
considered by the Committee.
The external auditor explained to the Committee the work they performed
in relation to the carrying value of the Group’s land and work in progress.
This included the procedures identified in relation to profit recognition and a
review of the latest site/phase valuation for all sites/phases active during the
year and those that are yet to commence production.
Following enquiry with management and the external auditor, the Committee
concluded that there are appropriate systems and internal controls in place to
assess the carrying value of the Group’s land and work in progress, and that the
carrying value of these assets in the financial statements is appropriate.
The key areas of control are as follows:
• a number of the Group’s key
External audit
functions are dealt with centrally.
These include taxation, pensions,
insurance, IT, legal, HR, regulatory
compliance and company secretarial
functions. This centralisation ensures
a consistent approach and the
appropriate range of skills to manage
these specialised areas.
Where any control recommendations
are made by the external auditors,
these are considered, and where
relevant are implemented to further
strengthen the control environment.
As mentioned in last year’s report,
a Head of Risk was appointed who
has a direct reporting line into both
the Group Finance Director and
myself. Whilst performing internal
audit reviews, the Head of Risk has
utilised specialists from within relevant
functions to assist in delivering the
audit plan.
Once an internal audit review is
completed, a report is produced by
the Head of Risk which is shared with
the relevant members of the divisional
and Group management team.
These reports summarise any system
and control deficiencies identified,
together with recommendations to
enhance the control environment
where appropriate. A central log is
retained along with progress against
any system and control improvements
to ensure they are implemented in a
timely and controlled basis.
During the year the Committee:
• reviewed and approved the
Internal Audit Charter and Risk
Management Policy.
• reviewed and approved the Internal
Audit Plan for 2016/17.
• reviewed the findings of internal
audit and risk reviews undertaken
in the year along with any control
improvements arising from
such reviews.
• the Board has agreed a list of key
risks which affect the Group, that are
reviewed throughout the year and
has considered the extent to which
the measures taken by the Group
mitigate those risks.
• the acquisition of land and land
interests is initiated by divisional
management and reviewed by the
appropriate Regional Chairman
prior to submission to Head Office
for approval. All land acquisitions
must achieve minimum financial
acquisition criteria and are subject to
approval by the executive directors
and in certain circumstances,
approval by the Board.
• a comprehensive monitoring and
reporting system is in place including
annual budgets, monthly forecasting
and management reporting,
incorporating variance analysis
and commentary. This is produced
by divisional management and
reviewed by the Regional Chairmen
and function heads at Head Office.
Summaries are also provided to the
executive directors.
• monthly divisional board meetings
are held to review divisional
performance, which are attended
by the Regional Chairmen.
The executive directors attend
certain divisional board meetings
on a regular basis during the year,
and this is supplemented with main
Board visits to divisions.
• site/phase valuations are produced
periodically throughout the life of
a site/phase, with a summary of
the actual and forecast costs and
revenues produced at a divisional
level prior to review by the divisional
management team and Head
Office team.
• regular visits to sites by in-house
health and safety teams and external
consultants to monitor health and
safety standards and performance.
• a central treasury function operates
at Head Office ensuring the optimum
financing is obtained for the Group
as a whole.
Audit effectiveness and
re-appointment
The external auditor of the Group
is KPMG, and their performance is
monitored by the Committee.
During the year the Committee
reviewed the performance of KPMG
using the guidance note titled ‘Audit
Quality’ produced by the FRC.
This review consisted of:
• considering the robustness and
appropriateness of KPMG’s approach
to auditing the significant risk areas
facing the Group.
• considering whether KPMG’s
materiality proposal for the 2015/16
financial year, which was the most
up to date information held at the
date of the review, was set at an
appropriate level for the component
parts of the Group.
• discussions with management
who were involved in the financial
reporting processes.
• an understanding of the findings
of the Audit Quality Review (‘AQR’)
team of the FRC following their
inspection of audit firms including
KPMG. This included understanding
whether any of the findings would
have affected the Bellway audit.
• an understanding of the AQR
and internal KPMG quality review
findings specifically in relation to the
engagement partner, Nick Plumb.
• considering KPMG’s
independence, objectivity and
professional scepticism.
• reviewing the performance of
KPMG against their audit strategy
for the 2015/16 financial year, the
most recent fully completed audit
cycle, and their interaction with the
Committee during the process.
• considering where KPMG
have added value and
demonstrated proactivity.
Following this review, the Committee
recommended to the Board, which
is in turn recommending to the
shareholders, that KPMG be
re-appointed as the auditor of
the Group.
KPMG has been the auditor of the
Group since 1979 when Bellway was
listed and it has not been tendered
49
Bellway p.l.c. Annual Report and Accounts 2017
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Audit Committee Report continued
in the intervening period. Nick Plumb
is the lead audit partner and has just
completed his fourth year out of a
maximum of five years in this role.
We are aware of the Order of the
Competition and Markets in relation to
FTSE 350 companies which will require
the Group to change its external
auditor prior to the audit for the year
ending 31 July 2021.
Auditor independence and
non-audit fees
The Independent Auditor Policy, which
seeks to preserve the independence of
the external auditor by defining those
non-audit services which the external
auditor may and may not provide, was
updated during the year to reflect both
the EU Audit Regulation and Directive
and FRC Ethical Standards for Auditors.
The main changes to the policy were:
• removing the ability for the auditor
to provide tax compliance and other
tax services.
• amending the level of total non-
audit fees that may be charged by
the auditor to a maximum of 70% of
the average of audit fees paid by the
Group in the last three consecutive
financial years. This is a change from
the previous policy which required
Board approval for fees above 100%
of the audit fee and a competitive
process for any fee in excess of
£200,000.
There are clearly defined levels of
approval depending on the value of
the work to be provided. Where fees
exceed £100,000 Board approval
is required.
The Group’s external auditor is not
engaged for any of the following non-
audit related services:
• tax compliance and other
tax services.
• bookkeeping or other services
related to the accounting records or
financial statements of the Group.
• financial information system design
and implementation.
• appraisal or valuation services,
fairness opinions, or contributions in
kind reports.
• actuarial services.
50
Bellway p.l.c. Annual Report and Accounts 2017
During the year the Committee
approved changes to the
Whistleblowing Policy to include
references to slavery and human
trafficking as per the Modern
Slavery Act.
Bribery Act
The Group’s Anti-Bribery and
Corruption Policy and procedures
are circulated throughout the Group
and are included on the Group’s
intranet. This already robust policy and
procedure was further strengthened
by management during the year, with
the amendments being approved by
the Committee.
Modern Slavery Act
The Committee reviewed and
approved the Anti-Slavery Policy and
the Slavery and Human Trafficking
Statement for the year ended 31 July
2016 which sets out the actions already
taken by the Group in relation to this,
along with the actions to be taken
during the year ended 31 July 2017.
These are new requirements following
the introduction of the Modern Slavery
Act 2015.
Data protection compliance
During the year a thorough review
was undertaken and the Committee
approved the Data Protection
Compliance Policy. This policy sets out
the Group’s approach in relation to
the data protection laws as the Group
is committed to complying with such
laws and respecting the privacy rights
of individuals.
Paul Hampden Smith
Chairman of the Audit Committee
16 October 2017
• internal audit outsourcing services.
• management functions or
human resources.
• broker or dealer, investment adviser
or investment banking services.
• legal services and expert services
unrelated to the audit.
• technical accounting advice.
• assistance on FTSE matters.
• any other service that is
impermissible by regulation.
For an analysis of fees paid to KPMG
see note 4 to the accounts. The non-
audit fees are for ad hoc assurance
work and an audit of the Group’s final
salary pension scheme.
The ratio of non-audit fees for the year
to the external audit fee was 5.2%.
KPMG provide written confirmation
on an annual basis that they
remain independent.
The Committee confirms there are no
independence issues in relation to the
external auditor and that the policy has
been adhered to throughout the year.
Audit Committee assessment
During the year the Committee
assessed both the performance
of the Committee as a whole and
that of its individual members,
utilising a questionnaire that was
independently facilitated.
I reviewed the results and consider
the Committee to be effective, with
members having an appropriate
and complementary set of skills and
experience to challenge the reports
and findings reviewed and discussed
by the Committee.
Other legislative
requirements
Whistleblowing
The Group’s Whistleblowing Policy
is well publicised at all locations,
and allows all employees to raise
concerns in confidence to either the
Deputy Group Company Secretary
or, alternatively, an independent
third party.
Governance
Report of the Board on Directors’ Remuneration
“ The Committee considers
that the bonus outturn
and long-term incentive
vesting reflects the strong
performance of the Group
and executive directors.”
Mike Toms
Chairman of the Board Committee
on Executive Directors’ Remuneration
Date appointed to Committee
Number of meetings
attended during the year
1 February 2009 (also date of
appointment as Committee Chairman)
4/4
4/4
4/4
4/4
N/A
Membership
Director
Mike Toms
(Chairman)
John Cuthbert
15 January 2010
Paul Hampden Smith 1 August 2013
Denise Jagger
Jill Caseberry
1 August 2013
1 October 2017
Main focus in 2016/17
• Approve the bonus payments and long-term incentive awards vesting levels
for the 2015/16 year.
• Approve the 2015/16 Report of the Board on Directors’ Remuneration.
• Set the bonus targets for the 2017/18 year.
• Make awards under the long-term incentive scheme.
• Review and determine the remuneration packages for the executive directors
and the Group General Counsel and Company Secretary.
• Review the new Remuneration Policy.
• Review and determine the fee payable to the Chairman.
• Review current market practice and future trends in executive remuneration.
• Review remuneration policies for senior management below Board level.
Focus areas for 2017/18
• Oversee the successful transition between Mike Toms and Jill Caseberry
as Chair of the Committee.
• Approve the bonus payments and long-term incentive awards vesting levels
for the 2016/17 year.
• Approve the 2016/17 Report of the Board on Directors’ Remuneration.
• Set the bonus targets for the 2018/19 year.
• Make awards under the long-term incentive scheme.
• Review and determine the remuneration packages for the executive directors
and the Group General Counsel and Company Secretary.
• Review and determine the fee payable to the Chairman.
• Review remuneration policies for senior management below Board level.
Annual Statement
Dear Shareholder
I am pleased to present my ninth and
final Report of the Board on Directors’
Remuneration, for the 2016/17 financial
year as Chairman of the Board
Committee on Executive Directors’
Remuneration (the ‘Committee’).
I will have served on the Board for
nine years in February 2018 and will
retire from the Board at the conclusion
of the AGM on 13 December 2017.
Jill Caseberry will become Chair of the
Committee following my retirement.
Over this period the Committee have
sought to operate and continuously
improve a remuneration structure
based on the three core elements of
basic pay, annual bonus paid in cash
and a share-based long-term incentive
plan. I believe that this approach has
aligned the management clearly with
the interests of shareholders, who
have seen operating profit rise from
£51.3 million in 2009/10 to £571.6 million
in 2016/17.
This is also the final year of reporting on
the current remuneration policy which
will expire at the AGM on 13 December
2017. A new remuneration policy, set
out overleaf, will be subject to a binding
shareholder vote at the 2017 AGM, and,
if approved, is intended to apply for
three years.
The Annual Report on Remuneration
and this Annual Statement will also be
subject to a single advisory vote at the
forthcoming AGM.
I set out overleaf a summary of the
pay outcomes for the 2016/17 financial
year, the key features of the new
remuneration policy and how it will be
implemented in 2017/18.
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Report of the Board on Directors’ Remuneration continued
Performance and reward
in 2016/17
The housing market remains
positive and these favourable market
conditions, together with Bellway’s
strong operational focus and consistent
execution of its growth strategy, has
resulted in a 10.7% increase in the
reservation rate and a 10.6% increase
in housing completions, producing
another set of excellent financial results.
Full details of how Company
performance impacted the outcomes
for the bonus and long-term incentive
awards are set out later in the Annual
Report on Remuneration. However,
the main performance outcomes are
summarised below:
• basic pay – as disclosed in last year’s
report, salaries were increased
by 3% in line with the average
increases awarded to the rest of the
workforce generally.
• annual bonus:
— operating profit grew by 16.2% to
£571.6 million and this resulted
in full payout under the financial
element of the bonus (90%
of salary).
— there was a 3.1% increase in plots
with detailed planning permission
and this resulted in 15% of salary
being earned as a bonus.
— the Group’s health and safety
incident rate, as measured
externally by the NHBC, improved
further, resulting in a full payout of
7.5% of basic salary.
— on customer care, Bellway was
awarded 5 star homebuilder
status by the HBF (one of only
two national housebuilders
to be recognised at this level).
The customer care score remained
high, but the target was narrowly
missed, and no bonus was
awarded on this measure.
— this performance resulted in a total
bonus of 112.5% out of a maximum
of 120% of salary and this will be
paid in November 2017.
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Bellway p.l.c. Annual Report and Accounts 2017
• long-term incentive awards – the
Performance Share Plan (‘PSP’) award
and the final Share Matching Plan
(‘SMP’) award made in 2014 were
based on relative Total Shareholder
Return (‘TSR’) performance against
two peer groups. Bellway’s TSR
over the period was 40.7% and this
strong growth means that the upper
target was achieved against both
targets and 100% of the awards will
vest, subject to the application of
Bellway’s financial underpin test.
The Committee has satisfied itself
that the TSR performance properly
reflected performance over a
broad range of financial measures
and the PSP and SMP awards will
vest in November and December
2017 respectively.
The Committee considers that the
bonus outturn and long-term incentive
vesting reflects the strong performance
of the Group and executive directors
during the twelve-month and three-
year period to 31 July 2017.
2017 proposed remuneration
policy
Context
Since the Remuneration Policy was
approved by shareholders in 2014,
the Group has grown significantly and
become more complex as a result of
management successfully delivering
the Group’s strategy, focusing on
expanding and enhancing geographic
coverage by opening new divisions,
principally in regions where demand
is high, and investing further in the
existing operational divisional structure.
In recent years, operational capacity
has expanded significantly and
the business now operates from 19
geographically spread trading divisions,
6 of which have been opened since
August 2013. The Group opened its
newest division in Durham, on 1 August
2016, with the 18th division opening in
Coventry in February 2016. These new
divisions have been making a positive
contribution to completions and
profitability, with the more established
new divisions all performing well.
The Group has successfully launched
a new brand, Ashberry Homes, to
maximise its sales potential. It has made
a number of significant corporate
staff appointments to ensure that it is
adequately resourced to manage a
larger and more diversified business.
This strong organic growth over
recent years, coupled with Bellway’s
strong balance sheet and operational
capacity for further growth, has
resulted in a more geographically
diversified business which, subject to
market conditions, is well placed for
further growth.
The Board believes the current
management team is critical to the
evolution and implementation of the
current strategy and to unlocking
future value. It is essential that the
remuneration policy is competitive
but not excessive and that it rewards
executive directors for strong and
sustainable performance over the
long-term, but not for failure. The policy
must also align both executive and
shareholder interests to retain, and,
where necessary, attract individuals
who are able to successfully implement
the Group’s strategy and grow
shareholder value.
Overview of the 2017 remuneration
policy
Following a comprehensive review of
remuneration in the year, supported
by its external advisers and following a
consultation with leading investors and
proxy voting agencies, the Committee
determined that the 2014 approved
policy remains effective, fair and fit-
for-purpose. Therefore, we have only
proposed minor changes to the policy
to improve clarity and take account of
recent developments in remuneration
best practice:
• a key change is an increase to
shareholding guidelines from 100%
to 200% of salary which means we
are now in line with market practice
in this area.
• no changes are proposed to
the bonus or PSP limits (at 120%
and 150% of salary respectively).
These incentive limits remain modest
taking into account both the size
and complexity of the business and
in the context of practice at other
housebuilders and similar-sized FTSE
250 companies.
• the two-year holding period will
continue to apply for PSP awards.
If approved by shareholders at the
AGM, this new policy will be effective
from 13 December 2017 until our
2020 AGM.
How we will implement
the proposed remuneration
policy in 2017/18
From 1 August 2017, the Chairman,
Chief Executive and Finance Director
were awarded salary increases of 3%,
consistent with the average salary
increase to the general workforce.
As announced on 14 August 2017, Ted
Ayres has taken a leave of absence
from the Company to undergo
treatment for a medical condition
and John Watson will assume the
position of Executive Chairman during
this absence.
John Watson’s salary as non-executive
Chairman had been set at £212,000
from 1 August 2017. He will receive
an additional payment at the rate of
£100,000 p.a. for the period during
which he has additional executive
responsibilities in Ted Ayres’ absence.
This payment will be eligible for an
annual bonus on the same terms as
the executive directors. John Watson
will continue to receive life and health
benefits but not a contribution towards
a pension or a car allowance. He will
not participate in the PSP.
Jason Honeyman, who was promoted
to the Board as Chief Operating Officer
on 1 September 2017, has a salary of
£383,000 which will next be reviewed
in August 2018. He will participate in
the annual bonus scheme and PSP.
The benefits and pension contribution
he will receive are in line with the
remuneration policy.
The 2017/18 annual bonus will continue
to be based mainly on financial
performance, with a bonus of 90%
of salary based on operating profit.
The remaining bonus of 30% of salary
will continue to be based on non-
financial measures as used last year,
with a bonus of 15% of salary on each
of land bank and customer care, and
with health and safety performance
taken into account as part of the
Committee’s overall assessment of the
bonus payment.
The Committee would have discretion
if, for example, health and safety
standards have been unsatisfactory, or
there has been a major safety failure, to
reduce the overall bonus payment and
could, in exceptional cases, reduce the
overall bonus payment to nil.
The proposed weightings ensure a
strong focus on financial performance
and sustainability through land bank
at the same time as increasing the
focus on customers, a key indicator of
future growth.
Health and safety continues to remain
an integral part of the performance
assessment and now has greater
potential influence on the bonus
outcome than before.
The Committee considered introducing
bonus deferral but on balance felt
that this was not necessary taking
into account an unchanged bonus
opportunity (which is modest by
market standards), the continuation
of a holding period on the long-term
incentive plan (‘LTIP’), a significant
increase in the share ownership
guideline and greater focus on the PSP
from 2018, see below.
The PSP award level for 2017/18 is
being increased from 130% of salary to
150% of salary for executive directors,
which remains within the policy limit.
This increase provides a greater focus
on incentivising long-term, sustained
performance and, in the Committee’s
view, is preferred to increasing the
annual bonus opportunity.
Whilst the Committee is aware of the
sensitivity to increases in quantum
in the current environment, it has
considered this proposal very carefully
and believes that having a 150% of
salary grant level reflects both the
increased size and complexity of the
business as described above.
The PSP has proven to be a valuable
instrument for successfully motivating
Bellway’s executives in recent years
and the proposed award level is
appropriate to retain and incentivise
a proven, high calibre senior
management team to deliver future
success and long-term value creation
for shareholders.
When considered in the context
of the presence of several best
practice features as set out above, the
Committee believes the proposed
increase is fair and reasonable.
The Committee uses benchmarking
data with caution but notes that the
current long-term incentive opportunity
has fallen some way behind market
levels and that, even with the proposed
increase, the LTIP award opportunity
remains relatively modest against
comparable housebuilders and FTSE
250 companies of a broadly similar size.
No changes are proposed to the
PSP performance metrics, with
awards based on two measures of
relative TSR performance with half
determined against the performance
of other quoted housebuilders and
the other half against the FTSE 250
index, excluding investment trusts and
financial services companies.
As part of its remuneration review
during the year, the Committee
considered a number of other possible
financial measures for use in addition
to TSR, including earnings per share
(‘EPS’). On balance, an EPS measure
was not felt to be appropriate at
this time due to the difficulties of
accurately setting robust long-term
financial targets given the cyclicality of
the industry.
The Committee will keep this
under review and will consult with
shareholders prior to the introduction
of an EPS or other financial measure in
the future if it becomes appropriate at a
later date.
I hope you will support the two
resolutions relating to directors’
remuneration which will be put to
shareholders for approval at the
AGM to be held on 13 December
2017. Further information on these
resolutions is set out in the Notice of
Meeting of the AGM.
Mike Toms
Chairman of the Board Committee on
Executive Directors’ Remuneration
16 October 2017
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Report of the Board on Directors’ Remuneration continued
Consideration of employment
conditions elsewhere in the Group
Whilst we do not consult directly
with employees when drawing
up the executive remuneration
policy, in determining the elements
of remuneration for the executive
directors the Committee takes into
consideration the pay and conditions
of employees throughout the Group
as a whole, paying particular attention
to the levels of basic pay increase
awarded to the workforce generally.
Since 2015 the salaries of the directors
have been increased in accordance
with the general pay increase awarded
to the workforce. Prior to that, the
salaries of the recently appointed
executive directors were below mid-
market value and were increased
incrementally until they reached mid-
market levels.
All eligible employees, including
the executive directors, can join the
Group’s savings related share option
arrangements, have life assurance
benefits and have access to pension
arrangements. A significant proportion
of employees benefit from health
insurance, a company car or car
allowance and are eligible to participate
in a discretionary bonus scheme.
The Committee is apprised regularly of
any significant policy changes for the
workforce generally and management
below Board level in particular.
