Building homes,
building value
Bellway p.l.c.
Annual Report and Accounts 2019
Financial and Strategic Highlights
Group revenue (£m)
Profit before taxation (£m)
£3,213.2m +8.6%
£662.6m +3.4%
Average selling price (£)
Order book value at 31 July (£m)
£291,968 +2.5%
£1,223.9m -5.9%
Plots contracted in the year (plots)
Owned and controlled land bank (plots)
13,113 plots +1.2%
42,721 plots +4.0%
Note:
Unless otherwise stated all numbers throughout the Annual Report and Accounts
exclude joint ventures.
89
Accounts
88 Group Income Statement
88
Statements of
Comprehensive Income
Statements of Changes
in Equity
91
Balance Sheets
92 Cash Flow Statements
93 Accounting Policies
98 Notes to the Accounts
Other Information
115 Five Year Record
116 Alternative
Performance Measures
118 Glossary
120 Advisers and Group
General Counsel and
Company Secretary
Shareholder Analysis
121
121 Financial Calendar
In this report
About Us
IFC Financial and
Strategic Highlights
In this report
IFC
1 Who we are
2 Why Bellway
Strategic Report
Principal KPIs
4
Chairman’s Statement
5
Our Marketplace
6
Key Stakeholder
8
Relationships
Business Model
Strategy
10
18
20 Operating Review
Financial Review
24
Principal Risks
26
28 Risk Management
30 Going Concern and Long-
Term Viability Statements
33 Corporate Responsibility
Governance
42 Board of Directors and
Group General Counsel
and Company Secretary
44 Chairman’s Statement on
Corporate Governance
46 Corporate Governance
Report
50 Nomination Committee
Report
52 Audit Committee Report
58 Remuneration Report
77 Directors’ Report
81
Independent Auditor’s
Report to the Members of
Bellway p.l.c.
For further details on our business please visit:
www.bellwayplc.co.uk
Who we are
Bellway has been building
quality homes for over 70 years.
We also build careers for
nearly 3,000 people.
We build trust by working
in a sustainable way.
We build value for
our shareholders.
We are building homes,
building value.
1
Bellway p.l.c. Annual Report and Accounts 2019About Us Why Bellway
2
Our homes
We build high quality homes designed to complement the
style of existing local architecture in communities that meet
local demand and enhance the area in which they are built.
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 meets 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 of London and to provide
apartments within the London boroughs, with our activity in
London predominantly in zone 3 and beyond.
Our brands
Bellway and Ashberry are the main brands we use to sell
our homes. Bellway is the brand we are most well known
for. The Ashberry brand was introduced a few years ago
as a means of helping us to develop larger sites more
quickly. These sites are dual branded and shared between
adjacent divisions so one will sell as Bellway and the other
as Ashberry. Ashberry branded homes are of equal quality
to Bellway homes but offer customers different elevations
and interior specifications. We have also launched a Bellway
London brand.
Our people
Our people are the key to our success and we aim to provide
them with a rewarding and fulfilling career.
Bellway has long had a reputation as a good employer,
taking a personal interest in its workforce and supporting
career development. As a result, many employees have
spent a large proportion of their working lives with us.
However, we are not complacent and strive to continue to
be an employer of choice.
Our customers
We pride ourselves on understanding the aspirations of
all of our customers, not just in the type of home that suits
their needs, but in the environment in which they want to
live. All of our customers are treated with the same high
level of customer service. Our high standard of service and
build quality is endorsed by our customers, with 9 out of
10 customers saying they would recommend to a friend
buying a new home from Bellway. Our Customer Experience
Committee drives improvements to quality and works to
develop and share best practice across the Group to further
enhance our service to customers.
Bellway p.l.c. Annual Report and Accounts 2019 Our business
We are committed to being a responsible homebuilder.
Our aim is to operate our business in an ethical and
sustainable manner while at the same time building
attractive, desirable and sustainable developments
in which customers want to live, in harmony with
existing communities.
As one of the UK’s largest homebuilders, we have an
important role to play in addressing the national housing
shortage by building high quality homes in desirable
locations. We work with a range of stakeholders to build
trust so that we can fulfil this role whilst at the same time
operating our business in a socially responsible, ethical
and sustainable way.
We currently operate from 22 divisions covering the
main population centres across England, Scotland and
Wales. 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.
Our capacity for growth
We continue to focus on our growth strategy to
help us build on our success in 2018/19 and beyond.
Providing market conditions continue to remain
supportive, the Group has the operational and financial
strength to further expand the divisional network,
thereby supporting additional growth in the years ahead
and delivering further sustainable long-term returns
for shareholders.
Rating from the Home Builders
Federation Customer Satisfaction survey
5 star
Mature divisions
Newer divisions
Not to scale
3
Bellway p.l.c. Annual Report and Accounts 2019About Us Principal KPIs
The Group has seven principal KPIs, which are shown below.
Our secondary performance measures, which support these KPIs,
are shown on pages 12 to 16.
Number of homes sold (homes)
Operating margin (%)
10,892
homes
+5.7%
10,307
10,892
9,644
21.0%
-110bps
22.3
22.1
21.0
2017
2018
2019
2017
2018
2019
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 (%)(~)
Earnings per ordinary share (p)
24.7%
-250bps
27.6
27.2
24.7
437.8p
+3.4%
423.4
437.8
370.6
2017
2018
2019
2017
2018
2019
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 (‘EPS’) is a useful measure of how
profitable Bellway is, year on year.
Net asset value per ordinary share (p)(~)
Total dividend per ordinary share (p)
2,372p
+14.1%
2,372
2,079
1,785
150.4p
+5.2%
143.0
150.4
122.0
2017
2018
2019
2017
2018
2019
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. Note that the 2019 final dividend figure is
proposed.
Operating profit (£m)
£674.9m
+3.4%
652.9
674.9
571.6
2017
2018
2019
Note:
Operating profit is another measure of how efficiently the business
is being operated and of the profitability of the Group’s core
business. This KPI is one of the measures used to determine the
directors’ annual bonus payment.
~ 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 116 to 117. Throughout this report ‘~’ refers to alternative
performance measures.
Link to remuneration – see pages 58 to 76.
4
Bellway p.l.c. Annual Report and Accounts 2019 Chairman’s Statement
Introduction
The Group, now comprising 22 operating divisions, delivered
another positive set of results, consistent with its long-term
growth strategy and in doing so, achieved record volume,
revenue and profit. In this tenth consecutive year of volume
growth, Bellway completed the sale of 10,892 homes (2018
– 10,307), thereby making another substantial contribution
to addressing the housing shortage in the UK. This growth,
together with a solid operational performance, resulted in
a 3.4% increase in earnings per share, which rose to 437.8p
(2018 – 423.4p). Return on Capital Employed (‘RoCE’) also
remained high at 24.7%(~) (2018 – 27.2%).
Importantly, growth was achieved alongside a continued
prioritisation of both build quality and customer care. For the
third year in succession, the Group was recognised as a
five star homebuilder, a testament to our significant and
continued efforts in this crucial aspect of the business.
This achievement further builds upon our reputation as a
leading national homebuilder, with a focus on customer
service and quality. Bellway remains fully committed
to growing the business in a safe, responsible and
sustainable manner.
The Group has consistently exercised strong financial
disciplines, resulting in net cash at 31 July of £201.2 million(~)
(2018 – £99.0 million). The strength and efficiency of the
balance sheet will not only provide Bellway with significant
flexibility and capacity for future investment, but it also
ensures that the Group can respond positively should there
be any unexpected changes in the economic environment.
Market conditions supportive of disciplined
volume growth strategy
The ongoing imbalance between supply and demand for
affordably priced, good quality housing remains across
many parts of the country. Additionally, strong demand for
new homes has continued to be supported by the ongoing
availability of Help to Buy, together with an environment of
low interest rates.
The land market remains attractive and the planning
environment favourable, with the Group continuing to
identify value enhancing opportunities which meet our
requirements in respect of both gross margin and RoCE.
Whilst a shortage of skilled labour remains a challenge for the
wider construction sector, this did not prevent Bellway from
delivering a record number of new homes in the year.
The Board continues to believe that value
generation is best evaluated through capital
growth, by increasing net asset value per share,
together with the payment of a regular dividend.
Paul Hampden Smith
Chairman
Bellway continues to draw upon these favourable market
conditions, retaining its clear strategy to deliver long-term and
disciplined volume growth. This, together with the continued
focus on quality and customer care, enables all stakeholders
to benefit from our continued success.
Commitment to value creation over the long-term
The Board continues to believe that value generation is
best evaluated through capital growth, by increasing net
asset value per share (‘NAV’), together with the payment of a
regular dividend.
For the year ended 31 July 2019, the solid trading
performance resulted in NAV rising by 14.1% to 2,372p(~) (2018 –
2,079p). Furthermore, the growth in earnings has enabled the
Board to recommend a 5.3% increase in the final dividend
to 100.0p per share (2018 – 95.0p), increasing the proposed
total dividend for the year by 5.2% to 150.4p per share (2018
– 143.0p). The dividend is determined following careful
consideration of capital requirements, as well as the Group’s
operational capability to deliver further long-term volume
growth. If approved, the total dividend will be covered by
earnings by 2.9 times (2018 – 3.0 times).
Measured over the medium-term, in the three years since
31 July 2016, the increase in NAV of 850p and cumulative
dividend payments of 389.4p per share have resulted in total
growth in value of 1,239.4p(~) per share. This is equivalent to a
substantial annualised accounting return of 22.0%(~) relative to
the 31 July 2016 NAV of 1,522p per share.
For the foreseeable future, and assuming continued
opportunity for investment and volume growth, the
Group will continue to reinvest earnings into attractive
land opportunities, as well as delivering sustainable and
appropriate growth in the dividend, thereby driving further
long-term value creation for shareholders.
People and supply chain
It is the hard work, dedication and efforts of those who have
worked for and with Bellway over the last twelve months
which have enabled the Group to deliver these record results
in a responsible and sustainable manner. On behalf of the
Board I would therefore like to extend our gratitude to all of
those who have contributed to another strong performance.
Paul Hampden Smith
Chairman
14 October 2019
5
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Our Marketplace
Conditions in the new build UK
housing market remain positive,
with strong demand for affordably
priced homes supported by high
employment, good access to
affordable mortgage finance and
the continued availability of Help
to Buy.
The primary market factors that can affect the Group’s
performance against its strategy are as follows:
The affordability of mortgages
Mortgage affordability is a crucial ingredient for a successful
and sustainable housing market. Access to affordable
finance assists potential purchasers in securing a new home.
Competition in the mortgage market and low interest rates
ensure new homes remain affordable. Average mortgage
repayments, as a percentage of income, have gradually fallen
from a peak in 2007, following the downturn in the housing
market in 2008/09.
The chart below demonstrates the affordability of houses in
the UK:
Affordability of houses in the UK
The availability of mortgages
Mortgage availability is an important component in a
successful housing market. Following the introduction of the
government’s Help to Buy scheme in April 2013 for new build
homes, the availability of 75% loan to value mortgage finance
has increased significantly, thereby assisting in an increase
in the sale of new homes, particularly for first-time buyers or
purchasers in London where affordability is most constrained.
The government announcement that the equity loan
element of the Help to Buy scheme in England will be
supported up to 2023, although with lower regional limits,
provides certainty for the new build housing market and
will greatly assist purchasers of new homes and first-time
buyers, in particular. It also allows the industry to invest for the
medium-term.
Help to Buy now accounts for 31% of all homes sold in the
new build sector, and 36% of all homes we sell. Undoubtedly,
this has helped boost new build output, which represents an
increasing proportion of the overall market.
Due to the confidence in the current marketplace, aided by
the continued success of Help to Buy, lenders are offering
a wider range of more competitive products to buyers.
This increased willingness of lenders to provide funding
together with the introduction of the Mortgage Market Review
has resulted in a more sustainable mortgage market.
i
s
g
n
n
r
a
e
:
e
c
i
r
p
e
s
u
o
H
10
9
8
7
6
5
4
3
2
1
0
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
i
s
g
n
n
r
a
e
f
o
e
g
a
t
n
e
c
r
e
p
a
s
a
s
t
n
e
m
y
a
p
e
r
e
g
a
g
t
r
o
M
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
–––– House price to earnings
–––– Mortgage repayments to earnings
Source: Halifax
6
Bellway p.l.c. Annual Report and Accounts 2019
Demand
Demand for new homes remains strong across the country.
Help to Buy provides ongoing support to the sector’s ability
to grow output, providing access to mortgage finance for
those with at least a 5% deposit. Additionally, the ongoing
environment of low interest rates ensures that new homes
remain affordable in a historical context, further supporting
the strong underlying demand.
Supply
Land supply and planning permissions
The land market continues to provide good buying
opportunities. House prices are firm, supporting land values
and hence vendors’ appetite to sell.
The availability of land is supported by a positive planning
environment. This is evidenced in the chart below, which
shows a record number of planning permissions granted in
England, Scotland and Wales over recent years:
Planning permissions granted in England, Scotland
and Wales
s
d
n
a
s
u
o
h
T
450
400
350
300
250
200
150
100
415
422
323
288
267
241
217
202
2011
Source: HBF
2012
2013
2014
2015
2016
2017
2018
The availability of land at attractive margins
Acquiring land in areas of high demand and in attractive
locations, in accordance with the Group’s financial and non-
financial acquisition criteria, is one of the key factors in the
success of Bellway.
The market for land in the UK, particularly in the main
conurbations, remains competitive.
The planning system
The Group’s ability to deliver new homes is dependent
on the efficiency of the planning system, to provide the
necessary planning consents in a timely and effective
manner, to meet the requirements of the Group’s
volume targets.
The National Planning Policy Framework system (‘NPPF’)
introduced in March 2012, working in parallel with the
Localism Act 2011, has had a positive effect on the planning
environment. This is evidenced by an increase in the number
of planning permissions over recent years. Further changes
as a result of the revised NPPF, published in July 2018, and
the government’s housing white paper, which includes
favourable proposals such as ‘brownfield’ first, a standard
method for calculating housing need and a requirement
to publish ‘ambitious’ local plans, has resulted in an up-
lift in housing demand in many locations across the UK,
however, it has resulted in more difficult circumstances in the
north of England with many local authorities reducing their
housing target.
Availability of labour and materials
Labour and material availability remain a constraint to
growth in the sector, with pressures tending to be specific
to certain trades, locations and supplies of items such as
structural timber, plastics, bricks and blocks. These pressures
are a result of the growth in housebuilding over the last five
years, an industry-wide lack of investment in training over
the long-term and the cyclical nature of the industry. As a
result, good forward planning disciplines, longer lead-in
times and extended build periods over recent years all
need to be considered when planning construction and
sales programmes. There has been some ongoing, but
manageable, upward pressure on material costs, arising due
to the weaker exchange rate, and whilst labour availability
in general remains an issue for the industry, the shortage
does not appear to have been exacerbated as a result of the
decision to leave the EU.
Summary of market backdrop
The market backdrop supporting Bellway’s ongoing and
disciplined growth strategy remains favourable.
• The ongoing imbalance between supply and demand for
affordably priced, good quality housing remains across
many parts of the country.
• Strong demand for new homes has continued to be
supported by the ongoing availability of Help to Buy,
together with an environment of low interest rates.
• The land market remains attractive and the planning
environment favourable, with the Group continuing to
identify value enhancing opportunities which meet our
requirements in respect of both gross margin and RoCE.
• Whilst a shortage of skilled labour remains a challenge for
the wider construction sector, this did not prevent Bellway
from delivering a record number of new homes in the year.
• There is cross-party support to deliver an increased supply
of new homes.
Bellway continues to draw upon these favourable market
conditions, retaining its clear strategy to deliver long-term and
disciplined volume growth. This, together with the continued
focus on quality and customer care, enables all stakeholders
to benefit from our continued success.
The Group’s strategic priorities take into consideration this
synopsis of the market backdrop.
7
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Key Stakeholder Relationships
Maintaining good relationships with our essential stakeholders is key to
what we do – ensuring our business runs effectively and our homes add
value to the local community.
Customers
Investors
• Our highly trained and dedicated team of Sales
Advisors engage and communicate with customers
from the first visit, through the home reservation stage
and on to the final legal completion and beyond.
They are always available to help ensure that the whole
home buying process runs as smoothly as possible.
• Following legal completion, our Customer Charter sets
out the process of engagement with our customers to
ensure that the after-sales experience continues to be
a positive one.
• Our dedicated customer care team at each division is
supported by a Group Head of Customer Care and our
Customer Experience Committee.
• Our executive management team meets with major
shareholders and analysts at least twice a year to
discuss interim and full year financial results.
• The Board receives reports from our brokers and PR
advisors following our interim and full year results
presentations that provide feedback from investors
and analysts.
• We seek the views of shareholder representative
bodies where necessary, especially on the areas of
director remuneration and Board succession.
• We respond to ad hoc queries from shareholders
wherever possible.
• During the year the Chairman met with or wrote to our
top 15 shareholders.
Employees
• We ensure that our colleagues are well informed and
have the knowledge they need to operate successfully
in the best interests of Bellway, our customers
and stakeholders.
• Our employees receive regular communications and
training in relation to changes to policies, procedures,
services and advice.
• The focus of our dedicated Human Resources team
continues to be on the attraction, development and
retention of talent across the business.
• Senior management regularly present to the Board and
directors visit the divisions, which helps to inform the
Board on matters that are important to our employees.
Suppliers/
consultants/sub-contractors
• We regularly hold meetings and communicate with our
suppliers, sub-contractors and consultants, passing on
relevant information to each division as appropriate.
Where there is new product information, this is
communicated in a timely manner to each division.
• Our Group Commercial department oversees
the development of our relationships with and
management of our supply chain. The uncertainty
surrounding Brexit poses a potential threat to materials’
availability, however, we have good forward planning
disciplines and we have engaged with key suppliers
to ensure that there is minimal short-term effect on the
supply chain.
• 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 strive to maintain long-term working relationships
with our suppliers, sub-contractors and consultants to
further strengthen the long-term interests of our business.
8
Bellway p.l.c. Annual Report and Accounts 2019 Local communities
• Prior to the submission of a planning application, we
undertake comprehensive consultation with the local
community in accordance with the public engagement
policy of the local authority. This frequently involves
informing communities about the proposed
development and attending public meetings and
exhibitions. In consultation with the local authority, we
listen and act on feedback received where reasonable
and practicable.
• This process allows us to ensure that the views
of the local community and neighbouring land
owners are taken into account as far as is reasonable
and practicable.
• We operate the Considerate Constructors Scheme on
developments where appropriate.
Government
and regulators
• We maintain national and regional representation with
Homes England, working closely on their public land
and housing investment agendas. We are a significant
partner in the government’s Help to Buy programme
and, through our presence on national forums,
we contribute to the efficient delivery of this major
policy initiative.
• We are an active participant in the Homes and
Communities Agency’s Delivery Partner Panel (‘DPP3’).
We have national coverage through representation
in all five regional frameworks and are also a member
of the Greater London Authority’s (‘GLA’) London
Development Panel.
• Regional and local government policy has a significant
influence on the operation of our business and we
seek to work collaboratively with local authorities and
key statutory bodies, ensuring that developments are
brought forward efficiently and with regard to local
needs. In London we work closely with the GLA and
London boroughs, and elsewhere engage at a senior
level with both the Welsh Assembly and Scottish
Parliament, working closely on their respective Help to
Buy programmes.
• Bellway also engages at a strategic level with senior
officials within the Ministry of Housing, Communities &
Local Government, the treasury and the cabinet office
to address the pressing issues of accelerating housing
delivery, widening home ownership opportunity and
the regeneration of communities.
Affordable housing
providers
• Effective partnerships with a range of public bodies
and agencies is central to the success of Bellway’s
business. We value the opportunities that partnerships
bring and the benefits these relationships deliver to the
communities in which we build.
• We have long established relationships with housing
association (‘HA’) partners across the country, ranging
from large national and regional organisations to
small rural providers. Together we work to build
communities and improve the affordability of housing
for local people.
• Our engagement with HAs ranges from strategic
partnerships and joint ventures to the ongoing delivery
of affordable housing on most of our developments.
These relationships are maintained across the Group
through regular meetings at national, regional and
local levels.
Land owners
• We actively seek land for development and are always
interested in hearing from land owners and agents
who have land to sell.
• Our local teams of specialist land buyers work directly
with private land owners, commercial vendors and
the public sector alike to realise land opportunities.
They are able to consider any site, whether greenfield
or brownfield and regardless of current planning
status, and they have direct access to substantial funds,
allowing for highly competitive offers to be arrived at
quickly, subject to the appropriate approval process.
• Through our local regional offices we have extensive
knowledge of local planning policies and frameworks
and have proven expertise in guiding challenging sites
through the planning system.
• In addition to acquiring land outright, we are also able
to consider joint venture and partnership agreements.
9
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Business Model
The following timeline demonstrates how we create value
from purchasing land to selling homes.
Selecting the
right land
Managing
the planning
process
Constructing
the right
product
For more information see page 12.
For more information see page 13.
For more information see page 14.
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 land, which is longer-
term plots typically 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 local 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 through the
planning system.
by our divisional and Head
Office land and planning teams
using their local knowledge and
contacts. A viability assessment
and appraisal is prepared by the
division, which is assessed in
detail at divisional, regional and
then Group level, where the final
decision is taken on whether to
purchase the site. Board approval
may also be required depending
upon the value and nature of the
proposed acquisition.
• The number of large, long-
term sites that 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 DPP which thereby
reduces risks, adds value and
enables higher returns.
• We aim to increase the number
of homes sold through continued
investment in land and in our
divisional teams.
10
What we do
• We construct a wide range
of homes to suit a variety of
budgets and lifestyles. Our homes
are built to a high standard in
compliance with specific building,
technical and health and safety
regulations and other regulatory
requirements, as well as to our
own quality standards.
• We take very seriously the health
and safety of our employees, sub-
contractors and visitors to any of
our locations.
• 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 closely monitor work in
progress to ensure that build rates
are consistent with sales rates.
Bellway p.l.c. Annual Report and Accounts 2019
Delivering
an excellent
customer
experience
Investing in
our people
For more information see page 15.
For more information see page 16.
What we do
• From the moment our customers
first encounter Bellway to the day
they move into their new home
and beyond, we strive to provide
an excellent customer experience
and to deliver a home which
people aspire to live in.
• We have earned a reputation for
delivering an excellent experience
to our customers throughout
the home buying process
and beyond.
• Our customer care teams are
located within each division and
supported at a Group level by our
Head of Customer Care.
• Our Customer Experience
Committee continues to drive
future improvements to quality
and customer care.
• We work hard to retain our HBF 5
star homebuilder status.
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 attracting
and hiring top quality
people to complement our
existing workforce.
• We provide opportunities for
employees to develop and grow
by delivering structured training
programmes for graduates,
apprentices and trainees through
our new Bellway Academy
and relevant training for other
employees. We are pleased to
be launching our new graduate
training programme ‘Great Careers
built with us’ this year.
• We provide career pathways
to enable long-term
development, progression and
succession planning.
• We provide information and
organise events to promote and
encourage our employees to lead
a healthy and balanced lifestyle.
How we
create value
• Earnings for employees
of £188.2 million (2018 –
£168.5 million).
• Payments to sub-contractors,
suppliers and consultants of
£1.7 billion (2018 – £1.6 billion).
• Investment in communities of
£77.3 million (2018 – £79.0 million).
• Payments to national and local
government of £210.9 million
(2018 – £216.0 million).
• Dividends to shareholders
of £178.9 million (2018 –
£162.6 million).
Over the next few
pages we explain
our business model
in more detail,
including how this
is aligned with our
three corporate
responsibility pillars.
Environment
Construction
Society and economy
11
Bellway p.l.c. Annual Report and Accounts 2019Strategic 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 promotion 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.
Alignment with our corporate responsibility pillars
By building a significant number of quality homes on
brownfield land we are contributing to the regeneration of
areas in mainly urban locations.
By paying section 106 and Community Infrastructure Levy
(‘CIL’) contributions we provide local authorities with revenue
for community investment.
Local authorities benefit from additional revenue under the
New Homes Bonus.
For more information see pages 33 to 41.
The risk we mitigate
The inability to source suitable land that meets our financial
and non-financial acquisition criteria, including minimum
gross margin and RoCE hurdle rates. There has been no
change to this risk during the year.
For more information see pages 26 to 27.
How we measure our performance
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. 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 and we
regularly review the pipeline to ensure that our land bank
remains appropriate.
12
Sufficient land bank of plots with DPP
Achieved
No change
Achieved Achieved
Gross margin (%)
24.6%
-100bps
RoCE (%)(~)
24.7%
-250bps
2018
2019
25.6(1)
24.6
2018
2019
27.2
24.7
2018
2019
Note:
1. Restated following the adoption of IFRS 15 ‘Revenue from contracts with customers’.
See note 25 to the accounts for further details.
Link to remuneration – see pages 58 to 76.
Bellway p.l.c. Annual Report and Accounts 2019 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 the planning process such as the
continuation of the NPPF.
Alignment with our corporate responsibility pillars
Number of plots in owned and controlled
land bank with DPP (plots)
26,421 plots
-1.7%
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 33 to 41.
The risk we mitigate
Delays and increasing complexity and cost in the planning
process. There has been no change in this risk during
the year.
For more information see pages 26 to 27.
How we measure our performance
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 to meet our strategy.
Number of plots acquired with DPP (plots)
641 plots
-86.8%
Number of plots converted from
medium-term ‘pipeline’ (plots)
9,795 plots
+46.5%
Number of plots in ‘pipeline’ (plots)
16,300 plots
+14.8%
Number of plots in strategic land bank
– longer-term interests (plots)
Number of plots in strategic land bank –
positive planning status (plots)
16,800 plots
+41.2%
16,800
11,900
8,800 plots
+3.5%
26,877
26,421
2018
2019
4,845
641
2019
2018
9,795
6,684
2018
2019
16,300
14,200
2018
2019
8,500
8,800
2018
2019
2018
2019
13
Strategic ReportBellway p.l.c. Annual Report and Accounts 2019 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.
Alignment with our corporate responsibility pillars
NHBC health and safety incident rate
0.856
-1.3%
0.867
0.856
2018
2019
The health and safety of everyone who works on and visits
any of our locations is paramount.
Number of NHBC Pride in the Job Awards (awards)
Reducing waste on-site and in divisional offices and sales
centres delivers cost savings for the business and reduces the
amount of waste sent to landfill.
42 awards
-14.3%
49
42
2018
2019
Number of RIDDOR seven-day reportable incidents
per 100,000 site operatives (accidents)
324.87accidents
-19.6%
404.02
324.87
2018
2019
Number of NHBC Health and Safety Awards (awards)
12 awards
+9.1%
12
11
2018
2019
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.
For more information see pages 33 to 41.
The risks we mitigate
• Shortage of building materials at competitive prices.
• Shortage of appropriately skilled construction people and
sub-contractors.
• Significant health and safety risks inherent in the
construction process.
There has been no change to these risks during the year.
For more information see pages 26 to 27.
How we measure our performance
The health and safety of our employees, sub-contractors
and visitors on site is paramount. Health and safety
performance is taken into account as part of the overall
assessment 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 RIDDOR seven-day reportable
incident rate per 100,000 site operatives.
The number of NHBC Pride in the Job Awards reduced
slightly but all other KPIs have improved.
14
Bellway p.l.c. Annual Report and Accounts 2019 Delivering an excellent customer experience
What we rely on
Sales and customer care teams that are well trained, have the
right attitude and have the resources available to them to
deliver excellent service to our customers, both before and
after occupation of their home. We also rely on well trained
Site Managers who are responsible for, and take genuine
pride in, the quality of each finished home that we build.
Alignment with our corporate responsibility pillars
Customer satisfaction score (%)
86.4%
+4bps
We continue to improve energy efficiency by building homes
that 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 more information see pages 33 to 41.
The risks we mitigate
There are a number of risks, which if not appropriately
mitigated, will negatively impact customer experience.
Our risk management processes, including the initiatives
being delivered by our Customer Experience Committee,
seek to reduce the impact of all of these risks, thus trying
to maintain an excellent level of customer experience.
These risks are not regarded as principal risks and so have
not been included in our principal risk table on pages 26 to
27. These risks have not changed during the year.
For more information see pages 26 to 27.
How we measure our performance
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.
The order book value has fallen slightly, our HBF homebuilder
status remains unchanged, but all other KPIs have improved
during the year.
Link to remuneration – see pages 58 to 76.
Number of homes sold (homes)
10,892 homes
+5.7%
Reservations rate (homes per week)
210 homes per week
+5.0%
HBF homebuilder status (star)
5 star
No change
Order book value at 31 July (£m)
£1,223.9m
-5.9%
86.0
86.4
2018
2019
10,307
10,892
2018
2019
200
210
2018
2019
5
5
2018
2019
1,301.1
1,223.9
2018
2019
15
Strategic ReportBellway p.l.c. Annual Report and Accounts 2019 Business Model continued
Investing in our people
What we rely on
That our skilled, professional and dedicated employees
are provided with the right level of training, support and
resources. We also rely on our dedicated Human Resources
team, which focusses on the attraction, development and
retention of diverse talent across the business. We ensure that
the human rights of our employees and of those who work
with us are respected and protected, and we ensure that we
provide a workplace and environment for our employees to
succeed, which looks after their safety as well as their health
and wellbeing.