Consideration of
shareholder views
The Committee takes into account
the views of shareholders. When any
significant changes are proposed to the
remuneration policy, the Chairman of
the Committee will consult with major
shareholders and representative bodies
in advance. In setting the new policy in
the year, the Committee consulted with
major shareholders, the Investment
Association (‘IA’) and Institutional
Shareholder Services Inc. (‘ISS’) who
were generally supportive of the
proposed changes and the approach
being taken.
This part of the remuneration report,
the Directors’ Remuneration Policy, has
been prepared in accordance with The
Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The overall remuneration policy has
been developed in compliance with
the principles of the UK Corporate
Governance Code, UK institutional
investor guidance and the Listing Rules.
The remuneration policy set out below
will be put to a binding shareholder
vote at the AGM on 13 December 2017
and, if approved, is intended to apply
for three years unless a new policy is
put to shareholders before then.
Directors’ Remuneration
Policy
Objectives of remuneration policy
The aim of the Committee is to ensure
that the Company has competitive
remuneration packages in place which
will promote the long-term success of
the Company and motivate executive
directors in the overall interests of
shareholders, the Group, its employees
and its customers.
The Committee has a policy of paying
a level of remuneration comparable
with that at a peer group of similar UK
housebuilding businesses, subject to
experience and performance.
The Committee uses this comparative
approach to benchmarking with
caution, recognising the relatively few
direct housebuilding comparators,
their differing size and the risk of an
upward ratchet effect with any peer-
based analysis. The structure of the
package has been designed to ensure
that the performance-related elements
of remuneration (annual bonus and
long-term incentives) constitute a
significant proportion of an executive’s
potential total remuneration package,
but are only receivable if stretching
performance targets are achieved.
The structure of the performance
conditions for annual bonus and long-
term incentives has been designed
to provide a strong link to the Group’s
performance, namely a focus on
maximising profit in a sustainable
fashion and producing superior
shareholder returns, thereby generating
a strong alignment of interest between
senior executives and shareholders.
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Bellway p.l.c. Annual Report and Accounts 2017
Policy table
This section of the report describes the key components of each element of the remuneration arrangements for executive
and non-executive directors.
Component and
link to strategy
Operation
Maximum
opportunity
Framework to assess
performance
Salary
To be market
competitive and
therefore assist in
recruiting, retaining
and motivating high
quality executives.
Reflects individual
role and experience.
Annual bonus
To reward
achievement with
a combination of
financial and non-
financial operational
based performance
targets in accordance
with Group KPIs.
Salaries are normally reviewed in July each year
and changes normally take effect from 1 August.
They are typically determined by reference
to market levels of a peer group of similar UK
housebuilding businesses, taking account of
salaries at other companies of a similar size,
and by taking account of the role, performance,
and experience of the individual, Company
performance, salary increases throughout the
rest of the business and economic conditions.
Where salaries of new executive directors are
positioned below market levels, the Committee’s
policy is to progress these over time, with
increases potentially higher than for the general
workforce, as experience is gained, subject
to performance.
No prescribed maximum.
Increases are normally in
line with the average for
the workforce generally.
Increases may be
below or above this
e.g. due to promotion,
change in responsibility
or experience, role
change, or a significant
change in the size, value
and/or complexity of
the Company.
Salaries for 2017/18 are set
out in the Annual Report
on Remuneration.
120% of basic
salary maximum.
Annual bonuses are normally payable in cash
in November following the year end on 31 July,
subject to the achievement of performance
targets that were set at the start of the
financial year.
The Company operates a recovery mechanism
which allows the Company to claw back some
or all of the payments made under the variable
components of an individual’s remuneration, in
the following circumstances:
(i) material misstatement of results.
(ii) error in assessing a performance condition.
(iii) gross misconduct by the individual.
In addition to the reviews by
the Chairman, as part of the
annual Board evaluation, the
performance of the executives
and the Company is kept under
continuous review by the Board.
The bonus may be based on
a combination of financial and
strategic objectives, with financial
performance accounting
for a majority of the overall
bonus opportunity.
The Committee determines the
choice of measure(s) and their
weighting for each year to ensure
alignment with the Board’s
priorities and Company strategy
over the short to medium-term.
The Committee has discretion to
adjust the payment outcome to
ensure it reflects the individual’s
contribution and/or the overall
performance of the Company
over the performance period.
Details of the performance
measures to be used for the
2017/18 year are set out in the
Annual Report on Remuneration.
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Component and
link to strategy
Operation
Long-term incentives (‘PSP’)
Maximum
opportunity
Framework to assess
performance
150% of basic salary.
To encourage
long-term value
creation, aid
retention, encourage
shareholding and
promote alignment
of interests
with shareholders.
The Company operates a PSP as its primary long-
term incentive.
Annual awards of nil cost options or conditional
awards may be made under the PSP to
the executive directors, at the discretion of
the Committee.
Awards normally vest three years after grant,
subject to the achievement of stretching
performance targets.
Dividend equivalents (in cash or shares) may be
payable, and will only accrue during the vesting
and holding period on awards that ultimately vest.
The Company operates recovery and withholding
mechanisms which allow the Company, in
exceptional circumstances, to clawback some or
all of the payments made, or recover unvested
awards, in the following circumstances:
(i) material misstatement of results.
(ii) error in assessing a performance condition.
(iii) gross misconduct by the individual.
A minimum holding period of two years applies to
awards post-vesting.
PSP awards are subject to
stretching three-year targets.
The current awards are subject
to relative TSR conditions against
relevant comparator companies.
For future awards the Committee
may choose a financial measure,
such as EPS, RoCE or NAV,
in conjunction with or as an
alternative to TSR depending
on the medium to long-term
priorities of the Group at the time
of grant.
If the Committee decides to
introduce a financial measure, it
will carry out prior consultation
with major shareholders.
The Committee has discretion
to adjust the vesting outcome
in exceptional circumstances
to ensure it is a true reflection
of the overall performance
of the Company over the
performance period.
Further details of the
performance metrics applying
to the awards for 2016/17 are
set out in the Annual Report
on Remuneration.
Pension
To provide a
structure and
value that is
market competitive.
Benefits
Pension contributions into the Company’s Group
Self Invested Personal Pension Plan and/or a salary
supplement in lieu of pension contributions.
Up to 20% of salary.
Not applicable.
To provide a range
and value that is
market competitive.
Typically comprises car or car allowance, life
assurance and health insurance. Other benefits
may be provided where appropriate.
Not applicable.
Not applicable.
Any expenses incurred in carrying out duties will
be fully reimbursed by the Company including any
personal taxation associated with such expenses.
All employee share schemes
To encourage
employees to build a
stake in the future of
the Company.
The executive directors can participate in any
HMRC-approved all-employee plans operated by
the Company.
Subject to prevailing
HMRC limits.
Not applicable.
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Bellway p.l.c. Annual Report and Accounts 2017
Component and
link to strategy
Operation
Maximum
opportunity
Framework to assess
performance
Not applicable.
Not applicable.
Share ownership guideline for executive directors
To align executive
directors’ interests
with those
of shareholders.
Executive directors are required to accumulate
a minimum shareholding equivalent to 200% of
basic salary.
Within a period of three months of appointment
an executive director must acquire a minimum of
1,000 ordinary shares in the Company and must
retain at least 50% of any shares awarded under
the PSP (or SMP in respect of awards granted in
2014 or before), after allowance for paying tax,
until the requisite number of shares has been
accumulated. If personal circumstances make this
difficult, the Committee would exercise discretion.
Chairman and non-executive directors
The performance of the non-
executive directors is assessed
by the Chairman. The senior
independent non-executive
director reviews the performance
of the Chairman in conjunction
with the directors.
To set appropriate
fees in light of the
time commitment,
responsibilities,
wider market and
best practice.
The Chairman’s fee is determined by the Board
Committee on Executive Directors’ Remuneration.
Not applicable.
The remuneration of the non-executive directors
is determined by the Board Committee on
Non-Executive Directors’ Remuneration, which
comprises the executive directors.
Fee levels are normally reviewed annually,
taking into account the time commitment and
responsibilities of the roles including membership
or chairmanship of Board committees
and the level of fees for similar positions in
comparable companies.
Non-executive directors are not normally
entitled to any benefits (with the exception of the
Chairman who receives health and life assurance
benefits) or pension. They do not participate in
any bonus or long-term incentive plans and they
are not entitled to compensation on termination
of their arrangements, other than normal notice
provisions of three months given by either party.
Travel, accommodation and other related
expenses incurred in carrying out the role will
be paid by the Company including any personal
taxation associated with such expenses.
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Report of the Board on Directors’ Remuneration continued
For the avoidance of doubt, in approving this Directors’ Remuneration Policy, authority is given to the Company to honour
any commitments entered into with current or former directors (such as in connection with the unvested SMP awards and the
final SMP award which was granted in 2014, notwithstanding that the SMP does not form part of the Company’s policy going
forward). Details of any payments made to former directors will be set out in the Annual Report on Remuneration as they arise.
Choice of performance measures and approaches to target setting
The performance measures used in the annual bonus and long-term incentive plan are aligned with the Company’s KPIs and
the business strategy.
For the annual bonus, operating profit is an appropriate barometer of short-term performance. Customer care and land bank
are important drivers of future growth and maintaining a strong health and safety record is very important to our employee
base and the Group.
The Committee believes that relative TSR is an appropriate long-term performance metric as it generates an alignment of
interest between executives and institutional shareholders by providing a reward mechanism for delivering superior stock
market performance. The TSR performance is independently calculated for the Committee by the Company’s brokers.
Targets for incentive plans are set to be stretching but achievable, taking into account internal and external reference points,
including internal forecasts and market consensus.
Clawback
The time period over which clawback will apply is at any time before the later of:
(i) the first anniversary of the date on which an award vests.
(ii) the date of publication of the Company’s first set of audited financial statements covering the financial year in which the
vesting took place.
Incentive plan discretions
The Committee will operate the annual bonus plan and PSP in accordance with their respective rules. As part of the rules the
Committee holds certain discretions which are required for both an efficient operation and administration of these plans, and
are consistent with standard market practice. These include the following discretions:
• participants of the plans.
• the timing of the grant of an award and/or payment.
• the size of an award and/or a payment (albeit with quantum and performance targets restricted to the descriptions detailed
in the policy table on page 56).
• the assessment of performance criteria and the determination of vesting.
• discretion required when dealing with a change of control (e.g. the timing of testing performance targets) or restructuring of
the Group.
• determination of a good/bad leaver for incentive plan purposes based on the rules of each plan and the appropriate
treatment chosen.
• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends).
• the annual review of performance conditions for the annual bonus plan and PSP from year-to-year.
• if certain events occur (e.g. a material divestment or acquisition of a Group business), which mean the original performance
conditions are no longer appropriate, the Committee retains the ability to make adjustments to the targets and/or set
different measures and alter weightings as necessary to ensure the conditions achieve their original purpose and are not
materially less difficult to satisfy.
• the outstanding share incentive awards which are detailed in the tables on pages 65 and 66 will remain eligible to vest
based on their original award terms. In addition, all arrangements disclosed in previous reports of the Remuneration
Committee will remain eligible to vest or become payable on their original terms.
Any use of the above discretions would, where relevant, be explained in the Annual Report on Remuneration and may, as
appropriate, be the subject of consultation with the Company’s major shareholders.
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Bellway p.l.c. Annual Report and Accounts 2017
Approach to recruitment remuneration
In arriving at a total package and in considering the quantum for each element of the package, the Committee will take into
account the skills and experience of the candidate and the market rate for a candidate of that experience, as well as the
importance of securing the preferred candidate.
Element
Salary.
General policy
Detail
At a level required to attract the most
appropriate candidate.
Pension and benefits.
In accordance with Company policies.
Bonus.
In accordance with existing schemes.
Long-term incentives
(PSP).
In accordance with Company policies and
maximum limits in the PSP rules.
Buyout of forfeited
remuneration.
The Committee may make an award in cash or
shares to replace deferred or incentive pay forfeited
by an executive leaving a previous employer (and, if
required, by relying on the flexibility provided in the
Listing Rules to grant such replacement awards).
Discretion to pay lower basic salary with incremental
increases, potentially higher than for the general workforce,
as new appointee becomes established in the role.
Additional benefits in relation to recruitment may be
provided where considered appropriate, for example,
relocation expenses or allowances, legal fees and other
recruitment-related costs may be payable.
Pension provision will be in line with the limits set out in the
policy table.
Depending on the timing of recruitment, bespoke targets
could be introduced for an individual within the maximum
individual limits of the annual bonus plan applicable at
the time.
Pro-rating would be applied as appropriate for
intra-year joiners.
An award may be made in the year of joining or,
alternatively, the award can be delayed until the
following year.
Targets would normally be the same as for other directors
and grant levels consistent within the permitted individual
maximum under the rules of the plan and this policy.
Awards would, where possible, be consistent with the
awards forfeited in terms of the vehicle, structure, vesting
periods, expected value and performance conditions.
Service contracts and loss of office payment policy
The executive directors have service contracts with a 12-month notice period from the Company and a 6-month notice period
from the executive.
The overriding principle for payments on loss of office will be to honour contractual remuneration entitlements.
The Committee would determine, on an equitable basis, the appropriate treatment of performance-linked elements of
the package, taking account of the circumstances, in accordance with the rules of each respective plan. Failure will not
be rewarded.
The Company may pay statutory claims. Reasonable costs of legal expenses incurred by the director may be reimbursed
by the Company by making direct payment to the professional adviser.
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Report of the Board on Directors’ Remuneration continued
Element
Bad leaver(1)
Departure on agreed terms(2)
Good leaver(3)
Salary, pension and
benefits (after cessation
of employment).
Nil.
Annual bonus.
No bonus payable.
Up to 12 months’ basic salary,
benefits and pension.
Payments may be phased and
subject to offsetting against
alternative income from elsewhere
during the notice period.
The Company may pay in lieu
of notice an amount equivalent
to 12 months’ salary, pension
and benefits.
For the proportion of the financial
year worked, bonus may be
payable pro-rata, subject to
performance, at the discretion of the
Committee. There will be no bonus
payment in respect of any period of
notice not worked.
PSP (and SMP awards
granted in 2014
or before).
All awards, including those which
have vested but are unexercised will
lapse immediately upon cessation
of employment.
Awards will lapse upon cessation of
employment, unless the Committee
decides otherwise, in which case
awards may vest.
Where employment ends before
the vesting date, awards may vest
at the normal time (other than by
exception) to the extent that the
performance conditions have
been satisfied.
The level of vested award will be
reduced, pro-rata, based upon
the period of time after the grant
date and ending on the date of
cessation of employment, relative to
the three-year performance period
unless the Committee, acting fairly
and reasonably, decides that such a
scaling back is inappropriate in any
particular case.
Depending upon circumstances,
the Committee may consider
payments in respect of an unfair
dismissal award, outplacement
support and assistance with
legal fees.
Other payments.
Nil.
Apart from death, the Company
may pay up to 12 months’ basic
salary, benefits and pension, less any
period of notice worked.
Payments may be phased and
subject to offsetting against
alternative income from elsewhere
during the notice period.
The Company may pay in lieu
of notice an amount equivalent
to 12 months’ salary, pension
and benefits.
For the proportion of the financial
year worked, bonus may be payable
pro-rata, subject to performance, at
the discretion of the Committee.
Awards may be exercised within
12 months of the vesting date.
Where employment ends before
the vesting date, awards may be
exercised at the normal vesting time
(other than by exception) and only
to the extent that the performance
conditions have been satisfied.
The level of vested award will be
reduced, pro-rata, based upon
the period of time after the grant
date and ending on the date of
cessation of employment, relative to
the three-year performance period
unless the Committee, acting fairly
and reasonably, decides that such a
scaling back is inappropriate in any
particular case.
The Company may pay for
outplacement support and
assistance with legal fees.
Notes:
1. For example, normal resignation from the Company or termination for cause (e.g. disciplinary issues).
2. This may cover a range of circumstances such as business reorganisation, changes in reporting structure, change in requirement for the role, termination as a result of a failure to be
re-elected at an AGM, etc.
3. Leaver for compassionate reasons such as death, injury, disability or retirement, with the agreement of the employer.
The details of the executive directors’ service contracts are as follows:
Executive director
Ted Ayres
Keith Adey
Jason Honeyman
First appointed as a director
Current contract commencement date
1 August 2011
1 February 2012
1 September 2017
1 August 2011
1 February 2012
1 September 2017
The executive directors may accept external appointments provided that such appointments do not, in any way, prejudice
their ability to perform their duties as executive directors of the Company. The extent to which any executive director is
allowed to retain any fees payable in respect of such appointments, or whether such fees are remitted to the Company, will be
assessed on a case-by-case basis. None of the executive directors currently hold any outside appointments.
60
Bellway p.l.c. Annual Report and Accounts 2017
All non-executive directors have letters of appointment with the Company for no more than three years, subject to annual
re-appointment at the AGM, with a three-month notice period by either side. The appointment letters for the Chairman and
non-executive directors provide that no compensation is payable on termination, other than fees accrued and expenses.
Non-executive
director
John Watson
Mike Toms
John Cuthbert
Paul Hampden Smith
Denise Jagger
Jill Caseberry
First appointed
as a director
1 August 1995
1 February 2009
1 November 2009
1 August 2013
1 August 2013
1 October 2017
Current letter of appointment
commencement date
Current letter of appointment
expiry date
1 February 2016
1 February 2015
1 November 2015
1 August 2016
1 August 2016
1 October 2017
31 January 2019
31 January 2018
31 October 2018
31 July 2019
31 July 2019
30 September 2020
Illustrations of application of current remuneration policy
The remuneration policy results in a significant portion of remuneration received by executive directors being dependent on
the Group’s performance. The chart below illustrates how the total pay opportunities for the executive directors vary under
three performance scenarios: minimum, target and maximum. The chart is indicative, as share price movement and dividend
accrual have been excluded.
817
1,703
2,589
490
1,007
1,524
490
1,007
1,524
3,000
2,500
2,000
0
0
0
£
1,500
1,000
500
0
38%
30%
29%
23%
100%
48%
32%
38%
30%
28%
23%
38%
30%
28%
23%
100%
49%
32%
100%
49%
32%
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
Chief Executive
Finance Director
Chief Operating Officer
Fixed pay
Annual bonus
Long-term share awards
Notes:
1. Chart labels show proportion of total package comprised of each element.
2. Assumptions:
• Minimum – fixed pay only (salary + benefits + pension/pay in lieu of pension). Salary is based on actual for 2017/18, benefits are based on the value of actual benefits received in 2016/17
and pension/pay in lieu of pension is based on policy of 20% of salary applied to the 2017/18 salary.
• Target – fixed pay plus 50% of maximum bonus payment plus PSP award of 150% of salary with 50% of the award vesting.
• Maximum – fixed pay plus 100% of maximum bonus payment plus PSP award of 150% of salary with 100% of the award vesting.
61
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information
Governance
Report of the Board on Directors’ Remuneration continued
Annual Report on Remuneration
Committee membership and activity
The Committee meets at least twice a year and details of the Committee members and their attendance are set out in the table
on page 51. The operation of the Committee is conducted by reference to its terms of reference which have been prepared
to comply with relevant statutory, regulatory and corporate governance requirements and best practice and are available at
www.bellwaycorporate.com/corporateGovernance.
None of the Committee members have a personal financial interest, other than as shareholders, in the matters to be decided.
There are no conflicts of interest arising from cross-directorships and no day-to-day involvement in running the business.
Activities during 2016/17
While the main focus of the Committee this year has been on the new remuneration policy, the following activities have also
taken place:
• approve the bonus payments and long-term incentive awards vesting levels for the 2015/16 year.
• approve the 2015/16 Report of the Board on Directors’ Remuneration.
• set the bonus targets for the 2017/18 year.
• make awards under the long-term incentive scheme.
• review and determine the remuneration packages for the executive directors and the Group General Counsel and
Company Secretary.
• review the new Remuneration Policy.
• review and determine the fee payable to the Chairman.
• review current market practice and future trends in executive remuneration.
• review remuneration policies for senior management below Board level.
The Committee receives independent external advice from New Bridge Street (‘NBS’), part of Aon plc. NBS was appointed
by the Committee and does not provide any other services to the Company other than to the Board Committee on Non-
Executive Directors’ Remuneration. NBS is also a member of the Remuneration Consultants Group and abides by its Code of
Conduct. The Committee is satisfied that NBS is independent. The total fee paid to NBS for advice to the committees during
the year was £45,101. The Committee also benefited from advice received from the Group General Counsel and Company
Secretary, on issues other than those relating to his own remuneration.
The remuneration of the non-executive directors (apart from the Chairman) is determined by the Board Committee on Non-
Executive Directors’ Remuneration, which comprises the executive directors. It also receives advice from the Group General
Counsel and Company Secretary and NBS.
62
Bellway p.l.c. Annual Report and Accounts 2017
Implementation of remuneration policy in 2016/17
The auditor is required to report on the information contained in the following part of this report.