Alignment with our corporate responsibility pillars
Employees who have worked for the Group
for 10 years or more (%)
15.1%
-130bps
16.4
15.1
2018
2019
Number of graduates and apprentices (number)
We have introduced employee listening groups, made
further improvements in training and development and
have improved parental leave. We have appointed Diversity
and Inclusion Champions in all operating divisions alongside
the introduction of mandatory diversity and inclusion training
for all employees.
For more information see pages 33 to 41.
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 26 to 27.
How we measure our performance
We use the following KPIs as indicators of how successful
we have been during the year in managing and developing
our people.
We have increased the number of graduates and apprentices
within the business, and continue to develop our staff
through increased levels of training. However, employee
turnover still remains high, and we are taking steps to address
this (see our strategy on page 19). The decrease in the
percentage of employees who have worked for the Group for
10 years or more is a reflection of the increase in the number
of new employees joining the business during this period of
sustained growth. We have policies and training in place to
protect the human rights of our employees and those who
work for us. These are overseen by our Human Resources
department to ensure these policies are adhered to, and any
concerns are reported through our whistleblowing hotline
(see pages 37 and 57 for further information). During the year
the Board has increased its focus on the number of women
in its senior management team, resulting in an increase to
19% (2018 – 14%).
155
+9.2%
Training days per employee (days)
5.1 days
+8.5%
Employee turnover (%)
22.4%
+100bps
Senior management gender split (%)
19%
+500bps
16
155
142
2018
2019
5.1
4.7
2018
2019
21.4
22.4
2018
2019
19
14
2018
2019
Bellway p.l.c. Annual Report and Accounts 2019 Building homes, building value
by investing in our people
Courtenay Hoare is a trainee buyer in our Wessex division.
She joined Bellway part way through a foundation degree
and we continued to support her development over
a period of three years via a day release programme.
Having graduated in June with a first in Construction
Management, Courtenay also won an award for her
dissertation which looked at diversity within the industry,
specifically focussing on the role of women in construction.
17
Strategic ReportBellway p.l.c. Annual Report and Accounts 2019 Strategy
Bellway’s strategy is to build shareholder value through sustainable and
disciplined volume growth, utilising the Group’s operational and balance
sheet capacity, combined with a strong focus on RoCE. This generates
growth in the Group’s NAV which, when combined with a progressive
dividend policy, results in value creation for shareholders.
To achieve our overall strategy we have identified the following seven key strategic priorities.
The metrics we use to measure our performance are on pages 12 to 16.
Strengthening the brand
Overview
The Bellway brand is
synonymous with quality
homes, built in desirable
locations at affordable
prices. By making sure
that our customers
receive an excellent
experience we will help to
make a Bellway home the
home of choice.
How we performed in 2018/19
• We retained our HBF 5 star homebuilder status.
• We have maintained the momentum of our Customer
Experience Committee and introduced more formal
divisional representation.
• We rolled out our new customer website.
• We rolled out our new Bellway London brand.
• We have improved our customer satisfaction score.
Our plans for 2019/20
• We will work hard to retain our HBF 5 star
homebuilder status.
• We will continue to develop and improve our
communications with prospective customers,
those who are in the buying process and those
who own a Bellway home.
• We will aim to further improve our customer
satisfaction score.
Volume growth
Overview
Delivering disciplined
growth through our
national divisional
structure, selecting the
right land and managing
the planning process.
How we performed in 2018/19
• We maintained our current disciplined growth strategy.
• We 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 2019/20.
• We have invested in sufficient land in all tiers of our land bank to
support our volume growth aspirations.
• We opened two new divisions during the year.
• We focussed our land buying on sites which suit smaller or lower
average selling price homes reflecting the upcoming changes to
Help to Buy.
.
Driving down costs
Overview
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.
How we performed in 2018/19
• We have made further design improvements to The Artisan
Collection of standard house types and secured cost savings
through standardisation and procurement efficiencies and
improved build times.
• Building upon our already strong culture of cost control, we have
launched a two-year Group-wide cost saving initiative, BWY2020,
which is designed to generate cost savings, maintain quality and
improve efficiencies by sharing and implementing best practice
across our divisions.
• We have increased the use of technology to improve
benchmarking and secure savings.
• We appointed a new senior and experienced member of staff,
the Group Commercial Director.
Our plans for 2019/20
• We will maintain our current disciplined
growth strategy, whilst being mindful of
market conditions.
• We will task newer divisions with delivering
ambitious long-term growth plans.
• We will seek to purchase land where possible
with the benefit of an existing DPP consent or
subject to such consent being granted prior
to acquisition.
Our plans for 2019/20
• We will continue design development and the
introduction of standard house types into The
Artisan Collection.
• We will deliver further cost savings through
the BWY2020 initiative, standardisation and
procurement efficiencies and improved
build times.
• We will trial the use of innovative new products.
18
Bellway p.l.c. Annual Report and Accounts 2019 Appointing the right people
Overview
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 2018/19
• We have introduced a new Bellway Academy.
• We have introduced a Site Manager training programme.
• We have launched a new graduate recruitment programme.
• We have started to update and refine our divisional management
progression and retention plan.
• We have introduced exit interviews to improve our
understanding of employee turnover.
• We have introduced total reward statements to assist in
staff retention.
• We have improved the focus of diversity across the Group.
• We have introduced employee listening groups.
Our plans for 2019/20
• We will continue to refine our divisional
management progression and retention plan.
• We will continue to improve the focus of
diversity across the Group.
• We will continue to promote the benefit of
employee listening groups and conduct an
employee engagement survey.
• We will train around 100 Mental Health
First Aiders.
• We will continue to invest in the Bellway
Academy, Site Manager, apprenticeships and
graduate training programmes.
• We will introduce the Bellway Employee Awards
celebrating employee achievements and long
service across the Group.
Focus on return on capital employed
Overview
Ensuring that our assets
are used in the most
efficient way to deliver
shareholder returns.
How we performed in 2018/19
• We have maintained our focus on balance sheet management,
with particular emphasis on large capital-intensive sites and a
drive to increase sales through the use of the Ashberry brand.
Our plans for 2019/20
• We will continue to maintain a focus on balance
sheet management, with particular emphasis on
large capital-intensive sites.
• We have maintained RoCE as a key assessment when
• We will continue to maintain RoCE as a key
buying land.
assessment when buying land.
• We have closely monitored and controlled work in progress.
• We will continue to monitor and control work
in progress.
Value creation through capital and dividend growth
How we performed in 2018/19
• We continued to invest capital into land and work in progress in
areas with high demand, without compromising our RoCE and
margin requirements, to ensure that the Group is well placed to
deliver further growth.
• Paid dividends of £178.9 million.
• Increased NAV by 14.1% to 2,372p.
Overview
Reinvestment of earnings
into financially attractive
land opportunities, whilst
maintaining a focus
on RoCE, has led to a
substantial increase in
value for shareholders
through a combination
of the ongoing growth
in NAV and increasing
dividend payments.
Our plans for 2019/20
• We will continue to invest capital into land and
work in progress in a controlled manner in areas
of high demand to ensure that the Group is well
placed to deliver further growth. This will be
done without compromising our gross margin
and RoCE requirements.
• The dividend is determined following careful
consideration of capital requirements, as well
as the Group’s operational capability to deliver
further long-term volume growth. If the final
2018/19 dividend is approved, the total dividend
will be covered by earnings by 2.9 times.
Maintaining a flexible capital structure
How we performed in 2018/19
• We increased our banking facilities to £575 million.
• We have maintained our current banking arrangements.
• We have maintained our current investor relations activities.
Our plans for 2019/20
• We will maintain our current
banking arrangements.
• We will maintain our current investor
relations activities.
Overview
We use a combination
of cash, bank facilities
and equity to provide us
with access to finance in
a balanced and flexible
way. This enables us to
deliver our growth strategy
while managing the cash
flow requirements of
the business, including
delivering dividends to
our shareholders.
19
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Operating Review
Beyond this new financial year, with a consistent
operating margin, the Board continues to see
further opportunities for both volume and
earnings growth.
Jason Honeyman
Chief Executive
The table below shows the number and average selling price
of homes completed in the year, analysed geographically,
between private and social homes:
Homes sold (number)
Private
Social
Total
2019
4,397
2018
4,171
2019
803
2018
890
2019
2018
5,200
5,061
4,045
4,092
1,647
1,154
5,692
5,246
North
South
Group
8,442
8,263
2,450
2,044 10,892
10,307
Average selling price (£000)
Private
Social
Total
2019
2018
2019
North
South
264.0
258.0
409.1
390.1
108.8
168.3
Group
333.5
323.4
148.8
2018
95.8
155.2
129.3
2019
2018
240.1
229.5
339.4
338.4
292.0
284.9
The total number of homes sold rose by 5.7% to 10,892
(2018 – 10,307), with this rate of increase positively affected by
a 19.9% rise in the number of social completions, which rose
to 2,450 (2018 – 2,044). This reflects planned construction
programmes and the requirements of planning agreements
and is in accordance with previous guidance.
The Ashberry brand, introduced to increase the sales rate
and improve capital efficiency on some of our larger sites,
continued to support volume growth, contributing 564
completions (2018 – 348). Ashberry now represents 5.2%
of total homes sold (2018 – 3.4%) and has the potential to
expand further in the years ahead, building upon the success
already achieved to date.
In all regions, the market remained strongest for affordably
priced homes in desirable locations. Divisions such as
Manchester, East Midlands and Northern Homes Counties
all performed well, each completing in excess of 600 homes,
benefitting from positive market conditions, together with
land investment and outlet openings over recent years.
Our new Scotland East division, which opened on 1 August
2018 and is based in Livingston, completed the sale of 273
homes in its first year of trading, benefitting from investment in
land and strong demand for new homes.
Trading performance
Demand for new homes remained strong across the country
and based on this, the Group has made further considered
investment into land and work in progress, opening an
additional 110 new sites, resulting in an average of 268 active
outlets (2018 – 247) throughout the year. This positive action
has resulted in an all-time high reservation rate of 210 per
week (2018 – 200), a 5.0% increase on last year. As is typically
the trend, the reservation rate in the second half of the
year was higher, which is a reflection of the stronger spring
market. Furthermore, the rate of increase in the second half
of the year was more pronounced at 7.2%, in part driven by
site openings, but also reflecting more positive customer
sentiment following some uncertainty in the run up to
Christmas. In addition to a robust overall performance, the
private reservation rate was also strong at 160 per week
(2018 – 152 per week), a rise of 5.3%, demonstrating the
positive underlying demand for new homes.
The cancellation rate remained low at 12% (2018 – 11%),
moderating slightly in the second half of the year, which
again was a reflection of stronger consumer sentiment in
the period.
The pricing environment remained firm and on some sites,
typically in affordable areas where demand is strongest,
low single digit price increases over budget expectations
were achieved. More generally, however, the rate of house
price inflation reduced throughout the year and its margin
enhancing benefit continues to diminish.
Help to Buy provides ongoing support to the sector’s ability
to grow output, providing access to mortgage finance for
those with at least a 5% deposit. Additionally, the ongoing
environment of low interest rates ensures that new homes
remain affordable in a historical context, further supporting
the strong underlying demand. Help to Buy was used across
the Group in 36% of completions (2018 – 39%), with first-time
buyers representing approximately two-thirds of customers
using the scheme. As in prior years, the use of Help to Buy
was more prevalent in London, given higher house prices
and hence deposit requirements in this part of the country.
20
Bellway p.l.c. Annual Report and Accounts 2019 In addition, good progress has been made in our most
recently launched divisions, Eastern Counties and London
Partnerships, both of which opened on 1 February 2019.
Eastern Counties delivered its first completions in the year
and has secured land in a number of locations to enable
further growth in the year ahead. London Partnerships,
whose benefit to the Group will grow over the longer-term,
has commenced on-site production and will contribute
completions in the next twelve months.
In London, where the Group has gradually reduced invested
capital, demand remains robust for affordably priced homes.
The London boroughs contributed 1,010 completions (2018 –
1,118) at an average selling price of £499,617 (2018 – £414,872),
with this representing 9.3% of the number of homes sold
(2018 – 10.8%).
Bellway’s exposure at the higher end of the London market
is limited, with The Residence development at Nine Elms
in Battersea remaining a noteworthy exception. This site
comprises 514 apartments at an anticipated overall average
selling price of around £670,500. It has sold very well to
date, contributing 214 completions in the year (2018 – 132),
at an average selling price of £820,467 (2018 – £705,567),
representing 5.5% of housing revenue (2018 – 3.2%).
Land at The Residence was bought in December 2013 and
the gross margin achieved has therefore been substantially
enhanced by positive house price growth and the post-
acquisition redesignation of the area as ‘zone 1’ by Transport
for London. Accordingly, the contribution to operating
margin from the site at Nine Elms in the year under review
was around 80 basis points greater than the contribution
recognised in the prior financial year. The site is now close to
conclusion, with only 31 apartments remaining to complete in
the new financial year.
Excluding completions from Nine Elms, the Group’s average
selling price in the capital was affordable at £413,359 (2018
– £375,956) and demand remains robust at this price point.
The Group will continue to invest in financially viable
locations in London where demand is strong, however the
proportion of homes sold in London is likely to reduce in the
foreseeable future, reflecting the positive availability of good
quality land at attractive returns elsewhere in the country.
Overall, the Group’s average selling price increased by 2.5%
to £291,968 (2018 – £284,937), driven mainly by investment
in good quality locations. Exposure at the upper end of the
market was limited, with just 4% of completions beyond the
Help to Buy threshold of £600,000. Notwithstanding the
reducing proportion of revenue generated in London, the
Board still expects the average selling price in the year ahead
to be in excess of £285,000.
Driving down costs
Given competition for resources, there is continued upward
pressure on build costs in the construction sector, as has
been the case for a number of years. To mitigate cost
pressures, the Group continues to pursue a number of cost
control initiatives across the business, under the direction
of a recently appointed and highly experienced Group
Commercial Director.
The Artisan Collection is one such initiative, introduced last
year, whereby the rationalised range of 43 standard Group
house types should more readily comply with local authority
planning requirements and reduce costs through the speed
of build and the scale of standardisation. Additionally, the
collection is appealing to customers, designed to enable the
Proportion of completions under the
Ashberry brand
5.2% +180bps
creation of distinctive communities with individual character
areas within developments. The Artisan Collection is currently
plotted on around 12,000 plots at 97 developments. The first
completion is due later this month at our site in Kings Norton,
Birmingham.
As previously reported, an experienced Head of Procurement
joined the Group in July 2018, with a key focus on achieving
savings from standardisation and rationalisation of Group
deals, whilst maintaining the quality of the homes we build.
This approach to cost saving is not just limited to the Group
procurement function, but is widespread throughout the
organisation. Building upon our already strong culture of
cost control, we have launched a two-year Group-wide cost
saving initiative, BWY2020, which is designed to generate
cost savings, maintain quality and improve efficiencies by
sharing and implementing best practice across our divisions.
Lastly, to better understand the effect of all of these initiatives,
the Group initiated a significant upgrade of IT systems,
in partnership with COINS, to strengthen financial and
commercial processes across the Group. This two-year
programme is progressing in line with expectations and
over the longer-term, it is expected to improve the quality
of management information. This will be used to target
cost saving measures and identify further opportunities
for improvement.
Leaving the EU
Bellway has been in close contact with its supply chain
partners over the last year to reduce any adverse risks to the
business from Brexit. Whilst most of our materials are sourced
in the UK, a limited number of our supply chain partners
manufacture in Europe, supplying goods such as electrical
appliances and ceramic tiles. We have forecast our material
requirements for the coming year and communicated these
to our suppliers. In turn, they have considered alternative
trade routes to bring goods into the UK and have increased
their stock levels to ensure that they have materials available
in the event of delays through ports.
Investing for growth
The land market remains attractive and we continue to focus
on population hubs in affordable areas, where there is high
demand for new homes. Our land teams have identified
value enhancing opportunities in accordance with the
Group’s requirements in respect of both gross margin and
RoCE. Accordingly, Bellway entered into contracts to acquire
13,113 plots (2018 – 12,962 plots) across 93 sites (2018 – 100
sites), with a total value of £782.0 million (2018 – £833.5 million).
Contracted plots include additions to both sections of the
owned and controlled land bank. Geographically, 48%
of those sites contracted were located in the north of the
country and 52% in the south, a balanced approach to
investment, with some diversification of risk and returns
across the country.
21
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Operating Review continued
The table below analyses the Group’s land holdings at 31 July:
2019
2018
Owned and controlled plots
DPP: plots with implementable detailed
planning permission
26,421 26,877
Pipeline: plots pending an implementable DPP 16,300 14,200
Total owned and controlled plots
42,721 41,077
Strategic plots
Positive planning status
Longer-term interests
Total strategic land holdings
8,800 8,500
16,800 11,900
25,600 20,400
Ensuring that land is in place to deliver growth remains a key
priority for the Group, and in that regard, the total owned and
controlled land bank rose to 42,721 plots (2018 – 41,077 plots),
representing a supply of 3.9 years (2018 – 4.0 years) based on
last year’s output.
The number of plots benefitting from an implementable
detailed planning permission (‘DPP’) remained broadly
unchanged at 26,421 (2018 – 26,877 plots). The Group either
acquired land or obtained DPP on 10,436 plots (2018 – 11,529
plots), with 94% of these additions to the top tier of the owned
and controlled land bank originating from the land ‘pipeline’.
These are typically sites which are bought conditionally
and on which value is added by progressing through the
planning process. Notwithstanding this success, the ‘pipeline’
section of the land bank grew by 14.8% to 16,300 plots
(2018 – 14,200 plots).
As previously reported, as the Group continues to grow,
longer-term strategic land becomes more important as
a supplementary source of supply. Accordingly, Bellway
continues to invest in its strategic land bank and entered into
option agreements to buy an additional 29 sites (2018 – 27
sites). The Group’s strategic land holdings have risen to some
25,600 plots (2018 – 20,400 plots), offering opportunity for
further volume growth in the years ahead.
Included within this total are 8,800 plots (2018 – 8,500 plots)
with a positive planning status, representing only those plots
that are the subject of a current planning application or form
part of an emerging local plan. The rise in plots has been
achieved notwithstanding the successful promotion of 1,717
plots into the owned and controlled land bank.
In addition to these shorter-term strategic plots, Bellway has
a further interest in an estimated 16,800 plots (2018 – 11,900
plots), which have the potential to obtain planning permission
over a longer time frame.
Providing compelling opportunities can be identified, Bellway
will make further investment in its strategic land resource,
further bolstering its in-house land team, thereby ensuring
that the contribution from this part of the business increases
in the future.
Strengthening the brand
Ensuring that the Bellway brand is one in which customers
can trust is fundamental in all that we do. As a result of our
considerable efforts in this area, we are delighted to have
achieved the status as a five star homebuilder in the Home
Builders Federation Customer Satisfaction survey for the third
consecutive year.
22
We are also proud that the high standards achieved by Site
Managers in the business were recognised, with 42 (2018
– 49) individuals receiving NHBC Pride in the Job Awards.
Furthermore, the Customer Experience Committee formed
two years ago continues to drive future improvements to
quality and customer care.
The Group has enhanced its efforts with regards to
digital marketing, launching a new consumer website in
September 2018 and a new corporate website in March this
year. More recently, in September 2019, we launched new
Instagram and Facebook accounts for both existing and
prospective customers. Increasing the amount of resource
dedicated to this area will make our marketing efforts
more effective and improve the buying experience for our
customers. Both the websites and our social media content
will continue to evolve in the future.
We will continue to prioritise quality and service in the year
ahead, ensuring that a positive customer experience is an
integral part of how we manage our business. An example
of this approach is the investment we are making in a new
customer care system. This will help us to better and more
efficiently manage customer appointments, building upon
the systems already in place in the business in order to
deliver further improvements to our customers’ experience.
Building new homes safely
The health and safety of both operatives and members of the
public who visit our sites is of the utmost importance to the
Group. Sites are frequently inspected by both our in-house
health and safety team and external consultants, including
the NHBC, to ensure that we maintain high standards.
We also use these visits to benchmark our performance
against other organisations in the sector and we continue to
compare favourably with our peers.
Our efforts in this area of the business have been recognised
in the NHBC Health and Safety Awards, with 12 of our
Site Managers receiving Commended Awards (2018 – 11),
representing 23% of the total awards issued across the
industry, significantly ahead of our share of volume output.
During their regular site visits, our own health and safety
team review processes and procedures in order to evaluate
compliance, develop good practice, identify training needs
and encourage innovation from our staff. We continue to run
campaigns on key target areas, utilising a variety of formats,
including billboards and on-site tool box talks. Performance of
individual sites is not only evaluated at divisional level, but
it is also highlighted to senior management, demonstrating
the importance of this issue throughout the Group.
Through continually focussing on improving our efforts
around health and safety we have continued to reduce
the lost time from accidents, with the seven-day reportable
incidence rate having fallen by 19.6% to 324.87 incidents per
100,000 site operatives (2018 – 404.02). We have a number
of important initiatives and focus areas for the coming year
including work around mental health and wellbeing.
The Grenfell tragedy has understandably increased the
focus on fire safety across the industry and more specifically
on apartment blocks. Government guidance issued in
December 2018 has sought to improve fire protection
measures within wall systems on buildings above 18 metres
in height. Bellway has a small number of developments,
which obtained full building regulation approval at the time of
construction, where cladding has been used. Given evolving
guidance in this complex area, as a responsible developer
Bellway p.l.c. Annual Report and Accounts 2019 and along with the wider housebuilding sector, we continue
to work proactively with the government and our delivery
partners in relation to fire safety on apartment schemes.
Appointing the right people
Given the strong growth in the business, Bellway continued
to expand its workforce, employing an average of 2,980
employees during the year (2018 – 2,808), an increase of 6.1%.
In addition, through indirect sub-contract labour and the
Group’s supply chain, we estimate that we supported around
30,000 to 34,000 jobs during the year, providing a valuable
boost to both local employment and the wider economy.
Bellway has a responsibility to ensure that the industry has
the right skill base in order to grow in the future. We continue
to invest in young talent and have increased the number of
apprenticeships and graduates in our business by 9.2% to 155
(2018 – 142). This is also ahead of our initial target, which was
set when we became members of ‘The 5% Club’, a charitable
organisation which recognises our commitment to have at
least 5% of our workforce employed in these developmental
roles. With the launch of our graduate training programme,
‘Great Careers built with us’, later this year, we expect that
this number will continue to grow in the next twelve months.
Bellway continues to participate in the HBF Home Building
Skills Partnership which works to attract new talent and
develop, grow and sustain the workforce required by the
industry to deliver further increases in housing supply.
The Group encourages and supports a diverse workforce
and has implemented a number of initiatives around equality,
diversity and inclusion. These include enhancing parental
leave benefits, equality, diversity and inclusion training
programmes and creating diversity champions in each of our
divisions to promote progress in this area.
Bellway4Good
Bellway remains committed to being a responsible
homebuilder and ensuring that its growth is achieved in
an ethical and sustainable manner for all its stakeholders,
including customers, employees, shareholders, suppliers
and local communities. Bellway4Good is the Group banner
for managing our corporate responsibility activities, with
targets focussed around the three ‘pillars’ of the environment,
construction and society and economy.
Under ‘environment’, the focus is on energy efficient work
and for the second year running, 100% of construction
compounds were fitted with energy saving devices.
All showhomes have also been fitted with LED lighting,
further contributing to carbon savings. Additionally, from
1 February 2019, all compound electrical supplies were
bought under the Renewable Energy Guarantees of Origin
system, thereby ensuring a commitment to buying energy
generated from renewable energy sources. As a result of
these actions, the Group reduced its own carbon emissions
per legal completion, i.e. excluding those arising from its
supply chain, to 2.4 tonnes (2018 – 2.5 tonnes). We also
remain committed to ensuring timber purchased by Bellway
is from sustainable sources, mandating that all supplies have
Forest Stewardship Council (‘FSC’) timber certification.
Within ‘construction’, for the fifth year running we have
increased the percentage of waste diverted from landfill to
98.4% (2018 – 98.1%). Waste diversion from offices has also
increased to 54.9% (2018 – 44.6%).
Under ‘society and economy’ our charitable initiatives have
gathered momentum. We are proud that at the end of
the year, our colleagues and business partners had raised
£494,812 for Cancer Research UK (2018 – £394,453), taking
total donations over the past three years to a noteworthy
£1,275,178, well ahead of our £1 million target. In recognition
of this effort, Bellway won the Cancer Research UK ‘Flame
of Hope’ award, acknowledging our significant fundraising
achievement and support for this worthwhile cause.
We continue to match employee fundraising for charities of
their choice and offer a payroll giving scheme for those who
wish to participate. In total, charitable donations amounted to
£754,793 (2018 – £564,040) in the year, of which £391,736 (2018
– £272,096) was raised by our employees or sub-contractors.
Current trading and outlook
In addition to delivering volume growth of 5.7%, the Group
ended the financial year with a sizeable forward order book
of 4,878 homes (2018 – 4,841), with a value of £1,223.9 million(~)
(2018 – £1,301.1 million). In the first nine weeks of the new
financial year, trading has remained robust, with the
Group achieving 183 reservations per week (1 August to
30 September 2018 – 176), an increase of 4.0%. As a result
of this positive start, the order book at 29 September 2019
remained strong and comprised 5,190 homes (30 September
2018 – 5,380 homes) with a value of £1,311.6 million(~)
(30 September 2018 – £1,469.5 million). The slight reduction
is a result of the higher number of completions recorded
in this short trading period, a reflection of good on-site
construction progress.
The Board is mindful that the uncertainty surrounding
Brexit could pose a threat to consumer confidence.
Assuming market conditions remain favourable, the strong
order book, together with additional, considered investment
in land and work in progress, should enable Bellway to
deliver further, yet more moderate volume growth in the
year ahead.
Also in the new financial year, the one-off benefit to the
operating margin from Nine Elms will not be repeated and
in addition, in the absence of house price inflation, industry-
wide build cost pressures will continue to have a moderating
effect. As a result of these combined influences, the reduction
to a consistent, underlying operating margin will be
more pronounced.
Beyond this new financial year, with a consistent operating
margin, the Board continues to see further opportunities for
both volume and earnings growth. Specifically, following the
growth potential afforded by investment in the additional
new divisions of Eastern Counties and London Partnerships,
the Group has capacity to increase output to 13,000 homes
per annum. Over the medium-term there is opportunity
to expand beyond this, with further new divisions. This,
together with the Group’s strong financial position, ensures
our strategy for growth will deliver further sustainable value
for shareholders.
Jason Honeyman
Group Chief Executive
14 October 2019
23
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Financial Review
Bellway’s long-term growth strategy and
continued disciplined investment in high return
land opportunities continues to deliver further
value growth for shareholders.
Keith Adey
Group Finance Director
Group revenue (£m)
£3,213.2m
+8.6%
3,213.2
2,957.7
2,558.6
Profit before taxation (£m)
£662.6m
+3.4%
641.1
662.6
560.7
2017
2018
2019
2017
2018
2019
Operating profit (£m)
£674.9m
+3.4%
652.9
674.9
571.6
Earnings per ordinary share (p)
437.8p
+3.4%
423.4
437.8
370.6
2017
2018
2019
2017
2018
2019
Operating margin (%)
21.0%
-110bps
22.3
22.1
21.0
Total dividend per ordinary share (p)
150.4p
+5.2%
143.0
150.4
122.0
2017
2018
2019
Note that the 2019 final dividend figure is proposed.
2017
2018
2019
Link to remuneration – see pages 58 to 76.
24
Bellway p.l.c. Annual Report and Accounts 2019 Operating performance
The successful delivery of the Group’s disciplined growth
strategy has resulted in further growth in housing revenue
for the tenth successive year, with this increasing by 8.3%
to £3,180.1 million (2018 – £2,936.8 million). This was driven
principally by the number of housing completions rising by
5.7% to 10,892 homes (2018 – 10,307 homes), a record level
for the Group. Additionally, the 2.5% increase in average
selling price to £291,968 (2018 – £284,937) contributed to this
growth, as a result of favourable changes in product and
geographic mix.
Other revenue, which includes non-recurring land,
commercial and ground rent sales, increased by £12.2 million
to £33.1 million (2018 – £20.9 million). This, combined with
housing revenue growth, resulted in total revenue rising by
8.6% to £3,213.2 million (2018 – £2,957.7 million).
The gross margin, although still high, was slightly below last
year at 24.6% (2018 – 25.6%(1)), with the reduction likely to
continue as Nine Elms trades out and build cost increases
remain a facet of the industry, with house price inflation
continuing to diminish.
Under IFRS 15 we now separately disclose the effect of part-
exchange sales which, during the period, resulted in a loss of
£5.6 million (2018 – £4.1 million).
In order to boost operational capability and support
continued growth, Bellway invested further in its regional
structure, with 22 operating divisions as at 31 July 2019. As a
consequence, administrative expenses grew to £109.7 million
(2018 – £100.5 million), but as a proportion of revenue, they
remained flat at 3.4%(~) (2018 – 3.4%).
The positive trading performance resulted in operating profit
increasing by 3.4% to £674.9 million (2018 – £652.9 million)
and the operating margin remained high at 21.0% (2018 –
22.1%).
Net finance expense
The net finance expense was £14.4 million(~) (2018 –
£13.6 million) and principally includes bank interest and
notional interest on land acquired on deferred terms.
Bank interest, which includes interest on drawn monies,
commitment fees and refinancing costs, increased to
£6.3 million (2018 – £5.2 million). Average net debt reduced
to £165.4 million(~) (2018 – £191.5 million). Notional interest on
land acquired on deferred terms decreased by £1.0 million to
£7.8 million (2018 – £8.8 million).
Profitability
Profit before taxation rose by 3.4% to £662.6 million (2018
– £641.1 million), in line with the rate of operating profit
growth. The corporation tax charge was £124.0 million
(2018 – £121.2 million), reflecting an effective tax rate of 18.7%
(2018 – 18.9%). The effective tax rate is below the standard
rate of corporation tax of 19.0% (2018 – 19.0%), primarily due
to an enhanced tax deduction for remediating previously
developed, brownfield land.
Basic earnings per share rose by 3.4% to 437.8p per share
(2018 – 423.4p).
Investing cash for future growth
The Group is highly cash generative and generated cash
from operations of £419.1 million (2018 – £375.6 million),
representing 62.1% of operating profit (2018 – 57.5%), with this
after making further investment in inventories to generate
future revenue growth.
The tax paid was £119.3 million and after dividend payments
of £178.9 million, joint venture funding of £4.3 million and
other minor cash outflows of £14.4 million, net cash at the
end of the year was £201.2 million(~) (2018 – £99.0 million),
with this ungeared balance sheet demonstrating the financial
strength of the business. Following a change in legislation
regarding the timing of tax payments-on-account, the cash
outflow in relation to tax in the new financial year will increase
by around 50%, although the effective tax rate in the income
statement is likely to be similar to that reported in the year
ended 31 July 2019.
Land creditors, which are considered to be a source of
longer-term debt finance, stood at £297.9 million (2018 –
£365.4 million) and continue to be used only when it is cost
effective to do so. Including land creditors, total debt stood at
£96.7 million (2018 – £266.4 million), representing very modest
adjusted gearing of 3.3%(~) (2018 – 10.4%).
A balanced and flexible capital structure
The balance sheet principally comprises amounts invested
in land and work in progress, with the balance of inventories
rising by 6.3% to £3,477.6 million (2018 – £3,271.6 million).
The carrying value of land remained broadly unchanged
at £2,004.4 million (2018 – £2,011.9 million) reflecting the
lower average plot cost of sites acquired in the period.
Work in progress rose by 16.4% to £1,298.2 million (2018 –
£1,115.1 million) and was 40.8% (2018 – 38.0%) as a proportion
of housing revenue.
Consistent with previous years, the financing structure
remains simple and transparent, with growth financed
through retained earnings, net bank borrowings and land
creditors. The Group has committed borrowing facilities of
£575 million, extending in tranches through to December
2023. This provides reassurance on the security of funding for
the years ahead.
The Group had a modest retirement benefit asset of
£2.8 million (2018 – £1.3 million) at 31 July reflecting an ongoing
commitment to funding this future, long-term obligation.
A focus on capital employed
Following the dividend payment of 145.4p per share, the
net asset value rose by 14.2% to £2,921.2 million (2018 –
£2,557.1 million), representing a net asset value per share of
2,372p(~) (2018 – 2,079p).
This growth in NAV and the payment of the dividend
resulted from the compounding effect of reinvesting earnings
back into high return land opportunities. RoCE remains
high at 24.7%(~) (2018 – 27.2%), or 22.1%(~) (2018 – 23.6%)
when including land creditors as part of the capital base.
Notwithstanding the lowly geared balance sheet, the post tax
return on equity remained high at 19.8%(~) (2018 – 22.1%).
Bellway’s long-term growth strategy and continued
disciplined investment in high return land opportunities
continues to deliver further value growth for shareholders.
Keith Adey
Group Finance Director
14 October 2019
Note:
1. Restated following the adoption of IFRS 15 ‘Revenue from contracts with customers’.
See note 25 to the accounts for further details.
25
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Principal Risks
We have identified the following principal risks to our business:
Risk and description
Strategic relevance
KPIs
Mitigation
Change in year
Land
Inability to source suitable
land at appropriate gross
margins and RoCE
Planning
Delays and complexity in
the planning process
• Insufficient land would affect
our volume growth targets.
• Land bank (with DPP).
• Number of homes sold.
• Failure to buy land at the
right margin would have
a detrimental effect on
future returns.
• RoCE.
• Gross margin.
• EPS.
• Budgeting and forecasting of growth
targets to ensure land bank supports
strategic target.
• Pre-purchase due diligence and viabilities
No change.
on all proposed land purchases.
• Authorisation of all land purchases in
accordance with Group procedures and
our Approvals Matrix.
• Group and divisional planning specialists
provide advice and support to the divisions
to assist with securing planning permissions.
• Management of immediate, medium-
No change.
term and strategic land to maintain an
appropriate balance of land in terms of
quantity and location.
• Failure to obtain planning
within appropriate timescales
would have a detrimental
impact on our growth
prospects and have an
adverse effect on returns.
• 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
and appropriate resources
causes delays in construction,
impacting the ability to deliver
volume growth targets.
• Number of homes sold.
• Customer satisfaction
score.
• Employee turnover.
• Pricing pressure would impact
• EPS.
returns.
• Systems are in place to select, appoint,
monitor, manage and build long-term
relationships with our sub-contractors.
• Competitive rates and prompt payment
No change.
for our sub-contractors.
• Group-wide purchasing arrangements
are in place.
• Continued review and monitoring of
supplier and sub-contractor performance.
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 would delay
construction and could result
in criminal prosecution, civil
litigation and reputational
damage.
• Number of RIDDOR
seven-day lost time
accidents per 100,000
site operatives.
• NHBC health and
safety benchmark.
• NHBC Health and
Safety Awards.
• 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.
No change.
External environment
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
• The impact of these external
• Number of homes sold.
factors would be on the ability
to sell houses and apartments
and on returns.
• Forward order book.
• Reservations rate.
• Customer satisfaction
score.
• EPS.
• RoCE.
• Ongoing monitoring of key 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.
26
Bellway p.l.c. Annual Report and Accounts 2019 Risk and description
Strategic relevance
KPIs
Mitigation
Change in year
External environment
Uncertainty over Brexit
and the future impact
on the economy could
significantly impact our
ability to deliver our
strategic objectives
• The uncertainty that currently
exists in relation to Brexit and
the economy has resulted in
splitting out the risk associated
with Brexit due to the potential
impact on our business.
• Number of homes sold.
• Forward order book.
• Reservations rate.
• EPS.
• RoCE.
• While outside of our direct control,
we continue to monitor business
performance and build a robust future-
proof business with a solid strategy and
sound financial controls.
No change.
Human resources
Inability to
attract and retain
appropriate people
• Failure to attract and retain
• Employee turnover.
• Continued development of the Group
people with appropriate skills
will affect our ability to perform
and deliver our volume growth
target.
• Number of graduates
and apprentices.
• Number of people
who have worked for
the Group for 10 years
or more.
• Training days per
employee.
• Senior management
gender split.
Human Resources function and
implementation of our people strategy.
• Monitoring and review of staff turnover and
No change.
feedback from exit interviews.
• Competitive salary and benefits packages
which are regularly reviewed and
benchmarked.
• Succession plans in place and key person
dependencies identified and mitigated.
• Increased level of training provided
to employees.
• Trainee Assistant Site Manager
apprenticeship training programme in place.
• Increased number of graduates
and apprentices.
• 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.
• Group-wide Cyber Security Committee
in place.
• In-house expertise from Group Company
Secretariat, Legal, Health and Safety and
Technical functions who advise and support
divisions on compliance and regulatory
matters.
• Consultation with government agencies,
specialist external legal advisors and subject
matter experts (e.g. fire safety consultants)
including ongoing co-operation with the
CMA.
• Strengthened Group-wide policies,
procedures and training for key
regulatory matters.
• Continual monitoring and review of changes
to legislation and regulation, including any
supporting guidance and advice notes.
• Continual liaison with the HBF on regulation
and compliance matters.
No change.
No change.
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.
• Volume growth.
• EPS.
• Number of homes sold.
• RoCE.
• Gross margin.
Legal and regulatory compliance
Failure to comply
with legislation and
regulatory requirements,
including changes to
Building Regulations, Fire
Safety Regulations and
leasehold reform legislation
as a result of ongoing
government consultations
• Lack of appropriate procedures
and compliance would result
in delays in land development,
construction and sales
completions plus possible re-
work to sites all of which could
have a detrimental impact on
profitability and reputation
potentially leading to financial
penalties and other regulatory
consequences.
• We await the outcome of the
government’s review under
the Building Safety Programme.
We are co-operating with the
CMA regarding their leasehold
investigation into the sale
of homes in the new build
housing market and await
the government’s detailed
proposals on leasehold reform
legislation.
The Group continues to invest in its control environment, with a significant IT implementation project and developments to
both IT and business processes ongoing. The risks associated with these changes, including those relating to the adjustment
of employees to new processes, are regularly monitored by management and the Board.
27
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Risk Management
Our established framework for managing risks has continued
to be in place across the business throughout this financial
year, with the responsibility to implement the Board’s
policies on risk management and internal control sitting
with management.
Our risk management objectives continue to be:
• assess risks against an agreed appetite for risk, which is
regularly reviewed.
• 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 framework
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.
• Conduct a robust assessment of the principal
risks facing the Company.
• 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.
Head of Risk
• Design and implement the risk management
framework and corresponding policy
and processes.
• Review and challenge risk information against
• Facilitate and implement the risk management
stated business objectives.
framework, policy and processes.
• Approve risk treatments and actions.
• Approve risk reports for the Board.
• Review and agree risk appetite.
Key
Reports to
Direct and monitor
• Undertake risk management activities and
produce reports in accordance with risk
management policy.
Risk management roles and responsibilities
In all businesses, the responsibility of managing risk sits with every employee. In undertaking their roles, 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 set out in the diagram below:
Risk management process
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
28
Bellway p.l.c. Annual Report and Accounts 2019 Risk management process
A risk register is maintained detailing all of our potential
risks, categorised between strategic, operational, financial,
compliance and reputational risks. The risk management
processes are set up to ensure all aspects of the business are
considered, from strategy through to business execution and
including any specialist business areas.
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 and other receivables, the amounts
presented in the balance sheet are measured at amortised
cost less a loss allowance for expected credit losses which
are assessed on the basis of an average weighting of the risk
of default (see note 13 to the accounts). For this purpose, a
default is determined to have occurred if the Group becomes
aware of evidence that it will not receive all contractual cash
flows that are due. Trade and other receivables includes
£39.0 million (2018 – £39.3 million) due from Homes England
relating to the Help to Buy scheme. As Homes England is
a UK government agency, the Group considers the risk of
default to be minimal.
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.
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.
A summary of principal risks is reported to management,
the Audit Committee and the Board, which is mainly,
but not exclusively, comprised of risks considered to be
outside of 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. The directors confirm that
they have conducted a robust assessment of the principal
risks facing the Company.
More information on risk management and internal controls
is included within the Audit Committee Report on pages 52
to 57.
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 reinvested profits, bank borrowings, cash
in hand and the management of working capital.
The dividend is determined following careful consideration
of capital requirements, as well as the Group’s operational
capability to deliver further long-term volume growth. If the
final dividend is approved, the total dividend will be covered
by earnings by 2.9 times (2018 – 3.0 times).
29
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report 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 80.
Long-Term Viability Statement
In accordance with provision C.2.2 of the UK Corporate
Governance Code, the directors have assessed the viability
of the Group over a period of three years which is longer
than that required by the going concern assumption.
This assessment is based on the Group’s current position and
the potential effect of its principal risks facing the Group, which
are summarised on pages 26 to 27.
The output of this review considered the profitability,
cash flows and funding requirements of the Group over a
period of three years, which is generally the same period
used for internal forecasts. The review entailed sensitising
the expected number of legal completions, average
selling prices, overheads and land expenditure, assuming
a severe downside scenario. The assessment included
an assumption that existing banking facilities remained in
place, but were not renewed at the end of their tenures.
Based on the results of this review, 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 this three-year period.
Risk Management continued
Liquidity risk
The Group finances its operations through a mixture of equity
(comprising share capital, reserves and reinvested 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 15 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 (see note 14 to the accounts).
No other security is held against any other financial assets of
the Group.
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 2019, 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
£1.7 million (2018 – £1.9 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.
30
Bellway p.l.c. Annual Report and Accounts 2019 Building homes, building value
by regenerating communities
We are working with housing association The Riverside
Group to develop a regeneration scheme in Camberwell.
The proposals guarantee that all tenants currently living
within the estate will be offered a new home which will meet
their housing needs. Four hundred homes are planned for
the site, as well as investment in new community facilities.
Under rules introduced in 2018 by the Mayor of London,
tenants of housing associations or local authorities are
balloted on regeneration schemes that involve demolition
of their homes. In Camberwell, 67% voted in favour of
the scheme.
31
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Building homes, building value
by being a
responsible builder
Bellway’s commitment to being a responsible homebuilder
has been developed over a number of years. Our aim is to
operate our business in an ethical and sustainable manner
while at the same time delivering high quality homes to
address the housing shortage across the UK.
32
Bellway p.l.c.
Annual Report and Accounts 2019
Corporate Responsibility
Environment
Biodiversity and ecology,
Carbon emissions, Energy,
Transport, Water
Construction
Planning, Procurement,
Research and development,
Site management, Waste
Society
and economy
Charities, Customers, Economic
development, Employees, Health
and safety, Stakeholders
For more information see pages 34 to 35.
For more information see pages 36 to 37.
For more information see pages 38 to 40.
As one of the UK’s leading homebuilders, Bellway is
committed to providing high quality homes in desirable
locations to address the country’s ongoing housing
shortage. We aim to do this while operating our business in a
responsible and ethical way, delivering long-term benefits for
our customers, employees, shareholders, suppliers and the
wider communities where we build.
Our Corporate Responsibility (‘CR’) activities continue
to operate under the three core pillars of environment,
construction and society and economy, ensuring that we
consider the interests of our diverse stakeholder groups
and make positive social, environmental and economic
contributions across our business. While the Chief Executive
is ultimately responsible for maintaining our overarching
CR programme, our CR Steering Committee manages CR
at a strategic level. Chaired and led by the Group Finance
Director, functional heads meet to assess progress against
targets and objectives, review principal CR KPIs and discuss
new initiatives to further embed CR within the business.
Our key achievements in 2018/19
We have continued to make progress on our CR aims,
specifically against the 15 targets we set ourselves for the
2018/19 year. Of these, 11 were achieved, 1 was refined and 2
are multi-year targets which are ongoing. The final target was
a three-year project to assess the benefits of the ‘Building
for Life 12’ standard on a Bellway development and while
this was not completed in the expected timeframe, we do
expect the final assessments to be completed in the next
few months.
11
1
targets achieved
target refined
1
target missed
2
targets are
multi-year and
progress will
continue into
2019/20
While some of our key achievements are outlined to the right,
our CR website includes full details of our performance as
well as our targets for the 2019/20 year.
For full details of our CR activity visit
www.bellwayplc.co.uk/corporate-responsibility
Environment
• Completed the programme to replace all fork lifts on site
with models fitted with 55 kW engines, delivering fuel and
carbon savings.
• Switched to LED lights in all new showhomes to reduce
energy use and carbon.
• Improved our office waste diversion to 54.9% (2018 – 44.6%).
Construction
• Continued to increase our overall waste diversion rate to
98.4% (2018 – 98.1%).
• Retained the highest rank in the WWF’s Timber Scorecard
2019 (3 Trees), one of only five national homebuilders to
achieve this score.
• Achieved a 0.19 NHBC reportable items per inspection
against an internal target of ≤ 0.3.
Society and economy
• Achieved our 5 star homebuilder status from the HBF for
the third year running.
• Continued our partnership with Cancer Research UK,
achieving our target of £1 million in fundraising and
donations six months early.
• Achieved a reduced RIDDOR seven-day reportable incident
rate per 100,000 site operatives of 324.87 (2018 – 404.02), the
third year in a row we have reduced this rate.
We continue to contribute to the Carbon Disclosure Project’s
(‘CDP’) ‘Climate Change’ and ‘Forests’ programmes and for
2018 our scores for both were ‘Awareness – C’, in line with our
sector average and the CDP programme average.
33
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report
Corporate Responsibility continued
Environment
The protection of the environment and climate change are two
significant challenges that we face both as a company and as a society.
At Bellway we aim to minimise the harmful effect our sites have on
these two important aspects through adopting a sustainable approach
to our operations.
Biodiversity and ecology
Our aim is to create sustainable communities, now and for
the future, ensuring that we protect, conserve and enhance
the environments in which we operate. Each new site
undergoes a risk assessment that will include biodiversity
and ecology where necessary. On sites where biodiversity
impacts are potentially significant, we may carry out detailed
Environmental Impact Assessments as well as implementing
biodiversity mitigation, enhancement or offsetting where
agreed with the planning authority.
Such measures may include the provision of bat boxes,
relocation of protected species, tree retention and improved
woodland/grassland areas, construction of on-site and off-
site ponds for both drainage and to support and promote
biodiversity, as well as contributing financially to assist in the
protection of Special Protection Areas.
We continue to build a proportion of our new homes on
brownfield land and this redevelopment can help to improve
the local environment, as well as having a positive effect on
the local community, helping to increase local employment
and create green spaces. In the past year 43% of our new
homes were built on previously developed land (2018 – 53%).
Energy
As a responsible business we have a duty to minimise our
energy usage where we can, even though energy is not a
significant financial cost for the business compared to land,
labour and materials. As reported last year, we met our target
early to fit all site compounds with energy saving technology and
all new compounds continue to meet this specification. This year
we completed our target to move our telehandler fleet over to
more efficient engines, with 100% of the fleet now compliant
(2018 – 88.6%). We have also investigated the potential for adding
photovoltaic panels onto compound roofs, and while at present
this is not cost effective, we will keep a watching brief as the
technology continues to reduce in price.
We set ourselves a target to introduce Passive Infrared (‘PIR’)
sensors in all new showhome lighting this year. However,
this did not prove to be cost effective, with minimal energy
savings compared to installation costs. Instead we have
moved all new showhomes over to 100% LED lighting
to deliver energy savings, as well as converting existing
showhomes to LED lighting where the property will be open
for a further six months or more.
We continue to fit renewable energy and energy saving
technology on new homes, with 36.0% of homes fitted this
year (2018 – 36.9%), helping customers to reduce the energy
4
1
targets achieved
target was refined
Energy
We will ensure that 100% of our compounds are
fitted with energy saving devices by 2020.
Energy
We will limit the engine size of fork lifts to 55 kW on
all sites by 2019, delivering fuel and carbon savings.
Energy
We will implement PIR sensors in all new showhome
lighting to reduce energy usage.
Carbon
We will investigate opportunities for a carbon strategy
and assess and implement a range of energy
reduction initiatives across the business.
Office Waste
We will increase the percentage of waste diverted
from landfill at divisional offices where we have
responsibility for our waste.
Decrease in carbon per home sold
-4.0%
34
Bellway p.l.c. Annual Report and Accounts 2019 consumption of their new homes. We also continue to design
our homes to be energy efficient, with the Dwelling Emission
Rate (a measure of energy efficiency) of new Bellway homes
being on average 4.5% better than required by the relevant
building regulations (2018 – 5.0%).
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 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 2018 government GHG
Conversion Factors for Company Reporting. We now use the
market-based method for calculating our scope 2 emissions to
account for the benefits of our purchased renewable electricity.
The reported emission sources include those which we are
responsible for, 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.
Greenhouse gas emissions (tonnes of CO2e)(1)
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 fork lift usage.
• Divisional offices where gas and electricity usage is included
within landlord charges. Bellway’s usage is estimated using a
kWh per square metre of occupied floor space figure derived
from other divisional offices with utility billing in place.
Our overall carbon emissions have risen by only 1.8% to
25,715 tonnes CO2e (2018 – 25,253), against a 5.7% increase
in homes sold. This smaller increase in carbon, compared to
construction growth, has been driven in part by our switch
during this year to procuring site compound electricity from
renewable sources through Renewable Energy Guarantee of
Origin (‘REGO’) backed supplies. For the current year this has
saved 961 tonnes of carbon from entering the atmosphere
and helped us reduce carbon from our electricity usage
by 2.5%, despite usage increasing by 16.9%. Reporting via
business metrics, overall carbon emissions per home sold
have decreased by 4.0% to 2.4 tonnes (2018 – 2.5) while
carbon emissions per employee have fallen by 4.4% to 8.6
tonnes (2018 – 9.0).
Both the 2017/18 and 2018/19 emissions have been externally
verified by Zeco Energy to a ‘reasonable assurance level’.
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 (market-based method)(2)
Total scope 1 and 2 emissions (market-based method)(2)
Emissions intensity(2)
tCO2e per Bellway home sold
tCO2e per Bellway employee(3)
Notes:
2019
2018
20,560
5,155
25,715
19,964
5,289
25,253
2.4
8.6
2.5
9.0
1. Carbon dioxide equivalent as per the meaning given in section 93(2) of the Climate Change Act 2008.
2. Scope 2 emissions are now reported using the market-based method to account for electricity supplies purchased under REGO contracts. Scope 2 emissions for 2018 have been restated
using the same methodology.
3. Based on the average number of employees during the year.
35
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Corporate Responsibility continued
Construction
As a homebuilder, the construction process is the most visible impact
we have on local communities, society and the wider environment.
We take a partnership approach on our developments, working
closely with suppliers, contractors, local authorities and local
communities to create new, attractive and sustainable communities
and developments.
We continued our assessment work on the benefits of
utilising the ‘Building for Life 12’ industry standard for the
design of new housing developments. This work was due
to complete this year but unfortunately the final assessment
process has been delayed and will now be undertaken in the
first half of the coming year. We will then use the findings to
help shape our evolving approach to delivering homes and
communities that are attractive, functional and sustainable.
It is acknowledged that while we need to build many more
homes to address the UK’s housing shortage, this needs
to be undertaken with due consideration for the long-term
sustainability of communities. As a result, our investment
in communities extends far beyond the creation of new
developments. We estimate that our construction activities
deliver a combined employment (direct, indirect and
induced) of between 30,000 and 34,000, with the benefits
being felt both locally and nationally. We also provide local
support through planning obligations and Community
Infrastructure Levy payments, with £77.3 million (2018 –
£79.0 million) invested in a range of local services and
amenities, including education, sport and leisure, health and
highway improvements.
Waste
The materials we use to build our homes are resources
that require careful management. Our aim is to use such
resources as efficiently as possible, ensuring that we limit
our impact on the environment by minimising waste, and so
deliver cost and efficiency savings which benefit our wider
business, customers and stakeholders.
This year 98.4% of our waste was diverted from landfill for
re-use, recycling or, as a last resort, ‘refuse-derived fuel’ (2018
– 98.1%), delivering on our target to maintain diversion rates
at 97.5% or above. As part of our target to reduce the quantity
of waste we generate, we have refined our metrics and
now report on ‘waste per home built’, which has increased
this year to 10.97 tonnes (2018 – 9.31 tonnes). The ongoing
standardisation of our house type designs will aid waste
minimisation and efforts in the coming years will focus on
best practice and supplier engagement to reduce the waste
we generate on sites.
1
target achieved
2
targets are multi-year
and progress will
continue into 2019/20
1
target missed
Waste
We will maintain the proportion of waste diverted
from landfill on construction sites at 97.5% or above.
Waste
We will aim to reduce the quantity of waste we
generate (excluding ground works waste) per home
under construction by 2021.
Sustainable Construction
We will complete research into six sustainable
construction methods and products, undertake
trials at a division level and implement successful
outcomes across the Group by 2021.
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 (2016/17 – 2018/19).
Communities
Creating communities is about more than just putting
together bricks and mortar. Our developments include
private housing, affordable housing, mixed-use and mixed
tenure, ensuring we create desirable, sustainable and
balanced communities for people to live in. We aim to
improve the overall health and wellbeing of the area by
incorporating recreational and community facilities into
development plans and working with local partners to bring
added value to development schemes.
36
Bellway p.l.c. Annual Report and Accounts 2019 Supply Chain
At Bellway we aim to create sustainable long-term
relationships with our suppliers and sub-contractors, with
procurement controlled by a central supply chain function
supported by divisional teams. Our supply chain spend
this year was £1.7 billion (2018 – £1.6 billion) and with the
HBF estimating that 90% of housebuilders’ supply chain
spend remains in the UK, Bellway’s supply chain activity
would deliver a £1.5 billion investment in the UK economy.
With a substantial portion of this spent in our divisions, local
companies and communities are significant beneficiaries.
A proportion of our procurement is through Group contracts
with each national supplier subject to an audit process prior
to commencing work with Bellway, covering a range of issues
from environmental and safety matters, to quality and security
of supply. We also work with many smaller businesses and
companies that are local to specific development sites,
providing materials, labour and services to Bellway and we
are committed to paying our suppliers and sub-contractors
within agreed terms and remain a signatory to the Prompt
Payment Code.
We do not tolerate any form of slavery, servitude and forced
compulsory labour or human trafficking in our supply chain
or in any part of our business. Our Anti-Slavery Policy reflects
this commitment and is available to view on our website,
along with our latest Slavery and Human Trafficking Statement
which sets out the actions being taken. We require all
applicable suppliers and sub-contractors to confirm that they
either have their own modern slavery policies in place or that
they adopt Bellway’s policy. Relevant staff receive training
to help them identify signs of slavery and our Anti-Slavery
Compliance Team monitors compliance activity throughout
the year.
Bellway’s zero tolerance approach to bribery and corruption
has been adopted by the Board. It extends to all of the
Group’s business dealings and transactions and our policy
and procedures set out the standards expected of all of our
employees and those who work for and with the Group.
Management are responsible for enforcing compliance and
additional checks are carried out via Head Office functions.
Our whistleblowing procedure enables concerns of any
wrongdoing to be reported in confidence. There were a
small number of reports made during the year where sadly
the behaviour of a few employees fell short of the standards
required of them, and appropriate disciplinary action
was taken.
Quality
The quality of Bellway construction continues to be
recognised in the NHBC Pride in the Job Awards, the only
UK-wide awards dedicated to recognising Site Managers who
achieve the highest standards in homebuilding. This year
Bellway Site Managers achieved 42 awards (2018 – 49), with
candidates assessed on a wide range of criteria, including
technical knowledge, leadership qualities and organisational
skills. Another yard-stick of Bellway’s quality is the NHBC
reportable items per inspection measure, and this year we
successfully maintained this at 0.19 reportable items per
inspection (2018 – 0.19).
37
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Corporate Responsibility continued
Society and economy
Investment in new homes is a key driver in regional and national
economic prosperity, playing a significant role in directly stimulating
growth and supporting jobs and employment. It is also vital to
addressing the housing shortage in the UK.
We have again used the HBF’s, Lichfield’s and other publicly
available metrics to estimate Bellway’s own contribution to
the wider economy(2):
• £1.3 billion in estimated gross value added generated by our
construction activities.
• 30,000 – 34,000 direct, indirect and induced jobs supported.
• £210.9 million contribution to public finances.
• £71.1 million in New Homes Bonus and council tax payments
to local authorities.
Customers
As a leading UK homebuilder, a large number of customers
rely on Bellway to deliver the home of their dreams. Year-on-
year we aim to deliver an excellent customer experience,
preserving our reputation as a high quality homebuilder,
and we are pleased to report that for the third year running
we have achieved 5 star homebuilder status from the HBF.
At least nine out of ten of our customers would recommend
Bellway to their friends.
Affordability
There continues to be a shortage of new homes in the UK,
with a government pledge aiming to increase the number of
new homes built to 300,000 per year. In addition, affordability
is often cited as a barrier to people wanting to take their first
step on the property ladder(3).
As part of Bellway’s contribution to addressing these issues,
we continue to build a range of quality homes to meet
differing budgets and needs. Our average selling price
in 2019 was £291,968 (2018 – £284,937) with 7% of homes
sold to unassisted first-time buyers (2018 – 8%). A further
36% of homes were sold to customers requiring additional
assistance via the various Help to Buy schemes (2018 – 39%),
which remain important mechanisms to supporting home
ownership in the UK. In total 30% of our homes were sold to
first-time buyers (2018 – 34%), representing 3,258 individuals
and families whom Bellway helped to get their first step on
the property ladder (2018 – 3,520).