Single figure of total remuneration
Salary
and fees
£
Taxable
benefits(2)
£
Annual
bonus
£
Sub-total
£
Long-term
incentives(4)
£
Other
items(5)
£
Total
£
Pension(3)
£
–
–
2017
2016
206,000
200,000
861
827
–
–
206,861
200,827
–
–
637,000
30,255
127,420
716,625
1,511,300
1,610,081
30,211
123,600
710,700
1,482,511
1,302,464
74,500
418,500
895,467
933,387
–
–
–
206,861
200,827
3,121,381
– 2,784,975
– 1,828,854
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
618,000
372,000
354,197(1)
64,000
59,941
64,000
62,593
64,000
59,941
56,000
54,636
30,467
30,091
–
–
–
–
–
–
–
–
72,200
415,150
871,638
770,158
2,233 1,644,029
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64,000
59,941
64,000
62,593
64,000
59,941
56,000
54,636
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64,000
59,941
64,000
62,593
64,000
59,941
56,000
54,636
Non-executive Chairman
John Watson
Executive directors
Ted Ayres
Keith Adey
Non-executive directors
Mike Toms
John Cuthbert
Paul Hampden Smith
Denise Jagger
Totals
Notes:
2017 1,463,000
61,583
201,920
1,135,125 2,861,628 2,543,468
– 5,405,096
2016 1,409,308
61,129
195,800
1,125,850 2,792,087 2,072,622
2,233 4,866,942
1.
Keith Adey’s basic salary for 2015/16 was £361,000 and where reference is made in this report to his basic salary for 2015/16 this is the amount to which reference is being made. The figure
shown in the table above is the actual amount paid during the financial year, reflecting a reduction in his take-home pay during a period of paternity leave.
2. Taxable benefits include car allowance and health insurance.
3. Pension includes both payments in lieu of pension of £181,851 and contributions to a defined contribution scheme of £20,069. None of the directors are members of the Group’s defined
benefit scheme and both of the executive directors are members of a defined contribution scheme.
4. The value of long-term incentives in 2017 reflects the vesting of the 2014 PSP awards, which will be exercisable from 10 November 2017, including additional shares in lieu of dividends
accrued from the date of grant to the date of vesting, and also the vesting of the 2014 SMP awards which will be exercisable from 4 December 2017. The value shown is based on a share
price of £29.59, being the average share price for the last quarter of the financial year i.e. 1 May – 31 July 2017 as a proxy for the share price at vesting. The 2016 figures for Ted Ayres and
Keith Adey have been adjusted by £127,822 and £73,757 respectively to reflect the actual share prices at the dates of vesting, which took place after the publication of last year’s report, and
the additional shares in lieu of dividends accrued from the date of grant to the date of vesting of the 2013 PSP awards (3,806 and 2,169 shares respectively). The additional shares in lieu of
dividends accrued for the 2013 SMP awards were already included in the figure shown in last year’s report.
5. Other items refer to the discount on the awards, during the year stated, under the Group’s all employee savings related share option scheme.
63
Bellway p.l.c. Annual Report and Accounts 2017
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Report of the Board on Directors’ Remuneration continued
Annual bonus for the year ended 31 July 2017
The annual bonus is payable in November 2017 for performance during the year ended 31 July 2017. The performance targets
for the 2016/17 bonus comprised operating profit and three non-financial measures.
The actual bonus payment against operating profit was determined on the following basis:
Measure
Operating profit (pre-exceptional)
Weighting
(% of salary)
Threshold
(39% pays
out)
Target
(50% pays
out)
Maximum
value (100%
pays out)
Actual
90%
£515.0
million
£540.0
million
£570.0
million
£571.6
million
Payment
(% of
maximum)
Payment
(% of salary)
100%
90%
The actual operating profit grew by 16.2% and exceeded the maximum value forecast by the directors, shareholders and
analysts at the start of the year.
Since 2014/15 the payment of any bonus for non-financial performance has been based on a sliding scale of targets. For land
bank, a 10% payment would be triggered for a predetermined percentage increase in plots with detailed planning permission
(‘DPP’), with an additional 1% payment for further improved performance, up to a maximum of 15% of salary. Similarly, for
health and safety and customer care there is a minimum payment of 4.5% for no deterioration in scores, with additional 1%
increments payable up to a maximum of 7.5% for improved performance.
The basis for payment of the actual bonus against the three non-financial metrics that applied are set out in the table below:
Non-financial measure Objectives and performance against target
Land bank
Increase in the land bank of plots with DPP (available for completion in the
following financial year) in the year to 31 July 2017 to ensure our growth
aspirations are not frustrated by land shortages in future years.
The land bank of plots with DPP (available for completion in the following
financial year) grew by 3.1% during the year. This met the target required for
a maximum payment.
Health and safety No deterioration of the NHBC health and safety incident rate from the
baseline as a minimum and additional payments made for improvements
in health and safety performance by reference to the NHBC health and
safety incident rate. Improvements in health and safety performance are
indicated by a lower NHBC health and safety incident rate.
Our baseline NHBC health and safety incident rate was 0.986, which
represents a level of safety significantly better than other housebuilders.
The target for a maximum payment in 2017 was 0.986. The actual rate was
0.690, which exceeded the target for a maximum payment.
No deterioration of previous year’s net assessment of customer satisfaction
score as a minimum, with additional bonus opportunity for improvement in
the Group’s customer satisfaction score.
The Group’s customer care score in 2017 was 85.2% compared with
85.7% in 2016. The customer care score remained high, but the target was
narrowly missed, and no bonus was awarded on this measure.
Customer care
Score
Maximum – 15%
of salary.
Achieved in full – 15%
of salary awarded.
Maximum – 7.5%
of salary.
Achieved in full – 7.5%
of salary awarded.
Maximum – 7.5%
of salary.
Not achieved – no bonus
payment awarded.
Overall, the Committee is satisfied that the resulting bonus payment of 112.5% of salary (out of 120%) is reflective of the
Company’s record performance during the year.
64
Bellway p.l.c. Annual Report and Accounts 2017
Long-term incentives vesting in respect of performance period ended 31 July 2017
The PSP and SMP awards granted in 2014 which will vest on 10 November and 4 December 2017 respectively, were based on a
three-year TSR performance for the period to 31 July 2017. The applicable vesting percentages will be as follows:
Metric
Performance condition
50% of awards
50% of awards
Total
Relative TSR against an index of peer
housebuilders comprising Barratt
Developments PLC, The Berkeley Group plc,
Bovis Homes Group PLC, Crest Nicholson
Holdings plc, Persimmon plc, Redrow plc and
Taylor Wimpey plc (‘Index’): 25% of this part of
an award vests at the Index, increasing, pro-
rata, to full vesting at Index + 7.5% p.a.
Relative TSR against the FTSE 250 (excluding
financial services companies and investment
trusts): 25% of this part of an award vests at
median, increasing, pro-rata, to full vesting at
the upper quartile.
Threshold
target
29.6%
TSR
(Index)
Stretch
target
37.1%
TSR
(Index +
7.5% p.a.)
Actual
% vesting
40.7%
Bellway
TSR
50%
85.5
rank
(median)
43
rank
(upper
quartile)
18
Bellway
rank
50%
100%
An underpin was also applied to the 2014 PSP and SMP awards. Regardless of TSR performance, no part of an award will vest
unless the Committee is satisfied that there has been an improvement in the underlying financial performance of the Group
over the performance period, taking into account, inter alia, operating profit, operating margin, RoCE and NAV. The Committee
agreed that this underpin had been met and the following PSP and SMP awards are expected to be exercisable on
10 November and 4 December 2017 respectively.
Ted Ayres
Keith Adey
Notes:
Scheme
Number of
shares at grant
Guaranteed number
of shares to vest
Estimated value at
vesting(1)
£000
PSP
SMP
PSP
SMP
35,842
14,562
20,908
8,298
35,842
14,562
20,908
8,298
1,061
431
619
246
1. Based on a share price of £29.59, being the average share price for the last quarter of the financial year i.e. 1 May – 31 July 2017 as a proxy for the share price at vesting.
2. Additional shares (not included above) will be awarded in lieu of dividends accrued from the date of the 2014 PSP award to the date of vesting in respect of each director as follows:
Ted Ayres 4,009 shares and Keith Adey 2,338 shares. For the SMP award the additional shares in lieu of dividends accrued will be calculated following the ex-dividend date of the final
dividend for the year ended 31 July 2017, which is after the date of publication of this report. Details of these additional shares will be included in next year’s report.
Directors’ share-based rewards and options
Details of all directors’ interests in the Company’s share-based reward schemes are shown below:
Ted Ayres
Scheme
PSP(1)
PSP(2)
PSP(3)
PSP(4)
SMP(1)
SMP(2)
2013 SRSOS(7)
Totals
Awards/options
held at
1 August 2016
Granted/
awarded
during the year
Lapsed
during
the year
Exercised
during
the year
Awards/options
held at
31 July 2017
Exercise price/
market price at
date of award (p)
Date of
grant/
award
Exercisable/
capable of
vesting from
34,506
35,842
33,727
–
–
–
–
35,223
14,501
14,562
1,306
–
–
–
134,444
35,223
–
–
–
–
–
–
–
–
(34,506)
–
–
–
(14,501)
–
–
–
35,842
33,727
35,223
–
14,562
1,306
1,449.0
1,674.0
2,382.0
2,351.0
1,448.0
1,918.0
1,378.0
18.12.2013
18.12.2016
10.11.2014
13.11.2015
10.11.2017
13.11.2018
09.11.2016
09.11.2019
28.11.2013
28.11.2016
04.12.2014
04.12.2017
17.11.2014
01.02.2018
(49,007)
120,660
65
Bellway p.l.c. Annual Report and Accounts 2017
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Report of the Board on Directors’ Remuneration continued
Keith Adey
Scheme
PSP(1)
PSP(2)
PSP(3)
PSP(4)
SMP(1)
SMP(2)
2013 SRSOS(7)
2013 SRSOS(7)
Totals
Notes:
Awards/
options held at
1 August 2016
Granted/
awarded
during the year
Lapsed
during
the year
19,668
20,908
19,701
–
9,320
8,298
1,099
439
–
–
–
20,569
–
–
–
–
79,433
20,569
–
–
–
–
–
–
–
–
–
Exercised
during
the year
(19,668)
–
–
–
(9,320)
–
–
–
(28,988)
Awards/options
held at
31 July 2017
Exercise price/
market price at
date of award (p)
Date of
grant/
award
Exercisable/
capable of
vesting from
–
1,449.0
18.12.2013
18.12.2016
20,908
19,701
20,569
–
8,298
1,099
439
71,014
1,674.0
10.11.2014
10.11.2017
2,382.0
13.11.2015
13.11.2018
2,351.0
09.11.2016
09.11.2019
1,448.0
28.11.2013
28.11.2016
1,918.0
04.12.2014
04.12.2017
1,378.0
17.11.2014
01.02.2020
2,048.8
16.11.2015
01.02.2019
1.
The performance period was 1 August 2013 – 31 July 2016. The TSR performance condition was in two parts. Half was measured by reference to an index of UK housebuilders comprising
Barratt Developments PLC, The Berkeley Group plc, Bovis Homes Group PLC, Crest Nicholson Holdings plc, Persimmon plc, Redrow plc and Taylor Wimpey plc (‘Housebuilders’
Index’). If Bellway’s TSR matched that of the index, 25% of the awards would vest. Full vesting would be achieved for 7.5% per annum outperformance of the index. The other half was
measured by reference to the companies in the FTSE 250 Index (excluding financial services companies and investment trusts). Awards would start to vest at 25% if Bellway’s TSR
matches the median of the companies in the Group, increasing on a straight-line basis so that full vesting would be achieved if Bellway’s TSR reached the upper quartile. Regardless of
TSR performance, no part of an award will vest unless the Committee is satisfied that there has been an improvement in the underlying financial performance of the Company over
the performance period, taking into account, inter alia, operating profit, operating margin, RoCE and NAV. Both parts of the performance conditions were met in full so 100% of these
awards vested.
2. Details of the vesting of these awards which will take place in November and December 2017 is set out in full under the heading ‘Long-term incentives vesting in respect of performance
period ended 31 July 2017’ above.
3. The performance period is 1 August 2015 – 31 July 2018. The awards are subject to the same TSR performance condition set out in note 1 above, and these awards are also subject to
clawback provisions.
4. On 9 November 2016, awards of performance shares under the PSP were made to Ted Ayres and Keith Adey. The performance period is 1 August 2016 – 31 July 2019. The awards
are subject to the same TSR performance condition set out in note 1, and these awards are also subject to clawback provisions. The awards were in the form of nil cost options.
The face values on grant of these awards were £828,093 and £483,577 to Ted Ayres and Keith Adey respectively, equal to 130% of their respective salaries, in line with the current
remuneration policy.
5. All of the above options set out in notes 1–4 were granted for nil consideration.
6. No share options were exercised in 2017 and therefore the gross gain is £nil. (The gross gain made by Keith Adey on the exercise of the 2003 SRSOS award in 2016 was £73,221). The value
of long-term incentive plans for both Ted Ayres and Keith Adey, which were exercised in the year and those which will become exercisable in 2017/18, are shown in the single figure of total
remuneration table on page 63.
7.
Further details of the 2013 SRSOS are shown in the summary of outstanding share options in note 18 to the accounts.
8. The market price of the ordinary shares at 31 July 2017 was 3,190p and the closing range during the year was 2,012p to 3,190p.
Payments to past directors
No payments were made to past directors in the year.
Payments for loss of office
No payments were made for loss of office in the year.
Dilution limits/shares held in Trust to satisfy awards
The Bellway Employee Share Trust (1992) (the ‘Trust’) holds market-purchased shares to satisfy awards made under some of
the Company’s executive and employee share schemes. At 31 July 2017 the Trust held 184,403 shares. It is the Company’s
current intention to use market-purchased shares to satisfy awards made under the PSP and SMP. Awards made under the
deferred bonus plans (to which the executive directors are not eligible) must be satisfied using market-purchased shares.
The SRSOS uses new issued shares. The Company’s share plans comply with the IA guidance on dilution limits and the
position as at 31 July 2017 was:
Limit of 5% in any ten years under all executive share plans
Limit of 10% in any ten years under all share plans
Actual 0.00%
Actual 1.65%
66
Bellway p.l.c. Annual Report and Accounts 2017
Statement of directors’ shareholdings and share interests
The directors’ interests (including family interests) in the ordinary share capital of the Company at 31 July 2017 are set out below:
Director
Beneficially
owned at
31 July 2017
% basic salary held
by executive
directors in shares(1)
Beneficially
owned at
31 July 2016
Outstanding
and unvested
PSP awards
Outstanding
and unvested
SMP awards
Outstanding
and unvested
share options
Share options
vested but
unexercised
Share options
exercised in
the year
John Watson
425,535
Ted Ayres
Keith Adey
Mike Toms
John Cuthbert
65,402
35,450
2,000
6,000
Paul Hampden Smith
12,548
Denise Jagger
1,250
Notes:
N/A
304
282
N/A
N/A
N/A
N/A
425,535
52,498
18,526
2,000
6,000
12,548
1,250
N/A
104,792
61,178
N/A
N/A
N/A
N/A
N/A
14,562
8,298
N/A
N/A
N/A
N/A
N/A
1,306
1,538
N/A
N/A
N/A
N/A
N/A
–
–
N/A
N/A
N/A
N/A
N/A
49,007
28,988
N/A
N/A
N/A
N/A
1. Executive directors are required to accumulate a minimum shareholding equivalent to 200% of basic salary.
2. There has been no change in any of the above interests between 31 July 2017 and the date of this report. Since the year end two directors have joined the Board. Jason Honeyman has
an interest in 4,252 shares and retains an interest in outstanding and unvested share options and awards over 31,589 shares. Jill Caseberry joined the Board on 1 October 2017 and as at
the date of this report holds no shares in the Company.
The following section of this report is not required to be audited.
Implementation of remuneration policy in 2017/18
This section sets out how the Company will implement the remuneration policy for the 2017/18 financial year. Full details of
how each element will operate are set out in the remuneration policy table earlier in this report.
Basic salaries
The Committee has awarded salary increases in line with the increases given to the general workforce of around 3% for
2017/18. Therefore from 1 August 2017, Ted Ayres’ salary was increased to £656,000 p.a. and Keith Adey’s salary was increased to
£383,000 p.a.
On 14 August 2017 Ted Ayres took a leave of absence for medical reasons and John Watson moved from non-executive
Chairman to Executive Chairman. John Watson’s fee as non-executive Chairman had been set at £212,000 from 1 August
2017. He will be paid an additional fee at the rate of £100,000 p.a. in respect of his executive responsibilities during Ted Ayres’
absence. This additional fee will be eligible for the annual bonus on the same basis as the executive directors. It will not be
eligible for pension payments, LTIP awards or a car allowance.
On 1 September 2017 Jason Honeyman was promoted to the Board as Chief Operating Officer and his basic salary has been
set at £383,000 p.a.
Annual bonus
For the 2017/18 financial year, the bonus opportunity will continue to be limited to 120% of basic salary. The performance
conditions relate to a stretching target of pre-exceptional operating profit (with a maximum payment of 90% of basic salary
achievable) and the following strategic performance measures which provide a maximum bonus opportunity of 30% of
basic salary.
Strategic measure
Objectives
Land bank
Customer care
Increase in the land bank of plots with DPP (available for completion in the
following financial year) in the year to 31 July 2018 to ensure our growth
aspirations are not frustrated by land shortages in future years.
No deterioration of previous year’s net assessment of customer satisfaction
score as a minimum, with additional bonus opportunity for improvement in
the Group’s customer satisfaction score.
The customer care element is assessed using the average of six key
indicators, as measured by the NHBC. This measure is used as it reflects
the metrics by which the performance of each division is managed by the
executives.
Score
Maximum – 15% of salary.
Maximum – 15% of salary.
67
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Report of the Board on Directors’ Remuneration continued
For each strategic element, sliding scale targets will apply whereby a proportion of the bonus will be payable if a base
threshold is achieved, with further bonus paid on a sliding scale for improvements in performance up to the maximum bonus
opportunity. In the event that the threshold profit criterion is not met, no bonus will be payable under the non-financial
elements. Health and safety performance will be taken into account as part of the Committee’s overall assessment of the
bonus payment.
The Committee would have discretion if, for example, health and safety standards have been unsatisfactory, or there has
been a major safety failure, to reduce the overall bonus payment and could, in exceptional cases, reduce the overall bonus
payment to nil. This includes a possible reduction to the 2017/18 bonus in relation to the outcome of any health and safety
investigation which has concluded in respect of the prior year. Maintaining a strong health and safety record remains a critical
objective and the new bonus structure provides for health and safety to have greater influence on annual bonus outcomes.
The actual annual bonus performance targets are considered to be commercially sensitive at this time, and the
Committee will disclose these retrospectively in next year’s annual report on remuneration, provided they are no longer
commercially sensitive.
Long-term incentives
The Company anticipates making a grant under the PSP in November 2017 with a face value equivalent to 150% of salary to
the executive directors. Awards will vest to executives after three years, subject to the achievement of performance conditions
based around TSR, which measures the total return on a notional investment in Bellway shares, compared to the return on
the same notional investment in shares in a group of other companies or an index. This award will be subject to a relative TSR
condition with 50% of awards measured against a group of housebuilders and the other 50% against the constituents of the
FTSE 250 (excluding financial services companies and investment trusts). This is shown below:
Metric
Performance condition
50% of awards
50% of awards
Relative TSR against an index of peer housebuilders
comprising Barratt Developments PLC, The Berkeley
Group plc, Bovis Homes Group PLC, Crest Nicholson
Holdings plc, Persimmon plc, Redrow plc and Taylor
Wimpey plc (‘Index’): 25% of this part of an award vests
at the Index, increasing, pro-rata, to full vesting at Index
+ 7.5% p.a.
Relative TSR against the FTSE 250 (excluding financial
services companies and investment trusts): 25% of this
part of an award vests at median, increasing, pro-rata, to
full vesting at the upper quartile.
Threshold target
Stretch target
TSR (Index) TSR (Index + 7.5% p.a.)
Median
Upper quartile
Chairman and non-executive director fees from 1 August 2017
Fee from 1 August 2016
£
% increase
Fee from 1 August 2017
£
Non-executive Chairman fee
Non-executive director fee
Senior independent non-executive director, Audit and
Remuneration Committee Chair fees
206,000
56,000
8,000
3
3
3
212,000
57,680
8,240
The non-executive Chairman became Executive Chairman shortly after the start of the financial year on an interim basis while
the Chief Executive is absent on medical leave. John Watson’s salary as non-executive Chairman had been set at £212,000
from 1 August 2017. He will receive an additional payment at the rate of £100,000 p.a. for the period during which he has
additional executive responsibilities in Ted Ayres’ absence. On Ted Ayres’ return to the business the Chairman will resume his
non-executive role and his fee will revert to £212,000.
The Company’s Articles of Association specify an annual limit on non-executive director fees of £500,000. This excludes the
fees for the Chairman and additional fees payable to the senior independent non-executive director and to Committee Chairs.
Shareholder approval is required to amend this limit.