Bellway also continues to incorporate affordable housing into
developments, creating mixed and diverse new communities.
This year 22% of our new homes were sold to affordable
housing providers (2018 – 20%).
6
targets achieved
Customer engagement
We will deliver high levels of customer satisfaction,
aiming to retain our 5 star homebuilder status for
the year.
Health and safety
We will aim to maintain RIDDOR rates at the 2018 level
or below.
Health and safety
We will deliver ‘Site Tidiness’ and ‘Working at Height’
safety briefings/training at 100% of sites to maintain a
safe working environment.
Employee development
We will develop a structured and integrated training
programme for Site Managers that will also consider
sustainability issues.
Employee development
We will increase the number of apprentices and
graduates we employ, helping to address the
industry-wide issue of skills shortages.
Charitable giving
We will extend our partnership with Cancer
Research UK for a further year and aim to increase
our fundraising and donation total across the three
year period to at least £1 million.
Economy
Investment in new homes is vital for regional economies
as well as the broader national economy, playing a
significant role in directly stimulating growth and supporting
employment. The HBF estimates that new housebuilding
generated £38 billion of economic output to the Great Britain
economy in 2017, as well as supporting almost 700,000
direct and indirect jobs and contributing £2.7 billion in tax
revenues(1).
38
Bellway p.l.c. Annual Report and Accounts 2019 Safety
The wellbeing of everyone who interacts with our business
is a top priority for Bellway. Utilising a range of measures,
including tool box talks, training, sharing of best practices and
formal inspections, we work with direct employees and sub-
contractors to actively promote a safe working culture and to
ensure all of our developments operate in a safe manner.
We are pleased that in the NHBC Health and Safety Awards,
the work of our Site Managers has again been recognised.
Twelve Site Managers collected ‘Commended’ Awards (2018
– eleven).
Over the course of the year, our focus on health and safety
has seen our RIDDOR seven-day reportable incident rate fall
to 324.87 incidents per 100,000 site operatives (2018 – 404.02),
the third year in a row that we have successfully reduced
this rate. Bellway also continues to outperform the industry
average on the NHBC health and safety incident rate,
achieving a score of 0.856 (2018 – 0.867).
Employees
The quality of our new homes and the high levels of
customer service we deliver are dependent on the people
who work for us. Directly employing an average of 2,980
individuals (2018 – 2,808), thousands more work indirectly
with Bellway as sub-contractors and suppliers, and our
people are key to the success of the business.
We continue to invest in our workforce, providing a range of
training opportunities to both address the ongoing skills-
shortage in construction and also to allow employees to
reach their full potential with Bellway. We have increased the
overall number of graduates and apprentices in the business
by 9.2% to 155 (2018 – 142) and a new graduate training
programme has been developed that will see the first cohort
joining Bellway in January 2020.
We are pleased to be able to report progress on our work
on diversity with an increase in the number of women in our
senior management team (see table on page 51). We have
now appointed Diversity and Inclusion Champions in all
divisions and introduced mandatory diversity and inclusion
training for all employees.
Over the past year our employee turnover rate has increased
to 22.4% (2018 – 21.4%), broadly in line with our sector.
As a responsible employer we are committed to ensuring
that all of our people are treated with fairness, consideration
and respect, and we operate a range of policies and provide
training to ensure equal opportunities are provided to all
existing and prospective employees, including modern
slavery and diversity and inclusion training. These policies are
listed on our website, and staff may report any concerns to
our HR department or through our SpeakUp procedure via
an independent provider.
Notes:
1. ‘The Economic Footprint of House Building in England and Wales’ (July 2018), prepared for the HBF by Lichfields.
2. Full details can be found in ‘Our Economic and Social Impact 2018-19’ summary which is available on our website.
3. ‘Fixing our Broken Housing Market’ (February 2017), Department for Communities and Local Government.
39
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Corporate Responsibility continued
Charitable Engagement
As a responsible business, part of our ethos is to support
both the local communities where we build as well as
those sections of society less fortunate than ourselves.
Our charitable focus remains on three key areas: supporting
our national charity partner Cancer Research UK (‘CRUK’);
supporting our divisions; and supporting our employees.
At the end of 2017/18 we extended our already successful
partnership with CRUK for a further year with the aim of
reaching £1 million in fundraising and donations, and we
continue to be overwhelmed by the support our staff show
to this cause. This year £283,841 was raised by employees,
sub-contractors and suppliers; a 43% increase on last year
(2018 – £198,953). When combined with Bellway’s ‘double
matching’ of employee fundraising, the total raised and
donated this year was £494,812; a 25% increase on last year
(2018 – £394,453). That brings the total donated to CRUK
over the past three years of our partnership to an amazing
£1,275,178, well above our £1 million target. We are proud that
our partnership has again been recognised, this time at the
CRUK’s Flame of Hope Awards, with the Bellway divisional
charity co-ordinators named as the Corporate Fundraising
Team of the Year.
As well as our CRUK partnership, our employees undertake
personal fundraising for causes of their choice, with their
fundraising matched by Bellway. This year employees raised
a total of £107,895 for their own causes; an increase of 49%
from last year (2018 – £72,643). In addition, our divisions
continue to operate their own charity budgets to assist
local charities and community groups in their operating
area. In total, across all our charitable activities, Bellway, our
employees, sub-contractors and suppliers have raised and
donated a total of £754,793 to good causes this year; an
increase of 34% (2018 – £564,040). Of this total, £391,736 was
raised by our employees, sub-contractors and suppliers, 44%
higher than last year (2018 – £272,096).
A timeline of Bellway and Cancer Research UK
2016
We partner with the British Thoracic
Society and develop a smartphone
app to give doctors quick and
easy access to guidelines to help
diagnose lung cancer.
25%
84%
2016
Our scientists announce exciting results from the STAMPEDE trial, one of the
largest clinical trials ever conducted for prostate cancer. Combining abiraterone
with a steroid, plus standard hormone therapy, improves survival by an
astounding 37%, with a 70% reduction in disease progression. What’s more,
it does this with fewer side effects. Prostate cancer survival in the UK has tripled
in the last 40 years.
2016
Bellway and Cancer Research
UK begin a life-saving and
what would become an award
winning partnership.
2017
Bellway celebrate raising a
record breaking £385k in the
first year of our partnership.
2018
Bellway celebrate winning Charity Partnership of the year in property and
construction category at the Business Charity Awards and set their employees the challenge
to raise £1 million by the end of year three through the ‘Help Us Raise a Million’ campaign.
2018
Michelle Mitchell OBE took up her
position at the helm of CRUK. ‘It’s an
honour for me to be appointed CEO
of Cancer Research UK. Without any
government funding for the work
we do, we need to make sure that
people understand why their support
is so important and how we can beat
cancer together.’
2019
Cancer Research UK
announce three major
international research
initiatives and award almost
£60 million collectively to
explore some of the biggest
challenges in cancer research.
2019
BELLWAY HIT THE
£1 MILLION MILESTONE!
‘As a company we are proud to say that
we have raised £1 million for vital cancer
research happening across the UK’.
Jason Honeyman – CEO of Bellway.
OUR LIFE SAVING WORK CONTINUES
RIGHT
NOW
40
Bellway p.l.c. Annual Report and Accounts 2019 Looking Forward
In the coming year work will continue on our existing and
new targets, and more details on our 2019 performance can
be found on our website: www.bellwayplc.co.uk/corporate-
responsibility.
Some of our key objectives for the coming year are
outlined below:
• Assess the use of single-use plastic in our business to
understand where we can reduce or eliminate usage.
• Aim to reduce our direct carbon emissions by 10% by 2023
(measured by CO2e per home sold).
• Train 75 Mental Health First Aiders by 2020.
• Extend our partnership with Cancer Research UK for a
further two years and increase our cumulative fundraising
and donation total to at least £2 million.
2019 has been another successful year in terms of CR
performance, and we are especially proud of the ongoing
commitment of our people to the CRUK partnership.
We remain committed to operating our business in a
responsible and sustainable way, meeting the needs of our
customers and shareholders while also delivering benefits to
our wider stakeholder groups.
Non-financial information statement
The table below identifies the pages of this annual report
where we discuss the information required to comply
with the Non-Financial Reporting Regulations set out in
sections 414CA and 414CB of the Companies Act 2006.
Relevant policies are available on our website, together with
our Economic and Social Impact report.
Non-financial information
Environment matters
Employees
Social matters
Human rights
Anti-bribery and corruption
Risks
Business model
Non-financial KPIs
Page
34 and 35
8, 11, 16 and 39
38 to 40
16, 37 and 39
37
26 to 30
10 to 16
IFC, 12 to 16
Approval of the Strategic Report
The Strategic Report was approved by the Board and signed
on its behalf by:
Jason Honeyman
Group Chief Executive
14 October 2019
41
Bellway p.l.c. Annual Report and Accounts 2019Strategic Report Board of Directors and Group General Counsel
and Company Secretary
Paul Hampden Smith
Chairman
Committees
N* R
Denise Jagger
Senior Independent
Non-Executive Director
Committees
A N R
Appointed to the Board on 1 August 2013.
Background and experience
Paul, a Chartered Accountant, was appointed as Chairman on 12
December 2018, having previously been a non-executive director
since 1 August 2013, and Audit Chair since 1 February 2014 until his
appointment as Chairman. Paul 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 – Treasurer and Chair of the
Finance Committee.
Cumberland Lodge, Windsor Great Park – Chairman of the
Audit Committee.
Appointed to the Board on 1 August 2013.
Background and experience
Denise, a solicitor, was appointed as a non-executive director on
1 August 2013 and became senior independent non-executive
director on 1 November 2018. Denise is a consultant at Eversheds-
Sutherland LLP, having been a partner from 2004 to April 2019.
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
Redrow plc and SCS Upholstery plc.
Other appointments
CLS Holdings plc – non-executive director and a member of the
Audit and Remuneration Committees.
Pool Reinsurance Limited – non-executive director and
Chair of Remuneration Committee and Nominations and
Conflicts Committee.
University of York – Chairman and pro Chancellor.
St Giles Trust – Chairman.
Yorkshire 2019 Limited – senior independent director.
Eversheds-Sutherland LLP – consultant.
Jason Honeyman
Chief Executive
Committee
NR*
Keith Adey
Group Finance Director
Committee
NR
Appointed to the Board on 1 September 2017.
Appointed to the Board on 1 February 2012.
Background and experience
Jason commenced employment with the Group in January 2005
as Managing Director of the Thames Gateway division, becoming
Southern Regional Chairman in December 2011. Jason joined
the Board as Chief Operating Officer and was promoted to Chief
Executive on 1 August 2018.
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.
42
Bellway p.l.c. Annual Report and Accounts 2019 Jill Caseberry
Independent Non-Executive
Director
Committees
A
N R*
Ian McHoul
Independent Non-Executive
Director
Committees
A* N R
Appointed to the Board on 1 October 2017.
Appointed to the Board on 1 February 2018.
Background and experience
Jill was appointed to the Board as a non-executive director
on 1 October 2017. Jill has extensive sales, marketing and
general management experience across a number of blue chip
companies including Mars, PepsiCo and Premier Foods.
Other appointments
Halfords Group plc – non-executive director, Remuneration
Committee Chair and a member of the Audit and
Nominations Committees.
C&C Group plc – non-executive director and a member of the
Remuneration Committee.
St. Austell Brewery Company Limited – non-executive
director and a member of the Audit, Nomination and
Remuneration Committees.
Background and experience
Ian, an accountant, was appointed to the Board as a non-
executive director on 1 February 2018, and appointed as
Chairman of the Audit Committee on 12 December 2018. He was
Finance & Strategy Director of the Inntrepreneur Pub Company
Limited from 1995 to 1998 and then served at Scottish & Newcastle
plc from 1998 to 2008, first as Finance Director of Scottish Courage
and later as Group Finance Director of Scottish & Newcastle plc.
From 2008 to 2017 he was Chief Financial Officer of Amec Foster
Wheeler plc. He was also a non-executive director of Premier
Foods plc from July 2004 to April 2013.
Other appointments
The Vitec Group plc - Chairman.
Britvic plc – senior independent non-executive director and
Chairman of the Audit Committee.
Young & Co’s Brewery, P.L.C. – non-executive director and
Chairman of the Audit Committee.
Simon Scougall
Group General Counsel
and Company Secretary
Appointed on 1 February 2016.
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 20
years’ experience in the housebuilding sector, working either in-
house or for clients in private practice.
Key:
A Audit Committee
N Nomination Committee
R Remuneration Committee
NR Board Committee on Non-Executive Directors’
Remuneration
* Denotes Committee Chairman
43
Bellway p.l.c. Annual Report and Accounts 2019Governance Chairman’s Statement on Corporate Governance
The Board reinforces our culture and the focus on
health and safety and customer care throughout
the Group.
Paul Hampden Smith
Chairman
Dear Shareholder
Changes to the Board
As reported in last year’s annual report, John Cuthbert retired
from the Board on 31 October 2018 and was succeeded by
Denise Jagger as senior independent non-executive director.
John Watson retired on 12 December 2018 at the conclusion
of the AGM, and I took over from him as Chairman.
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. I am pleased
to report that women make up 33% of our Board. Our Board
Diversity Policy is available to view on our website.
As at 31 July 2019 our female employees made up 30% (2018
– 28%) of our total workforce.
During the year the Board has increased its focus on
increasing the number of women in its senior management
team. As at 31 July 2019 19% (2018 – 14%) of our senior
management were women, and of our Head Office senior
management team, 30% are women (2018 - 25%).
Our culture – ‘retaining an entrepreneurial spirit’
The Board has continued to develop the core principles of
the Company’s culture that exist within the business, and has
consulted with employees via our newly formed employee
listening groups. The Board reinforces our culture and the
focus on health and safety and customer care throughout the
Group through divisional visits and informal Board dinners to
which senior managers are invited. We will be conducting an
employee engagement survey in 2019/20.
Board effectiveness and evaluation
During the year the evaluation of the Board and its
committees was conducted with the assistance of the Group
General Counsel and Company Secretary.
Each director 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
discussing individually with each director and the Group
General Counsel and Company Secretary 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.
These evaluations concluded that the Board and committees
were well run and continued to be operating effectively.
The main areas highlighted for further development or
improvement were:
• Board dinners to be used to allow non-executive directors
to meet more management below board level.
• Continue our work on improving diversity below
board level.
• Increase communications between board meetings.
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 annual report.
The areas highlighted for improvement in last year’s
Board evaluation and progress made are set out in the
table overleaf.
44
Bellway p.l.c. Annual Report and Accounts 2019 Board evaluation 2017/18 update
Action
Progress
How to further improve
the use of Board papers
to ensure that the right
balance is achieved in
terms of content and
time spent on the most
important issues.
How to further improve
presentations to the Board.
Continue to focus on
strategy as a top priority.
Board packs have been
rationalised and have become
more focussed. This will be
kept under review.
These have become more
succinct, with reports taken
as read, allowing the Board
to concentrate their time on
discussion of the topics.
Strategy is discussed at every
Board meeting and at our
annual strategy day. This work
continues to be a top priority
for the Board.
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. The revised
Code published in July 2018 applies to the Company from
1 August 2019 and I can confirm we have complied with that
Code from 1 August 2019 to the date of this report.
Shareholder engagement
The Company encourages active dialogue with its
private and institutional shareholders, and the directors
communicate with both existing and prospective institutional
shareholders on a regular basis and as requested.
Following my appointment in December 2018, I wrote to 15 of
our top shareholders and subsequently met with a number
of them.
In addition to the financial results presentations, during the
year our executive directors hosted further presentations
attended by institutional investors, analysts and shareholders,
with other members of the senior management team being
present. We also consulted with a number of shareholders on
our CR strategy. 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.
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 88% of
the votes cast were cast in favour of the resolutions put to
shareholders by the Board.
The senior independent non-executive director and I
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 on our
website at www.bellwayplc.co.uk.
Paul Hampden Smith
Chairman
14 October 2019
45
Bellway p.l.c. Annual Report and Accounts 2019Governance Corporate Governance Report
3
4
5
1
2
6
7
1 Ian McHoul
3 Simon Scougall
5 Paul Hampden Smith
7 Keith Adey
2 Denise Jagger
4 Jason Honeyman
6 Jill Caseberry
Board of Directors
Audit
Committee
Nomination
Committee
Remuneration
Committee
Board Committee
on Non-Executive
Directors’ Remuneration
See pages 52 to 57.
See pages 50 to 51.
See pages 58 to 76.
See page 49.
Executive Directors
Group General Counsel
and Company Secretary
Head Office
Senior Management
Team
Regional
Chairmen
Divisional Boards
46
Bellway p.l.c. Annual Report and Accounts 2019 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
Remuneration Report.
Leadership
At the date of this report the Board consists of six directors
whose names, responsibilities and other details appear on
pages 42 to 43. Currently two of the directors are executive
and four are non-executive.
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.
• ensuring that the Company complies 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.
Chief Executive
• implementing the strategy agreed by the Board.
• leading the executive directors and the senior management
team 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.
• supervising the activities of the Regional Chairmen
and divisional senior management, overseeing their
development and succession planning.
• overseeing Group operations.
• overseeing the activities of subsidiary companies.
• approving land purchases within specified limits.
• overseeing divisional expansion plans.
• together with the Chairman, providing coherent leadership
of the Group, including representing the Group to
customers, suppliers, government, shareholders, financial
institutions, employees, the media, the community and the
general public.
• keeping the Chairman informed of all important matters.
• overseeing the purchase of strategic land.
• overseeing the health and safety, sales and marketing and
technical departments.
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.
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.
• ensuring effective communication with shareholders.
• holding meetings with the non-executive directors without
• 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.
• approves land purchases over specified limits in
conjunction with the wider Board.
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.
47
Bellway p.l.c. Annual Report and Accounts 2019Governance Corporate Governance Report continued
Group General Counsel and Company Secretary
• supporting the Chairman and Chief Executive in fulfilling
their duties.
• keeping the Board regularly updated on corporate
governance, legal, commercial and HR 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.
• managing the Group’s external legal panel.
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. 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 full Board meetings,
including one meeting dedicated almost entirely to strategy.
Additional Board meetings are arranged as and when
required. The number of committee meetings are set out in
each committee report.
The non-executive directors formally met twice during the
year, including once without the Chairman present.
Ian McHoul was unable to attend one Board meeting and
the AGM due to a family bereavement. There were no other
absences from any other Board or committee meetings.
The non-executive directors meet to review the
performance of management and they also meet without
the Chairman being present to appraise his performance.
These meetings are chaired by the senior independent non-
executive director.
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.
Board activity 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 focussed
on during the strategy day were the seven key strategic
priorities of:
1. Strengthening the brand.
2. Volume growth.
3. Driving down costs.
4. Appointing the right people.
5. Focus on return on capital employed.
6. Value creation through capital and dividend growth.
7. Maintaining a flexible capital structure.
Each year we 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.
We also host informal Board dinners where senior
management meet members of the Board. The Chairman
meets with executive management and 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.
The executive directors, Group General Counsel and
Company Secretary and Chairman regularly visited
the divisions during the year. The Board also received
presentations from the Regional Chairmen and certain
Group function heads on the opportunities and challenges
they face.
Each non-executive director separately visits at least one
division during the year, independent of the executive
directors, and reports their key findings and observations at
the next Board meeting.
The meetings with operational management ensured that
the Board’s standards and values for integrity and honesty are
disseminated. Each of our 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.
The Board has adopted a schedule of matters that 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, land acquisition, contracts
and agreements, communication, Board membership and
other appointments, remuneration, delegation of authority,
corporate governance matters, Group policies and other
miscellaneous items.
48
Bellway p.l.c. Annual Report and Accounts 2019 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).
We also receive presentations and reports from Head Office,
regional and divisional management and external advisers
throughout the year. The Board also takes a report from the
Group General Counsel and Company Secretary on legal,
HR, commercial and corporate governance matters at each
Board meeting.
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 three of the four Regional
Chairmen on the performance of the divisions under
their responsibility.
• receiving presentations from Finance, HR, IT, Land,
Procurement, Sales and Marketing and Technical Head
Office departments.
• approval of the updated Group Anti-Bribery and
Corruption Policy.
• 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 2017/18.
• approval of the Annual Report and Accounts for 2017/18.
• approval of preliminary announcement, interim results and
trading updates.
• recommending the final dividend for 2017/18 to be
approved by shareholders and approval of the interim
dividend for 2018/19.
• approval of tax strategy.
Training and development
The Board receives appropriate training and updates on
various matters relevant to its role and responsibilities.
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.
Non-executive directors attend external training sessions
designed specifically for non-executives and members of
Board committees as and when required.
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 Company considers all of its non-executive directors,
including 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 that would materially affect the exercise of his or
her independent judgement and decision-making.
The senior independent non-executive director is Denise
Jagger, 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.
The Board committees
The Board has formally constituted Audit, Nomination and
Remuneration 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.bellwayplc.co.uk.
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. Last year it met on
one occasion to review the fees and terms of appointment
of the non-executive directors (excluding the Chairman)
and received advice from the Group General Counsel and
Company Secretary and external remuneration consultants
when required.
49
Bellway p.l.c. Annual Report and Accounts 2019Governance Nomination Committee Report
The Committee’s focus during the year has been the
induction of myself as the new Chairman, continuing
our work on succession planning and developing an
action plan to improve diversity within the Group.
Paul Hampden Smith
Chairman of the Nomination Committee
Membership
Director
Paul Hampden Smith
(Chairman)
Date appointed to
the Committee
1 August 2013, appointed
Committee Chairman on
1 November 2018
Denise Jagger
1 August 2013
Jill Caseberry
Ian McHoul
John Watson
John Cuthbert
1 October 2017
1 February 2018
1 February 2013 (retired
12 December 2018)
1 November 2009,
appointed Committee
Chairman on 1 February
2013 (retired 31 October
2018)
Number of
meetings
attended during
the year
2/2
2/2
2/2
2/2
1/1
1/1
Main focus in 2018/19
• To monitor the effectiveness of the recent appointments
and role changes at Board level, including my induction
into my new role as Chairman of the Board.
• To continue to develop, with support from the executive
directors and Group Human Resources, the succession plan
for those immediately below Board level.
• To increase the focus on diversity throughout the Group.
Focus areas for 2019/20
• To continue our work to improve diversity within the
Group, taking into account the recommendations from the
Parker Review.
• 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, in accordance with the Board’s Diversity Policy,
and recommend to the Board any changes it considers
appropriate. This encompasses membership of the Board
committees and the reappointment, 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 reappointment 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.bellwayplc.co.uk/
investor-centre/governance/committees.
The members of the Committee are shown in the table to
the left.
50
Bellway p.l.c. Annual Report and Accounts 2019
Focus in 2019/20
• following feedback from our employee listening groups we
will trial flexi-time at one of our divisions and will also shortly
commence a trial to give our Sales Advisors one weekend
off each month. If successful, these initiatives will then be
rolled out across the Group under an updated Flexible
Working Policy.
• we have introduced an Applicant Tracking System to
improve the candidate experience, improve and streamline
recruitment processes. At the point of application,
candidates are asked to complete equality and diversity
data, including age band, disability, ethnicity, gender, marital
status, religion and sexual orientation. After a very short
period of time, we can already see that there are a diverse
range of candidates applying for roles with Bellway.
• we are currently recruiting 40 graduates for our new
Graduate Programme ‘Great Careers built with us’ which
launches in January 2020. As part of this recruitment
selection we are taking the opportunity to recruit female
and BAME candidates where possible.
• we will review and create job descriptions and person
specifications to make them (a) more inclusive, (b) include
gender neutral language to attract more females into
the business and (c) remove certain barriers, such as the
requirement to hold a driving licence regardless of the
role, which may have discouraged potential applicants
with disabilities.
• we will run a national campaign to recruit more women into
the construction side of the Group.
• we are running a series of case studies in our staff
newsletter focussing on female employees who are
progressing their careers within the business.
Director and employee profile
The following table shows the gender split in the Group as at
31 July 2019:
Male
No.
Male
%
Female
No.
Female
%
Total
No.
Workforce
%
Board of directors
Senior managers
Other employees
Total
4
129
1,974
2,107
67
81
70
70
2
30
859
891
33
19
6
159
30 2,833
30 2,998
<1
5
94
100
Paul Hampden Smith
Chairman of the Nomination Committee
14 October 2019
Activities in 2018/19
The Committee’s focus during the year has been the
induction of myself as the new Chairman and developing an
action plan to improve diversity within the Group.
The work done in relation to diversity so far includes:
• equality, Diversity and Inclusion e-learning has been issued
to employees and forms part of the mandatory training
a new employee must undertake on commencing their
new role. 99.6% of employees have completed this training
within three months of this being issued to them.
• we held an externally facilitated Senior Leaders Diversity
and Inclusion session which was focussed on agreeing
our strategic priorities, job design and flexible working.
Work is under way to expand these sessions to other senior
managers in the business.
• each division has nominated at least one Diversity and
Inclusion Champion. All champions are completing a NCFE
Level 2 Equality and Diversity qualification.
• the following policies have been updated:
o Bullying, Harassment and Sexual Harassment Policy to
include specifically how we will manage claims of sexual
harassment and introduce strengthened reporting lines.
o Maternity and Paternity Policies to provide enhanced
maternity and paternity pay schemes.
• Equality Policy and Flexible Working Policy are in the
process of being updated in order to attract more women
and younger people into housebuilding.
• launch of a new Group recruitment panel to include
partners with a particular focus on improving diversity.
• we have begun working with www.Workingmums.co.uk.
We will use this site to advertise professional and senior
roles in order to encourage more women to come and
work for Bellway. We have also attended roundtable events
relating to diversity including the future of flexible working
and women in leadership.
• working with the Regional Chairmen and Managing
Directors to develop their progression and retention plans
for the key employees within each division, promoting
diversity where possible.
• we have introduced Personal Protective Equipment (‘PPE’)
specifically designed for females, namely high-vis jackets,
blouses and trousers.
• the Group Head of HR is a member of the HBF Equality,
Diversity and Inclusion Group that was formed last year to
understand what the housebuilding industry is doing to
improve diversity and inclusion.
Also during the year the Committee continued to develop,
with support from the executive directors and Group Human
Resources, the succession plan for those immediately below
Board level. This exercise will look to promote diversity
where possible.
In addition the Committee considered and recommended
to the Board that Denise Jagger be invited to remain on
the Board for her third and final three-year term from
1 August 2019.
51
Bellway p.l.c. Annual Report and Accounts 2019Governance Audit Committee Report
I consider the Committee to be effective and
provide a robust and independent oversight over
the financial reporting, internal control and risk and
external audit activities of the Group.
Ian McHoul
Chairman of the Audit Committee
I am pleased to provide you with my first report as Chairman
of the Audit Committee and to provide you with an update
of the work undertaken by the Audit Committee (the
‘Committee’) during the period. The Committee supports
the Board in achieving its governance framework, with
its principal activities focussed 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
During the year Paul Hampden Smith and John Cuthbert
retired from the Committee and I replaced Paul as the
Committee Chair. I would like to take this opportunity to
thank Paul and John for their valuable contributions to the
Committee during their tenures. The Committee currently
comprises three independent non-executive directors shown
in the table to the left. I believe that between us we have
an appropriate and relevant combination of experience
and knowledge.
I am currently Chair of the Audit Committee of both Britvic
plc and Young & Co’s Brewery, P.L.C. and was Chief Financial
Officer of Amec Foster Wheeler plc until 2017. The Board
consider that I have recent and relevant financial experience
as required by the Code. The Board has also confirmed that
they are confident that the collective and broad 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 42 to 43.
In line with the terms of reference, there were three
scheduled meetings of the Committee during the year and all
members of the Committee in post at the date of the meeting
attended each meeting.
The Group Finance Director, Group General Counsel and
Company Secretary, Group Financial Controller 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.
Number of
meetings
attended during
the year
3/3
3/3
3/3
1/1
1/1
Director
Ian McHoul
(Chairman)
Date appointed to
the Committee
1 February 2018,
appointed Committee
Chairman on 12
December 2018
Denise Jagger
1 August 2013
Jill Caseberry
1 October 2017
Paul Hampden Smith 1 August 2013, appointed
Committee Chairman on
1 February 2014 (retired
from the Committee
12 December 2018)
John Cuthbert
15 January 2010 (retired
31 October 2018)
Main focus in 2018/19
• Financial reporting.
• Internal control and risk management.
• Audit effectiveness.
• Assist with the induction of the two new Committee
members who joined during 2017/18.
• Handover of Chair to Ian McHoul from December 2018.
Focus areas for 2019/20
• Financial reporting.
• Internal control and risk management.
• Audit effectiveness.
• Approve annual tax strategy statement.
52
Bellway p.l.c. Annual Report and Accounts 2019 Representatives of KPMG LLP (‘KPMG’) attended all of the meetings during the year and also met the Committee independently
of management. No significant concerns 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.
Detailed papers are prepared and circulated in advance of Committee meetings by both management and KPMG, thereby
allowing informed discussions and decisions to take place.
Responsibilities and terms of reference
A comprehensive version of the Committee’s terms of reference is available on the Group’s website at
www.bellwayplc.co.uk/investor-centre/governance/committees.
Main activities during the year
The Committee met on three occasions during the financial year. The activities undertaken at the October 2019 meeting
concluded the Committee’s activities in relation to the Group’s financial reporting for the year ended 31 July 2019.
The main activities performed by the Committee at these meetings are described below:
Meeting date Activities
October 2018 The Committee:
• reviewed the final draft of the 2018 Annual Report and Accounts, together with a report produced by
KPMG, which detailed their findings both on areas of key financial reporting judgements/matters and other
areas of audit focus.
• reviewed and concluded that the 2018 Annual Report and Accounts presented a fair, balanced and
understandable assessment of the Group’s position and prospects after considering reports from the
external auditor. The Committee recommended the 2018 Annual Report and Accounts to the Board
for approval.
• reviewed the draft viability statement to appear in the 2018 Annual Report and Accounts.
• received a paper on significant judgemental areas prepared by management and provided appropriate
challenge to their assumptions.
• reviewed a paper which analysed notable one-off items that affected profit during the year.
• considered and challenged management about the use of Alternative Performance Measures (‘APMs’) and
whether they are appropriate or whether GAAP measures would be more relevant.
• reviewed a paper setting out progress made on the implementation of the new finance and valuation
system across the Group.
• considered a paper produced by management setting out management’s assessment in relation to
potential risks associated with cladding, work that will be performed and whether appropriate provision is
included within the financial statements of the Group.
• held a private meeting with KPMG.
January 2019 The Committee:
• received a risk management update from the Head of Risk and reviewed the Risk Management Policy.
• received an update on the Internal Audit activities undertaken in the previous calendar year and provided
feedback on the proposed 2019 Internal Audit plan.
• received a report on the risks associated with Brexit.
• reviewed the terms of reference of the Committee, number of meetings and skills and experience of
the Committee.
• reviewed the Group’s policies and procedures in relation to Whistleblowing, Anti-Bribery and Corruption,
Anti-Slavery and Data Protection.
• received an Anti-Money Laundering compliance report.
• assessed the performance of the external auditor including obtaining an update from KPMG in relation
to the general annual AQR audit quality findings the firm had received compared to their peers and
understanding the effect, if any, they had on the Bellway audit.
• reviewed the Independent Auditor Policy.
• held a private meeting with KPMG.
53
Bellway p.l.c. Annual Report and Accounts 2019Governance Audit Committee Report continued
Main activities during the year continued
Meeting date Activities
March 2019
The Committee:
• received a paper on significant judgemental areas prepared by management and provided appropriate
challenge to their assumptions.
• reviewed the final draft of the 2019 Interim Announcement.
• reviewed KPMG’s audit plan, including the proposed Group, subsidiary and divisional materiality for the
2019 audit.
• received a Risk and Internal Audit update.
• reviewed an updated version of the approvals and authority levels matrix.
• held a private meeting with KPMG.
October 2019 The Committee:
• reviewed the final draft of the 2019 Annual Report and Accounts, together with a report produced by KPMG
which detailed their findings both on areas of key financial reporting judgements/matters and other areas
of audit focus.
• reviewed and concluded that the 2019 Annual Report and Accounts presented a fair, balanced and
understandable assessment of the Group’s position and prospects after considering reports from the
external auditor. The Committee recommended the 2019 Annual Report and Accounts to the Board
for approval.
• reviewed the draft viability statement to appear in the 2019 Annual Report and Accounts.
• received a paper on significant judgemental areas prepared by management and provided appropriate
challenge to their assumptions.
• reviewed a paper which analysed notable one-off items that affected profit during the year.
• considered and challenged management about the use of APMs and whether they are appropriate or
whether GAAP measures would be more relevant.
• reviewed a paper setting out the external audit tender process and correspondence that will be issued to
various parties.
• considered a paper produced by management setting out management’s assessment in relation to
potential risks associated with fire safety and work that will be performed and whether appropriate
provisions and disclosures were included in the financial statements of the Group, including the contingent
liability note.
• reviewed a paper produced by management considering the Brexit risk associated with the supply chain.
• reviewed and approved the Slavery and Human Trafficking Statement 2019.
• received a Risk and Internal Audit update.
• considered the findings of the performance evaluation of the Committee.
• held a private meeting with KPMG.
Financial reporting
Significant and key financial reporting matters
The Committee confirmed that they believe the significant financial reporting judgements for the Group have not changed from
last year and are:
• cost of sales recognition.
• the carrying value of the Group’s land and work in progress.
In addition, the Committee consider the carrying value of investments by the Company a significant financial reporting matter.
The table overleaf sets out the matters considered and the action performed by the Committee during the year in relation to
these significant financial reporting matters.
54
Bellway p.l.c. Annual Report and Accounts 2019 The carrying value of the Group’s land
and work in progress (Group)
The carrying value of
investments (Company)
Land and work in progress are the most
significant assets on the Group’s balance
sheet and at 31 July 2019 had a book value
of £3,428.1 million. The carrying value of land
and work in progress is affected by the profit
recognition policy of the Group, as set out to
the left. In addition 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 ‘cost of sales recognition’ column.
The risk is that for any site/phase, currently
trading or not, that the whole site/phase margin
may be negative resulting in a net realisable
value that is below cost. Divisional management
review all sites/phases to ensure any with a
forecast negative whole site/phase margin have
an appropriate provision, and this has been re-
assessed at regular intervals during the year.
Investments in joint
ventures and subsidiaries
(‘investments’) is a significant
asset on the Company’s
balance sheet and at 31 July
2019 had a carrying value of
£41.4 million. Investments are
held at cost less impairment.
The risk surrounds the
judgement about whether
an impairment is required
given the inherent
uncertainty involved in
forecasting future cash flows
of an investment.
The carrying value of the Group’s land
and work in progress (Group)
The carrying value of
investments (Company)
The Committee reviewed
a paper comparing the
carrying value of the
investments held by the
Company to their associated
net assets.
Following a review of
this paper and enquiry
with management and
the external auditor, the
Committee concluded
that the carrying value of
investments is appropriate.
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.
Matters considered
Cost of sales recognition (Group)
Cost of sales of £2,423.1 million has been
recognised on housing and other revenue.
Cost of sales for completed housing sales is
recognised as an allocation of costs 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.
Action performed by the Committee
Cost of sales recognition (Group)
The Committee understands the Group’s
revenue and cost of sales recognition policy
and the related systems and controls.
During the year the Committee reviewed a
paper produced by management setting out
the revenue recognition policy and adherence
with this around reporting periods.
Management outlined the existing systems and
controls surrounding cost of sales 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, cost of
sales 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, implementation and operating
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 cost of sales recognition
policy is appropriate and has been properly
applied in these financial statements.
55
Bellway p.l.c. Annual Report and Accounts 2019Governance Audit Committee Report continued
Viability statement
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 challenged
management on the assumptions, methodology and
timespan that the viability statement covers.
A paper prepared by management was considered by the
Committee who concluded that the viability statement and
going concern basis of preparation is appropriate. This was
then recommended to the Board for approval.
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 by the Board, with a full review of the
risk register taking place throughout the business 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.
The principal risks facing the Group, which are described in
the Strategic Report on pages 26 to 27, 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.
The key areas of control are as follows:
• 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.
• a number of the Group’s key 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.
The Group has a risk function which, in part, performs internal
audit reviews. The Head of Risk has a direct reporting line
into both the Group Finance Director and myself. During the
year the risk function undertook a number of internal audit
reviews, utilising specialists from within relevant functions.
The Head of Risk provided the Committee with a summary
of the findings together with recommendations to further
enhance the control environment. A register is maintained
centrally which monitors progress against any system and
control enhancements to ensure they are implemented
appropriately and in a timely and controlled manner.
External audit
Audit effectiveness and reappointment
The external auditor of the Group is KPMG. Their performance
is regularly reviewed by both management and the
Committee, and this is done formally on an annual basis.
The Committee considered a paper produced by
management which used the FRC guidance note titled ‘Audit
Quality’ as the basis.
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
2017/18 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.
56
Bellway p.l.c. Annual Report and Accounts 2019 • 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.
• 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 ratio of non-audit fees for the year to the external audit
fee was 0:1. KPMG provide written confirmation on at least 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
internally facilitated. No major areas of improvement
were identified.
Following a review of these results, I consider that
the Committee is effective and provides a robust and
independent oversight over the financial reporting, internal
control and risk and external audit activities of the Group.
The Committee has an appropriate and complementary
set of skills and experience that enable it to deliver
the aforementioned.
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.
During the year the Committee approved minor changes to
the Whistleblowing Policy.
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.
Ian McHoul
Chairman of the Audit Committee
14 October 2019
• an understanding of the AQR and internal KPMG
quality review findings specifically in relation to the new
engagement partner for the 2019 audit, Johnathan Pass.
• considering KPMG’s independence, objectivity and
professional scepticism.
• reviewing the performance of KPMG against their audit
strategy for the 2017/18 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.
As part of this review a few small areas of improvement
were identified which have been fed back to KPMG who
have incorporated them in to their audit for the year ending
31 July 2019.
Following this review, the Committee recommended to the
Board, which is in turn recommending to the shareholders,
that KPMG be reappointed as the auditor of the Group.
Following the completion of the 2018 audit, Johnathan Pass
replaced Nick Plumb who had been the lead audit partner for
five years.
KPMG has been the auditor of the Group since 1979 when
Bellway was listed and the audit has not been tendered
in the intervening period. In line with UK rules relating
to the requirement for rotation of auditors of FTSE 350
companies, we have commenced the tender process for the
appointment of a new external auditor. The incoming auditor
will sit alongside KPMG during the 2020 audit to ensure
a smooth transition takes place before they are formally
appointed for the 2021 audit.
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 reviewed during the year and no changes
were made.
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.
• internal audit outsourcing services.
• management functions or human resources.
57
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report
The Committee continues to operate a
remuneration structure… which it considers
closely aligns shareholder interests with those
of management.
Jill Caseberry
Chairman of the Remuneration Committee
Annual Statement
Dear Shareholder
I am pleased to present the Report of the Remuneration
Committee (the ‘Committee’). This report consists of this
Annual Statement and the Annual Report on Remuneration
for the 2018/19 financial year, which will be subject to a single
advisory shareholder vote at the forthcoming AGM.
This is the second year of reporting on the current
remuneration policy and so the Committee will be bringing
a resolution to approve a renewal of the policy to next
year’s AGM.
Board changes
A number of changes have taken place in the year:
• As I explained last year, Jason Honeyman was promoted
from his role as Chief Operating Officer to Chief Executive
from 1 August 2018.
• John Cuthbert retired on 31 October 2018 and Denise
Jagger took over his role as senior independent non-
executive director.
• John Watson retired at the AGM on 12 December 2018 and
was succeeded by Paul Hampden Smith as non-executive
Chairman, with Ian McHoul replacing Paul as the Chairman
of the Audit Committee on the same date.
The new remuneration arrangements for these individuals
are covered below in the section on implementation of the
remuneration policy in 2018/19.
Performance and reward in 2018/19
The Committee continues to operate a remuneration
structure based on the three core elements of basic salary,
annual cash bonus and a share-based long-term incentive
plan, which it considers closely aligns shareholder interests
with those of management.
The Group has delivered another positive set of results,
consistent with its long-term growth strategy and has
achieved record volume, revenue and operating profit.
We have sold 10,892 homes (2018 – 10,307), increased
revenue by 8.6% to £3,213.2 million (2018 - £2,957.7 million)
and operating profit by 3.4% to £674.9 million (2018 -
£652.9 million). Earnings per share rose to 437.8p (2018 –
423.4p) and RoCE remained high at 24.7%(~) (2018 – 27.2%).
The Committee has awarded the executive directors a
bonus payment of 76.67% of basic salary and the long-term
incentive plan awarded in 2016/17 will vest at 30.57% of the
award. The award made to Jason Honeyman in November
2016 was made in respect of his position as Southern
Regional Chairman, before he joined the Board. Full details
of the bonus and long-term incentive plan performance and
levels of award, along with the CEO to employee pay ratio
are set out in the Annual Report on Remuneration on pages
61 to 70. The Committee considers that the level of bonus
payment and long-term incentive vesting reflects the strong
performance of the Group and the executive directors during
the twelve-month and three-year period to 31 July 2019.
58
Bellway p.l.c. Annual Report and Accounts 2019 The PSP award level is unchanged from last year at
150% of salary for executive directors, measured by
relative TSR performance against the same two peer
groups. The Committee considers this level of award
provides a strong focus on incentivising long-term,
sustained performance.
For bonus years commencing and PSP awards granted
after 1 August 2018, the time period over which clawback
and malus provisions will apply is the third anniversary of
payment of bonus or vesting of the PSP award, as relevant.
These provisions will also apply in the case of corporate
failure or material reputational damage.
Whilst not a requirement of the policy, the Chief Executive
has informed the Committee that he will invest 25%
of his 2019 and 2020 bonuses (after income tax and
national insurance) in Bellway shares which he will keep
for a minimum of three years. This will help to build his
shareholding ahead of a change in the policy that the
Committee will consider proposing to the 2020 AGM.
The Committee has also determined that in the event that a
new executive director is appointed, their pension allowance
will be capped at the workforce level.
The Committee continues to monitor changes in best
practice and corporate governance to ensure the policy,
how it is operated and our disclosures remain appropriate.
These and further changes (for example post-employment
shareholding requirements) will be brought to next year’s
AGM for approval as part of our renewed policy.
I hope you will support the resolution relating to directors’
remuneration which will be put to shareholders for approval
at the 2019 AGM.
Jill Caseberry
Chairman of the Remuneration Committee
14 October 2019
How we will implement the remuneration policy
in 2019/20
From 1 August 2019, the Group Finance Director was awarded
a salary increase of 2%, consistent with the average salary
increase to the general workforce.
As disclosed last year and in line with the current policy
on salaries for new executive directors, the salary of Jason
Honeyman, the Chief Executive, was initially set at a level
significantly below market levels with the clear intention of
then increasing it. Jason was appointed to the Board as Chief
Operating Officer in September 2017 at a salary of £383,000,
taking on many of the functions of the Chief Executive due to
Ted Ayres’ ill heath absence the previous month. On 1 August
2018 he was appointed to the Chief Executive role with a
salary of £530,000, which was £137,425 more than the Group
Finance Director’s salary, but £126,000 below the retiring Chief
Executive’s salary. This allowed him to gain experience and
fully develop into the role.
The Committee announced its intention in last year’s
report to increase Jason Honeyman’s salary to £689,000
from 1 August 2019, subject to his satisfactory personal
performance, to reflect an appropriate salary for the level
of responsibility and scope of the full role. This brought the
salary in to line with the salary that would have been payable
to Ted Ayres from that date (having applied two years of
workforce salary increases) if he had remained as Chief
Executive. The Committee has therefore phased his salary
increase over three years and sees no reason to make any
further increase above that applying to the general workforce,
in this policy period.
The 2019/20 annual bonus will continue to be based mainly
on financial performance, with a bonus opportunity of 85%
of salary based on operating profit. The remaining bonus
opportunity of 35% of salary will be based on the same
strategic measures as last year of land bank and customer
care, however, a third customer care measure has been
added. This new measure will attract a bonus opportunity
of 6.25% of basic salary and will be based on a survey on
the standard of finish which will be conducted eight weeks
after each legal completion. The existing customer care
measure of achieving 5 star homebuilder status will have a
bonus opportunity of 7.5% of basic salary, and the customer
satisfaction score will attract a bonus opportunity of 6.25%
of basic salary. Land bank continues to attract a bonus
opportunity of 15% of salary. Health and safety performance
will be taken into account as part of the Committee’s overall
assessment of the bonus payment which it does every year
before making a final determination.
59
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report continued
Remuneration at a glance
How remuneration links to our strategy (see pages 18 and 19 for details of our performance)
Strategic objective
Link to remuneration
Metric
Performance against metric
Volume growth and driving down costs
Annual bonus
Operating profit
Volume growth and focus on RoCE
Annual bonus
Strengthening the brand
Annual bonus
Sufficient land bank of plots
with DPP
Achieve 5 star homebuilder
status
Partly achieved
Achieved
Achieved
Strengthening the brand
Annual bonus
Customer satisfaction score
Partly achieved
Appointing the right people
Underpin to annual bonus Overall health and safety
Achieved
Value creation through capital and
dividend growth
Long-term incentive plan
How our executive directors were paid during 2018/19
performance
Relative TSR against two
comparator groups
Partly achieved
Chief
Executive
Group
Finance
Director
55%
50%
34%
9% 2%
£1,206
0
0
0
£
30%
17%
3%
£1,014
0
20
40
60
80
100
Fixed pay
Annual bonus
Long-term share awards
Share price gain on long-term share awards
%
Bonus outcomes – see pages 62 and 63
Strategic
objective
Operating profit
(pre-exceptional)
Weighting
(% of salary)
Threshold
(39% pays out)
Maximum value
(100% pays out)
90%
£665.0
million
£710.0
million
Actual(1)
£677.0
million
Payment
(% of maximum)
55.2%
Payment
(% of salary)
49.67%
Strategic objectives and performance against target
Score
Land bank
The land bank of plots with DPP (available for completion in the following financial
year) exceeded the maximum target and an award of 15% of salary was achieved.
Achieved in full – 15% of
salary awarded.
Customer care We retained our 5 star homebuilder status.
The Group’s customer satisfaction score in 2019 was 86.4% compared with the
base of 86.0%. The maximum score was 87.5%. The customer care score improved
slightly and the minimum payment of 4.5% of salary was achieved.
Achieved in full – 7.5% of
salary awarded.
Partly achieved – 4.5% of
salary awarded.
Note:
1. For profit and land bank bonus purposes, targets and outcomes include joint ventures.
LTIP outcomes – see page 63
The PSP awards granted in 2016/17 were based on a three-year TSR performance for the period to 31 July 2019.
Metric
Performance condition
Threshold target
Stretch target
Actual
% vesting
50%
of awards
Relative TSR against an index of peer housebuilders
41.4% TSR
(median)
63.9% TSR
(median
+22.5%)
39.7%
Bellway TSR
50%
of awards
Relative TSR against the FTSE 250 (excluding
financial services companies and investment trusts)
84 rank
(median)
42.5 rank
(upper quartile)
64
Bellway rank
Total
60
0.00%
61.14%
30.57%
Bellway p.l.c. Annual Report and Accounts 2019 Annual Report on Remuneration
Committee membership and activity
The Committee met five times during the year and details of the Committee members and their attendance are set out in the
table below.
Membership
Director
Date appointed to
the Committee
Number of meetings
attended during the year
Jill Caseberry (Chairman)
1 October 2017 (appointed as Committee Chairman on 13 December 2017)
Paul Hampden Smith
Denise Jagger
Ian McHoul
John Cuthbert
1 August 2013
1 August 2013
1 February 2018
15 January 2010 (retired 31 October 2018)
5/5
5/5
5/5
5/5
2/2
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.bellwayplc.co.uk/investor-centre/governance/committees.
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.
The Committee has received independent external advice from Korn Ferry since 1 January 2019. Prior to that the Committee
was advised by New Bridge Street (‘NBS’), part of Aon Hewitt. Both Korn Ferry and NBS were appointed by the Committee and
do not provide any other services to the Company other than to the Remuneration Committee and the Board Committee on
Non-Executive Directors’ Remuneration. They are both members of the Remuneration Consultants Group and abide by its
Code of Conduct. The Committee is satisfied that both Korn Ferry and NBS are independent. The total fee paid to Korn Ferry
and NBS for advice to the committees during the year was £41,043 and £25,182 respectively, totalling £66,225 (2018 - £50,696
– fee paid to NBS only). The Committee also benefitted 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 Korn Ferry.
Main focus in 2018/19
• Approve the bonus payments and long-term incentive awards vesting levels for the 2017/18 year.
• Approve the 2017/18 Remuneration Report.
• Set the bonus targets for the 2019/20 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, and the first tier of management below Board level.
• Review remuneration policies for senior management below Board level and the wider workforce.
• Put the role of remuneration consultant out to tender and deal with the handover between the outgoing and incoming
consultant firm.
61
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report continued
Focus areas for 2019/20
• Implement the requirements of the UK Corporate Governance Code 2018 which apply to the Company from 1 August 2019.
• Commence review of the new Remuneration Policy for 2020/21 to 2022/23 financial years, subject to approval by shareholders
at the 2020 AGM.
• Approve the bonus payments and long-term incentive awards vesting levels for the 2018/19 year.
• Approve the 2018/19 Remuneration Report.
• Set the bonus targets for the 2020/21 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, and the first tier of management below Board level.
• Review remuneration policies for senior management below Board level and the wider workforce.
Implementation of remuneration policy in 2018/19
The auditor is required to report on the information contained in the following part of this report.
Annual bonus for the year ended 31 July 2019
The annual bonus is payable in November 2019 for performance during the year ended 31 July 2019. The performance targets
for the 2018/19 bonus comprised operating profit and two strategic targets.
The actual bonus payment against operating profit was determined on the following basis:
Strategic
objective
Operating profit
(pre-exceptional)
Weighting
(% of salary)
Threshold
(39% pays out)
Maximum value
(100% pays out)
90%
£665.0
million
£710.0
million
Actual(1)
£677.0
million
Payment
(% of maximum)
55.2%
Payment
(% of salary)
49.67%
Operating profit grew by 3.4% to £677.0 million, above the minimum threshold but below the maximum threshold.
The basis for payment of the actual bonus against the two strategic measures is set out below:
Strategic measure Objectives and performance against target
Land bank
Increase in the land bank of plots with detailed planning permission (‘DPP’)
(available for completion in the following financial year) in the year to 31 July 2019 to
ensure our growth aspirations are not frustrated by land shortages in future years.
A payment of 10% of salary would be triggered for a predetermined percentage
increase in plots with DPP, with an additional 1% payment for further improved
performance, up to a maximum of 15% of salary.
The land bank of plots with DPP (available for completion in the following financial
year) exceeded the maximum target and an award of 15% of salary was achieved.
The land bank targets are commercially sensitive and will be disclosed one year in
arrears.
Customer care Achievement of 5 star homebuilder status (as measured by the HBF).
We retained our 5 star homebuilder status and an award of 7.5% was made.
No deterioration of the previous year’s customer satisfaction score would result in a
minimum payment of 4.5% of salary, with an additional bonus opportunity of 1% of
salary for each additional 0.5% improvement in the score up to a maximum of 7.5%
of salary.
Score
Maximum –
15% of salary.
Achieved – 15% of
salary awarded.
Maximum –
7.5% of salary.
Achieved – 7.5% of
salary awarded.
Maximum –
7.5% of salary.
The Group’s customer satisfaction score in 2019 was 86.4% compared with the base
of 86.0%. The customer care score improved slightly and the minimum payment of
4.5% of salary was achieved.
Partly achieved – 4.5%
of salary awarded.
Note:
1. For profit and land bank bonus purposes, targets and outcomes include joint ventures.
Health and safety performance is taken into account by the Committee as part of its overall assessment of the bonus payment,
and the Committee has discretion to reduce the overall bonus payment if it considers that health and safety standards have
been unsatisfactory. The Committee is satisfied with the health and safety standards over the year with an improved RIDDOR
seven-day reportable incident rate per 100,000 site operatives of 324.87 (2018 – 404.02); the third year in a row we have reduced
this rate. Bellway also continues to outperform the industry average on the NHBC health and safety incident rate, and have
improved the score this year to 0.856 (2018 – 0.867).
62
Bellway p.l.c. Annual Report and Accounts 2019 50% of
awards
50% of
awards
Total
Overall, the Committee is satisfied that the resulting bonus payment of 76.67% of salary (out of 120%) is reflective of the
Company’s performance during the year. The Committee considered that there were no circumstances that warranted the
exercise of discretion.
Bonus 2017/18 update
For the previous year’s bonus payment, the land bank element was calculated using the opening land bank with DPP, including
joint ventures, available for completion, in the 2018/19 financial year at 1 August 2017 of 10,634 plots. The base target to be
achieved by 1 August 2018 was set at 11,432 plots with a maximum target of 11,697 plots. The actual position as at 1 August 2018
was 11,510 plots and therefore a bonus of 11% of salary (out of a maximum of 15% of salary) was achieved.
Long-term incentives vesting in respect of performance period ended 31 July 2019
The PSP awards granted in 2016/17 were based on a three-year TSR performance for the period to 31 July 2019. The applicable
vesting percentages will be as follows:
Metric
Performance condition
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 median, increasing pro-rata, to full vesting at median +22.5%
(+7.5% p.a.).
Threshold
target
41.4%
TSR
(median)
Stretch
target
63.9%
TSR
(median
+22.5%)
Actual
% vesting
0.00%
39.7%
Bellway
TSR
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.
84 rank
(median)
42.5 rank
(upper
quartile)
64
Bellway
rank
61.14%
30.57%
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 considered there were no circumstances that warranted the
exercise of discretion. As a result, the following awards are expected to vest on 9 November 2019, and will be subject to a two-
year post-vesting holding period whereby shares may not be sold, other than to pay tax, until November 2021. The award made
to Jason Honeyman in 2016 was made in respect of his position as Southern Regional Chairman, before he joined the Board.
Director
Jason Honeyman
Keith Adey
Ted Ayres
Notes:
Value on
award
Number of
shares
at grant
Vesting
(% of max)
Guaranteed
number of
shares to vest
Share price
growth
Dividend
equivalent
£000(2)
£000
Estimated
value at
vesting(2)
£000
13,143
20,569
20,233(3)
30.57
30.57
30.57
4,018
6,288
6,185
20
31
31
17
26
26
131
205
202
£000(1)
309
484
476
1. Based on 100% salary for Jason Honeyman and 130% for Keith Adey and Ted Ayres (see also note 3).
2. Based on a share price of £28.51, being the average share price for the last quarter of the financial year i.e. 1 May – 31 July 2019 as a proxy for the share price at
vesting. The estimated value at vesting includes the value of dividend equivalent shares.
3. The award made to Ted Ayres has been pro-rated down from 35,223 to 20,233 on a time basis to 31 July 2018, the date on which he retired from the Board.
63
Bellway p.l.c. Annual Report and Accounts 2019Governance
Remuneration Report continued
Single figure of total remuneration
Non-executive Chairman
Paul Hampden Smith(1) 2019
2018
John Watson(2)
Executive directors
Jason Honeyman(3)
Keith Adey
Ted Ayres(4)
2019
2018
2019
2018
2019
2018
2019
2018
Non-executive directors
Denise Jagger(5)
2019
Jill Caseberry(6)
Ian McHoul(6)
John Cuthbert(6)
Mike Toms(6)
Totals
Notes:
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Salary and
fees
£
Taxable
benefits(7)
£
162,837
65,920
79,010
309,051
–
–
726
989
Pension(8)
£
–
–
–
–
Annual
bonus
£
Sub-total
£
Long-term
incentives(9)
£
Other
items(10)
£
Total
£
–
–
–
162,837
65,920
79,736
102,360
412,400
–
–
–
–
131,203
391,012
–
–
–
–
–
–
162,837
65,920
79,736
412,400
1,205,978
1,200,579
530,000
32,424
106,000
406,351
1,074,775
70,217
359,369
809,567
351,083
392,575
383,000
–
28,898
32,424
31,525
–
567,480
31,277
131,126
78,515
300,987
804,501
205,329
3,748
1,013,578
76,599
392,039
883,163
647,749
–
–
–
–
–
1,530,912
–
–
–
–
–
–
–
–
–
–
–
–
–
729,883
1,002,716
4,497
1,737,096
65,700
57,680
68,200
53,138
64,423
28,841
17,050
65,920
–
24,256
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65,700
57,680
68,200
53,138
64,423
28,841
17,050
65,920
–
24,256
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65,700
57,680
68,200
53,138
64,423
28,841
17,050
65,920
–
24,256
1,379,795
1,906,369
65,574
92,689
184,515
277,942
707,338 2,337,222
336,532
3,748
2,677,502
853,768
3,130,768
2,041,477
4,497
5,176,742
1. Paul Hampden Smith became Chairman on 12 December 2018. Prior to that date (and for the full 2017/18 year) he was a non-executive director and the Audit
Committee Chairman. His remuneration for 2018/19 therefore reflects his two roles during the year. His remuneration as Chairman during the year was paid at
a rate of £217,000 p.a.
2. John Watson received an additional payment of £100,000 p.a. from 14 August 2017 to 31 July 2018 to reflect the executive responsibilities he undertook during
Ted Ayres’ leave of absence. This payment was eligible for a bonus on the same basis as the bonus payable to the executive directors. On 1 August 2018 he
resumed his role as non-executive Chairman until his retirement on 12 December 2018. His fee in 2018/19 therefore reflects his shorter period of service during
the financial year.