68
Bellway p.l.c. Annual Report and Accounts 2017
Performance graph and table
The graph below shows the TSR performance over the past eight years of the Company, the FTSE 250 Index and the bespoke
Housebuilders’ Index (as defined in note 1 on page 66). The FTSE 250 Index has been selected as the most appropriate
‘broad equity market index’ as the Company has been a constituent of the FTSE 250 Index over this period. The bespoke
Housebuilders’ Index has been selected as this index is used for the Company’s long-term incentive plans.
Total shareholder return
Source: Datastream (Thomson Reuters)
)
d
e
s
a
b
e
r
(
n
r
u
e
r
t
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
600
500
400
300
200
100
0
532
524
307
450
372
259
361
334
261
246
208
202
263
227
222
128
80
78
152
100
92
151
118
115
31 July 2009
31 July 2010
31 July 2011
31 July 2012
31 July 2013
31 July 2014
31 July 2015
31 July 2016
31 July 2017
Bellway
Housebuilders’ Index
FTSE 250 Index
This graph shows the value, by 31 July 2017, of £100 invested in Bellway p.l.c. on 31 July 2009 compared with the value of £100
invested in the FTSE 250 Index and £100 invested equally in each of the housebuilders currently contained in the FTSE 350
Index (excluding Bellway). The other points plotted are the values at intervening financial year ends.
Chief Executive total remuneration
The table below sets out the total remuneration for the Chief Executive over the same eight-year period as for the chart above,
together with the percentage of annual bonus paid and the vesting of long-term incentives as a percentage of the maximum
(relating to the performance periods ending in that year).
Total remuneration
(£000)
Annual bonus paid
(as % of maximum)
PSP vesting
(as % of maximum)
Notes:
2010
1,532
2011
1,899
2012
1,396
2013
1,243(1)
2014
1,450
2015
1,960
2016
2,785(2)
2017
3,121
76.9%
100.0%
99.3%
100.0%
91.6%
88.8%
95.8%
93.8%
48.3%
99.6%
0.0%
0.0%
50.0%
50.0%
100.0%
100.0%
1.
John Watson held the role of Chief Executive up until 31 January 2013 and Ted Ayres was Chief Executive for the remainder of the financial year from 1 February 2013 to 31 July 2013.
The total remuneration for the period as Chief Executive was £714,053 for John Watson and £528,500 for Ted Ayres.
2. Restated as per note 4 to the table on page 63.
69
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Report of the Board on Directors’ Remuneration continued
Percentage change in remuneration of the Chief Executive
The table below shows the percentage change over the financial year in respect of the Chief Executive’s base salary, benefits
and annual bonus compared to the average increase across all employees.
Salary
Benefits
Annual bonus
Chief Executive
All other employees
Chief Executive
All other employees
Chief Executive
All other employees
% change
+3
+3
0
+2
+1
+4
Importance of remuneration relative to dividends and section 106 and CIL payments
The table below shows the relative expenditure of the Group in respect of employee remuneration, dividends and section 106
and CIL payments, together with the percentage change in each, for the financial years ended 31 July 2016 and 31 July 2017.
The directors have chosen dividends and section 106 and CIL payments as comparators to employee costs as they consider
that these demonstrate the relative importance of the remuneration of its employees to the returns the Group generates to
shareholders and the contribution it makes to developing communities through section 106 and CIL payments.
Employee costs(1)
Dividends(2)
Section 106 and CIL payments(3)
Notes:
2017
£000
130,891
149,575
118,176
2016
£000
118,899
132,486
147,900
% change
+10
+13
-20
1. Employee costs are calculated as wages and salaries, bonus and taxable benefits (including the directors).
2. The dividend figures shown are the interim and final dividends paid or payable for the relevant financial year less forfeited dividends (see note 7).
3. The section 106 and CIL payments figures are calculated from invoices received for these payments.
Statement of voting at AGMs
The votes cast by proxy at AGMs in relation to resolutions regarding directors’ remuneration are set out in the table below:
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Directors’ Remuneration Policy
(binding vote at AGM
on 12 December 2014)
Number
of votes
89,575,994
2,136,039
91,712,033
1,132,868
% of
votes cast
97.67
2.33
100.00
N/A
Report of the Board on Directors’
Remuneration (advisory vote at AGM
on 13 December 2016)
Number
of votes
% of
votes cast
86,002,698
561,858
86,564,556
1,768,443
99.35
0.65
100.00
N/A
This report will be put to an advisory vote of the Company’s shareholders at the AGM on 13 December 2017.
On behalf of the Board
Mike Toms
Chairman of the Board Committee on Executive Directors’ Remuneration
16 October 2017
70
Bellway p.l.c. Annual Report and Accounts 2017
Governance
Report of the Directors
“ The directors have proposed a final
ordinary dividend for the year ended
31 July 2017 of 84.5p per share.”
Simon Scougall
Group General Counsel and Company Secretary
The directors of Bellway p.l.c. present their report in accordance with section 415 of the Companies Act 2006.
Bellway p.l.c. is the holding company of the Bellway Group of companies and is a UK publicly listed company whose shares
are traded on the London Stock Exchange. The main trading company is Bellway Homes Limited and this and all other
subsidiaries and joint arrangements of the Group are listed in note 26 to the accounts.
The following table sets out where information can be found which is required to be reported on in the Report of the
Directors, but has been included elsewhere in the Annual Report and Accounts and is simply cross-referenced here to avoid
repetition. Where information that is required to be set out in this Report of the Directors has been included in the Strategic
Report, reference is made to the Strategic Report in the table below:
Topic
Directors
Page number
36 – 37
Appointment and replacement of directors
42 and in the Articles
Directors’ interests
Future developments
Group undertakings
Environmental issues
Greenhouse gas emissions
Whistleblowing
Financial risk management
Going concern
67
25 of the Strategic Report
109
28 – 35 of the Strategic Report
31 of the Strategic Report
50
20 of the Strategic Report
21 of the Strategic Report
Results and dividends
The profit for the year attributable to equity holders of the parent company amounts to £454.1 million (2016 – £402.9 million).
The directors have proposed a final ordinary dividend for the year ended 31 July 2017 of 84.5p per share (2016 - 74.0p). This has
not been included within creditors as it was not approved by shareholders before the end of the financial year. The directors
recommend payment of the final dividend on Wednesday 10 January 2018 to shareholders on the Register of Members at the
close of business on Friday 1 December 2017.
Dividends paid during the year comprise a final dividend of 74.0p per share in respect of the year ended 31 July 2016, together
with an interim dividend in respect of the year ended 31 July 2017 of 37.5p per share.
71
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Report of the Directors continued
Directors’ indemnities and Directors’ and Officers’ liability insurance
The Company carries appropriate insurance cover in respect of possible legal action being taken against its directors, officers
and senior employees. The Articles provide the directors and officers with further protection against liability to third parties,
subject to the conditions set out in the Companies Act 2006. Such qualifying third party indemnity provision remains in force
as at the date of this report.
Major interests in shares
As at 31 July 2017 and as at the date of this report, the Company had been notified under DTR 5 of the following interests,
amounting to 3% or more of the voting rights in the issued ordinary share capital of the Company:
Standard Life Investments (Holdings) Limited – (name changed on
14 August 2017 to Standard Life Aberdeen plc following the merger of
Aberdeen Asset Management PLC and Standard Life plc)
BlackRock Inc
Dimensional Fund Advisors LP
Credit Suisse Securities (Europe) Ltd
Post balance sheet events
There were no post balance sheet events.
As at 31 July 2017
As at 16 October 2017
Number of
shares with
voting rights
% total
voting rights
Number of
shares with
voting rights
% total
voting rights
12,237,705
6,510,966
6,150,766
3,890,282
9.97
5.30
5.00
3.17
10,478,474
6,510,966
6,150,766
3,890,282
8.53
5.30
5.00
3.17
Information on those third parties with which the Company has contracts or arrangements
essential to its business
The Company is party to a number of banking agreements with major clearing banks. The withdrawal of such facilities could
have a material effect on the financing of the business. There are no other arrangements which the Group considers to be
critical to the performance of the business.
Takeovers Directive and change of control
The Company is party to a number of banking agreements which may be terminable in the event of a change of control of
the Company. On a change of control any outstanding options and awards granted under the Group’s share schemes would
become exercisable, subject to any performance conditions being met.
Share capital
The Company’s total issued share capital, as at 31 July 2017, consisted of 122,797,958 ordinary shares of 12.5p each.
Further details of the issued capital of the Company can be found in note 18 to the accounts. The rights and obligations
attaching to the ordinary shares in the Company are set out in the Articles of Association (the ‘Articles’). Copies of the
Articles can be obtained from Companies House or by writing to the Group General Counsel and Company Secretary at the
Company’s registered office.
Restrictions on the transfer of shares
The restrictions on the transfer of shares are set out in the Articles. In compliance with the Company’s Share Dealing Code,
Company approval is required for directors, certain employees and those persons closely associated with them to deal in the
Company’s ordinary shares. No person has special rights of control over the Company’s share capital.
Rights in relation to the shares held in the employee benefit trust
The voting rights on shares held in the Bellway Employee Share Trust (1992) in relation to the Company’s employee share
schemes are exercisable by the trustees.
Restrictions on voting rights
Details of the deadlines for exercising voting rights are set out in the Articles. The directors are not aware of any agreements
between shareholders that may result in restrictions on the transfer of securities or on voting rights.
Amendments to the Articles
The Company may amend its Articles by passing a special resolution at a general meeting of its shareholders.
72
Bellway p.l.c. Annual Report and Accounts 2017
Powers of the Board
The business and affairs of the Company are managed by the directors, who may exercise all such powers of the Company
as are, not by law or by the Articles, required to be exercised by the Company in general meetings. Subject to the provisions
of the Articles, all powers of the directors are exercised at meetings of the directors which have been validly convened and at
which a quorum is present.
Allotment of shares
During the year, 111,972 new ordinary shares were issued to satisfy awards made under the Company’s employee share
schemes. The directors have authority to allot shares within limits agreed by shareholders. Details of the renewal of this
authority, including the resolutions which seek to renew this authority, are set out in the Notice of Meeting of the AGM, to be
held on Wednesday 13 December 2017.
Purchase of the Company’s own shares
The Company was given authority at the AGM on 13 December 2016 to purchase its own ordinary shares. As at the date of this
report, no market purchases have been made by the Company. This authority will expire at the end of the forthcoming AGM.
Details of the renewal of this authority including the resolution which seeks to renew this authority for a further year are set out
in the Notice of Meeting of the AGM.
Listing Rules
There are no disclosures required by LR9.8.4 which apply to the Company.
Accountability and audit
The Going Concern Statement, Long-Term Viability Statement and the Statement of Directors’ Responsibilities in respect of the
Annual Report and Accounts are shown on pages 21, 21 and 74 respectively.
The Audit Committee, whose role is detailed on pages 46 to 50, has meetings at least twice a year with the Company’s auditor,
KPMG LLP.
People
The important role that our people perform is described throughout the Strategic Report. The following disclosures provide
additional information on how we treat our people and how we engage with them.
We are an equal opportunities employer. It is our policy to develop and apply, throughout the Group, procedures and
practices which are designed to ensure that equal opportunities are provided to all of our employees, or those who seek
employment with the Group, irrespective of their age, colour, disability, ethnic origin, gender, marital status, nationality, parental
status, race, religion, belief or sexual orientation.
All employees, whether part-time, full-time or temporary, are treated fairly and equally. Selection for employment, promotion,
training or other matters affecting their employment is on the basis of aptitude and ability. All employees are supported and
encouraged to develop to their full potential and the talents and resources of the workforce are fully utilised to maximise the
efficiency of the organisation. Training at each division is planned and monitored through an annual training plan.
It is our policy to give full and fair consideration to the employment needs of disabled persons (and persons who become
disabled whilst employed by the Group) and to comply with any current legislation with regard to disabled persons.
The importance of good communications with employees is recognised by the directors and senior management team.
A newsletter is issued to all of our employees on a regular basis and each division maintains good employee relations using a
variety of means appropriate to its own particular needs, with guidance when necessary from Head Office.
All new employees, when eligible, are automatically entered into the Group’s pension arrangements. In addition, we operate
a savings related share option scheme and have discretionary bonus arrangements in place. We also provide life assurance
cover to all of our employees, offer a private medical scheme (depending on seniority) and offer childcare vouchers.
Health and safety at work
We promote all aspects of health and safety throughout our operations in the interests of employees, sub-contractors,
suppliers, customers and visitors to our sites and premises. Health and safety issues are considered at each Board meeting and
are addressed in the Strategic Report and on our website at www.bellway.co.uk/corporate-responsibility. The Board receives
external advice and training from specialist advisers on both the directors’ and the Company’s regulatory obligations.
Auditor
In accordance with section 489 of the Companies Act 2006, a resolution for the appointment of KPMG LLP as auditor of the
Company is to be proposed at the forthcoming AGM.
AGM – special business
Five resolutions will be proposed as special business at the AGM to be held on Wednesday 13 December 2017.
Explanatory notes on these resolutions are set out in the Notice of Meeting of the AGM.
73
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Report of the Directors continued
Disclosure of all relevant information to the auditor
The directors who held office at the date of this report confirm that, so far as they are each aware, there is no relevant audit
information of which the Company’s auditor is unaware and that each director has taken all the steps that he or she ought to
have taken as a director to make himself or herself aware of any relevant audit information and to establish that the Company’s
auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of
section 418 of the Companies Act 2006.
Statement of Directors’ Responsibilities in respect of the Annual Report and the Financial
Statements
The directors are responsible for preparing the Annual Report and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent company financial statements for each financial year. Under
that law they are required to prepare the Group financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare
the parent company financial statements on the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of
the Group and parent company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently.
• make judgements and estimates that are reasonable, relevant and reliable.
• state whether they have been prepared in accordance with IFRSs as adopted by the EU.
• assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern.
• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to
cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company
and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the directors in respect of the Annual Report and Accounts
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation
taken as a whole.
• the Strategic Report includes a fair review of the development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks
and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and performance, business model and strategy.
By order of the Board
Simon Scougall
Group General Counsel and Company Secretary
16 October 2017
74
Bellway p.l.c. Annual Report and Accounts 2017
Independent Auditor’s Report to the Members of
Bellway p.l.c.
1. Our opinion is unmodified
We have audited the financial statements of Bellway p.l.c.
(‘the Company’) for the year ended 31 July 2017 which
comprise the Group income statement, Group and Company
statements of comprehensive income, statements of
changes in equity, balance sheets, cash flow statements and
the related notes, including the accounting policies.
We were appointed as auditor by the shareholders
on 19 January 1997. The period of total uninterrupted
engagement is the 20 years ended 31 July 2017. We have
fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied
to listed public interest entities. No non-audit services
prohibited by that standard were provided.
Overview
Materiality:
£26 million (2016 - £23 million)
Group financial statements
as a whole
4.6% (2016 - 4.8%) of Group
profit before tax
Coverage
99% (2016 - 99%) of Group
profit before tax
Risk of material misstatement
vs 2016
Recurring risks
Gross Profit recognition
on current sites and
carrying amount of land
held for development
and work in progress
Investments in
subsidiaries
In our opinion:
— the financial statements give a true and fair view of the
state of the Group’s and of the parent Company’s affairs
as at 31 July 2017 and of the Group’s profit for the year
then ended;
— the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU);
— the parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted by
the EU and as applied in accordance with the provisions of
the Companies Act 2006; and
— the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006 and, as regards the Group financial statements, Article
4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable
law. Our responsibilities are described below. We believe
that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit Committee.
75
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Independent Auditor’s Report to the Members of Bellway p.l.c. continued
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters unchanged from 2016 in arriving
at our audit opinion above, together with our key audit procedures to address those matters and, as required for public
interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures
undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our
opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
Accounts
The risk
Our response
Our procedures included:
— Control design: Evaluating the Group’s site valuation
process upon which the site gross profit margin is based.
This includes assessing the frequency of site valuations and
assessing the process for authorising and recording incurred
costs in the site valuations.
— Control observation: Attending a selection of site valuation
meetings to assess whether divisional senior management
sufficiently challenge the latest site valuations.
— Test of details: For all sites with unit sales during the year,
comparing the gross margin recognised in the accounts
to the latest site valuation and corroborate any significant
differences by checking whether the differences in the
margin recognised are supported by changes in valuations.
This includes corroborating explanations received from
divisional management in respect of undeveloped land and
site valuations to underlying planning and legal documents
and quantity surveyor assessments where applicable.
— Benchmarking assumptions: Across all divisions,
challenging judgements made by divisional management
on site valuations and undeveloped land based on our
knowledge of the Group and the industry.
— Historical comparisons: Comparing budgeted and latest site
valuations to assess the Group’s ability to accurately forecast.
— Assessing transparency: Assessing the adequacy of the
Group’s disclosures about the degree of estimation involved
in calculating the gross margin and carrying value of land
and work in progress.
Our results
— We found the level of gross profit recognised to be
acceptable.
— We found the carrying value of land and work in progress to
be acceptable.
— Comparing valuations: Evaluating the audit procedures
performed over the subsidiaries’ net assets, and comparing
the carrying value of investments in the parent’s accounts to
the net assets within the subsidiary accounts; and
— Tests of details: Inspection of the latest available audited
accounts and consideration of the work performed by the
Group audit team in respect of current year results.
Our results
— We found the carrying value of investments to be
acceptable.
Group: Carrying amount of
land held for development
and work in progress
£2,934 million (2016 – £2,532
million).
Gross profit £662 million
(2016 – £575 million).
Refer to page 48 (Audit
Committee Report), pages
86 and 89 (accounting
policies) and note 13
on page 97 (financial
disclosures).
Subjective estimate:
The gross profit recognised
on current sites and the
carrying value of land held
for development and work
in progress is reliant on the
Group’s forecasts of the
future selling price and the
build costs, both of which
are uncertain and can vary
with market conditions.
Parent: Investments in
subsidiaries £37 million
(2016 - £35 million).
Refer to page 86
(accounting policies) and
note 11 on pages 95 and 96
(financial disclosures).
Subjective estimate:
The estimated recoverable
amount of investments
is subjective due to the
inherent uncertainty
involved in forecasting
the future cash flows of an
investment.
76
Bellway p.l.c. Annual Report and Accounts 2017
3. Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as a whole was
set at £26 million, determined with reference to a benchmark
of Group profit before tax, of which it represents 4.6% (2016 -
4.8%).
Materiality for the parent Company financial statements as a
whole was set at £9.7 million (2016 - £9.7 million), determined
with reference to a benchmark of Company total assets, of
which it represents 1.5% (2016 - 1.5%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £1.3 million,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
The components within the Group scope of our work
accounted for the percentages illustrated opposite.
For the residual components, we performed analysis at
an aggregated Group level to re-examine our assessment
that there were no significant risks of material misstatement
within these.
The Group team approved the component materialities,
which ranged from £22.1 million to £0.002 million, having
regard to the mix of size and risk profile of the Group across
the components. The work on all components, including
the audit of the parent Company, was performed by the
Group team.
Profit before tax
£561 million
(2016 - £498 million)
Profit before tax
Group materiality
Group Materiality
£26 million (2016 - £23 million)
£26 million
Whole financial
statements materiality
(2016 - £23 million)
£22.1 million
Range of materiality
at 9 components
(£22.1 million - £0.002 million)
(2016 - £17.0 million
to £0.01 million)
£1.3 million
Misstatements reported
to the Audit Committee
(2016 - £1.0 million)
Group revenue
Group profit before tax
1
1
99%
(2016 - 99%)
99
99
100%
(2016 - 100%)
Group total assets
1
1
99%
(2016 - 99%)
99
99
Full scope for Group audit purposes 2017
Residual Components 2017
Full scope for Group audit purposes 2016
Residual Components 2016
77
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Governance
Independent Auditor’s Report to the Members of Bellway p.l.c. continued
4. We have nothing to report
on going concern
We are required to report to you if:
— we have anything material to add or draw attention to
in relation to the directors’ statement on page 85 on the
use of the going concern basis of accounting with no
material uncertainties that may cast significant doubt over
the Group and Company’s use of that basis for a period
of at least twelve months from the date of approval of the
financial statements; or
— the related statement under the Listing Rules set out on
page 21 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
5. We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for
the financial year is consistent with the financial statements;
and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance
with the Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
— the directors’ confirmation within the Long-Term Viability
Statement on page 21 that they have carried out a robust
assessment of the principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency and liquidity;
— the Risk Management disclosures describing these
risks and explaining how they are being managed and
mitigated; and
— the directors’ explanation in the Long-Term Viability
Statement of how they have assessed the prospects of
the Group, over what period they have done so and
why they considered that period to be appropriate, and
their statement as to whether they have a reasonable
expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due
over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Under the Listing Rules we are required to review the
Long-Term Viability Statement. We have nothing to report in
this respect.
Corporate governance disclosures
We are required to report to you if:
— we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider that
the annual report and financial statements taken as a
whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy; or
— the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee; or
— a corporate governance statement has not been prepared
by the company.
We are required to report to you if the Corporate
Governance Statement does not properly disclose a
departure from the eleven provisions of the UK Corporate
Governance Code specified by the Listing Rules for
our review.
We have nothing to report in these respects.