3. Jason Honeyman was appointed to the Board on 1 September 2017 as Chief Operating Officer. His salary and bonus were set at the same level as Keith Adey’s
but the amounts shown as paid reflects the fact that he joined the Board after the start of the financial year. On 1 August 2018 Jason was appointed Chief
Executive and his salary was increased to reflect his promotion.
4. Ted Ayres’ basic salary for 2017/18 was £656,000 and where reference is made in this report to his basic salary for 2017/18 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
his absence on sick leave. Ted stepped down from the Board on 31 July 2018 and his remuneration during the 2018/19 financial year is not disclosed in the
table above as he was not a director during that year, however he received compensation during that year in accordance with his service agreement and our
remuneration policy as a good leaver. As such, he was entitled to salary, pension, benefits and car allowance for his 12 months’ notice period, but not bonus, and
as a good leaver, his outstanding PSP awards have all been time pro-rated by reference to 31 July 2018 and have vested/will vest on their normal vesting dates,
subject to achievement of the relevant performance conditions for each award over the three-year performance periods.
5. Denise Jagger became senior independent non-executive director on 1 November 2018 and received an additional fee from that date.
6. Jill Caseberry was appointed to the Board on 1 October 2017, Mike Toms retired from the Board on 13 December 2017, Ian McHoul was appointed to the Board on
1 February 2018 and John Cuthbert retired from the Board on 31 October 2018. Fees paid to these non-executive directors reflect their shorter period of service
during the relevant financial years.
7. Taxable benefits include car allowance and health insurance.
8. Pension includes both payments in lieu of pension of £174,515 and contributions to a defined contribution scheme of £10,000. None of the directors are members
of the Group’s defined benefit scheme and all of the executive directors are members of a defined contribution scheme.
9. The value of long-term incentives in 2019 reflects the vesting of the November 2016 PSP awards, which will be exercisable in 2019/20, including additional shares
in lieu of dividends accrued from the date of grant to the date of vesting. The value shown is based on a share price of £28.51, being the average share price for
the last quarter of the financial year i.e. 1 May – 31 July 2019 as a proxy for the share price at vesting. The 2018 figures for Jason Honeyman, Keith Adey and Ted
Ayres have been adjusted upwards by £20,707 for Jason Honeyman’s award and adjusted downwards by £50,165 and £77,657 for Keith Adey and Ted Ayres’
awards 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 award made to Jason Honeyman of 1,636 shares. The additional shares in lieu of
dividends accrued for the awards made to Keith Adey and Ted Ayres of 2,395 and 3,708 shares respectively were already included in the figures shown in last
year’s report.
10. Other items refer to the discount on the awards, during the year stated, under the Group’s all-employee savings related share option scheme.
64
Bellway p.l.c. Annual Report and Accounts 2019 Directors’ share-based rewards and options
Details of all directors’ interests in the Company’s share-based reward schemes are shown below:
Jason Honeyman
Scheme
PSP(1), (6)
PSP(2), (6)
PSP(3)
PSP(4)
Totals
Keith Adey
Scheme
PSP(1)
PSP(2)
PSP(3)
PSP(4)
2013 SRSOS(7), (8)
2013 SRSOS(7)
2013 SRSOS(7)
Totals
Notes:
Awards/
options
held at
1 August
2018
11,727
13,143
16,822
–
41,692
Awards/
options
held at
1 August
2018
19,701
20,569
16,822
–
439
1,099
–
Granted/
awarded
during
the year
–
–
–
28,909
28,909
Exercised
during
the year
Lapsed
during
the year
Awards/
options
held at
31 July
2019
Exercise
price/market
price at date
of award (p)
Date of
grant/
award
Exercisable/
capable of
vesting from
(11,700)
(27)
–
2,558.0
21.01.2016
21.01.2019
–
–
–
–
–
–
(11,700)
(27)
13,143
16,822
28,909
58,874
2,351.0
09.11.2016
09.11.2019
3,450.0
10.11.2017
10.11.2020
2,750.0
22.10.2018
22.10.2021
Granted/
awarded
during the
year
Exercised
during
the year
Lapsed
during
the year
Awards/
options
held at
31 July
2019
Exercise
price/market
price at date
of award (p)
Date of
grant/
award
Exercisable/
capable of
vesting from
–
–
–
21,413
–
–
621
(19,656)
(45)
–
2,382.0
13.11.2015
13.11.2018
–
–
–
(439)
–
–
–
–
–
–
–
–
20,569
16,822
21,413
–
1,099
621
2,351.0
09.11.2016
09.11.2019
3,450.0
10.11.2017
10.11.2020
2,750.0
22.10.2018
22.10.2021
2,048.8
1,378.0
16.11.2015
01.02.2019
17.11.2014
01.02.2020
2,414.4
03.12.2018
01.02.2024
58,630
22,034
(20,095)
(45)
60,524
1. The performance period was 1 August 2015 – 31 July 2018. The TSR performance condition was in two parts. Half was measured by reference to the median of a
group 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 median of the companies in that group, 25% of the awards
would vest. Full vesting would be achieved for 7.5% per annum outperformance of the median (22.5% in total). 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. The first part of the
performance condition was met in full and 99.550% of the second, so 99.775% of these awards vested.
2. Details of the vesting of these awards which will take place in the 2019/20 financial year are set out in full under the heading ‘Long-term incentives vesting in
respect of performance period ended 31 July 2019’ above. These awards are also subject to clawback provisions.
3. The performance period is 1 August 2017 – 31 July 2020. 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 22 October 2018, awards of performance shares under the PSP were made to Jason Honeyman and Keith Adey, equal to 150% of their respective salaries at
the date of grant. The face values on grant of these awards were £794,998 and £588,858 respectively. The performance period is 1 August 2018 – 31 July 2021.
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. The awards
were in the form of nil cost options.
5. All of the above options set out in notes 1–4 were granted for nil consideration.
6. These awards were made to Jason Honeyman during his employment as Southern Regional Chairman, before he joined the Board.
7. Further details of the 2013 SRSOS are shown in the summary of outstanding share options in note 22 to the accounts.
8. The gross gain made by the executive directors on the exercise of their 2013 SRSOS awards in 2019 was £4,462 (2018 – £46,442).
9. The value of long-term incentive plans for the executive directors which were exercised in the year and those which will become exercisable in 2019/20 are
shown in the single figure of total remuneration table on page 64.
10. The market price of the ordinary shares at 31 July 2019 was 2,970p and the closing range during the year was 2,419p to 3,226p.
65
Bellway p.l.c. Annual Report and Accounts 2019Governance
Remuneration Report continued
Payments to past directors
Other than payments made to Ted Ayres, as described below under ‘Payments for loss of office’ and elsewhere in this report, no
other past director received any payment during the year.
Payments for loss of office
Payments have been made to Ted Ayres in the 2018/19 financial year in relation to his retirement from the Board on 31 July 2018.
These related to contractual notice payments and the exercise of share awards as a good leaver.
Statement of directors’ shareholdings and share interests
The directors’ interests (including family interests) in the ordinary share capital of the Company at 31 July 2019 are set out below:
Director
Jason Honeyman
Keith Adey
Paul Hampden Smith
Denise Jagger
Jill Caseberry
Ian McHoul
Notes:
Beneficially
owned at
31 July 2019
16,586
64,853
12,548
1,250
–
–
% basic
salary held
by executive
directors
in shares(1)
Shareholding
target of
200% of basic
salary met?
93 In progress
491
N/A
N/A
N/A
N/A
Yes
N/A
N/A
N/A
N/A
Beneficially
owned at
31 July 2018
Outstanding
and unvested
PSP awards
Outstanding
and unvested
share options
Share options
exercised in
the year
9,531
52,748
12,548
1,250
–
–
58,874
58,804
N/A
N/A
N/A
N/A
–
1,720
N/A
N/A
N/A
N/A
11,700
20,095
N/A
N/A
N/A
N/A
1. Executive directors are required to accumulate a minimum shareholding equivalent to 200% of basic salary. Jason Honeyman joined the Board in September
2017 so has not yet had sufficient time to build the target shareholding from vesting share awards. Jason has informed the Committee that he will spend 25% of
his 2018/19 and 2019/20 bonuses buying Bellway shares that he will then hold for at least three years. The % shareholding is based on salaries as at 31 July 2019.
2. There has been no change in any of the above interests between 31 July 2019 and the date of this report.
The following section of this report is not required to be audited.
Implementation of remuneration policy in 2019/20
This section sets out how the Company will implement the remuneration policy for the 2019/20 financial year. Full details of how
each element will operate are set out in the remuneration policy table later in this report.
The Committee has taken into account the remuneration and related policies for the rest of the workforce generally when
setting the 2019/20 targets for the executives.
Basic salaries
The Committee has awarded Keith Adey a salary increase in line with the increases given to the general workforce of around
2% for 2019/20. Therefore from 1 August 2019, Keith’s salary was increased to £400,427 p.a.
As disclosed last year and in line with the current policy on salaries for new executive directors, the salary of the Chief Executive
was initially set at a level significantly below market levels with the clear intention of then increasing it. Jason was appointed
to the Board as Chief Operating Officer in September 2017 at a salary of £383,000 taking on many of the functions of the Chief
Executive due to Ted Ayres’ ill heath absence the previous month. On 1 August 2018 he was appointed to the Chief Executive
role with a salary of £530,000 which was £137,425 more than the Group Finance Director’s salary but £126,000 below the retiring
Chief Executive’s salary. This allowed him to gain experience and fully develop into the role. The Committee announced its
intention in last year’s report to increase this to £689,000 from 1 August 2019, subject to his satisfactory personal performance
and proving himself in the role over the year, to reflect an appropriate salary for the level of responsibility and scope of the full
role. It brought the salary in to line with the salary that would have been payable to Ted Ayres from that date (having applied
two years of workforce salary increases) if he had remained as Chief Executive. The Committee has therefore phased his salary
increase over three years and sees no reason to make any further increase above that applying to the general workforce, in this
policy period.
66
Bellway p.l.c. Annual Report and Accounts 2019
Annual bonus
For the 2019/20 financial year, the bonus opportunity will continue to be limited to 120% of basic salary. The performance
conditions relate to a stretching target of adjusted (pre-exceptional) operating profit (with a maximum payment of 85% of basic
salary achievable) and the following strategic performance measures which provide a maximum bonus opportunity of 35%
of basic salary. The increased weighting for customer care reflects the Committee’s belief that this is more important than in
previous years.
Strategic measure Objectives
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 2020 to ensure our growth aspirations are not
frustrated by land shortages in future years. A payment of 10% of salary would be
triggered for a predetermined percentage increase in plots with DPP, with an additional
1% payment for further improved performance, up to a maximum of 15% of salary.
Customer care This will be in three parts:
• 7.5% of salary for achieving 5 star homebuilder status (as measured by the HBF).
• 6.25% of salary linked to customer satisfaction score.
• 6.25% of salary based on standard of finish (survey results after eight weeks of each
legal completion).
The customer satisfaction score 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 –
20% of salary.
In the event that the threshold profit criterion is not met, no bonus will be payable under the strategic targets. 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 2019/20 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
this bonus structure allows for health and safety to have a 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 October 2019 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. Regardless of the vesting
outcome the Committee may adjust the level of vesting (including to nil) to such extent as it considers appropriate to ensure
the level of vesting is a true reflection of the overall performance of the Company over the performance period.
Metric
Performance condition
50% of awards Relative TSR against a group 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: 25% of this part of an award vests
at the median, increasing pro-rata, to full vesting at median +7.5% p.a.
Threshold
target
Median
Stretch
target
Median
+7.5% p.a.
50% of awards Relative TSR against the FTSE 250 (excluding financial services companies and
Median
investment trusts): 25% of this part of an award vests at median, increasing pro-rata,
to full vesting at the upper quartile.
Upper
quartile
67
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report continued
Chairman and non-executive director fees from 1 August 2019
Non-executive Chairman fee
Non-executive director fee
Senior independent non-executive director, Audit and Remuneration Committee
Chair fees
Fee from
1 August 2018
£
%
increase
Fee from
1 August 2019
£
217,000
58,200
2.0
–
221,340
58,200
10,000
13.5
11,350
The average fee increase for the Chairman and non-executive directors, taking into account the increase to the fees paid for
acting as senior independent non-executive director/chairing a committee (which each of the three non-executive directors
receive) is 2%, which is consistent with the average salary increase to the general workforce.
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.
Performance graph and table
The graph below shows the TSR performance over the past ten years of the Company, the FTSE 250 Index and the bespoke
Housebuilders’ Index (as defined in note 1 on page 65). 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 these companies have been 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
31 July
2009
532
530
307
508
505
543
533
333
323
450
372
259
373
334
261
246
208
208
202
263
263
227
227
222
128
80
78
152
100
92
151
118
115
31 July
2010
31 July
2011
31 July
2012
31 July
2013
31 July
2014
31 July
2015
31 July
2016
31 July
2017
31 July
2018
31 July
2019
Bellway
Housebuilders’ Index
FTSE 250 Index
This graph shows the value, by 31 July 2019, of £100 invested in Bellway on 31 July 2009 compared with the value of £100
invested in the FTSE 250 Index and £100 invested equally in each of the other seven large housebuilders. The other points
plotted are the values at intervening financial year ends.
68
Bellway p.l.c. Annual Report and Accounts 2019
Chief Executive total remuneration
The table below sets out the total remuneration for the Chief Executive over the same ten-year period as for the chart overleaf,
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 a %
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
2017
3,468
2018(3)
1,737(2)
2019(4)
1,206
76.9% 100.0%
99.3% 100.0%
91.6%
88.8%
95.8%
93.8%
0.0% 76.67%
48.3%
99.6%
0.0%
0.0%
50.0%
50.0% 100.0% 100.0%
99.8% 30.57%
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 9 to the table on page 64.
3. Ted Ayres was absent during the 2017/18 financial year due to ill health and so the figures shown are lower than would normally be expected if he had been at
work during the year.
4. Jason Honeyman was appointed as Chief Executive on 1 August 2018.
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
+10
No change
+29
+1
+7
CEO pay ratio
Although not required until our 2019/20 annual report, we are publishing our CEO pay ratio figures for the current year.
Over time, ten years’ ratios will eventually be disclosed.
Upper quartile
Median
Lower quartile
Financial year
Method
Pay
ratio
Total pay
and benefits
£
Salary
component
£
Pay
ratio
Total pay
and benefits
£
Salary
component
£
Pay
ratio
Total pay
and benefits
£
Salary
component
£
2018/19
A
19:1
62,168
50,200
28:1
42,845
22,647
40:1
29,858
23,305
The pay ratios have been calculated as at 31 July 2019 using Option A of the Regulations, that is, the full-time equivalent pay
and benefits for all of our employees to identify those employees on the quartiles. Employee benefits include company car, car
allowance, private medical, employer pension contributions and share option gains. The bonus element for the Chief Executive
is the bonus earned during the 2018/19 financial year which will be paid in November 2019 but the bonus element for all other
employees is calculated as bonus or commission paid during the 2018/19 financial year. The bonus earned by employees
during 2018/19 will be paid in November 2019 but these individual amounts will not be known until after the date of this report
and therefore the prior year’s bonus figures have been used.
69
Bellway p.l.c. Annual Report and Accounts 2019Governance
Remuneration Report continued
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 2018 and 31 July 2019.
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:
2019
£000
167,054
185,139
77,271
2018
£000
148,768
175,809
79,023
% change
+12
+5
-2
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 6 to the accounts).
3. The section 106 and CIL payments figures are calculated from invoices received for these payments.
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 2019 the Trust held 64,629 shares. It is the Company’s current
intention to use new issue shares to satisfy awards made under the PSP. 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 2019 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 0.25%
Actual 1.42%
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 on the following pages was approved by shareholders at the AGM on 13 December 2017 and is
intended to apply for three years unless a new policy is put to shareholders before then. The main areas of the policy report have
been reproduced for information and have been updated where appropriate to reflect the passage of time. The full approved
version can be found in the 2017 Annual Report on the Company’s website at www.bellwayplc.co.uk/media/1163/21110_bellway-
ar17_web.pdf.
70
Bellway p.l.c. Annual Report and Accounts 2019 Directors’ Remuneration Policy
Objectives of remuneration policy
The aim of the Committee is to ensure that the Company has competitive remuneration packages in place that 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. The two
year post-vesting holding period which applies to the long-term incentive plan (which also applies to good leavers) reinforces
that alignment.
Consideration of employment conditions elsewhere in the Group
Whilst we do not consult directly with employees when drawing up the executive remuneration policy, our employee
listening groups provide an opportunity for employees to raise issues which are reported to the Board. 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.
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.
Clawback/Malus
The time period over which clawback/malus will apply to bonus years ended and PSP awards made prior to 1 August 2018 is at
any time before the later of:
(i)
the first anniversary of the date on which the bonus is paid or an award vests, as relevant; or
(ii) the date of publication of the Company’s first set of audited financial statements covering the financial year in which the
payment or vesting took place, as relevant.
The time period over which clawback/malus will apply to bonuses in respect of bonus years commencing and PSP awards
granted after 1 August 2018 is at any time before the third anniversary of payment of bonus or vesting of PSP award, as relevant.
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. Any use of the 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.
71
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report continued
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
Pension
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 are set out
in the Annual Report
on Remuneration.
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.
To provide a structure
and value that is
market competitive
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.
Not applicable.
Not applicable.
120% of basic
salary maximum.
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 level of payout at threshold for financial
metrics will not be more than 40% of maximum,
and varies for non-financial metrics.
Full vesting will take place for equalling or
exceeding maximum, subject to the health and
safety underpin.
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 used are
set out in the Annual Report on Remuneration.
Not applicable.
Not applicable.
Benefits
To provide a range
and value that is
market competitive
Annual bonus
To reward achievement
with a combination
of financial and
non-financial
operational based
performance targets
in accordance with
Group KPIs
Typically comprises car or car allowance, life
assurance and health insurance. Other benefits
may be provided where appropriate.
Any expenses incurred in carrying out duties will
be fully reimbursed by the Company including any
personal taxation associated with such expenses.
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 clawback 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.
(iv) in relation to bonuses for the financial year
2018/19 onwards, also in the case of corporate
failure or material reputational damage*.
*These circumstances are in addition to those
approved under the current policy (noted at
paragraphs (i) to (iii) above) and will be tabled for
formal inclusion into the policy at a future date.
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.
72
Bellway p.l.c. Annual Report and Accounts 2019 Component and
link to strategy
Operation
Long-term incentives (‘PSP’)
Maximum opportunity
Framework to assess performance
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.
(iv) in relation to awards for the financial year
2018/19 onwards, also in the case of corporate
failure or material reputational damage*.
*These circumstances are in addition to those
approved under the current policy (noted at
paragraphs (i) to (iii) above) and will be tabled for
formal inclusion into the policy at a future date.
A minimum holding period of two years applies to
awards post-vesting.
150% of basic salary.
PSP awards are subject to stretching three-
year targets.
The current awards are subject to relative TSR
conditions against relevant comparator companies.
25% will vest at threshold with full vesting taking
place for equalling or exceeding maximum.
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 are set out in the Annual Report
on Remuneration.
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.
Chairman and non-executive directors
Not applicable.
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
Remuneration Committee.
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 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.
For the avoidance of doubt, under this Directors’ Remuneration Policy, authority is given to the Company to honour any
commitments entered into with current or former directors that is consistent with the approved remuneration policy in force at
the time the commitment was made (or, if made before the current policy was approved, as have been disclosed previously
to shareholders), or was made at the time when the relevant individual was not a director of the Company. Details of any
payments made to former directors will be set out in the Annual Report on Remuneration as they arise.
73
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report continued
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.
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.
We intend that any new director’s pension contributions will
be in line with the rest of the workforce. The current employer
pension contribution rates are between 5% and 10% of salary.
Bonus
In accordance with existing schemes. 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.
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).
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 details of the executive directors’ service contracts are as follows:
Executive director
Jason Honeyman
Keith Adey
First appointed as
a director
Current contract
commencement date
1 September 2017
1 August 2018
1 February 2012
1 February 2012
Notice period
from employer
6 months
12 months
Notice period
from executive
6 months
6 months
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.
All non-executive directors have letters of appointment with the Company for no more than three years, subject to annual
reappointment 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
Paul Hampden Smith
Denise Jagger
Jill Caseberry
Ian McHoul
74
First appointed as
a director
Current letter
of appointment
commencement date
Current letter of
appointment
expiry date
1 August 2013
12 December 2018
12 December 2021
1 August 2013
1 August 2019
31 July 2022
1 October 2017
1 October 2017 30 September 2020
1 February 2018
1 February 2018
31 January 2021
Bellway p.l.c. Annual Report and Accounts 2019 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.
Element
Bad leaver(1)
Departure on agreed terms(2)
Good leaver(3)
Salary, pension and
benefits (after cessation of
employment)
Nil.
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.
Annual bonus
No bonus payable. For the proportion of the financial
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.
Other payments
Nil.
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.
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.
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 requirements 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.
75
Bellway p.l.c. Annual Report and Accounts 2019Governance Remuneration Report continued
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:
For
Against
Total votes cast (excluding votes withheld)
Votes withheld
Directors’ Remuneration Policy
(binding vote at AGM on 13 December 2017)
Remuneration Report
(advisory vote at AGM on 12 December 2018)
Number
of votes
84,362,645
2,206,550
86,569,195
578,001
% of
votes cast
97.451
2.549
100.000
Number
of votes
76,787,077
10,381,411
87,168,488
2,027,564
% of
votes cast
88.090
11.910
100.000
As a result of the 12% vote against the Remuneration Report, the Chairman and the Remuneration Committee Chairman
engaged with a significant shareholder to discuss their concerns around the remuneration package for the Chief Executive.
Following our engagement the shareholder has confirmed that it is now broadly comfortable with our approach.
This report will be put to an advisory vote of the Company’s shareholders at the AGM on 10 December 2019.
On behalf of the Board
Jill Caseberry
Chairman of the Remuneration Committee
14 October 2019
76
Bellway p.l.c. Annual Report and Accounts 2019 Directors’ Report
The directors have proposed a final ordinary
dividend for the year ended 31 July 2019 of 100.0p
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 24 to the accounts.
The following table sets out where information can be found which is required to be reported on in the Directors’ Report, but
has been included elsewhere in the Annual Report and Accounts, and is simply cross-referenced here to avoid repetition.
Topic
Directors
Page number
42 to 43
Appointment and replacement of directors
48 and in the Articles
Directors’ interests
Future developments
Group undertakings
Environmental issues
Greenhouse gas emissions
Whistleblowing
Financial risk management
Going concern
66
23 of the Strategic Report
113
34 and 35 of the Strategic Report
35 of the Strategic Report
57
29 of the Strategic Report
30 of the Strategic Report
Results and dividends
The profit for the year attributable to equity holders of the parent company amounts to £538.6 million (2018 – £519.9 million).
The directors have proposed a final ordinary dividend for the year ended 31 July 2019 of 100.0p per share (2018 – 95.0p). 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 8 January 2020 to shareholders on the Register of Members at the
close of business on Friday 29 November 2019.
Dividends paid during the year comprise a final dividend of 95.0p per share in respect of the year ended 31 July 2018, together
with an interim dividend in respect of the year ended 31 July 2019 of 50.4p per share.
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.
77
Bellway p.l.c. Annual Report and Accounts 2019Governance Directors’ Report continued
Major interests in shares
As at 31 July 2019 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 Aberdeen plc
Dimensional Fund Advisors LP
BlackRock, Inc.
Credit Suisse Securities (Europe) Ltd
Polaris Capital Management, LLC
Post balance sheet events
There were no post balance sheet events.
As at 31 July 2019
As at 14 October 2019
Number of
shares with
voting rights
9,482,382
6,150,585
6,143,561
3,890,282
3,729,913
% total
voting rights
Number of
shares with
voting rights
% total
voting rights
7.71
9,482,382
5.00
5.00
3.38
3.03
6,150,585
6,143,561
3,890,282
3,729,913
7.71
5.00
5.00
3.38
3.03
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 that 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 that 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 2019, consisted of 123,167,828 ordinary shares of 12.5p each. Further details
of the issued capital of the Company can be found in note 16 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.
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, 187,562 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
Tuesday 10 December 2019.
78
Bellway p.l.c. Annual Report and Accounts 2019 Purchase of the Company’s own shares
The Company was given authority at the AGM on 12 December 2018 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 that 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 Financial Statements are shown on pages 30, 30 and 80 respectively.
The Audit Committee, whose role is detailed on pages 52 to 57, 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.bellwayplc.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 Tuesday 10 December 2019. Explanatory notes
on these resolutions are set out in the Notice of Meeting of the AGM.
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.
79
Bellway p.l.c. Annual Report and Accounts 2019Governance Directors’ Report continued
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 the Financial Statements
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
14 October 2019
80
Bellway p.l.c. Annual Report and Accounts 2019 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 2019 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 first appointed as auditor of the Company before
1979. The period of total uninterrupted engagement is
for more than the 40 financial years ended 31 July 2019.
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.
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 2019 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.
Overview
Materiality: Group financial
statements as a whole
Coverage
Key audit matters
Recurring risks
Event driven
£31 million (2018 – £31 million)
4.7% (2018 – 4.8%) of Group profit
before tax
100% (2018 – 100%) of Group
profit before tax
vs 2018
Cost of sales recognition on
current sites and carrying
amount of land held for
development and work
in progress
Recoverability of parent
company’s investment
in subsidiaries
New: The impact of
uncertainties due to the UK
exiting the European Union
81
Bellway p.l.c. Annual Report and Accounts 2019Governance Independent Auditor’s Report to the Members of Bellway p.l.c.
continued
2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, 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 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.
The risk
Our response
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in planning
and performing our audits. Our procedures included:
• Our Brexit knowledge: We considered the directors’
assessment of Brexit-related sources of risk for the Group’s
business and financial resources compared with our own
understanding of the risks. We considered the directors’ plans
to take action to mitigate the risks.
• Sensitivity analysis: When addressing going concern and
the carrying amount of land held for development and work
in progress and other areas that depend on forecasts, we
compared the directors’ analysis to our assessment of the full
range of reasonably possible scenarios resulting from Brexit
uncertainty and, where forecast cash flows are required to be
discounted, considered adjustments to discount rates for the
level of remaining uncertainty.
• Assessing transparency: As well as assessing individual
disclosures as part of our procedures on the carrying amount of
land held for development and work in progress we considered
all of the Brexit related disclosures together, including those in
the strategic report, comparing the overall picture against our
understanding of the risks.
Our results:
• As reported under the carrying amount of land held for
development and work in progress, we found the resulting
estimates and related disclosures of the carrying amount
of land held for development and work in progress and
disclosures in relation to going concern to be acceptable.
However, no audit should be expected to predict the
unknowable factors or all possible future implications for a
company and this is particularly the case in relation to Brexit.
Unprecedented levels
of uncertainty:
All audits assess and challenge
the reasonableness of estimates,
in particular as described in
the carrying amount of land
held for development and
work in progress below, and
related disclosures and the
appropriateness of the going
concern basis of preparation
of the financial statements (see
below). All of these depend
on assessments of the future
economic environment and the
Group’s future prospects and
performance.
In addition, we are required to
consider the other information
presented in the Annual Report
including the principal risks
disclosure and the viability
statement and to consider
the directors’ statement
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.
Brexit is one of the most
significant economic events
for the UK and at the date of
this report its effects are subject
to unprecedented levels of
uncertainty of outcomes, with
the full range of possible effects
unknown.
The impact of uncertainties
due to the UK exiting
the European Union on
our audit
Refer to page 27 (principal
risks), page 30 (viability
statement) and page 93
(accounting policy).
82
Bellway p.l.c. Annual Report and Accounts 2019 Group: Cost of sales
recognition and carrying
amount of land held for
development and work in
progress
Land held for development
and work in progress
(£3,428 million;
2018 – £3,224 million)
Cost of sales
(£2,423 million;
2018 – £2,200 million)
Refer to page 55 (Audit
Committee Report), pages
94 and 97 (accounting
policies) and note 12
on page 103 (financial
disclosures).
The risk
Our response
Subjective estimate:
The cost of sales recognised
is based upon an allocation of
whole site costs to each plot
when it is legally completed.
Cost of sales is subject to
estimation uncertainty as it is
reliant on the Group’s estimate
of future selling prices and
associated build costs, both of
which are uncertain and can
vary with market conditions.
The assessment of recoverability
of the carrying value of land
held for development and work
in progress is also dependent on
these same estimates.
The effect of these matters
is that, as part of our risk
assessment, we determined
that the cost of sales estimate
of £2,423 million and carrying
amount of land held for
development and work in
progress of £3,428 million have
a high degree of estimation
uncertainty, with a potential
range of reasonable outcomes
greater than our materiality
for the financial statements
as a whole, and possibly
many times that amount. The
financial statements disclose
the sensitivity estimated by the
Group.