78
Bellway p.l.c. Annual Report and Accounts 2017
Based solely on our work on the other information
described above:
— with respect to the Chairman’s Statement on Corporate
Governance disclosures about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures:
— we have not identified material misstatements therein;
and
— the information therein is consistent with the financial
statements; and
— in our opinion, the Chairman’s Statement on Corporate
Governance has been prepared in accordance
with relevant rules of the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority.
6. We have nothing to report on the other
matters on which we are required to report
by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
— adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
— the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
— certain disclosures of directors’ remuneration specified by
law are not made; or
— we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free
from material misstatement, whether due to fraud, other
irregularities, or error, and to issue our opinion in an
auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from
fraud, other irregularities or error and are considered material
if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of the financial statements. The risk of not
detecting a material misstatement resulting from fraud or
other irregularities is higher than for one resulting from error,
as they may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control and
may involve any area of law and regulation not just those
directly affecting the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a
body, for our audit work, for this report, or for the opinions we
have formed.
7. Respective responsibilities
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Quayside House, 110 Quayside, Newcastle Upon Tyne, NE1 3DX
16 October 2017
Directors’ responsibilities
As explained more fully in their statement set out on page
74, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
79
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Accounts
Group Income Statement
for the year ended 31 July 2017
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Profit on disposal of investment in joint venture
Finance income
Finance expenses
Share of result of joint ventures
Profit before taxation
Income tax expense
Profit for the year*
* All attributable to equity holders of the parent.
Earnings per ordinary share – Basic
Earnings per ordinary share – Diluted
2017
Total
2016
Pre-exceptional
item
Notes
£000
£000
1
2,558,561
2,240,651
(1,896,977)
(1,665,892)
661,584
574,759
(90,029)
571,555
(82,751)
492,008
–
1,248
–
1,186
(12,492)
(12,326)
412
(306)
2016
Exceptional
item
(note 5)
£000
–
–
–
–
–
17,306
–
–
–
2016
Total
£000
2,240,651
(1,665,892)
574,759
(82,751)
492,008
17,306
1,186
(12,326)
(306)
497,868
(94,966)
560,723
480,562
17,306
(106,666)
(94,966)
–
454,057
385,596
17,306
402,902
370.6p
369.0p
328.7p
328.0p
4
5
2
2
11
6
8
8
Statements of Comprehensive Income
for the year ended 31 July 2017
Profit for the period
Other comprehensive income/(expense)
Items that will not be recycled to the income statement:
Remeasurement gains/(losses) on defined benefit pension plans
Income tax on other comprehensive income/(expense)
Other comprehensive income/(expense) for the period,
net of income tax
Notes
Group
2017
£000
Group
2016
£000
454,057
402,902
Company
2017
£000
135,000
Company
2016
£000
173,950
24
6
3,846
(730)
(1,806)
(136)
3,116
(1,942)
–
–
–
–
–
–
Total comprehensive income for the period*
457,173
400,960
135,000
173,950
* All attributable to equity holders of the parent.
80
Bellway p.l.c. Annual Report and Accounts 2017
Accounts
Statements of Changes in Equity
at 31 July 2017
Group
Notes
£000
£000
Issued
capital
Share
premium
Capital
redemption
reserve
£000
Other
reserves
Retained
earnings
Total
£000
£000
£000
Non-
controlling
interest
£000
Total
equity
£000
Balance at 1 August 2015
15,314
169,012
20,000
1,492
1,370,160
1,575,978
(66)
1,575,912
Total comprehensive
income for the period
Profit for the period
Other comprehensive
expense*
Total comprehensive
income for the period
Transactions with
shareholders recorded
directly in equity:
Dividends on equity shares
Shares issued
Purchase of own shares
7
18
19
Credit in relation to share
options and tax thereon
6, 24
Total contributions by
and distributions to
shareholders
–
–
–
–
21
–
–
21
–
–
–
–
1,134
–
–
1,134
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
402,902
402,902
(1,942)
(1,942)
400,960
400,960
(105,411)
(105,411)
–
1,155
(6,864)
(6,864)
1,264
1,264
(111,011)
(109,856)
–
–
–
–
–
–
–
–
402,902
(1,942)
400,960
(105,411)
1,155
(6,864)
1,264
(109,856)
Balance at 31 July 2016
15,335
170,146
20,000
1,492
1,660,109
1,867,082
(66)
1,867,016
Total comprehensive
income for the period
Profit for the period
Other comprehensive
income*
Total comprehensive
income for the period
Transactions with
shareholders recorded
directly in equity:
Dividends on equity shares
Shares issued
7
18
Credit in relation to share
options and tax thereon
6, 24
Total contributions by
and distributions to
shareholders
–
–
–
–
14
–
14
–
–
–
–
1,094
–
1,094
–
–
–
–
–
–
–
–
–
–
–
–
–
–
454,057
454,057
3,116
3,116
457,173
457,173
(136,556)
(136,556)
–
1,108
2,599
2,599
(133,957)
(132,849)
–
–
–
–
–
–
–
454,057
3,116
457,173
(136,556)
1,108
2,599
(132,849)
Balance at 31 July 2017
15,349
171,240
20,000
1,492 1,983,325 2,191,406
(66) 2,191,340
* An additional breakdown is provided in the Statements of Comprehensive Income.
81
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information
Accounts
Statements of Changes in Equity continued
at 31 July 2017
Company
Balance at 1 August 2015
Total comprehensive income for the period
Profit for the period
Other comprehensive income*
Total comprehensive income for the period
Transactions with shareholders recorded directly
in equity:
Dividends on equity shares
Shares issued
Purchase of own shares
Credit in relation to share options
Total contributions by and distributions to
shareholders
7
18
19
24
Issued
capital
Share
premium
Notes
£000
£000
Capital
redemption
reserve
£000
15,314
169,012
20,000
Other
reserves
Retained
earnings
Total
equity
£000
2,145
£000
£000
359,578
566,049
–
–
–
–
21
–
–
21
–
–
–
–
1,134
–
–
1,134
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
173,950
173,950
–
–
173,950
173,950
(105,411)
(105,411)
–
1,155
(6,864)
(6,864)
1,568
1,568
(110,707)
(109,552)
Balance at 31 July 2016
15,335
170,146
20,000
2,145
422,821
630,447
Total comprehensive income for the period
Profit for the period
Other comprehensive income*
Total comprehensive income for the period
Transactions with shareholders recorded directly
in equity:
Dividends on equity shares
Shares issued
Credit in relation to share options
Total contributions by and distributions to
shareholders
7
18
24
–
–
–
–
14
–
14
–
–
–
–
1,094
–
1,094
–
–
–
–
–
–
–
–
–
–
–
–
–
–
135,000
135,000
–
–
135,000
135,000
(136,556)
(136,556)
–
2,066
1,108
2,066
(134,490)
(133,382)
Balance at 31 July 2017
15,349
171,240
20,000
2,145
423,331
632,065
* An additional breakdown is provided in the Statements of Comprehensive Income.
82
Bellway p.l.c. Annual Report and Accounts 2017
Accounts
Balance Sheets
at 31 July 2017
ASSETS
Non-current assets
Property, plant and equipment
Investment property
Investments in joint ventures and subsidiaries
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Retirement benefit obligations
Trade and other payables
Deferred tax liabilities
Current liabilities
Interest-bearing loans and borrowings
Corporation tax payable
Trade and other payables
Total liabilities
Net assets
EQUITY
Issued capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Notes
Group
2017
£000
Group
2016
£000
Company
2017
£000
Company
2016
£000
9
10
11
14
12
13
14
21
24
16
12
15
16
18
19
11,255
14,904
–
34,345
–
2,432
48,032
–
4,550
11,406
2,490
33,350
–
–
–
–
37,285
35,219
–
–
–
–
37,285
35,219
2,968,184
2,548,339
–
–
85,168
45,965
80,185
58,968
3,099,317
2,687,492
3,147,349
2,720,842
542,318
542,766
52,751
595,069
632,354
52,762
595,528
630,747
3,977
113,743
686
118,406
8,036
87,866
314
96,216
30,000
58,143
749,460
837,603
956,009
2,191,340
32,500
50,500
674,610
757,610
853,826
1,867,016
–
–
–
–
–
–
289
289
289
–
–
–
–
–
–
300
300
300
632,065
630,447
15,349
171,240
20,000
1,492
15,335
170,146
20,000
1,492
1,983,325
1,660,109
2,191,406
1,867,082
15,349
171,240
20,000
2,145
423,331
632,065
(66)
(66)
–
15,335
170,146
20,000
2,145
422,821
630,447
–
2,191,340
1,867,016
632,065
630,447
Approved by the Board of Directors on 16 October 2017 and signed on its behalf by:
John Watson
Director
Keith Adey
Director
Registered number 1372603
83
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Notes
Group
2017
£000
Group
2016
£000
Company
2017
£000
Company
2016
£000
454,057
402,902
135,000
173,950
Accounts
Cash Flow Statements
for the year ended 31 July 2017
Cash flows from operating activities
Profit for the year
Depreciation charge
Exceptional profit
Profit on sale of property, plant and equipment
Loss on sale of investment properties
Finance income
Finance expenses
Share-based payment expense
Share of post tax result of joint ventures
Income tax expense
Increase in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash from operations
Interest paid
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment in joint venture - exceptional item
Proceeds from sale of investment properties
Dividends received
Increase in loans to joint ventures
Interest received
9
5
4
2
2
24
11
6
5
11
2,759
–
(162)
–
(1,248)
12,492
2,066
(412)
3,044
(17,306)
(74)
187
(1,186)
12,326
1,568
306
106,666
94,966
(419,845)
(413,041)
7,561
92,581
256,515
(4,616)
(98,790)
153,109
(2,109)
3,161
–
–
–
(29,383)
167
(68)
165,737
249,361
(4,284)
(82,384)
162,693
(3,373)
273
16,600
1,422
–
(1,768)
250
Net cash (outflow)/inflow from investing activities
(28,164)
13,404
Cash flows from financing activities
Decrease in bank borrowings
Proceeds from the issue of share capital on exercise of share
options
Purchase of own shares by employee share option plans
Dividends paid
Net cash outflow from financing activities
(2,500)
(47,500)
1,108
–
1,155
(6,864)
1,108
–
7
(136,556)
(105,411)
(136,556)
(137,948)
(158,620)
(135,448)
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(13,003)
58,968
45,965
17,477
41,491
58,968
(11)
52,762
52,751
21
84
Bellway p.l.c. Annual Report and Accounts 2017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
448
(11)
135,437
(62,831)
2
111,121
–
–
–
–
135,437
111,121
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000
–
–
4,000
–
1,155
(6,864)
(105,411)
(111,120)
4,001
48,761
52,762
Accounts
Accounting Policies
Basis of preparation
Bellway p.l.c. (the ‘Company’) is a company incorporated in England and Wales.
Both the Company financial statements and the Group financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’) and have
been prepared on the historical cost basis except for assets recognised at fair value through profit or loss which are stated at
their fair value. On publishing the Company financial statements here together with the Group financial statements, which were
approved for issue on 16 October 2017, the Company is taking advantage of the exemption in section 408 of the Companies
Act 2006 not to present its individual income statement and related notes that form a part of these financial statements.
The preparation of the financial statements in conformity with Adopted IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are
set out in the Operating Review on pages 22 to 25. The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review on pages 26 to 27 and the Report of the Directors on pages 71 to 74.
The Risk Management section on pages 16 to 20 sets out the Group’s policies and processes for managing its capital, financial
risk, and its exposure to credit, liquidity, interest rate and housing market risk.
The Group’s activities are financed principally by a combination of ordinary shares and bank borrowings less cash in hand.
At 31 July 2017, net cash was £16.0 million having expended cash of £10.5 million during the year. The Group has operated
within all of its banking covenants throughout the year. In addition, the Group had bank facilities of £430.0 million, expiring in
tranches up to November 2020, with £400.0 million available for drawdown under such facilities at 31 July 2017.
The directors consider that the Group is well placed to manage business and financial risks in the current economic
environment and have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the Annual Report
and Accounts.
Judgements made by the directors, in the application of these accounting policies and Adopted IFRSs, that have a
significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year, are
discussed below.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
these consolidated financial statements.
Effect of new standards and interpretations effective for the first time
The Group adopted IAS 1 ‘Disclosure Initiative’ and Annual Improvements 2012-2014 during the year. The adoption of these
has not had a material effect on the Group’s profit for the year or equity.
The other standards and interpretations that are applicable for the first time in the Group’s financial statements for the year
ended 31 July 2017 have had no effect on these financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company made up to 31 July. The Company controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control,
potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of these
entities are included in the consolidated financial statements from the date that control commences until the date that
control ceases.
Joint arrangements are those entities over whose activities the Group has joint control, established by contractual agreement.
A joint arrangement can take two forms:
(i) Joint venture – These entities are consolidated using the equity method of accounting.
(ii) Joint operation – The Group’s share of the assets, liabilities and transactions of such entities are consolidated as if they were
assets, liabilities and transactions of the Group.
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Accounting Policies continued
Property, plant and equipment
Items are stated at cost less accumulated depreciation and impairment losses. Depreciation on property, plant and equipment
is charged to the income statement on a straight-line basis over their estimated useful lives over the following number of years:
• Plant, fixtures and fittings – 3 to 10 years.
• Freehold buildings – 40 years.
Freehold land is not depreciated.
Investment property
Investment property is initially recognised at cost. Subsequent to recognition, investment property is measured using the cost
model and is carried at cost less any accumulated depreciation and accumulated impairment losses.
Depreciation is charged, where material, so as to write off the cost less residual value of the investment properties over their
estimated useful lives. The residual values and useful lives of investment properties are reviewed at each financial year end.
The useful life of investment properties has been assessed as being 10 to 100 years.
Land is not depreciated.
Investments in subsidiaries
Interests in subsidiary undertakings are valued at cost less impairment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost, in relation to work in progress and showhomes,
comprises direct materials and, where applicable, direct labour costs and those overheads, not including any general
administrative overheads, that have been incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price less all estimated costs of completion and overheads.
Land held for development, including land in the course of development until legal completion of the sale of the asset, is
initially recorded at cost. Regular reviews are carried out to identify any impairment in the value of the land by comparing
the total estimated selling prices less estimated selling expenses against the book cost of the land plus estimated costs to
complete. A provision is made for any irrecoverable amounts. Where, through deferred payment terms, the fair value of land
purchased differs from the amount that will subsequently be paid in settling the liability, the difference is charged as a finance
expense in the income statement over the period to settlement.
Options purchased in respect of land are capitalised initially at cost. Regular reviews are carried out for impairment in the value
of these options, and provisions made accordingly to reflect loss of value. The impairment reviews consider the period elapsed
since the date of purchase of the option given that the option contract has not been exercised at the review date. Further, the
impairment reviews consider the remaining life of the option, taking account of any concerns over whether the remaining time
available will allow a successful exercise of the option. The carrying cost of the option at the date of exercise is included within
the cost of land purchased as a result of the option exercise.
Investments in land without the benefit of planning consent, either through the purchase of land or non-refundable deposits
paid on land purchase contracts subject to planning consent, are included initially at cost. Regular reviews are carried out
for impairment in the values of these investments and provision made to reflect any irrecoverable element. The impairment
reviews consider the existing use value of the land and assess the likelihood of achieving planning consent and the
value thereof.
Trade and other receivables
Trade and other receivables are stated at their fair value at the date of initial recognition and subsequently at amortised cost
less allowances for impairment.
Consideration which is contingent on future events is recognised based on the estimated amount if it is probable and can be
reliably measured. Any subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents are defined as cash balances in hand and in the bank (including short-term cash deposits).
The Group utilises bank overdraft facilities, which are repayable on demand, as part of its cash management policy. As a
consequence, bank overdrafts are included as a component of net cash and cash equivalents within the cash flow statement.
Interest-bearing loans and borrowings
Interest-bearing loans and borrowings are stated at their fair value at the date of initial recognition and subsequently at
amortised cost.
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Bellway p.l.c. Annual Report and Accounts 2017
Trade and other payables
Trade and other payables on normal terms are not interest-bearing and are stated at their nominal value. Trade and other
payables on deferred terms, most notably in relation to land purchases, are recorded initially at their fair value. The discount to
nominal value is amortised over the period to settlement and charged to finance expenses.
Dividends
Dividends on equity shares are recognised as a liability in the period in which they are approved by the shareholders.
Interim dividends are recognised when paid.
Classification of equity instruments and financial liabilities issued by the Group
Equity instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other
financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially
unfavourable to the Company (or Group); and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that
includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will
be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up
share capital and share premium account exclude amounts in relation to those shares.
Grants
Grants are included within work in progress in the balance sheet to the extent that they contribute to construction costs and
within deferred income to the extent that they contribute to site income. Grants are credited to the income statement over the
life of the developments to which they relate.
Revenue recognition
(a) Private and social (turnkey and plot sale) housing sales and land sales.
Revenue is recognised in the income statement when the significant risks and rewards of ownership have transferred to the
purchaser, which is when legal title is transferred.
(b) Social housing properties as part of a land sale and design and build contract.
Revenue is recognised in the income statement when the significant risks and rewards of ownership have transferred to the
purchaser, which is when the homes are build complete and all material contractual obligations have been fulfilled.
Incentives
Sales incentives are substantially cash in nature but include part-exchange costs which mainly relate to amounts written
down, where the part-exchange allowance given to the purchaser of the new home is greater than the valuation of the part-
exchange property. Incentives are accounted for by reducing the housebuild revenue by the cost to the Group of providing
the incentive.
Rental income
Rental income is recognised in the income statement on a straight-line basis over the term of the lease.
Part-exchange properties
The purchase and subsequent sale of part-exchange properties is an activity undertaken in order to achieve the sale of a
new property. As such, the activity is regarded as a mechanism for selling. Impairments and gains or losses on the sale of
part-exchange properties are classified as a cost of sale.
Contingent liabilities
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within
the Group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the
Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will
be required to make a payment under the guarantee.
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Accounting Policies continued
Taxation
The charge for taxation is based on the result for the year and takes into account current and deferred taxation. The charge
is recognised in the income statement except to the extent that it relates to items recognised in equity in which case it is
recognised in equity.
Deferred taxation is provided for all temporary differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Employee benefits – retirement benefit costs
The defined benefit scheme liability is the present value of the defined benefit obligation less the fair value of scheme assets,
both at the balance sheet date. The calculation is performed by a qualified actuary using the projected unit credit method.
All remeasurement gains and losses are recognised immediately in the Statement of Comprehensive Income (‘SOCI’).
Net interest cost is calculated on the defined benefit liability for the period by applying the discount rate used to measure the
defined benefit liability at the start of the year. Return on plan assets in excess of the amounts included in the net interest cost
are recognised in the SOCI.
Further details of the scheme and the valuation methods applied may be found in note 24 to the accounts.
Defined contribution pension costs are charged to the income statement in the period for which contributions are payable.
Employee benefits – share-based payments
The fair value of equity settled share options granted is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured as at the date the options are granted and the charge is only amended if vesting does not
take place due to non-market conditions not being met. Various option pricing models are used according to the terms of the
option scheme under which the options were granted. The fair value is spread over the period during which the employees
become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual
number of options that vest. At the balance sheet date, if it is expected that non-market conditions will not be satisfied, the
cumulative expense recognised in relation to the relevant options is reversed.
With respect to share-based payments, a deferred tax asset is recognised on the relevant tax base. The tax base is then
compared to the cumulative share-based payment expense recognised in the income statement. Deferred tax arising on the
excess of the tax base over the cumulative share-based payment expense recognised in the income statement has been
recognised directly in equity outside the SOCI as share-based payments are considered to be transactions with shareholders.
Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in its individual
financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity settled share-based
payment charge recognised in its consolidated financial statements, with the corresponding credit being recognised in equity.
Own shares held by ESOP trust
Transactions of the Company-sponsored ESOP trust are included in both the Group financial statements and the Company’s
own financial statements. The purchase of shares in the Company by the trust are charged directly to equity.
Operating leases
Operating lease rentals are charged to the income statement on a straight-line basis over the period of the lease.
Finance income and expenses
Finance income includes interest receivable on bank deposits.
Finance expenses includes interest on bank borrowings. The discounting of the deferred payments for land purchases
produces a notional interest payable amount and this is also charged to finance expenses.
Exceptional items
Exceptional items are those which, in the opinion of the Board, are material by size or nature, non-recurring, and of such
significance that they require separate disclosure on the face of the income statement.
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Bellway p.l.c. Annual Report and Accounts 2017
Accounting estimates and judgements
Management considers the key estimates and judgements made in the financial statements to be related to:
Valuation of work in progress and land held for development
Inventories are carried at the lower of cost and net realisable value. Net realisable value represents the estimated selling price
(in the ordinary course of business) less all estimated costs of completion and overheads. Valuations of site/phase work in
progress are carried out at regular intervals and estimates of the cost to complete a site/phase and estimates of anticipated
revenues are required to enable a development profit to be determined. Management are required to employ considerable
judgement in estimating the profitability of a site/phase and in assessing any impairment provisions which may be required.