Our procedures included:
• 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 profit margin recognised to the latest site
valuation and determining whether variances are supported by
changes in site valuations and post year end sales.
• Test of details: For a sample of undeveloped land sites,
corroborating explanations received from divisional
management as to their status by assessing underlying
planning and legal documents and quantity surveyor
assessments where applicable.
• Test of details: For a sample of sites, assessing the accuracy of
inputs in to the valuations such as sales price forecasts to actual
selling prices after the year end and cost forecasts to latest
assessments.
• Historical comparisons: For all sites that have been legally
completed during the year performing a retrospective review
to compare the budgeted gross profit margin with the margin
actually achieved.
• Historical comparisons: Comparing budgeted and latest site
valuations to assess the Group’s ability to accurately forecast;
and
• Assessing transparency: Assessing the adequacy of the
Group’s disclosures about the degree of estimation involved in
calculating cost of sales and carrying value of land and work in
progress.
Our results:
• We found the carrying value of land and work in progress to be
acceptable (2018 result – acceptable).
• We found the level of cost of sales recognised to be acceptable
(2018 result – acceptable).
Company: Recoverability
of parent company’s
investment in subsidiaries
(£41.4 million; 2018 –
£39.7 million)
Refer to page 55 (Audit
Committee Report), page
94 (accounting policy)
and note 10 on page 102
(financial disclosures).
Low risk, high value:
The carrying amount of the
parent company’s investments
in subsidiaries represents 6%
(2018 – 6%) of the company’s
total assets. Their recoverability
is not at a high risk of significant
misstatement or subject
to significant judgement.
However, due to their
materiality in the context of
the parent company financial
statements, this is considered
to be the area that had the
greatest effect on our overall
parent company audit.
Our procedures included:
• Tests of detail: Comparing the carrying amount of 100% of
investments with the relevant subsidiaries’ draft balance sheet
to identify whether their net assets, being an approximation
of their minimum recoverable amount, were in excess of their
carrying amount and assessing whether those subsidiaries
have historically been profit-making.
• Assessing subsidiary audits: Assessing the work performed
by the subsidiary audit teams on all of those subsidiaries and
considering the results of that work, on those subsidiaries’
profits and net assets.
Our results:
• We found the Group’s assessment of the recoverability of the
investment in subsidiaries to be acceptable (2018 – acceptable).
83
Bellway p.l.c. Annual Report and Accounts 2019Governance Independent Auditor’s Report to the Members of Bellway p.l.c.
continued
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 £31 million, determined with reference to a benchmark
of Group profit before tax of £662.6 million, of which it
represents 4.7% (2018 – 4.8%).
Materiality for the parent company financial statements
as a whole was set at £10.6 million (2018 – £10.6 million),
determined with reference to a benchmark of company total
assets, of which it represents 1.7% (2018 – 1.7%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £1.55 million,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the Group’s nine (2018 – nine) reporting components,
we subjected nine (2018 – nine) to full scope audits for
Group purposes.
The components within the scope of our work accounted for
the percentages illustrated opposite.
For the three (2018 – three) 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 £0.001 million to £27 million (2018 –
£0.001 million to £26.4 million), having regard to the mix of
size and risk profile of the Group across the components.
The work on all of the components (2018 – all components),
including the audit of the parent Company, was performed
by the Group team.
Profit before tax
£662.6 million
(2018 – £641.1 million)
Profit before tax
Group materiality
Group materiality
£31 million (2018 – £31 million)
£31 million
Whole financial
statements materiality
(2018 – £31 million)
£27 million
Range of materiality at
nine components
£0.001 million – £27 million
(2018 – £0.001 million
to £26.4 million)
£1.55 million
Misstatements reported
to the Audit Committee
(2018 – £1.55 million)
Group revenue
Group profit before tax
100%
(2018 - 100%)
100
100
100%
(2018 - 100%)
100
100
Group total assets
1
100%
(2018 - 99%)
99
100
Full scope for Group audit purposes 2019
Residual Components 2019
Full scope for Group audit purposes 2018
Residual Components 2018
84
Bellway p.l.c. Annual Report and Accounts 2019 4. We have nothing to report on going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as
they have concluded that the Company’s and the Group’s
financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a
going concern for at least a year from the date of approval of
the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of
the directors’ conclusions and, had there been a material
uncertainty related to going concern, to make reference to
that in this audit report. However, as we cannot predict all
future events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence
of reference to a material uncertainty in this auditor’s report
is not a guarantee that the Group and the Company will
continue in operation.
In our evaluation of the directors’ conclusions, we considered
the inherent risks to the Group’s and Company’s business
model and analysed how those risks might affect the Group’s
and Company’s financial resources or ability to continue
operations over the going concern period. The risks that
we considered most likely to adversely affect the Group’s
and Company’s available financial resources over this
period were:
• increases in build costs or delays in build programmes;
• changes in government regulation and policy;
• reductions in mortgage availability; and
• uncertainty in macro political and economic factors
including the impact of Brexit.
As these were risks that could potentially cast significant
doubt on the Group’s and the Company’s ability to continue
as a going concern, we considered sensitivities over the
level of available financial resources indicated by the Group’s
financial forecasts taking account of reasonably possible
(but not unrealistic) adverse effects that could arise from
these risks individually and collectively and evaluated the
achievability of the actions the directors consider they would
take to improve the position should the risks materialise.
We also considered less predictable but realistic second
order impacts, such as the impact of Brexit and the erosion
of customer or supplier confidence, which could result in a
rapid reduction of available financial resources.
Based on this work, we are required to report to you if:
• we have anything material to add or draw attention to
in relation to the directors’ statement in the financial
statements 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 30 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects, and we did not
identify going concern as a key audit matter.
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 30 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 Principal Risks 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 viability
statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context
of only the knowledge acquired during our financial
statements audit. As we cannot predict all future events or
conditions and as subsequent events may result in outcomes
that are inconsistent with judgments that were reasonable at
the time they were made, the absence of anything to report
on these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.
85
Bellway p.l.c. Annual Report and Accounts 2019Governance Independent Auditor’s Report to the Members of Bellway p.l.c.
continued
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.
Based solely on our work on the other information
described above:
• with respect to the Corporate Governance Statement
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 Corporate Governance Statement
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.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
80, 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.
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 or other
irregularities (see below), 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.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our sector experience, through
discussion with the directors and other management (as
required by auditing standards), and from inspection of the
Group’s regulatory and legal correspondence and discussed
with the directors and other management the policies and
procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation, and taxation legislation and
we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial
statement items.
86
Bellway p.l.c. Annual Report and Accounts 2019 Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of
fines or litigation. We identified the following areas as those
most likely to have such an effect: health and safety, anti-
bribery, anti-money laundering, employment law and certain
aspects of company legislation recognising the nature of the
Group’s activities and its legal form. Auditing standards limit
the required audit procedures to identify non-compliance
with these laws and regulations to enquiry of the directors
and other management and inspection of regulatory and
legal correspondence, if any. Through these procedures, we
became aware of actual or suspected non-compliance and
considered the effect as part of our procedures on the related
financial statement items. The identified actual or suspected
non-compliance was not sufficiently significant to our audit to
result in our response being identified as a key audit matter.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our audit
in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations
(irregularities) is from the events and transactions reflected in
the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify
it. In addition, as with any audit, there remained a higher
risk of non-detection of irregularities, as these may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal controls. We are not responsible
for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.
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.
Johnathan Pass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
14 October 2019
87
Bellway p.l.c. Annual Report and Accounts 2019Governance Group Income Statement
for the year ended 31 July 2019
Revenue
Cost of sales
Gross profit
Other operating income
Other operating expenses
Administrative expenses
Operating profit
Finance income
Finance expenses
Share of result of joint ventures
Profit before taxation
Income tax expense
Profit for the year*
Earnings per ordinary share – Basic
Earnings per ordinary share – Diluted
Note
1, 25
2019
£000
2018
£000
Restated(1)
3,213,243
2,957,664
(2,423,062)
(2,200,184)
790,181
169,922
(175,513)
(109,685)
674,905
569
(15,014)
2,131
662,591
(124,037)
538,554
437.8p
436.4p
757,480
141,093
(145,125)
(100,577)
652,871
649
(14,261)
1,798
641,057
(121,152)
519,905
423.4p
421.6p
4
2
2
10
5
7
7
Statements of Comprehensive Income
for the year ended 31 July 2019
Profit for the period
Other comprehensive income
Items that will not be recycled to the income statement:
Remeasurement gains on defined benefit pension plans
Income tax on other comprehensive income
Other comprehensive income for the period, net of
income tax
Total comprehensive income for the period*
* All attributable to equity holders of the parent.
1. Restated, see note 25.
Note
Group
2019
£000
Group
2018
£000
538,554
519,905
Company
2019
£000
181,750
Company
2018
£000
160,000
22
5
1,333
(227)
5,001
(850)
1,106
4,151
–
–
–
–
–
–
539,660
524,056
181,750
160,000
88
Bellway p.l.c. Annual Report and Accounts 2019
Statements of Changes in Equity
at 31 July 2019
Group
Balance at 1 August 2017
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
6
16
Credit in relation to share
options and tax thereon
5, 22
Transactions with
non-controlling interest
Total contributions by and
distributions to shareholders
Issued
capital
Share
premium
Note
£000
£000
Capital
redemption
reserve
£000
Other
reserves
Retained
earnings
Total
£000
£000
£000
Non-
controlling
interest
£000
Total
equity
£000
15,349
171,240
20,000
1,492
1,983,325
2,191,406
(66) 2,191,340
–
–
–
–
23
–
–
–
–
–
–
2,412
–
–
23
2,412
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
519,905
519,905
4,151
4,151
524,056
524,056
(162,647)
(162,647)
–
2,435
1,850
1,850
–
–
–
–
–
–
519,905
4,151
524,056
(162,647)
2,435
1,850
–
–
66
66
(160,797)
(158,362)
66
(158,296)
Balance at 31 July 2018
15,372
173,652
20,000
1,492 2,346,584
2,557,100
–
2,557,100
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
Purchase of own shares
Shares issued
6
17
16
Credit in relation to share
options and tax thereon
5, 22
Total contributions by and
distributions to shareholders
–
–
–
–
–
23
–
23
–
–
–
–
–
2,102
–
2,102
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
538,554
538,554
1,106
1,106
539,660
539,660
(178,865)
(178,865)
(512)
(8)
(512)
2,117
1,674
1,674
(177,711)
(175,586)
–
–
–
–
–
–
–
–
538,554
1,106
539,660
(178,865)
(512)
2,117
1,674
(175,586)
Balance at 31 July 2019
15,395
175,754
20,000
1,492 2,708,533 2,921,174
– 2,921,174
* An additional breakdown is provided in the Statements of Comprehensive Income.
89
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Statements of Changes in Equity continued
at 31 July 2019
Company
Balance at 1 August 2017
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
Issued
capital
Share
premium
Note
£000
£000
Capital
redemption
reserve
£000
15,349
171,240
20,000
Other
reserves
Retained
earnings
Total
equity
£000
2,145
£000
£000
423,331
632,065
–
–
–
–
23
–
23
–
–
–
–
2,412
–
2,412
–
–
–
–
–
–
–
–
–
–
–
–
–
–
160,000
160,000
–
–
160,000
160,000
(162,647)
(162,647)
–
2,459
2,435
2,459
(160,188)
(157,753)
6
16
22
Balance at 31 July 2018
15,372
173,652
20,000
2,145
423,143
634,312
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
Purchase of own shares
Shares issued
Credit in relation to share options
Total contributions by and distributions
to shareholders
–
–
–
–
–
23
–
23
–
–
–
–
–
2,102
–
2,102
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
181,750
181,750
–
–
181,750
181,750
(178,865)
(178,865)
(512)
(8)
1,648
(512)
2,117
1,648
(177,737)
(175,612)
6
17
16
22
Balance at 31 July 2019
15,395
175,754
20,000
2,145
427,156
640,450
* An additional breakdown is provided in the Statements of Comprehensive Income.
90
Bellway p.l.c. Annual Report and Accounts 2019
Balance Sheets
at 31 July 2019
ASSETS
Non-current assets
Property, plant and equipment
Investment property
Investments in subsidiaries
Financial assets and equity accounted joint arrangements
Deferred tax assets
Retirement benefit assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Current liabilities
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
Note
Group
2019
£000
Group
2018
£000
Company
2019
£000
Company
2018
£000
8
9
10
10
11
22
12
13
19
14
11
14
16
17
29,791
13,095
–
–
49,902
706
2,776
83,175
–
–
43,463
1,121
1,298
58,977
–
–
–
–
41,392
39,744
–
–
–
–
–
–
41,392
39,744
3,477,583
127,858
201,241
3,271,611
114,915
98,993
3,806,682
3,485,519
3,889,857
3,544,496
–
546,599
52,755
599,354
640,746
–
542,107
52,740
594,847
634,591
97,215
2,199
99,414
66,314
802,955
869,269
968,683
82,320
2,538
84,858
61,463
841,075
902,538
987,396
–
–
–
–
296
296
296
–
–
–
–
279
279
279
2,921,174
2,557,100
640,450
634,312
15,395
175,754
20,000
1,492
15,372
173,652
20,000
1,492
2,708,533
2,346,584
2,921,174
2,557,100
15,395
175,754
20,000
2,145
427,156
640,450
15,372
173,652
20,000
2,145
423,143
634,312
Approved by the Board of Directors on 14 October 2019 and signed on its behalf by:
Paul Hampden Smith
Director
Keith Adey
Director
Registered number 1372603
91
Bellway p.l.c. Annual Report and Accounts 2019Accounts
(11,901)
(45,377)
419,064
(7,829)
(119,311)
291,924
(5,126)
74
(5,750)
1,442
482
(8,878)
Group
2019
£000
Group
2018
£000
Company
2019
£000
Company
2018
£000
538,554
519,905
181,750
160,000
5,757
4
(569)
15,014
1,648
(2,131)
124,037
1,855
(72)
(649)
14,261
2,459
(1,798)
121,152
(205,972)
(303,427)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
211
(10)
(29,319)
51,228
(4,492)
17
375,595
177,275
160,201
(5,472)
(116,128)
–
–
–
–
253,995
177,275
160,201
(3,921)
298
(7,320)
–
188
(10,755)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(30,000)
(3,538)
–
2,117
(512)
(178,865)
(180,798)
102,248
98,993
201,241
2,435
–
(162,647)
(190,212)
53,028
45,965
98,993
2,117
(512)
(178,865)
(177,260)
15
52,740
52,755
2,435
–
(162,647)
(160,212)
(11)
52,751
52,740
Cash Flow Statements
for the year ended 31 July 2019
Cash flows from operating activities
Profit for the year
Depreciation charge
Loss/(profit) on sale of property, plant and equipment
Finance income
Finance expenses
Share-based payment expense
Share of post tax result of joint ventures
Income tax expense
Increase in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase 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
Increase in loans to joint ventures
Repayment of loans by joint ventures
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Decrease in bank borrowings
Payment of lease liabilities
Proceeds from the issue of share capital on exercise of
share options
Purchase of own shares
Dividends paid
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
8
4
2
2
22
10
5
10
10
6
19
92
Bellway p.l.c. Annual Report and Accounts 2019
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 14 October 2019, 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 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 20 to 23. The financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Financial Review on pages 24 to 25 and the Director’s Report on pages 77 to 80.
The Risk Management section on pages 28 to 30 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 2019, cash was £201.2 million having generated cash of £102.2 million (see note 18) during the year. The Group has
operated within all of its banking covenants throughout the year. In addition, the Group had bank facilities of £575.0 million,
expiring in tranches up to December 2023, with £575.0 million available for drawdown under such facilities at 31 July 2019.
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 IFRS 15 ‘Revenue from contracts with customers’ during the current financial year. Details of the effect on
these financial statements are included in note 25.
The Group adopted IFRS 16 ‘Leases’ during the current financial year. IFRS 16 requires lessees to recognise a lease liability
reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The Group used the modified
retrospective approach so the comparative information has not been restated. The right-of-use asset at the date of transition
was equal to the lease liability at that date, adjusted by the amount of any prepaid or accrued lease payments relating to that
lease recognised in the balance sheet immediately before the date of initial application. The weighted average incremental
borrowing rate applied to lease liabilities at the date of initial application was 3.15%.
The Group has also adopted the following standards and interpretations for the first time in these financial statements which
had no material effect:
– IFRS 9 ‘Financial Instruments’
– Annual Improvements to IFRS 2014-2016 Cycle
– Amendments to IFRS 2: Classification and measurement of share-based payment transactions
93
Bellway p.l.c. Annual Report and Accounts 2019Accounts Accounting Policies continued
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 accounted for directly as if
they were assets, liabilities and transactions of the Group.
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 in the Company financial statements 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.
94
Bellway p.l.c. Annual Report and Accounts 2019 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 the
income statement.
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.
Trade and other payables
Trade and other payables on normal terms are not interest-bearing and are stated at their nominal value. Trade payables on
deferred terms, most notably in relation to land purchases, are recorded initially at the fair value of all expected future payments.
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 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 measured at the fair value of consideration received or receivable, net of incentives. Revenue is recognised in
the income statement at a point in time when the performance obligation, being the transfer of a completed dwelling to a
customer, has been satisfied. This is when legal title is transferred.
(b) Social housing properties as part of a land sale and design and build contract.
Revenue is measured at the fair value of consideration received or receivable, net of incentives. Revenue is recognised in the
income statement at a point in time when the performance obligations have been satisfied. This is when the homes are build
complete and all material contractual obligations have been fulfilled.
Incentives
Sales incentives are substantially cash in nature. Cash incentives are recognised as a reduction in housebuild revenue by the
cost to the Group of providing the incentive.
95
Bellway p.l.c. Annual Report and Accounts 2019Accounts Accounting Policies continued
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. The original sale of private housing is recognised, as above, at the fair value of the part-exchange property plus the
cash received or receivable. The fair value of the part-exchange property is equal to the amount assessed by external valuers.
The onward sale of a part-exchange property is recognised at the fair value of consideration received or receivable. As it is not
considered a principal activity of the Group the income and expenses associated with this are recognised in other operating
income and other operating expenses. Income is recognised in the income statement at a point in time when the performance
obligations have been satisfied. This is when legal title is transferred.
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.
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 net defined benefit scheme asset or liability is the fair value of scheme assets less the present value of the defined benefit
obligation 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 income/(cost) is calculated on the defined benefit asset/(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 22.
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 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.
96
Bellway p.l.c. Annual Report and Accounts 2019 Leases
The lease liability is initially measured at the present value of the remaining lease payments, discounted using the Group’s
incremental borrowing rate. The lease term comprises the non-cancellable period of the contract, together with periods
covered by an option to extend the lease where the Group is reasonably certain to exercise that option. Subsequently, the
lease liability is measured by increasing the carrying amount to reflect interest on the lease liability, and reducing it by the
lease payments made. The lease liability is remeasured when the Group changes its assessment of whether it will exercise an
extension or termination option.
Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, plus any initial
direct costs and an estimate of asset retirement obligations, less any lease incentives. Subsequently, right-of-use assets are
measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain
remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease.
The Group has elected to apply exemptions for short-term leases and leases for which the underlying asset is of low value.
For these leases, payments are charged to the income statement on a straight-line basis over the term of the relevant lease.
Right-of-use assets are presented in property, plant and equipment on the balance sheet and lease liabilities are shown on the
balance sheet in trade and other payables in current liabilities and non-current liabilities depending on the length of the lease term.
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.
Accounting estimates and judgements
Management consider the following to be major sources of estimation that have been made in these financial statements:
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 judgement in estimating the
profitability of a site/phase and in assessing any impairment provisions which may be required. If a 10% increase was applied to
the inventories net realisable provision, this would not have a material effect on the carrying value of work in progress and land
held for development at the year end.
For both the years ended 31 July 2019 and 31 July 2018, 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 2019 and 31 July 2018 no exceptional charge has resulted from the review.
Cost of sales recognition
Cost of sales is recognised for completed house sales as an allocation of 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. This is a key estimate made in the financial statements.
To determine the amount of cost of sales that the Group is able to recognise on its sites/phases in the year, the Group needs
to allocate site/phase wide costs between all plots, both those sold in the current year, and those plots to be sold in future
periods. It is also necessary to estimate costs to complete on such sites/phases. In making these assessments certain estimates
are made. In addition the Group makes estimates in relation to future sales prices on the site/phase. The Group has a number
of internal controls to assess and review the reasonableness of estimates made. If housing gross margin increased by 200 basis
points, it is estimated that the quantum of housing cost of sales would decrease by around 2.7%.
Judgements
In the course of preparing the financial statements, no major judgements have been made in the process of applying the
Group’s accounting policies, other than those involving estimation, as set out above, that have had a significant effect on the
amounts recognised in the financial statements.
Standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements there were a number of standards and interpretations which were
in issue and endorsed by the EU but not yet effective. These have not been applied in these financial statements and are not
expected to have a material effect when adopted.
97
Bellway p.l.c. Annual Report and Accounts 2019Accounts Notes to the Accounts
1 Segmental analysis
The executive Board (the Chief Operating Decision Maker as defined in IFRS 8 ‘Operating segments’) 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 20 to 23. 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
Interest element of movement in pension scheme asset
Other interest income
Finance income
Interest payable on bank loans and overdrafts
Interest on deferred term land payables
Interest payable on leases
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 22)
Share-based payments (note 22)
2019
£000
397
136
36
–
569
6,690
7,826
498
–
15,014
2018
£000
161
425
–
63
649
5,410
8,754
–
97
14,261
2019
£000
164,136
16,477
5,976
1,648
188,237
2018
£000
146,284
14,686
5,092
2,459
168,521
The average number of persons employed by the Group during the year was 2,980 (2018 – 2,808) comprising 1,023 (2018 – 991)
administrative and 1,957 (2018 – 1,817) 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 Remuneration Report on pages 58 to 76.
Key management personnel remuneration, including directors, comprised:
Salaries and fees
Taxable benefits
Annual bonus – cash
Pension costs
Share-based payments
2019
£000
3,027
188
1,919
160
1,016
6,310
2018
£000
3,012
157
1,858
80
1,311
6,418
Key management personnel, as disclosed under IAS 24 ‘Related party disclosures’, comprises the directors and other senior
operational management.
98
Bellway p.l.c. Annual Report and Accounts 2019
4 Operating profit
Operating profit is stated after charging/(crediting):
Staff costs (note 3)
Loss/(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
Pension scheme audit
Other assurance services
2019
£000
2018
£000
188,237
168,521
4
5,757
14,876
–
(72)
1,855
15,745
1,841
30
195
7
–
30
174
5
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 £0.020 million (2018 – £0.018 million).
All other operating income relates to the sale of part-exchange properties and all other operating expenses relate to the
associated fair value of the part-exchange properties less costs to sell.
5 Income tax expense
Current tax expense:
UK corporation tax
Adjustments in respect of prior years
Deferred tax (income)/expense:
Origination and reversal of temporary differences
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
Non-taxable income and enhanced deductions
Adjustments in respect of prior years – current tax
Effective tax rate and tax expense for the year
– deferred tax
2019
£000
2018
£000
126,218
(2,056)
124,162
(162)
37
(125)
124,037
2018
%
19.0
–
(0.1)
–
18.9
120,397
(949)
119,448
1,704
–
1,704
121,152
2018
£000
641,057
121,801
300
(949)
–
121,152
2019
%
2019
£000
19.0
–
(0.3)
–
18.7
662,591
125,892
164
(2,056)
37
124,037
The deferred tax assets/(liabilities) held by the Group that are expected to be realised after 31 March 2020 are valued at 17%,
the substantively enacted corporation tax rate that will be effective after that date.
The effective income tax expense is 18.7% of profit before taxation (2018 – 18.9%) and compares favourably to the Group’s
standard tax rate for the year of 19.0% (2018 – 19.0%). 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.
99
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Notes to the Accounts continued
5 Income tax expense continued
Deferred tax recognised directly in equity:
Credit/(charge) relating to equity-settled transactions
Charge relating to remeasurements on the defined benefit pension scheme
6 Dividends on equity shares
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2018 of 95.0p per share (2017 – 84.5p)
Interim dividend for the year ended 31 July 2019 of 50.4p per share (2018 – 48.0p)
Dividends forfeited
2019
£000
26
(227)
2018
£000
(609)
(850)
2019
£000
2018
£000
116,829
62,041
(5)
103,668
58,997
(18)
178,865
162,647
Proposed final dividend for the year ended 31 July 2019 of 100.0p per share (2018 – 95.0p)
123,103
116,830
The 2019 proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 10 December
2019 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 2018, shares were held by the Bellway Employee
Share Trust (1992) (the ‘Trust’) on which dividends had been waived (see note 17).
The level of distributable reserves are sufficient in comparison to the proposed dividend.
7 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 per
share
Earnings
Weighted
average
number of
ordinary
shares
2018
Number
Earnings per
share
2018
p
423.4
(1.8)
421.6
2019
p
437.8
(1.4)
436.4
2018
£000
519,905
122,779,199
528,251
519,905
123,307,450
Earnings
2019
£000
Weighted
average
number of
ordinary
shares
2019
Number
For basic earnings per ordinary share
538,554
123,012,723
Dilutive effect of options and awards
398,943
For diluted earnings per ordinary share
538,554
123,411,666
100
Bellway p.l.c. Annual Report and Accounts 2019
8 Property, plant and equipment
Group
Cost
At 1 August 2017
Additions
Disposals
At 1 August 2018
Opening right-of-use asset recognised on adoption of IFRS 16
Additions
Disposals
At 31 July 2019
Depreciation
At 1 August 2017
Charge for year
On disposals
At 1 August 2018
Charge for year
On disposals
At 31 July 2019
Net book value
At 31 July 2019
At 31 July 2018
At 31 July 2017
Land and
property
£000
Plant, fixtures
and fittings
£000
Right-of-use
assets
£000
Total
£000
23,362
3,921
(1,894)
25,389
14,231
8,394
(1,945)
–
–
–
–
14,231
3,268
(153)
17,346
46,069
–
–
–
–
3,426
(58)
3,368
13,978
–
–
12,107
1,855
(1,668)
12,294
5,757
(1,773)
16,278
29,791
13,095
11,255
9,548
15
–
9,563
–
1,555
–
11,118
2,165
249
–
2,414
242
–
13,814
3,906
(1,894)
15,826
–
3,571
(1,792)
17,605
9,942
1,606
(1,668)
9,880
2,089
(1,715)
2,656
10,254
8,462
7,149
7,383
7,351
5,946
3,872
On 1 August 2018 the Group adopted IFRS 16 ‘Leases’ which requires lessees to recognise a lease liability and a ‘right-of-use
asset’ for virtually all lease contracts.
The Company has no property, plant and equipment.
9 Investment property
Group
Cost
At 1 August 2017 and 1 August 2018
Disposals
At 31 July 2019
Depreciation
At 1 August 2017 and 1 August 2018
On disposals
At 31 July 2019
Net book value
At 31 July 2019
At 31 July 2017 and 31 July 2018
Total
£000
423
–
423
423
–
423
–
–
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 (2018 – £nil).
The Company has no investment properties.
101
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Notes to the Accounts continued
10 Financial assets and equity accounted joint arrangements, and investments in subsidiaries
The Group and Company have the following investments or financial assets in subsidiaries and joint ventures:
Subsidiary undertakings
Interest in subsidiary undertakings' shares at cost
Financial assets and equity accounted joint arrangements
Financial assets – loan to joint ventures
Interest in joint ventures – equity
Group
2019
£000
–
45,568
4,334
49,902
Group
2018
£000
Company
2019
£000
–
41,392
Company
2018
£000
39,744
41,260
2,203
43,463
–
–
–
–
–
–
49,902
43,463
41,392
39,744
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 50 subsidiaries and 8 joint
arrangements. Further details are included in note 24.
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.
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 Lambeth Regeneration LLP 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 both the equity accounted joint ventures and related financial assets during the year is as follows:
At the start of the year
Increase in loans
Repayment of loans
Share of result
At the end of the year
2019
£000
43,463
5,750
(1,442)
2,131
49,902
The Group’s share of the joint ventures’ net assets/(liabilities) and income/(expenses) are 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 result of joint ventures
2019
£000
9
57,626
(50,033)
(3,268)
4,334
8,902
(6,720)
2,182
(51)
2,131
Guarantees relating to the overdrafts of the joint arrangements have been given by the Company (see note 20).