For both financial years, a full review of inventories has been performed and write-downs have been made where cost
exceeds net realisable value. Estimated selling prices have been reviewed on a site by site/phase by phase basis and have
been amended based on local management and the Board’s assessment of current market conditions. For the years ended
31 July 2017 and 31 July 2016 no exceptional charge has resulted from the review.
Gross profit recognition
Gross profit for completed house sales is recognised based on the latest whole site/phase gross margin which is an output
of the site/phase valuation. These valuations, which are updated at frequent intervals throughout the life of the site/phase,
use actual and forecast selling prices, land costs and construction costs and are sensitive to future movements in both the
estimated cost to complete and expected selling prices. Forecast selling prices are inherently uncertain due to changes in
market conditions.
Standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the following relevant standards which have not been applied in
these financial statements were in issue and endorsed by the EU but not yet effective:
• IFRS 9 ‘Financial Instruments’. This standard will replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ and
will affect both the measurement and disclosures of financial instruments. This is effective for the period beginning on
1 August 2018. The Group is still assessing the full effect of this standard.
• IFRS 15 ‘Revenue from contracts with customers’. This is a converged standard from the IASB and FASB on revenue
recognition to assist with comparability of revenue globally. This is effective for the period beginning on 1 August 2018. It is
expected that this standard will result in presentational changes to the income statement to gross up part-exchange revenue
and expenses within operating profit which are currently recognised on a net basis within cost of sales. It is not anticipated
that the adoption of this standard will effect either the balance sheet or cash flow statement.
Of the other IFRSs that are available for early adoption, none are expected to have a material effect on the financial statements.
The following standard, which is expected to effect the financial statements of the Group, has not been applied in these
financial statements, but was in issue although not yet endorsed by the EU:
• IFRS 16 ‘Leases’. This standard replaces the existing standard, IAS 17 ‘Leases’, where lessees are required to make a distinction
between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 requires lessees to recognise
a lease liability reflecting future lease payments and a ‘right of use asset’ for virtually all lease contracts. This is effective for
the period beginning on 1 August 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from contracts with customers’ is
also applied. This is likely to affect the timing of the recognition of the lease costs within the income statement and the split
between operating profit and finance expenses.
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Notes to the Accounts
1 Segmental analysis
The executive Board (the Chief Operating Decision Maker as defined in IFRS 8) regularly reviews the Group’s performance and
balance sheet position at both a consolidated and divisional level. Each division is an operating segment as defined by IFRS 8
in that the executive Board assess performance and allocates resources at this level. All of the divisions have been aggregated
in to one reporting segment on the basis that they share similar economic characteristics, including:
• national supply agreements are in place for key inputs including materials.
• debt is raised centrally and the cost of capital is the same at each division.
• sales demand at each division is subject to the same macroeconomic factors, such as mortgage availability and
government policy.
Additional information on average selling prices and the unit sales split between north, south, private and social has been
included in the Operating Review on pages 22 to 25. The Board does not, however, consider these categories to be separate
reportable segments as they review the entire operations at a consolidated and divisional level when assessing performance
and making decisions about the allocation of resources.
2 Finance income and expenses
Interest receivable on bank deposits
Interest on fair value through profit or loss
Other interest income
Finance income
Interest payable on bank loans and overdrafts
Interest on deferred term land payables
Interest element of movement in pension scheme deficit
Finance expenses
3 Employee information
Group employment costs, including directors, comprised:
Wages and salaries
Social security
Pension costs (note 24)
Share-based payments (note 24)
2017
£000
154
1,054
40
1,248
4,642
7,662
188
12,492
2017
£000
128,880
13,580
4,068
2,066
2016
£000
211
533
442
1,186
4,497
7,589
240
12,326
2016
£000
117,215
11,615
3,867
1,568
148,594
134,265
The average number of persons employed by the Group during the year was 2,544 (2016 – 2,366) comprising 887 (2016 – 810)
administrative and 1,657 (2016 – 1,556) production and others employed in housebuilding and associated trading activities.
The executive directors and the Group General Counsel and Company Secretary are the only employees of the Company
and the emoluments of the executive directors are disclosed in the Report of the Board on Directors’ Remuneration on pages
51 to 70.
Key management personnel remuneration, including directors, comprised:
Salaries and fees
Taxable benefits
Annual bonus – cash
Pension costs
Share-based payments
2017
£000
2,633
132
2,056
107
1,109
6,037
2016
£000
2,506
125
2,054
141
995
5,821
Key management personnel, as disclosed under IAS 24: ‘Related party disclosures’, comprises the directors and other senior
operational management.
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Bellway p.l.c. Annual Report and Accounts 2017
4 Operating profit
Operating profit is stated after charging/(crediting):
Staff costs (note 3)
Profit on sale of property, plant and equipment
Depreciation of property, plant and equipment
Hire of plant and machinery
Operating lease charges for land and buildings
Auditor's remuneration:
Audit of these financial statements
Amounts receivable by the auditor and its associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Other services relating to taxation
Pension scheme audit
Other assurance services
2017
£000
2016
£000
148,594
134,265
(162)
2,759
15,568
1,618
(74)
3,044
13,844
1,407
30
30
163
–
5
5
154
15
4
–
Amounts paid to the Company’s auditor and their associates in respect of services to the Company, other than the audit of
the Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a
consolidated basis. The relevant proportion of amounts paid to the auditor for the audit of financial statements of joint ventures
is £0.016 million (2016 – £0.016 million).
5 Exceptional item
Exceptional items are those which, in the opinion of the Board, are material by size or nature, non-recurring, and of such
significance that they require separate disclosure on the face of the income statement.
On 7 March 2016, the Group disposed of its entire interest in Barking Riverside Limited, its joint venture company with the
Greater London Authority, to L&Q New Homes Limited. Bellway will receive total consideration with a fair value of £43.5 million
over the three years from the date of disposal, including £17.0 million received in March 2016 on completion. The deferred
consideration is recognised as a ‘fair value through profit or loss’ (note 17) financial asset. In addition to the disposal proceeds,
the Group was relieved from its substantial funding obligations with regards to the ongoing remediation and infrastructure
requirements of this long-term, capital intensive site. The profit of £17.3 million, arising on disposal, was treated as an
exceptional item during the year ended 31 July 2016.
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Notes to the Accounts continued
6 Income tax expense
Current tax expense:
UK corporation tax
Adjustments in respect of prior years
Deferred tax expense/(income):
Origination and reversal of temporary differences
Reduction in tax rate
Adjustments in respect of prior years
Total income tax expense in income statement
Reconciliation of effective tax rate:
Profit before taxation
Tax calculated at UK corporation tax rate
Enhanced deductions and non-taxable income
Adjustments in respect of prior years – current tax
Effective tax rate and tax expense for the year
– deferred tax
2017
£000
2016
£000
108,413
(1,980)
106,433
95,770
(616)
95,154
236
(13)
10
233
91
(298)
19
(188)
106,666
94,966
2017
%
2017
£000
2016
%
2016
£000
560,723
110,462
(1,826)
(1,980)
10
106,666
19.7
(0.3)
(0.4)
–
19.0
497,868
99,574
(4,011)
(616)
19
94,966
20.0
(0.8)
(0.1)
–
19.1
The corporation tax rate reduced to 20% with effect from 1 April 2015 and 19% with effect from 1 April 2017.
The deferred tax assets/(liabilities) held by the Group at the start of the comparative year were revalued at the substantively
enacted corporation tax rate that will be effective when they are expected to be realised. Reductions in the UK corporation tax
rate to 19% from April 2017 and to 18% from April 2020 have been announced and were substantively enacted at 31 July 2016.
The deferred tax assets/(liabilities) held by the Group at the start of the current year that were expected to be realised after
31 March 2020 have been revalued at 17%, the substantively enacted corporation tax rate that will be effective when they are
expected to be realised.
The effective income tax expense is 19.0% of profit before taxation (2016 – 19.1%) and compares favourably to the Group’s
standard tax rate for the year of 19.7% (2016 – 20.0%). The lower effective tax rate in the current year is principally due to
enhanced tax deductions received by the Group in relation to land remediation relief and a credit following the finalisation of
the prior year corporation tax returns.
Deferred tax recognised directly in equity:
Credit/(charge) relating to equity-settled transactions
Charge relating to remeasurements on the defined benefit pension scheme
2017
£000
533
(730)
2016
£000
(304)
(136)
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Bellway p.l.c. Annual Report and Accounts 2017
7 Dividends on equity shares
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2016 of 74.0p per share (2015 – 52.0p)
Interim dividend for the year ended 31 July 2017 of 37.5p per share (2016 – 34.0p)
Dividends forfeited
2017
£000
2016
£000
90,589
45,980
(13)
63,712
41,709
(10)
136,556
105,411
Proposed final dividend for the year ended 31 July 2017 of 84.5p per share (2016 – 74.0p)
103,608
90,787
The 2017 proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 13 December
2017 and, in accordance with IAS 10 ‘Events after the Reporting Period’, has not been included as a liability in these financial
statements. At the record date for the final dividend for the year ended 31 July 2016 shares were held by the Bellway Employee
Share Trust (1992) (the ‘Trust’) (note 19) on which dividends had been waived.
The level of distributable reserves are sufficient in comparison to the proposed dividend.
8 Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing earnings by the weighted average number of ordinary shares
in issue during the year (excluding the weighted average number of ordinary shares held by the Trust which are treated
as cancelled).
Diluted earnings per ordinary share uses the same earnings figure as the basic calculation. The weighted average number of
shares has been adjusted to reflect the dilutive effect of outstanding share options allocated under employee share schemes
where the market value exceeds the option price. Diluted earnings per ordinary share is calculated by dividing earnings by the
diluted weighted average number of ordinary shares.
Reconciliations of the earnings and weighted average number of shares used in the calculations are outlined below:
Earnings
2017
£000
Weighted
average
number of
ordinary
shares
2017
Number
Earnings per
share
Earnings
2017
p
2016
£000
Weighted
average
number of
ordinary
shares
2016
Number
For basic earnings per ordinary share
454,057
122,511,626
370.6
402,902 122,558,261
Dilutive effect of options and awards
536,577
(1.6)
291,845
For diluted earnings per ordinary share
454,057 123,048,203
369.0
402,902 122,850,106
Earnings per
share
2016
p
328.7
(0.7)
328.0
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Land and
property
£000
Plant, fixtures
and fittings
£000
Total
£000
9,259
165
–
9,424
124
–
9,548
1,748
208
–
1,956
209
–
2,165
7,383
7,468
7,511
17,909
3,208
(1,892)
19,225
1,985
(7,396)
13,814
10,646
2,836
(1,693)
11,789
2,550
(4,397)
9,942
27,168
3,373
(1,892)
28,649
2,109
(7,396)
23,362
12,394
3,044
(1,693)
13,745
2,759
(4,397)
12,107
3,872
7,436
7,263
11,255
14,904
14,774
Accounts
Notes to the Accounts continued
9 Property, plant and equipment
Group
Cost
At 1 August 2015
Additions
Disposals
At 1 August 2016
Additions
Disposals
At 31 July 2017
Depreciation
At 1 August 2015
Charge for year
On disposals
At 1 August 2016
Charge for year
On disposals
At 31 July 2017
Net book value
At 31 July 2017
At 31 July 2016
At 31 July 2015
The Company has no property, plant and equipment.
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Bellway p.l.c. Annual Report and Accounts 2017
10 Investment property
Group
Cost
At 1 August 2015
Disposals
At 1 August 2016
Disposals
At 31 July 2017
Depreciation
At 1 August 2015
On disposals
At 1 August 2016
On disposals
At 31 July 2017
Net book value
At 31 July 2017
At 31 July 2016
At 31 July 2015
Total
£000
2,257
(1,834)
423
–
423
648
(225)
423
–
423
–
–
1,609
Investment properties represent homes which have been sold under a shared ownership scheme and where Bellway has
retained an equity stake. They are valued under the cost model and are held at cost less accumulated depreciation and
accumulated impairment losses. A formal internal valuation of investment properties was carried out at the end of the financial
year. The fair value of the investment properties was assessed at £nil (2016 – £nil).
Investment properties are held at cost and categorised as level 3 within the hierarchical classification of IFRS 7 (as defined
within the standard). The fair value is the estimated amount receivable by the Group, discounted to present day values. The fair
value of future anticipated cash receipts takes into account the directors’ view of significant unobservable inputs including
future house price movements, the expected timing of receipts and the likelihood that a purchaser defaults on a repayment.
The directors revisited the future anticipated cash receipts from the assets at the end of each reporting period. See note 17 for
further details.
The Company has no investment properties.
11 Investments in subsidiaries and joint ventures
The Group and Company have the following investments in subsidiaries and joint ventures:
Subsidiary undertakings
Interest in subsidiary undertakings' shares at cost
Investments accounted for using equity method
Interest in joint ventures – loan
Interest in joint ventures – equity
Group
2017
£000
–
Group
2016
£000
Company
2017
£000
Company
2016
£000
–
37,285
35,219
33,940
405
34,345
4,557
(7)
4,550
–
–
–
–
–
–
34,345
4,550
37,285
35,219
The subsidiary undertakings and joint arrangements in which the Group has interests are incorporated in England and
Wales. In each case their principal activity is related to housebuilding. The Group is made up of 58 subsidiaries and 8 joint
arrangements. Further details are included in note 26.
Where Bellway owns 100% of the voting rights of a business, the company is considered to be controlled by Bellway and is
treated as a subsidiary.
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Notes to the Accounts continued
11 Investments in subsidiaries and joint ventures continued
North Solihull Partnership LP, Cramlington Developments Limited and Leebell Developments Limited are classified as joint
operations as the shareholders have substantially all of the economic benefit of the assets and fund the liabilities of the entities.
Ponton Road LLP, Fradley Residential LLP and Barking Riverside Limited (until it was classified as held for sale during the year
ended 31 July 2016) are classified as joint ventures as the Group has rights to the net assets of the arrangements rather than the
individual assets and liabilities.
The movement on the investment in the joint ventures during the year is as follows:
At the start of the year
Net increase in loans
Transfer to assets held for sale
Share of results
At the end of the year
2017
£000
4,550
29,383
–
412
34,345
The Group’s share of the joint ventures’ net assets/(liabilities) and income/(expenses) is made up as follows:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Share of net assets/(liabilities) of joint ventures
Revenue
Costs
Operating profit
Interest
Share of results of joint ventures
2017
£000
19
40,046
(36,832)
(2,828)
405
2,623
(2,055)
568
(156)
412
2016
£000
28,997
2,050
(26,191)
(306)
4,550
2016
£000
24
8,599
(8,099)
–
524
4,204
(4,191)
13
(319)
(306)
Guarantees relating to the overdrafts of the joint ventures have been given by the Company (note 22).
On 31 January 2016 the Group reclassified its investment in Barking Riverside Limited from investments in joint ventures to
assets held for sale. On 7 March 2016 the Group disposed of its entire interest in Barking Riverside Limited for consideration
with a fair value of £43.5 million (note 5).
12 Deferred taxation
The following are the deferred tax assets and liabilities recognised by the Group and the movements thereon during the
current and prior year:
Group
At 1 August 2015
Income statement credit/(charge)
Charge to statement of comprehensive income
Charge to equity
At 31 July 2016
Income statement credit/(charge)
Charge to statement of comprehensive income
Credit to equity
At 31 July 2017
96
Bellway p.l.c. Annual Report and Accounts 2017
Capital
allowances
£000
(144)
49
–
–
(95)
123
–
–
28
Retirement
benefit
obligations
£000
1,492
92
(136)
–
Share-based
payments
£000
1,269
77
–
(304)
1,448
1,042
(40)
(730)
–
678
151
–
533
1,726
Other
temporary
differences
£000
(189)
(30)
–
–
(219)
(467)
–
–
(686)
Total
£000
2,428
188
(136)
(304)
2,176
(233)
(730)
533
1,746
The following is an analysis of the deferred tax balances for financial reporting purposes:
Retirement benefit obligations
Capital allowances
Share-based payments
Deferred tax assets
Capital allowances
Other temporary differences
Deferred tax liabilities
Net deferred tax asset
2017
£000
678
28
1,726
2,432
–
(686)
(686)
2016
£000
1,448
–
1,042
2,490
(95)
(219)
(314)
1,746
2,176
The carrying amount of the deferred tax asset is reviewed at each balance sheet date and is recognised to the extent that
there will be sufficient taxable profits to allow the asset to be recovered.
There are no deferred tax balances in respect of the Company.
13 Inventories
Group
Land
Work in progress
Showhomes
Part-exchange properties
2017
£000
2016
£000
1,838,190
1,625,619
1,017,693
836,080
78,224
34,077
70,357
16,283
2,968,184
2,548,339
Inventories of £1,854.3 million were expensed in the year (2016 – £1,630.8 million).
In the ordinary course of business inventories have been written back by a net £8.1 million (2016 – £9.4 million) in the year.
Land with a carrying value of £202.0 million (2016 – £109.9 million) was used as security for land payables (note 16).
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 12 months. It is not possible to determine with accuracy when
specific inventory will be realised as this is subject to a number of factors including consumer demand and planning
permission delays.
The Company has no inventory.
14 Trade and other receivables
Current receivables
Trade receivables
Other receivables
Amounts owed by Group undertakings
Prepayments and accrued income
Group
2017
£000
34,075
46,626
–
4,467
85,168
Group
2016
£000
24,383
51,833
Company
2017
£000
Company
2016
£000
–
–
–
–
–
542,318
542,766
3,969
80,185
–
–
542,318
542,766
The Group assesses the ageing of trade receivables in terms of whether amounts are receivable in less than one year or more
than one year. None of the trade receivables are past their due dates (2016 – nil).
Other receivables includes £21.169 million (2016 – £22.172 million) in relation to VAT recoverable.
97
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Notes to the Accounts continued
14 Trade and other receivables continued
Non-current receivables
Other receivables
15 Interest-bearing loans and borrowings
Current liabilities
Bank loans
16 Trade and other payables
Non-current liabilities
Land payables
Other payables
Group
2017
£000
–
Group
2016
£000
11,406
Company
2017
£000
–
Company
2016
£000
–
Group
2017
£000
Group
2016
£000
30,000
32,500
Company
2017
£000
–
Company
2016
£000
–
Group
2017
£000
111,750
1,993
113,743
Group
2016
£000
82,959
4,907
87,866
Company
2017
£000
Company
2016
£000
–
–
–
–
–
–
Land payables of £77.883 million (2016 – £16.448 million) are secured on the land to which they relate.
The carrying value of the land used for security is £76.342 million (2016 – £16.183 million).
Current liabilities
Trade payables
Land payables
Social security and other taxes
Other payables
Accrued expenses and deferred income
Payments on account
Group
2017
£000
272,767
255,023
5,702
2,089
112,464
101,415
749,460
Group
2016
£000
216,335
221,201
4,051
2,576
82,547
147,900
674,610
Company
2017
£000
Company
2016
£000
–
–
–
289
–
–
289
–
–
–
300
–
–
300
Land payables of £127.628 million (2016 – £95.400 million) are secured on the land to which they relate.
The carrying value of the land used for security is £125.663 million (2016 – £93.696 million).
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Bellway p.l.c. Annual Report and Accounts 2017
17 Financial instruments
Land purchased on deferred terms
The Group sometimes acquires land on deferred payment terms. In accordance with IAS 39 ‘Financial Instruments:
Recognition and Measurement’, the creditor is initially recorded at fair value, being the price paid for the land discounted
to present day, and subsequently at amortised cost. The difference between the nominal value and the initial fair value is
amortised over the deferred term to finance expenses, increasing the land creditor to its full cash settlement value on the
payment date.
The maturity profile of the total contracted cash payments in respect of amounts due on land creditors at the balance sheet
date is as follows:
At 31 July 2017
At 31 July 2016
Balance
at 31 July
£000
366,773
304,160
Total
contracted
cash payment
£000
Within 1
year or on
demand
£000
373,574
256,832
310,271
223,016
1–2 years
2–5 years
More than
5 years
£000
82,953
52,563
£000
33,789
34,692
£000
–
–
The maturity profile of the total contracted payments in respect of financial liabilities (excluding amounts due on land creditors
shown separately above) is as follows:
Bank loans – floating rates
Trade and other payables
At 31 July 2017
Bank loans – floating rates
Trade and other payables
At 31 July 2016
Balance
at 31 July
£000
30,000
282,551
312,551
32,500
227,869
260,369
Total
contracted
cash payment
£000
30,012
282,551
312,563
32,526
227,869
260,395
Within 1
year or on
demand
£000
30,012
280,558
310,570
32,526
222,962
255,488
1–2 years
2–5 years
More than
5 years
£000
£000
–
–
–
–
–
–
–
–
–
–
–
–
£000
–
1,993
1,993
–
4,907
4,907
The imputed interest rate on land payables reflects market interest rates available to the Group on floating rate bank loans at
the time of acquiring the land.
At the year end, the Group had £400.0 million (2016 – £467.5 million) of undrawn bank facilities available.
Cash and cash equivalents
This comprises cash held by the Group and short-term bank deposits with a maturity date of less than one month.
The amounts of cash and cash equivalents for the years ended 31 July 2017 and 31 July 2016 for both the Group and the
Company are shown in note 21.
At 31 July 2017 the average interest rate earned on the temporary closing cash balance, excluding joint ventures, was 0.24%
(2016 – 0.46%).
Fair values
The carrying values of financial assets and liabilities reasonably approximate their fair values.
Financial assets and liabilities by category
Loans and receivables
Fair value through profit or loss
Cash and cash equivalents
Financial liabilities at amortised cost
Group
2017
£000
68,717
11,984
45,965
Group
2016
£000
60,192
27,430
58,968
(673,622)
(560,478)
Company
2017
£000
542,318
–
52,751
(289)
Company
2016
£000
542,766
–
52,762
(300)
(546,956)
(413,888)
594,780
595,228
The fair value through profit or loss asset is categorised as level 3 within the hierarchical classification of IFRS 7 Revised.
This asset is recorded at fair value, being the estimated amount receivable by the Group, discounted to present day values
and is included in other receivables (note 14).
99
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Accounts
Notes to the Accounts continued
17 Financial instruments continued
Bank facilities
The Group has bank facilities of £430.0 million (2016 – £500.0 million) which expire during the course of the following
financial years:
By 31 July 2017
By 31 July 2018
By 31 July 2019
By 31 July 2020
By 31 July 2021
Group
2017
£000
–
50,000
125,000
175,000
80,000
Group
2016
£000
70,000
50,000
125,000
175,000
80,000
430,000
500,000
Company
2017
£000
Company
2016
£000
–
–
–
–
–
–
–
–
–
–
–
–
Capital management
The Group is financed through the proceeds of issued ordinary shares, re-invested profits and bank borrowings less cash in
hand. The following table analyses the capital structure:
Equity
Net bank debt
Capital employed
Group
2017
£000
Group
2016
£000
Company
2017
£000
2,191,340
1,867,016
632,065
–
–
–
Company
2016
£000
630,447
–
2,191,340
1,867,016
632,065
630,447
Risks
Details of the risks relating to financial instruments are set out in the Risk Management section on page 20.
18 Issued capital
Group and Company
Allotted, called up and fully paid 12.5p ordinary shares
At start of year
Issued on exercise of options
At end of year
2017
Number
000
2017
£000
2016
Number
000
122,686
15,335
122,522
112
14
164
122,798
15,349
122,686
2016
£000
15,314
21
15,335
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company.
100
Bellway p.l.c. Annual Report and Accounts 2017
Share options
At 31 July 2017 all outstanding options to purchase ordinary shares in Bellway p.l.c., in accordance with the terms of the
applicable schemes, were as follows:
Grant date
Number of
shares
Exercise
prices (p)
Dates from
which exercisable
Expiry
date
(a) Bellway p.l.c. (2003) Savings Related Share Option Scheme
16 November 2012
(b) Bellway p.l.c. (2013) Savings Related Share Option Scheme
14,474
14,474
25,103
167,542
33,834
99,777
13,312
168,152
20,704
805.6
1 February 2018
to 31 July 2018
1,218.4
1,378.0
1,378.0
2,048.8
2,048.8
1,892.8
1,892.8
1 February 2019
to 31 July 2019
1 February 2018
to 31 July 2018
1 February 2020
to 31 July 2020
1 February 2019
to 31 July 2019
1 February 2021
to 31 July 2021
1 February 2020
to 31 July 2020
1 February 2022
to 31 July 2022
528,424
542,898
15 November 2013
17 November 2014
17 November 2014
16 November 2015
16 November 2015
29 November 2016
29 November 2016
Total
Details of directors’ share options are contained within the Report of the Board on Directors’ Remuneration on pages 51 to 70.
19 Reserves
Own shares held
The Group and Company holds shares within the Bellway Employee Share Trust (1992) (the ‘Trust’) for participants of certain
share-based payment schemes as outlined in note 24. During the period the Trust made a market purchase of nil shares
(2016 – 342,143 shares at an average price of 2,006p) and transferred 119,733 (2016 – 55,823) shares to employees and directors.
The number of shares held within the Trust, and on which dividends have been waived, at 31 July 2017 was 184,403 (2016 –
304,136). These shares are held within the financial statements at a cost of £3.421 million (2016 – £5.908 million). The market
value of these shares at 31 July 2017 was £5.882 million (2016 – £6.375 million).
Capital redemption reserve
On 7 April 2014 the Company redeemed 20,000,000 £1 preference shares, being all of the preference shares in issue.
An amount of £20 million, equivalent to the nominal value of the shares redeemed, was transferred to a capital redemption
reserve on the same date.
Income statement
As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these
financial statements. The Company’s profit for the financial year was £135.000 million (2016 – £173.950 million).
20 Reconciliation of net cash flow to net cash/(debt)
Group
(Decrease)/increase in net cash and cash equivalents
Decrease in bank borrowings
Decrease in net (cash)/debt from cash flows
Net cash/(debt) at 1 August
Net cash at 31 July
2017
£000
(13,003)
2,500
(10,503)
26,468
15,965
2016
£000
17,477
47,500
64,977
(38,509)
26,468
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Notes to the Accounts continued
20 Reconciliation of net cash flow to net cash/(debt) continued
Company
(Decrease)/increase in net cash and cash equivalents
(Decrease)/increase in net cash from cash flows
Net cash at 1 August
Net cash at 31 July
21 Analysis of net cash
Group
Cash and cash equivalents
Bank loans
Net cash
Company
Cash and cash equivalents
Net cash
2017
£000
(11)
(11)
52,762
52,751
2016
£000
4,001
4,001
48,761
52,762
Cash
flows
£000
(13,003)
At 31 July
2017
£000
45,965
2,500
(30,000)
(10,503)
15,965
Cash
flows
£000
(11)
(11)
At 31 July
2017
£000
52,751
52,751
At 1 August
2016
£000
58,968
(32,500)
26,468
At 1 August
2016
£000
52,762
52,762
22 Contingent liabilities
The Company is liable, jointly and severally with other members of the Group, under guarantees given to the Group’s bankers
in respect of overdrawn balances on certain Group bank accounts and in respect of other overdrafts, loans and guarantees
given by the banks to or on behalf of other Group undertakings.
At 31 July 2017 there were bank overdrafts of £nil (2016 – £nil) and loans of £30.0 million (2016 – £32.5 million). The Company
has given performance and other trade guarantees on behalf of subsidiary undertakings. The Company has guaranteed the
overdrafts of joint arrangements up to a maximum of £0.3 million (2016 – £0.3 million). It is the directors’ expectation that the
possibility of cash outflow on these liabilities is considered minimal and no provision is required.
23 Commitments
Group
Capital commitments
Contracted not provided
Authorised not contracted
2017
£000
–
798
Operating leases
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which expire as follows:
Expiring within one year
Expiring within two to five years
Expiring in more than five years
2017
£000
311
4,890
3,886
9,087
2016
£000
200
–
2016
£000
84
2,111
3,117
5,312
Operating lease payments principally relate to rents payable by the Group for office premises and motor vehicles. The office
premises leases are subject to periodic rent reviews.
Company
The commitments of the Company were £nil (2016 – £nil).
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Bellway p.l.c. Annual Report and Accounts 2017
24 Employee benefits
(a) Retirement benefit obligations
The Group sponsors the Bellway plc 1972 Pension Scheme (the ‘Scheme’) which has a funded defined benefit arrangement
which is closed to new members and to future service accrual. The Group also sponsors the Bellway plc 2008 Group Self
Invested Personal Pension Plan (‘GSIPP’) which is a defined contribution contract-based arrangement.
Contributions of £4.068 million (2016 – £3.867 million) were charged to the income statement for the GSIPP.
Defined contributions have been excluded from the assets and liabilities.
Role of Trustees
The Scheme is managed by the Trustees, who are appointed by either the Company or the members. The role of the Trustees
is to manage the Scheme in line with the Scheme trust deed and rules, to act prudently, responsibly, honestly, impartially
and in the interests of all beneficiaries. The main responsibilities of the Trustees are to agree with the employer the level of
contributions to the Scheme, to make sure these contributions are paid, to decide how the Scheme’s assets are invested so
the Scheme is able to meet its liabilities and to oversee that the payment of benefits, record keeping and administration of the
Scheme complies with the Scheme trust deed and rules and legislation.
Funding
UK legislation requires that pension schemes are funded prudently (i.e. to a level in excess of the current expected cost of
providing benefits). The last full actuarial valuation of the Scheme was carried out by a qualified independent actuary as at
31 July 2014 and updated on an approximate basis to 31 July 2017.
With regard to the Scheme, regular contributions made by the employer over the financial year were £nil (2016 – £1.21 million).
The employer paid no special contributions (2016 – £nil) and reimbursed the pension fund £0.40 million (2016 – £0.25 million)
for expenses incurred by the fund.
The Group is expected to make no regular contributions during the year ending 31 July 2018.
Regulation
The UK pensions market is regulated by the Pensions Regulator whose key statutory objectives in relation to UK defined
benefit plans are:
• to protect the benefits of members of occupational pension schemes.
• to promote, and to improve understanding of the good administration of work-based pension schemes.
• to reduce the risk of situations arising which may lead to compensation being payable from the Pension Protection Fund.
• to maximise employer compliance with employer duties and the employment safeguards introduced by the Pensions
Act 2008.
Risk
The Scheme exposes the Group to a number of risks, the most significant are:
Risk
Description
Asset volatility
Inflation risk
The Scheme’s defined benefit obligation is calculated using a discount rate set with reference to
corporate bond yields. However, a significant proportion of the Scheme’s assets are invested in growth
assets, such as equities, that would be expected to outperform corporate bonds in the long-term but
create volatility and risk in the short-term.
A significant proportion of the Scheme’s defined benefit obligation is linked to inflation, with higher
inflation increasing the liabilities. However, there are caps of either a 3% or 5% p.a. increase in place to
limit the effect of higher inflation.
Life expectancy
The majority of the Scheme’s liabilities are to provide a pension for the life of the member, with any
increase in life expectancy also increasing the Scheme’s defined benefit obligation.
103
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Notes to the Accounts continued
24 Employee benefits continued
(a) Retirement benefit obligations continued
Movements in net defined benefit obligations
Balance at 1 August
Included in the income statement
Interest (cost)/income
Included in other comprehensive income/
(expense)
Remeasurement gain/(loss) arising from:
– Change in demographic and financial
assumptions
– Experience adjustments
Return on plan assets excluding interest income
Other
Contributions paid by the employer
Benefits paid
Defined benefit obligation
Fair value of Scheme assets
Net defined benefit liability
2017
£000
2016
£000
2017
£000
2016
£000
2017
£000
2016
£000
(59,909)
(54,721)
51,873
47,269
(8,036)
(7,452)
(1,418)
(1,418)
(1,924)
(1,924)
1,230
1,230
1,684
1,684
(188)
(188)
(240)
(240)
1,142
379
–
1,521
–
1,630
1,630
(6,834)
1,018
–
(5,816)
–
2,552
2,552
–
–
2,325
2,325
401
(1,630)
(1,229)
–
–
4,010
4,010
1,462
(2,552)
(1,090)
51,873
1,142
379
2,325
3,846
401
–
401
(3,977)
(6,834)
1,018
4,010
(1,806)
1,462
–
1,462
(8,036)
Balance at 31 July
(58,176)
(59,909)
54,199
The weighted average duration of the defined benefit obligation at the end of the reporting period is 17 years (2016 – 17 years).
Scheme assets
The fair value of the Scheme assets is:
Diversified growth fund
Equity instruments
Corporate bonds
Liability driven instruments
Cash and cash equivalents
Total
2017
£000
29,718
16,079
2,666
5,526
210
54,199
2016
£000
–
25,933
24,072
–
1,868
51,873
All of the Scheme assets, with the exception of cash and cash equivalents, are considered to be level 2.
Diversified growth funds are pooled funds invested across a diversified range of assets with the aim of giving long-term
investment growth with lower short-term volatility than equities.
Actuarial assumptions
The following are the principal actuarial assumptions at the reporting date:
Discount rate
Future salary increases
Allowance for pension in payment increases of RPI or 5% p.a. if less
Allowance for deferred pension increases of CPI or 5% p.a. if less
2017
% per annum
2016
% per annum
2.55
3.70
3.10
2.20
2.40
3.50
2.90
2.00
Allowance for commutation of pension for cash at retirement
50% of maximum
50% of maximum
104
Bellway p.l.c. Annual Report and Accounts 2017
The mortality assumptions adopted at 31 July 2017 are based on the S2PxA tables and allow for future improvement in
mortality. The tables used imply the following life expectancies at age 65:
Male retiring at age 65 in 2017
Female retiring at age 65 in 2017
Male retiring at age 65 in 2037
Female retiring at age 65 in 2037
23.0 years
24.9 years
24.8 years
26.7 years
Sensitivities
The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises
the effect on the defined benefit obligation at the end of the reporting period if different assumptions were used:
Assumption
Discount rate
Future salary increases
Inflation – RPI
Mortality
Change in assumption
Change in liabilities (%)
+0.1% p.a.
+0.1% p.a.
+0.1% p.a.
Decrease by 1.7%
Increase by 0.1%
Increase by 1.4%
+1 year life expectancy
Increase by 3.0%
The calculations for the sensitivity analysis are not as accurate as a full valuation carried out using these assumptions. Each
assumption change is considered in isolation, which in practice is unlikely to occur, as changes in some of the assumptions
are correlated.
(b) Share-based payments
The Group operates a long-term incentive plan (‘LTIP’), a share matching plan (‘SMP’), deferred bonus plans (‘DBP’ and ‘2003
DBP’), an employee share option scheme (‘ESOS’) and Savings Related Share Option Schemes (‘SRSOS’), all of which are
detailed below.
Awards under the LTIP and SMP have been made to executive directors, the Group General Counsel and Company Secretary,
and senior employees, with awards under the 2003 DBP also made to senior employees. The awards take the form of ordinary
shares in the Company.
The Bellway p.l.c. (2014) Employee Share Option Scheme (‘2014 ESOS’) is an approved discretionary scheme which provides
for the grant of options over ordinary shares to employees and executive directors. It is, however, the current intention that no
executive directors of the Company should be granted options under this scheme. Awards will be available to vest after three
years, subject to objective performance targets. As at 31 July 2017 no options had been granted under this scheme.
Options issued under the SRSOS are offered to all employees including the executive directors.
An outline of the performance conditions in relation to the LTIP and the SMP is detailed under the long-term incentive scheme
section on pages 65 to 68 within the Report of the Board on Directors’ Remuneration.
Various small share option awards have been made to employees at divisional management level under the terms of the
2003 DBP. Awards will be available to vest after three years, subject to objective performance targets. There are no DBP
awards outstanding.
Share-based payments have been valued by an external third party using various models detailed below, based on publicly
available market data at the time of the grant, which the directors consider to be the most appropriate method of determining
their fair value.
105
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Notes to the Accounts continued
24 Employee benefits continued
Share-based payments continued
(b)
The number and weighted average exercise price of share-based payments is as follows:
LTIP, SMP and DBP
Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
Number of
options
304,136
121,560
–
(119,733)
305,963
2016
Number of
options
303,744
90,969
(34,754)
(55,823)
304,136
–
–
The options outstanding at 31 July 2017 have a weighted average contractual life of 1.3 years (2016 – 1.3 years).
1996, 2005 and 2007 ESOS and SRSOS
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
Number of
options
507,795
200,669
(53,594)
(111,972)
542,898
2016
Number of
options
561,387
153,473
(42,994)
(164,071)
507,795
–
781
The options outstanding at 31 July 2017 have an exercise price in the range of 805.6p to 2,048.8p (2016 – 556.0p to 2,048.8p)
and have a weighted average contractual life of 2.2 years (2016 – 2.3 years). The weighted average share price at the date of
exercise for share options exercised during the year was 2,530.3p (2016 – 2,656.1p).
Valuation methodology
For LTIP and SMP options, half of the performance criteria is based on TSR against comparator companies with the other half
based on TSR measured against the FTSE 250 Index (excluding investment trusts and financial service companies). A simplified
Monte Carlo simulation method has been used to determine the Group’s TSR performance against the FTSE 250 Index
(excluding investment trusts and financial service companies).
In the case of the DBP, a simplified Black Scholes method is applied with an exercise price and dividend yield of zero. This is
because no performance conditions attach to the award and no dividends are credited to the individual. The result is that the
fair value equates to the face value of the award.
The Black Scholes method is used for the SRSOS due to the relatively short exercise window of six months.
For the 1996, 2005 and 2007 ESOSs, a lattice method is used which enables early exercise behaviour to be modelled in a more
sophisticated manner than under Black Scholes.
106
Bellway p.l.c. Annual Report and Accounts 2017
The fair value of services received in return for share options granted is measured by reference to the fair value of the share
options granted. The inputs into the models for the various grants in the current and previous year were as follows:
2017
2016
November
2016
November
2016
November
2016
December
2015
November
2015
January
2016
November
2015
November
2015
December
2015
Scheme description
LTIP
3 Year
SRSOS
5 Year
SRSOS
DBP
LTIP
LTIP
3 Year
SRSOS
5 Year
SRSOS
DBP
Grant date
09-Nov-16 29-Nov-16 29-Nov-16 01-Dec-16 12-Nov-15 20-Jan-16 16-Nov-15 16-Nov-15 15-Dec-15
Risk free interest rate
0.0%
0.3%
0.7%
0.0%
–
1,892.8p 1,892.8p
–
0.0%
–
0.0%
0.9%
1.4%
– 2,048.8p
2,048.8p
0.0%
–
Exercise price
Share price at date
of grant
Expected dividend
yield
Expected life
2,426.0p 2,490.0p 2,490.0p 2,388.0p
2,382.0p
2,558.0p
2,406.0p
2,406.0p
2,772.0p
4.50%
4.50%
4.50%
N/A
3.00%
3.00%
3.00%
3.00%
N/A
3 years
3 years
2 months
5 years
2 months
3 years
3 years
3 years
3 years
2 months
5 years
2 months
3 years
Vesting date
09-Nov-19 01-Feb-20 01-Feb-22 01-Dec-19 12-Nov-18 20-Jan-19 01-Feb-19 01-Feb-21
15-Dec-18
Expected volatility
35%
35%
30%
N/A
25%
25%
Fair value of option
1,220.5p
655.0p
590.0p 2,388.0p
1,267.0p
1,701.0p
25%
481.0p
30%
N/A
617.0p
2,772.0p
The expected volatility for all models was determined by considering the volatility levels historically for the Group.
Volatility levels for more recent years were considered to have more relevance than earlier years for the period reviewed.
The Group recognised total expenses of £2.066 million (2016 – £1.568 million) in relation to equity-settled share-based
payment transactions.
25 Related party transactions
The Board and certain members of senior management are related parties within the definition of IAS 24 ‘Related
Party Disclosures’. Summary information of the transactions with key management personnel is provided in note 3.
Detailed disclosure of individual remuneration of Board members is included in the Report of the Board on Directors’
Remuneration on pages 51 to 70.
Following shareholder approval at last year’s AGM, the Chief Executive legally completed the purchase of a property for
£390,995 from Bellway Homes Limited at one of the Group’s developments using shareholder discount. The purchase price
was calculated on an arm’s length basis using prices already achieved for similar properties on the same development.
Transactions between fellow subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed.
Group
During the year the Group entered into the following related party transactions with its joint arrangements:
Invoiced to joint arrangements in respect of accounting, management fees, interest on loans, land
purchases and infrastructure works
Invoiced from joint arrangements in respect of fees, land purchases and infrastructure works
Amounts owed to joint arrangements in respect of land purchases and management fees at the
year end
Amounts owed by joint arrangements in respect of accounting, management fees, interest, land
purchases and infrastructure works
2017
£000
4,623
(2,822)
2016
£000
1,104
(5,156)
(5,118)
(5,267)
42,765
10,076
107
Bellway p.l.c. Annual Report and Accounts 2017
About UsStrategic ReportGovernanceAccountsOther Information Accounts
Notes to the Accounts continued
25 Related party transactions continued
Company
During the year the Company entered into the following related party transactions with its subsidiaries and joint arrangements:
Amounts received in the year from subsidiaries for share options exercised by subsidiary company
employees and dividends received
136,108
171,155
Amounts paid in the year by subsidiaries on behalf of the Company in respect of dividends, finance
expenses and share purchases, and receivable from subsidiaries on disposal of investments
(136,556)
(112,318)
Amounts owed by subsidiaries in respect of dividends and shares issued net of amounts paid on
behalf of the Company
Investments in subsidiaries and joint ventures
542,318
542,766
37,285
35,219
The Company has suffered no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2016 – £nil).
2017
£000
2016
£000
108
Bellway p.l.c. Annual Report and Accounts 2017
26 Group undertakings
The directors set out below information relating to the Group undertakings as at 31 July 2017. All of these companies are
registered in England and Wales, apart from Bellway (Scotland) Limited which is registered in Scotland. They are engaged in
housebuilding and associated activities, have coterminous year ends with the Group, 100% of their ordinary share capital is
held by the Company and the registered address is the same as the Company (unless otherwise stated).
Subsidiaries – trading
Bellway Financial Services Limited
Bellway Homes (North Solihull G P) Limited
Bellway Homes Limited
Bellway Housing Trust Limited
Subsidiaries – dormant^
Ashberry Homes Limited
B.C.P. (Transport) Limited
Bellway (Builders) Limited
Bellway (North East) Limited
Bellway (Scotland) Limited(3)
Bellway City Solutions Limited
Bellway Conversions Limited
Bellway Homes (Anglia) Limited
Bellway Properties Limited
Bellway (Services) Limited
Litrose Investments Limited
The Victoria Dock Company Limited (60% owned)*
D. F. W. Golding (Southern) Limited
D. F. W. Golding Limited
Dymock Properties Limited
George Blackett Limited
Heron Electrical Contractors Limited
Homes2Let Limited
J. T. B. (Chapel Farm) Estates Limited
J. T. B. Estates Limited
Bellway Homes (Barking Reach) Limited
John T Bell & Sons (1976) Limited
Bellway Homes (Cupernham Lane) Limited
Bellway Homes (Hertfordshire) Limited
Bellway Homes (North Solihull) Limited
Bellway Homes (Social Housing) Limited
Bellway Homes (Wales) Limited
Bellway Homes (West Midlands) Limited
Bellway Housebuilders Limited
Bellway I Limited
Bellway Marine Limited
Bellway Residential Limited
Bellway Trustee Company Limited
Bellway Urban Renewals (Contracts) Limited
Bellway Urban Renewals Limited
Bulldog Premium Growth I Limited
Bulldog Premium Growth II Limited
Commercials Limited
Joint arrangements
Angst Limited (50% owned)^
Mansions Limited
Metier Properties Limited
Moorfield Investments Limited
Nixons Kitchens Limited
Seaton GR SPV 6 Limited
Seaton GR SPV 7 Limited
Seaton GR SPV 8 Limited
Seaton GR SPV 9 Limited
Seaton GR SPV 10 Limited
Seaton GR SPV 11 Limited
Seaton GR SPV 12 Limited
Seaton GR SPV 13 Limited
Telvec Investments Limited
Terraces Limited
The Barking Reach Company Limited
Tyneside Land & Property Company Limited
Other entities
HBF Insurance PCC Limited(4)
Cramlington Developments Limited (50% owned, year end of 30 June)*(1)
MI New Home Insurance PCC Limited(4)
Easel Leeds Limited (50% owned)^
Fradley Residential LLP (50% owned)*
Leebell Developments Limited (50% owned, year end of 30 June)*(1)
Notes:
^ Dormant.
* These shares are held indirectly.
North Solihull (GP) Limited (25% owned, year end of 31 March)^*(2)
1. Registered address is Persimmon House, Fulford, York, YO19 4FE.
North Solihull Partnership LP (49.8% owned, year end of 31 March)*(2)
Ponton Road LLP (50% owned)*
2.
3.
Registered address is Council House, Manor Square, Solihull, West Midlands, B91 3QB.
Registered address is Bothwell House, Hamilton Business Park, Caird Street, Hamilton,
ML3 0QA.
4.
Registered address is Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 4EY.
109
Bellway p.l.c. Annual Report and Accounts 2017
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Five Year Record
Income statement
Revenue
Operating profit
Net finance expenses
Share of results of joint ventures
Profit before taxation
Income tax expense
2013
£m
2014
Restated
£m
2015
£m
2016
£m
2017
£m
1,110.7
151.1
(10.2)
–
140.9
(32.3)
1,484.8
255.6
(9.9)
0.3
246.0
(54.6)
1,765.4
360.5(1)
(13.1)
(0.1)
347.3(1)
(69.6)(1)
2,240.7
492.0
(11.1)
(0.3)
480.6(1)
(95.0)
2,558.6
571.6
(11.3)
0.4
560.7
(106.6)
Profit for the year (all attributable to equity holders of the
parent)
108.6
191.4
277.7(1)
385.6(1)
454.1
Balance sheet
ASSETS
Non-current assets
Current assets
LIABILITIES
Non-current liabilities
Current liabilities
EQUITY
Total equity
Statistics
Number of homes sold
Average price of new homes
Pre-exceptional gross margin(~)
Gross margin
Pre-exceptional operating margin(~)
Operating margin
Basic earnings per ordinary share
Dividend per ordinary share
Pre-exceptional return on capital employed(~)
Return on capital employed(~)
Gearing (including preference shares)(~)
Net asset value per ordinary share(~)
Land portfolio – plots with planning permission
56.7
1,594.9
80.4
1,882.0
48.1
2,241.2
33.3
48.0
2,687.5
3,099.3
(54.1)
(378.7)
(74.3)
(522.0)
(60.3)
(653.1)
(96.2)
(757.6)
(118.4)
(837.6)
1,218.8
1,366.1
1,575.9
1,867.0
2,191.3
5,652
6,851
7,752
8,721
9,644
£193.0k
£213.2k
18.3%
18.3%
13.6%
13.6%
89.3p
30.0p
12.3%
12.3%
2.1%
21.3%
21.3%
17.2%
17.2%
157.0p
52.0p
19.6%
19.6%
–
1,001p
18,991
1,118p
19,434
£223.8k
24.2%(1)
24.6%
20.4%(1)
20.8%
231.5p
77.0p
23.9%(1)
24.4%
2.4%
1,286p
£252.8k
£260.4k
25.7%
25.7%
22.0%
22.0%
328.7p
108.0p
28.2%
28.2%
–
25.9%
25.9%
22.3%
22.3%
370.6p
122.0p
27.6%
27.6%
–
1,522p
1,785p
21,411
24,879
25,655
Weighted average no. of ordinary shares
121,572,688 121,919,049 122,315,198 122,558,261 122,511,626
No. of ordinary shares in issue at end of year
121,772,058
122,191,378
122,521,915 122,685,986 122,797,958
Note:
1. Stated before exceptional item (note 5).
110
Bellway p.l.c. Annual Report and Accounts 2017
Other Information
Alternative Performance Measures
Bellway uses a variety of alternative performance measures (‘APM’) which, although financial measures of either historical or
future performance, financial position or cash flows, are not defined or specified by IFRSs. The directors use a combination of
APMs and IFRS measures when reviewing the performance, position and cash of the Group.
The APMs used by the Group are defined below:
• Pre-exceptional gross profit and pre-exceptional operating profit – Both of these measures are reconciled to total gross
profit and total operating profit on the face of the consolidated income statement. The directors consider that the removal of
exceptional items provide a better understanding of the underlying performance of the Group.
• Pre-exceptional gross profit margin – Pre-exceptional gross profit margin is the pre-exceptional gross profit divided by total
revenue. The directors consider this to be an important indicator of the underlying trading performance of the Group.
• Administrative expenses as a percentage of revenue – This is calculated as the total administrative overheads divided by total
revenue. The directors consider this to be an important indicator of how efficiently the Group is managing its administrative
overhead base.
• Pre-exceptional operating profit margin – Pre-exceptional operating profit margin is the pre-exceptional operating profit divided
by total revenue. The directors consider this to be an important indicator of the operating performance of the Group.
• Net finance expense – This is finance expenses less finance income. The directors consider this to be an important measure
when assessing whether the Group is using the most cost effective source of finance.
• Dividend cover – This is calculated as earnings per ordinary share for the period divided by the dividend per ordinary share
relating to that period. At the half year the dividend per ordinary share is the proposed interim ordinary dividend, and for the
full year it is the interim dividend paid plus the proposed final dividend. The directors consider this an important indicator of the
proportion of earnings paid to shareholders and re-invested in the business.
• Capital invested in land, net of land creditors, and work in progress – This is calculated as shown in the table below.
The directors consider this as an indicator of the net investment by the Group in the period to achieve future growth.
Per balance sheet
Land
Work in progress
2017
£m
1,838.2
1,017.7
2016
£m
1,625.6
836.1
Increase in capital invested in land and work in
progress in the year
Land creditors
(366.8)
(304.2)
Increase in capital invested in land, net of land
creditors, and work in progress in the year
2016
£m
1,625.6
836.1
2015
£m
1,297.0
763.7
(304.2)
(192.6)
Mvt
£m
212.6
181.6
394.2
(62.6)
331.6
Mvt
£m
328.6
72.4
401.0
(111.6)
289.4
• Net asset value per ordinary share (‘NAV’) – This is calculated as total net assets divided by the number of ordinary shares in
issue at the end of each period (note 18). The directors consider this to be a proxy when reviewing whether value, on a share by
share basis, has increased or decreased in the period.
• Capital employed – Capital employed is defined as the total of equity and net bank debt. Equity is not adjusted where the Group
has net cash. The directors consider this to be an important indicator of the operating efficiency and performance of the Group.
• Return on capital employed (‘RoCE’) – This is calculated as operating profit divided by the average capital employed.
Average capital employed is calculated based on opening, half year and closing capital employed. The calculation is shown in
the table below. The directors consider this to be an important indicator of whether the Group is achieving a sufficient return on
its investments.
Operating profit
Capital employed/land creditors:
Opening
Half year
Closing
Average
£m
571.6
1,867.0
2,152.4
2,191.3
2,070.2
2017
Capital
employed
2017
Land
creditors
2017
Capital
employed
including land
creditors
£m
571.6
£m
304.2
301.7
366.8
2,171.2
2,454.1
2,558.1
324.2
2,394.4
2016
Capital
employed
2016
Land
creditors
£m
492.0
1,614.4
1,753.8
1,867.0
1,745.1
£m
192.6
275.7
304.2
257.5
2016
Capital
employed
including land
creditors
£m
492.0
1,807.0
2,029.5
2,172.2
2,002.6
Return on capital employed
27.6%
23.9%
28.2%
24.6%
111
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Other Information
Alternative Performance Measures continued
• Post tax return on equity – This is calculated as profit for the year divided by the average of the opening, half year and
closing net assets. The directors consider this to be a good indicator of the operating efficiency of the Group.
Profit for the year
Net assets:
Opening
Half year
Closing
Average
Post tax return on equity
2017
£m
2016
£m
454.1
402.9
1,867.0
1,977.3
2,191.3
2,011.9
1,575.9
1,694.9
1,867.0
1,712.6
22.6%
23.5%
• Total growth in value per ordinary share – The directors use this as a proxy for the increase in shareholder value since
31 July 2014.
Net asset value per ordinary share:
At 31 July 2017
At 31 July 2014
Net asset value growth per ordinary share
Dividend paid per ordinary share:
Year ended 31 July 2017
Year ended 31 July 2016
Year ended 31 July 2015
Cumulative dividends paid per ordinary share
Total growth in value per ordinary share
1,785p
1,118p
111.5p
86.0p
61.0p
667.0p
258.5p
925.5p
• Annualised accounting return in NAV and dividends paid since 31 July 2014 – This is calculated as the annualised increase
in net asset value per ordinary share plus cumulative ordinary dividends paid per ordinary share since 31 July 2014 (as
detailed above) divided by the net asset value per ordinary share at 31 July 2014. The directors use this as a proxy for the
increase in shareholder value since 31 July 2014.
Net asset growth per ordinary share
Dividend paid per ordinary share
Total growth in value per ordinary share
Net asset value per ordinary share at 31 July 2014
Total value per ordinary share
Annualised accounting return = (2,043.5/1,118.0)1/3-1
667.0p
258.5p
925.5p
1,118.0p
2,043.5p
22.3%
112
Bellway p.l.c. Annual Report and Accounts 2017
• Net cash – This is the cash and cash equivalents less bank debt. The directors consider this to be a good indicator of the
financing position of the Group. This is reconciled in note 21.
• Cash generated from operations before investment in land, net of land creditors, and work in progress – This is calculated
as shown in the table below. The directors consider this as an indicator of whether the Group is generating cash before
investing in land and work in progress to achieve future growth.
Cash from operations
Add: increase in capital invested in land, net of land creditors, and work in progress
(as described above)
Cash generated from operations before investment in land, net of land creditors, and work
in progress
2017
£m
2016
£m
256.5
249.4
331.6
289.4
558.1
538.8
• Gearing – This is calculated as net bank debt divided by total equity. The directors consider this to be a good indicator of the
financial stability of the Group.
• Adjusted gearing – This is calculated as the total of net bank debt/cash and land creditors divided by total equity.
The directors believe that land creditors are a source of long-term finance so this provides an alternative indicator of the
financial stability of the Group.
113
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Glossary
See also Alternative Performance Measures section on pages 111 to 113.
Affordable Housing
Social rented and intermediate housing provided to specified eligible households whose needs are not met by the market, at
a cost low enough for them to afford, determined with regard to local incomes and local house prices.
Average Selling Price
Calculated by dividing the total price of homes sold by the number of homes sold.
Brownfield
Land which has been previously used for other purposes.
Cancellation Rate
The rate at which customers withdraw from a house purchase after paying the reservation fee, but before contracts are
exchanged, usually due to difficulties in obtaining mortgage finance. Reservation fees are refunded in accordance with the
Consumer Code for Home Builders.
Community Infrastructure Levy (‘CIL’)
The CIL is a tool for local authorities in England and Wales to help deliver infrastructure to support the development of
the area.
Earnings per Share (‘EPS’)
Profit attributable to ordinary equity shareholders divided by the weighted average number of ordinary shares in issue during
the financial year excluding the weighted average number of ordinary shares held by the Bellway Employee Trust (1992) which
are treated as cancelled.
Home Builders Federation (‘HBF’)
The HBF is an industry body, representing the home building industry in England and Wales. It represents member interests
on a national and regional level to create the best possible environment in which to deliver new homes.
Help to Buy
The Help to Buy equity loan scheme is a government scheme which provides equity loans to both first-time buyers and home
movers on newly constructed homes worth up to £600,000 in England. Buyers have to contribute at least 5% of the property
price as a deposit and obtain a mortgage of up to 75% and the government provides a loan for up to 20% of the price.
The Help to Buy mortgage guarantee scheme helps people to buy a home worth up to £600,000 in the UK with a 5% deposit
to obtain a 95% mortgage. The government gives a guarantee to the lender of up to 15% of the value of the property.
Land Bank
The land bank is comprised of three tiers: i) owned or unconditionally contracted land with an implementable detailed
planning permission (‘DPP’); ii) medium-term ‘pipeline’ land owned or controlled by the Group, pending an implementable
DPP; iii) strategic long-term plots which currently have a positive planning status and are typically held under option.
National Planning Policy Framework (‘NPPF’)
The NPPF sets out the government’s planning policies for England and how these are expected to be applied. It provides
a framework within which local people and their accountable councils can produce their own distinctive local and
neighbourhood plans, which reflect the needs and priorities of their communities.
National House Building Council (‘NHBC’)
The NHBC is the leading warranty insurance provider and body responsible for setting standards of construction for UK
housebuilding for new and newly converted homes.
New Homes Bonus (‘NHB’)
The NHB was introduced in 2011 by the coalition government with the aim of encouraging local authorities in England to grant
planning permissions for the building of new houses in return for additional revenue. Under the scheme, the government has
been matching the Council Tax raised on each new home built in England for a period of six years.
114
Bellway p.l.c. Annual Report and Accounts 2017
Pipeline
Plots which are either owned or contracted by the Group, often conditionally, pending an implementable detailed
planning permission.
Planning Permission
Usually granted by the local planning authority, this permission allows a plot of land to be built on, change its use or, for an
existing building, be redeveloped or altered. Permission is either ‘outline’ when detailed plans are still to be approved, or
‘detailed’ when detailed plans have been approved.
RIDDOR
RIDDOR refers to the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013. The regulations require
an employer to report any absence by an employee of seven days or more caused by an accident at work to the Health and
Safety Executive.
Section 106 Planning Agreements
These are legally-binding agreements or planning obligations entered into between a landowner and a local planning
authority, under section 106 of the Town and Country Planning Act 1990. These agreements are a way of delivering or
addressing matters that are necessary to make a development acceptable in planning terms. They are increasingly used
to support the provision of services and infrastructure, such as highways, recreational facilities, education, health and
affordable housing.
Site/phase
A site is a concise area of land on which homes are being constructed. Larger sites may be divided into a number of phases
which are developed at different times.
Social Housing
Housing that is let at low rents and on a secure basis to people in housing need. It is generally provided by councils and not-
for-profit organisations such as housing associations.
115
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Shareholder Information
Ordinary shareholders by size of holding at 31 July 2017
0 – 2,000
2,001 – 10,000
10,001 – 50,000
50,001 and over
Total
Holdings
Number
1,854
419
226
229
%
67.97
15.36
8.28
8.39
Shares
Holding
1,022,874
1,855,990
5,362,876
114,556,218
2,728
100.0
122,797,958
%
0.83
1.51
4.37
93.29
100.00
Dividend Re-Investment Plan (‘DRIP’)
Shareholders may agree to participate in the Company’s DRIP to receive dividends in the form of shares in Bellway p.l.c. instead
of in cash. The DRIP is provided by Capita Asset Services, a trading name of Capita IRG Trustees Limited which is authorised and
regulated by the Financial Conduct Authority. For more information please call 0371 664 0381 (calls are charged at the standard
geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international rate. Lines are
open 9.00 am – 5.30 pm, Monday to Friday (excluding public holidays in England and Wales). Alternatively you can e-mail
shares@capita.co.uk or log on to www.signalshares.com.
Non-sterling bank account
If you live outside the UK, or have a non-sterling bank account, Capita can provide you with a service that will convert your
sterling dividend into your local currency and send you the funds by currency draft, or pay them straight into your overseas
bank account. You can register for this service on the Share Portal (by clicking on ‘your dividend options’ and following the
on-screen instructions) or by contacting the Customer Support Centre. For further information e-mail ips@capita.co.uk or call
0871 664 0300 (calls cost 12p per minute plus your phone company’s access charge. From overseas call +44 371 644 0300,
calls outside the UK will be charged at the applicable international rate. Lines are open 9.00 am – 5.30 pm Monday to Friday
(excluding public holidays in England and Wales).
Share dealing service
The Company’s registrars, Capita Asset Services, provide a share dealing service to existing shareholders to buy or sell the Company’s
shares. Online and telephone dealing facilities provide an easy to access and simple to use service.
For further information on this service, or to buy or sell shares, please contact www.capitadeal.com for online dealing, or telephone
0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the
applicable international rate. Lines are open 9.00 am – 5.30 pm, Monday to Friday (excluding public holidays in England and Wales).
Please note that the directors of the Company are not seeking to encourage shareholders to either buy or sell their shares in the
Company. Shareholders in any doubt as to what action to take are recommended to seek financial advice from an independent
financial adviser, authorised under the terms of the Financial Services and Markets Act 2000.
Discount to shareholders
The following discount arrangement is currently available to shareholders. N.B. This discount will be withdrawn from 1 August 2018.
The last date on which a reservation may be made using shareholder discount will be 31 July 2018.
Should you intend to purchase a new Bellway home, you will be entitled to a discount of £2,000 per £25,000, or pro-rata on part
thereof, of the purchase price provided that:
(a) you have been the registered holder of at least 2,000 ordinary shares for a minimum period of 12 months prior to the reservation of
your new home; and
(b) you inform our sales representative on the relevant site when reserving your property that you are claiming shareholder discount.
This discount arrangement is only available to shareholders on the Company’s Register of Members. Employees of investing
companies or members of investing institutions would not therefore be eligible. Underlying beneficial shareholders would be entitled
to benefit from the arrangements by providing proof of ownership.
For further details please contact the Group General Counsel and Company Secretary, Bellway p.l.c., Seaton Burn House, Dudley
Lane, Seaton Burn, Newcastle upon Tyne NE13 6BE, telephone 0191 217 0717 or e-mail investor.relations@bellway.co.uk.
Beneficial owners of shares with ‘Information Rights’
Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights
under section 146 of the Companies Act 2006 are required to direct all communications to the registered holder of their shares
rather than to the Company’s registrar or to the Company directly.
Corporate responsibility reporting
Further reporting on the Company’s corporate responsibility activities is available to view on our website at
www.bellway.co.uk/corporate-responsibility.
116
Bellway p.l.c. Annual Report and Accounts 2017
Other Information
Advisers and Group General Counsel and
Company Secretary
Group General Counsel and Company
Secretary and Registered Office
Simon Scougall
Bellway p.l.c.
Seaton Burn House
Dudley Lane
Seaton Burn
Newcastle upon Tyne
NE13 6BE
Registered number 1372603
Registrars and Transfer Office
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Financial Adviser
N M Rothschild & Sons Limited
Stockbrokers
Citigroup Global Markets Limited
Numis Securities Limited
Bankers
Barclays Bank PLC
Lloyds Banking Group plc
Royal Bank of Scotland Group plc
Auditor
KPMG LLP
Solicitor
Slaughter and May
Financial Calendar
Announcement of results and dividends
Half year
Full year
Dividend payments
Interim
Final
Annual Report published
Final 16/17 dividend – ex-dividend date
Final 16/17 dividend – record date
AGM
DRIP election date for final 16/17 dividend
Final 16/17 dividend – payment date
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7
Bellway p.l.c.
Seaton Burn House,
Dudley Lane,
Seaton Burn,
Newcastle upon Tyne
NE13 6BE
Tel: (0191) 217 0717
Fax: (0191) 236 6230
DX: 711760 Seaton Burn
www.bellway.co.uk