2018
£000
34,345
7,320
–
1,798
43,463
2018
£000
14
48,678
(44,971)
(1,518)
2,203
8,401
(6,510)
1,891
(93)
1,798
102
Bellway p.l.c. Annual Report and Accounts 2019
11 Deferred taxation
The following are the deferred tax assets/(liabilities) recognised by the Group and the movements thereon during the current
and prior year:
Group
At 1 August 2017
Income statement (charge)/credit
Charge to statement of comprehensive income
Charge to equity
At 31 July 2018
Income statement (charge)/credit
Charge to statement of comprehensive income
Credit to equity
At 31 July 2019
Capital
allowances
£000
28
(50)
–
–
(22)
(89)
–
–
(111)
Retirement
benefit
obligations/
(assets)
£000
678
(47)
(850)
–
(219)
(26)
(227)
–
(472)
The following is an analysis of the deferred tax balances for financial reporting purposes:
Share-based payments
Deferred tax assets
Capital allowances
Retirement benefit assets
Other temporary differences
Deferred tax liabilities
Net deferred tax liability
Share-based
payments
Other
temporary
differences
£000
1,726
4
–
(609)
1,121
(441)
–
26
706
£000
(686)
(1,611)
–
–
(2,297)
681
–
–
Total
£000
1,746
(1,704)
(850)
(609)
(1,417)
125
(227)
26
(1,616)
(1,493)
2019
£000
706
706
(111)
(472)
(1,616)
(2,199)
2018
£000
1,121
1,121
(22)
(219)
(2,297)
(2,538)
(1,493)
(1,417)
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.
12 Inventories
Group
Land
Work in progress
Showhomes
Part-exchange properties
2019
£000
2,004,424
1,298,243
125,455
49,461
2018
£000
2,011,881
1,115,091
97,447
47,192
3,477,583
3,271,611
Inventories of £2,376.1 million were expensed in the year (2018 – £2,154.7 million).
In the ordinary course of business, inventories have been written back by a net £1.0 million in the year (2018 – £0.8 million).
Land with a carrying value of £172.3 million (2018 – £217.0 million) was used as security for land payables (see note 14).
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.
103
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Notes to the Accounts continued
13 Trade and other receivables
Current receivables
Trade receivables
Other receivables
Amounts owed by Group undertakings
Prepayments and accrued income
Group
2019
£000
60,963
59,046
–
7,849
127,858
Group
2018
£000
39,459
69,623
Company
2019
£000
Company
2018
£000
–
–
–
–
–
546,599
542,107
5,833
114,915
–
–
546,599
542,107
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 (2018 – nil).
Other receivables includes £28.0 million (2018 – £26.0 million) in relation to VAT recoverable.
The Group has assessed expected credit losses and the loss allowance for trade and other receivables as immaterial.
14 Trade and other payables
Non-current liabilities
Land payables
Other payables
Lease liabilities
Group
2019
£000
85,292
–
11,923
97,215
Group
2018
£000
80,382
1,938
–
82,320
Company
2019
£000
Company
2018
£000
–
–
–
–
–
–
–
–
Land payables of £57.7 million (2018 – £68.7 million) are secured on the land to which they relate.
The carrying value of the land used for security is £55.5 million (2018 – £66.8 million).
Current liabilities
Trade payables
Land payables
Social security and other taxes
Other payables
Lease liabilities
Accrued expenses
Payments on account
Group
2019
£000
328,525
212,650
5,083
6,933
3,049
136,779
109,936
802,955
Group
2018
£000
Company
2019
£000
Company
2018
£000
301,349
284,993
7,771
13,278
–
124,498
109,186
841,075
–
–
–
–
–
–
296
279
–
–
–
–
–
–
296
279
Land payables of £120.5 million (2018 – £153.8 million) are secured on the land to which they relate.
The carrying value of the land used for security is £116.8 million (2018 – £150.2 million).
Payments on account comprises deposits received in advance which are contract liabilities. Deposits received in advance are
typically held for up to 18 months before the associated performance obligations are satisfied and the revenue is recognised.
The majority of the contract liabilities as at 31 July 2018 have been recognised as revenue in the current year. The approximate
transaction value allocated to the performance obligations that are unsatisfied at 31 July 2019 is £1,223.9 million (2018 –
£1,301.1 million), the majority of which is expected to be recognised as revenue during the next financial year.
104
Bellway p.l.c. Annual Report and Accounts 2019
15 Financial instruments
Land purchased on deferred terms
The Group sometimes acquires land on deferred payment terms. In accordance with IFRS 9 ‘Financial Instruments’ 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 2019
At 31 July 2018
Balance
at 31 July
£000
297,942
365,375
Total
contracted
cash payment
£000
305,226
371,950
Within 1
year or on
demand
£000
214,624
287,414
1–2 years
2–5 years
£000
51,950
57,549
£000
30,999
26,987
More than
5 years
£000
7,653
–
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:
Trade and other payables (excluding
lease liabilities)
Lease liabilities
At 31 July 2019
Trade and other payables
At 31 July 2018
Balance
at 31 July
£000
Total
contracted
cash payment
£000
Within 1
year or on
demand
£000
1–2 years
2–5 years
More than
5 years
£000
£000
£000
340,541
14,972
355,513
324,336
324,336
340,541
18,158
340,541
3,349
358,699
343,890
324,336
324,336
322,398
322,398
–
3,157
3,157
–
–
–
5,686
5,686
–
–
–
5,966
5,966
1,938
1,938
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 £575.0 million (2018 – £430.0 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 amount of cash and cash equivalents for the years ended 31 July 2019 and 31 July 2018 for both the Group and the
Company are shown in note 19.
At 31 July 2019 the average interest rate earned on the temporary closing cash balance, excluding joint ventures, was 0.61%
(2018 – 0.36%).
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
2019
£000
165,577
–
201,241
(648,372)
(281,554)
Group
2018
£000
142,440
7,902
98,993
(681,940)
(432,605)
Company
2019
£000
546,599
–
52,755
(296)
Company
2018
£000
542,107
–
52,740
(279)
599,058
594,568
The fair value through profit or loss asset is categorised as level 3 within the hierarchical classification of IFRS 13. This asset
is recorded at fair value, being the estimated amount receivable by the Group, discounted to present day values and was
included in other receivables at 31 July 2018 (see note 13).
105
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Notes to the Accounts continued
15 Financial instruments continued
Reconciliation of liabilities arising from financing activities
Group
At 1 August
2017
£000
Net cash
flows
£000
At 1 August
2018
£000
On adoption
of IFRS 16
£000
Bank borrowings
30,000
(30,000)
Lease liabilities
–
–
30,000
(30,000)
–
–
–
–
14,840
14,840
Net cash
flows
£000
–
(3,538)
(3,538)
New
leases
£000
–
3,268
3,268
Disposals
Interest
£000
–
(96)
(96)
£000
–
498
498
At 31 July
2019
£000
–
14,972
14,972
There were no liabilities arising from financing activities within the Company.
Bank facilities
The Group has bank facilities of £575.0 million (2018 – £430.0 million) which expire during the course of the following
financial years:
By 31 July 2019
By 31 July 2020
By 31 July 2021
By 31 July 2022
By 31 July 2023
By 31 July 2024
Group
2019
£000
–
155,000
175,000
–
50,000
195,000
575,000
Group
2018
£000
Company
2019
£000
Company
2018
£000
125,000
175,000
80,000
–
50,000
–
430,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Capital management
The Group is financed through the proceeds of issued ordinary shares, reinvested profits and bank borrowings less cash in
hand. The following table analyses the capital structure:
Equity
Net bank debt
Capital employed
Group
2019
£000
Group
2018
£000
Company
2019
£000
2,921,174
2,557,100
640,450
–
–
–
Company
2018
£000
634,312
–
2,921,174
2,557,100
640,450
634,312
Risks
Details of the risks relating to financial instruments are set out in the Risk Management section on pages 29 to 30.
16 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
2019
Number
000
122,980
188
123,168
2019
£000
2018
Number
000
15,372
23
122,798
182
15,395
122,980
2018
£000
15,349
23
15,372
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.
17 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 22. These are held within retained earnings. During the period 20,000
shares were purchased by the Trust (2018 – nil shares) and the Trust transferred 20,911 (2018 – 118,863) shares to employees and
directors. The number of shares held within the Trust and on which dividends have been waived, at 31 July 2019 was 64,629
(2018 – 65,540). These shares are held within the financial statements at a cost of £1.3 million (2018 – £1.2 million). The market
value of these shares at 31 July 2019 was £1.9 million (2018 – £1.9 million).
106
Bellway p.l.c. Annual Report and Accounts 2019
17 Reserves continued
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 £181.750 million (2018 – £160.000 million).
18 Reconciliation of net cash flow to net cash
Group
Increase in net cash and cash equivalents
Decrease in bank borrowings
Increase in net cash from cash flows
Net cash at 1 August
Net cash at 31 July
Company
Increase/(decrease) in net cash and cash equivalents
Increase/(decrease) in net cash from cash flows
Net cash at 1 August
Net cash at 31 July
19 Analysis of net cash
Group
Cash and cash equivalents
Net cash
Company
Cash and cash equivalents
Net cash
2019
£000
102,248
–
102,248
98,993
201,241
2019
£000
15
15
52,740
52,755
Cash
flows
£000
102,248
102,248
Cash
flows
£000
15
15
2018
£000
53,028
30,000
83,028
15,965
98,993
2018
£000
(11)
(11)
52,751
52,740
At 31 July
2019
£000
201,241
201,241
At 31 July
2019
£000
52,755
52,755
At 1 August
2018
£000
98,993
98,993
At 1 August
2018
£000
52,740
52,740
20 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 2019 there were bank overdrafts of £nil (2018 – £nil) and loans of £nil (2018 – £nil). 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 (2018 – £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.
Following the Grenfell fire, there has been evolving guidance in the complex area of fire safety, including amendments to the
Building Regulations which, from 21 December 2018, ban the use of combustible materials in the external walls of new high-rise
residential buildings 18 metres or more in height. The result of this and revised guidance to building owners and responsible
persons is additional scrutiny and review of the materials used in the construction of apartment schemes. Whilst all buildings
constructed by Bellway obtained the appropriate building regulations approval at the time of construction, as a responsible
developer, Bellway continues to work with residents, management companies, housing associations and freeholders to assess
the performance of specific cladding systems and fire safety measures. A liability, which is immaterial in the context of these
financial statements, is included in the balance sheet based on management’s expectation of the potential cost of working with
partners to carry out replacement cladding and related fire safety works as part of Bellway’s commitment to be a responsible
developer. These estimates may change over time as further information is assessed, building works progress and fire safety
regulations further evolve.
107
Bellway p.l.c. Annual Report and Accounts 2019Accounts Notes to the Accounts continued
21 Commitments
Capital commitments
Group
Contracted not provided
Authorised not contracted
2019
£000
6,387
–
2018
£000
221
–
Company
The commitments of the Company were £nil (2018 – £nil).
22 Employee benefits
(a) Retirement benefit assets
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 £5.976 million (2018 – £5.092 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 and 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 and to make sure these 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 2017 and updated on an approximate basis to 31 July 2019.
With regard to the Scheme, regular contributions made by the employer over the financial year were £nil (2018 – £nil).
The employer paid no special contributions (2018 - £nil) and reimbursed the pension fund £0.36 million (2018 – £0.37 million)
for expenses incurred by the fund.
The Group is expected to make no regular contributions during the year ending 31 July 2020.
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; and
• 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
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.
Inflation risk
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.
108
Bellway p.l.c. Annual Report and Accounts 2019
22 Employee benefits continued
Movements in net defined benefit assets
Balance at 1 August
Included in the income statement
Interest (cost)/income
Expenses
Past service costs
Included in other comprehensive
income
Remeasurement (loss)/gain arising from:
– Change in demographic and financial
assumptions
– Recognition of insurance policies
annuities
– 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 asset
2019
£000
2018
£000
2019
£000
(52,737)
(58,176)
54,035
2018
£000
54,199
(1,356)
(26)
(220)
(1,602)
(1,448)
1,392
1,351
–
–
–
–
–
–
(1,448)
1,392
1,351
2019
£000
1,298
36
(26)
(220)
(210)
2018
£000
(3,977)
(97)
–
–
(97)
(4,128)
1,716
(7,107)
(86)
–
(11,321)
–
3,375
3,375
–
2,368
–
4,084
–
2,803
2,803
–
7,107
–
5,547
12,654
355
(3,375)
(3,020)
65,061
–
–
–
917
917
371
(2,803)
(2,432)
54,035
(4,128)
1,716
–
(86)
5,547
1,333
355
–
355
2,776
–
2,368
917
5,001
371
–
371
1,298
Balance at 31 July
(62,285)
(52,737)
The weighted average duration of the defined benefit obligation at the end of the reporting period is 18 years (2018 – 18 years).
During the year assets and liabilities of £7.107 million relating to insurance policies annuities held by the Scheme on behalf of the
members have been recognised.
Scheme assets
The fair value of the Scheme assets is:
Diversified growth fund
Equity instruments
Corporate bonds
Liability driven instruments
Insurance policies annuities
Cash and cash equivalents
Total
2019
£000
29,357
2,783
4,996
20,587
7,107
231
2018
£000
22,632
16,492
3,845
10,871
–
195
65,061
54,035
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
2019
% per annum
2018
% per annum
2.10
2.80
3.10
2.30
2.65
3.70
3.10
2.20
Allowance for commutation of pension for cash at retirement
50% of maximum 50% of maximum
109
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Notes to the Accounts continued
22 Employee benefits continued
The mortality assumptions adopted at 31 July 2019 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 in 2019
Female retiring in 2019
Male retiring in 2039
Female retiring in 2039
22.6 years
24.4 years
23.9 years
26.0 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 (%)
-0.25% p.a.
Increase by 4.4%
+0.25% p.a.
Increase by 0.3%
+0.25% p.a.
Increase by 3.0%
+1 year life expectancy
Increase by 3.5%
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 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 2019 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 are detailed under the long-term incentive scheme section
on pages 63 to 65 within the Remuneration Report. No awards have been made under the SMP since 2014 and there are no
awards outstanding under the SMP as at 31 July 2019.
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.
The number and weighted average exercise price of share-based payments is as follows:
LTIP, SMP, 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
2019
Number of options
2018
Number of options
256,970
121,129
(10,339)
(95,471)
272,289
305,963
112,746
(42,876)
(118,863)
256,970
1,845
–
The options outstanding at 31 July 2019 have a weighted average contractual life of 1.3 years (2018 – 1.3 years).
The weighted average share price at the date of exercise for share options exercised during the year was 2,904.5p (2018 – 3,498.7p).
110
Bellway p.l.c. Annual Report and Accounts 2019
22 Employee benefits continued
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
2019
Number of options
2018
Number of options
466,441
203,168
(91,766)
(113,002)
464,841
542,898
155,769
(49,918)
(182,308)
466,441
721
–
The options outstanding at 31 July 2019 have an exercise price in the range of 1,378.0p to 2,934.4p (2018 – 1,218.4p to 2,934.4p)
and have a weighted average contractual life of 2.2 years (2018 – 2.3 years). The weighted average share price at the date of
exercise for share options exercised during the year was 2,919.6p (2018 – 3,291.7p).
Valuation methodology
For LTIP 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 2003 DBP, there are no market-related performance
conditions and awards will be eligible to vest upon reaching a date set out in the Deed of the award. As dividends are not
reinvested, the fair value of these awards is equal to the share price at the date of the grant. The Black Scholes method is used
for the SRSOS due to the relatively short exercise window of six months.
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:
2019
2018
October
2018
November
2018
November
2018
December
2018
December
2018
November
2017
November
2017
November
2017
December
2017
December
2017
Scheme
description
LTIP
LTIP
DBP
3 Year
SRSOS
5 Year
SRSOS
LTIP
LTIP
DBP
3 Year
SRSOS
5 Year
SRSOS
Grant date 22-Oct-18 22-Nov-18 22-Nov-18 03-Dec-18 03-Dec-18 10-Nov-17 14-Nov-17 14-Nov-17 05-Dec-17 05-Dec-17
0.0%
0.0%
0.0%
0.8%
0.9%
0.0%
0.0%
0.0%
0.6%
0.8%
–
–
–
2,414.4p 2,414.4p
–
–
–
2,934.4p
2,934.4p
2,763.0p
2,877.0p
2,877.0p
2,561.0p
2,561.0p
3,450.0p
3,499.0p
3,499.0p
3,517.0p
3,517.0p
5.0%
5.0%
5.0%
5.0%
5.0%
–
–
–
3.5%
3.5%
Risk free
interest rate
Exercise
price
Share price
at date of
grant
Expected
dividend
yield
Expected life
3 years
3 years
3 years
3 years
2 months
5 years
2 months
3 years
3 years
3 years
3 years
2 months
5 years
2 months
Vesting date 22-Oct-21 22-Nov-21 22-Nov-21 01-Feb-22 01-Feb-24 10-Nov-20 14-Nov-20 14-Nov-20 01-Feb-21 01-Feb-23
Expected
volatility
Fair value of
option
30%
30%
30%
30%
30%
35%
35%
N/A
35%
30%
1,264.0p
1,392.5p
2,621.0p
407.0p
430.0p
2,114.0p
2,181.0p
3,499.0p
893.0p
837.0p
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 £1.6 million (2018 – £2.5 million) in relation to equity-settled share-based
payment transactions.
111
Bellway p.l.c. Annual Report and Accounts 2019Accounts
Notes to the Accounts continued
23 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 Remuneration Report on pages 58 to 76.
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
2019
£000
28,233
(25)
2018
£000
16,547
(419)
(4,493)
(3,197)
50,885
48,832
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
183,871
162,436
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
(179,379)
(162,647)
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
546,599
41,392
542,107
39,744
The Company has suffered no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2018 – £nil).
2019
£000
2018
£000
112
Bellway p.l.c. Annual Report and Accounts 2019 24 Group undertakings
The directors set out below information relating to the Group undertakings as at 31 July 2019. All of these companies are
registered in England and Wales, apart from Seaton Eleven 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 City Solutions Limited
Bellway Conversions Limited
Bellway Homes (Anglia) Limited
Bellway Homes (Barking Reach) Limited
Bellway Homes (Hertfordshire) Limited
Bellway Homes (North Solihill) Limited
Bellway Homes (Social Housing) Limited
Bellway Homes (West Midlands) Limited
Bellway I Limited
Bellway London Limited
Bellway Marine Limited
Bellway Trustee Company Limited
Bellway Urban Renewals (Contracts) Limited
Bellway Urban Renewals Limited
Bulldog Premium Growth I Limited
Bulldog Premium Growth II Limited
D.F.W. Golding (Southern) Limited
D.F.W. Golding Limited
Joint arrangements
Cramlington Developments Limited (50% owned,
year end of 30 June)^^/1
Easel Leeds Limited (50% owned)^
Fradley Residential LLP (50% owned)^^
Leebell Developments Limited (50% owned,
year end of 30 June)^^/1
North Solihull (GP) Limited (25% owned,
year end of 31 March)^/^^/2
North Solihull Partnership LP (49.8% owned,
year end of 31 March)^^/2
Ponton Road LLP (50% owned)^^
Lambeth Regeneration LLP (50% owned)
Bellway Properties Limited
Bellway (Services) Limited
Litrose Investments Limited
George Blackett Limited
Heron Electrical Contractors Limited
Homes2Let Limited
J. T. B. (Chapel Farm) Estates Limited
J. T. B. Estates Limited
John T. Bell & Sons (1976) Limited
Lowfield Street Limited
Nixons Kitchens Limited
Seaton Eight Limited
Seaton Eleven Limited3
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
Seaton GR SPV 14 Limited
Seaton Nine Limited
Seaton Ten Limited
Telvec Investments Limited
Terraces Limited
Tyneside Land & Property Company Limited
Other entities
HBF Insurance PCC Limited4
MI New Home Insurance PCC Limited4
Notes:
^ Dormant.
^^ These shares are held indirectly.
1 Registered address is Persimmon House, Fulford, York, YO19 4FE.
2 Registered address is Council House, Manor Square, Solihull, West Midlands, B91 3QB.
3
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.
113
Bellway p.l.c. Annual Report and Accounts 2019Accounts Notes to the Accounts continued
25 Revenue from contracts with customers
(a) Restatement on adoption of IFRS 15 'Revenue from contracts with customers’
The Group adopted IFRS 15 ‘Revenue from contracts with customers’ during the current financial year. This standard resulted
in presentational changes to the income statement to gross up part-exchange revenue and expenses within operating
profit which were previously recognised on a net basis within cost of sales, since part-exchange transactions were treated
as being associated with housing sales. The Group used the full retrospective approach so the prior year comparatives have
been restated. The effect of IFRS 15 is that these are considered separate transactions and are therefore presented separately
within other operating income and other operating expenses as it is not a principal activity of the Group, and for the period
ended 31 July 2019 was an increase in other operating income of £169.9 million, an increase in other operating expenses of
£175.5 million, and a corresponding £5.6 million decrease in cost of sales.
The financial statement items affected by the adoption of IFRS 15 for the comparative period are shown below. There was no
change in previously reported balance sheet information or earnings per share.
Revenue
Cost of sales
Gross profit
Other operating income
Other operating expenses
Administrative expenses
Operating profit
(b) Revenue from contracts with customers
An analysis of the Group’s revenue is as follows:
Housebuilding revenue
Non-housebuilding revenue
Total revenue
The Group’s housebuilding revenue can be analysed as follows:
Private
Social
Total housebuilding revenue
Year ended 31 July 2018
As previously
reported
£000
2,957,664
(2,204,216)
753,448
–
–
(100,577)
652,871
Adjustment
in respect of
part-exchange
transactions
£000
Restated
£000
–
2,957,664
4,032
4,032
141,093
(145,125)
–
–
(2,200,184)
757,480
141,093
(145,125)
(100,577)
652,871
2019
£000
2018
£000
3,180,113
2,936,844
33,130
20,820
3,213,243
2,957,664
2019
£000
2018
£000
2,815,609
2,672,472
364,504
264,372
3,180,113
2,936,844
114
Bellway p.l.c. Annual Report and Accounts 2019
Five Year Record
Income statement
Revenue
Operating profit
Net finance expenses
Share of results of joint ventures
Profit before taxation
Income tax expense
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
1,765.4
360.5*
(13.1)
(0.1)
347.3*
(69.6)*
2,240.7
492.0
(11.1)
(0.3)
480.6*
(95.0)
2,558.6
571.6
(11.3)
0.4
560.7
(106.6)
2,957.7
652.9
(13.6)
1.8
641.1
(121.2)
3,213.2
674.9
(14.4)
2.1
662.6
(124.0)
Profit for the year (all attributable to equity holders
of the parent)
277.7*
385.6*
454.1
519.9
538.6
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 implementable DPP
48.1
2,241.2
(60.3)
(653.1)
33.3
2,687.5
48.0
3,099.3
59.0
3,485.5
83.2
3,806.7
(96.2)
(757.6)
(118.4)
(837.6)
(84.9)
(902.5)
(99.4)
(869.3)
1,575.9
1,867.0
2,191.3
2,557.1
2,921.2
7,752
£223.8k
24.2%*/^
24.6%^
20.4%*
20.8%
231.5p
77.0p
23.9%*
24.4%
2.4%
1,286p
21,411
8,721
9,644
10,307
£252.8k
25.7%^
25.7%^
22.0%
22.0%
328.7p
108.0p
28.2%
28.2%
–
1,522p
24,879
£260.4k
25.9%^
25.9%^
22.3%
22.3%
370.6p
122.0p
27.6%
27.6%
–
1,785p
25,655
£284.9k
25.6%**
25.6%**
22.1%
22.1%
423.4p
143.0p
27.2%
27.2%
–
2,079p
26,877
10,892
£292.0k
24.6%
24.6%
21.0%
21.0%
437.8p
150.4p
24.7%
24.7%
–
2,372p
26,421
Weighted average number of ordinary shares
122,315,198
122,558,261
122,511,626
122,779,199
123,012,723
Number of ordinary shares in issue at end of year
122,521,915
122,685,986
122,797,958
122,980,266
123,167,828
Notes:
* Stated before exceptional item.
** Restated due to the adoption of IFRS 15 ‘Revenue from contracts with customers’.
^ Not restated following the adoption of IFRS 15 ‘Revenue from contracts with customers’.
115
Bellway p.l.c. Annual Report and Accounts 2019Other Information
Alternative Performance Measures
Bellway uses a variety of alternative performance measures (‘APMs’) 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 provides 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 reinvested 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
2019
£m
2,004.4
1,298.2
2018
£m
2,011.9
1,115.1
Increase in capital invested in land and work in
progress in the year
Land creditors
(297.9)
(365.4)
Increase in capital invested in land, net of land
creditors, and work in progress in the year
2018
£m
2,011.9
1,115.1
2017
£m
1,838.2
1,017.7
(365.4)
(366.8)
Mvt
£m
(7.5)
183.1
175.6
67.5
243.1
Mvt
£m
173.7
97.4
271.1
1.4
272.5
• 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 (see note 16). 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.
2019
Capital
employed
2019
Land
creditors
£m
365.4
294.5
297.9
319.3
£m
674.9
2,557.1
2,720.4
2,921.2
2,732.9
24.7%
2019
Capital
employed
including land
creditors
£m
674.9
2,922.5
3,014.9
3,219.1
3,052.2
2018
Capital
employed
2018
Land
creditors
£m
652.9
2,191.3
2,455.3
2,557.1
2,401.2
£m
366.8
367.3
365.4
366.5
22.1%
27.2%
2018
Capital
employed
including land
creditors
£m
652.9
2,558.1
2,822.6
2,922.5
2,767.7
23.6%
Operating profit
Capital employed/land creditors:
Opening
Half year
Closing
Average
Return on capital employed
116
Bellway p.l.c. Annual Report and Accounts 2019
• 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
2019
£m
538.6
2018
£m
519.9
2,557.1
2,693.8
2,921.2
2,724.0
2,191.3
2,323.9
2,557.1
2,357.4
19.8%
22.1%
• Total growth in value per ordinary share – The directors use this as a proxy for the increase in shareholder value since 31 July 2016.
Net asset value per ordinary share:
At 31 July 2019
At 31 July 2016
Net asset value growth per ordinary share
Dividend paid per ordinary share:
Year ended 31 July 2019
Year ended 31 July 2018
Year ended 31 July 2017
Cumulative dividends paid per ordinary share
Total growth in value per ordinary share
2,372p
1,522p
145.4p
132.5p
111.5p
850.0p
389.4p
1,239.4p
• Annualised accounting return in NAV and dividends paid since 31 July 2016 – 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 2016 (as
detailed above) divided by the net asset value per ordinary share at 31 July 2016. The directors use this as a proxy for the
increase in shareholder value since 31 July 2016.
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 2016
Total value per ordinary share
Annualised accounting return = (2,761.4/1,522.0)(1/3) – 1
850.0p
389.4p
1,239.4p
1,522.0p
2,761.4p
22.0%
• 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 19.
• Average net debt – This is calculated by averaging the net debt/cash position at 1 August and each month end during the
year. The directors consider this to be a good indicator of the financing position of the Group throughout the year.
• 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
2019
£m
419.1
2018
£m
375.6
243.1
272.5
662.2
648.1
• 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.
• Order book – This is calculated as the total expected sales value of current reservations that have not legally completed.
The directors consider this to be an important indicator of the likely future operating performance of the Group.
117
Bellway p.l.c. Annual Report and Accounts 2019Other Information
Glossary
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. It is generally provided by
councils and not-for-profit organisations such as housing associations.
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 homebuilding 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% (60% in London) and the government provides a loan for up to 20%
(40% in London) of the price.
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.
Mortgage Market Review (‘MMR’)
The MMR was a comprehensive review of the mortgage market which introduced reforms to deliver a mortgage market that is
sustainable and works better for consumers.
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.
118
Bellway p.l.c. Annual Report and Accounts 2019 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.
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.
The 5% Club
Members of The 5% Club aspire to achieve 5% of their workforce in ‘earn and learn’ positions (including apprentices, sponsored
students and graduates on formalised training schemes) within 5 years of joining.
See also Alternative Performance Measures section on pages 116 to 117.
119
Bellway p.l.c. Annual Report and Accounts 2019Other 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, Transfer Office and Shareholder Queries
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
E-mail: enquiries@linkgroup.co.uk
Tel: 0871 664 0300 (UK); +44 (0)371 664 0300 (from overseas). Calls cost 12p per minute plus your phone company’s access
charge. Calls outside the UK will be charged at the applicable international rate. Lines are open between 9:00 am and 5:30 pm
Monday to Friday, excluding public holidays in England and Wales.
Financial Adviser
Citigroup Global Markets 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
120
Bellway p.l.c. Annual Report and Accounts 2019 Shareholder Analysis
Shareholders by size of holding at 31 July 2019
Holdings
Shares
0 – 2,000
2,001 – 10,000
10,001 – 50,000
50,001 and over
Total
Number
1,858
422
182
241
%
69
15
7
Holding
990,950
1,861,829
4,615,524
9 115,699,525
2,703
100
123,167,828
Shareholders by type at 31 July 2019
Holdings
Shares
Private shareholders
Investment trusts
Pension funds
Nominee companies
Limited companies
Bank and bank nominees
Other institutions
Total
Financial Calendar
Final 2018/19 dividend – ex-dividend date
Final 2018/19 dividend – record date
AGM
DRIP election date for final 2018/19 dividend
Final 2018/19 dividend – payment date
Trading update
Announcement of 2019/20 half year results
%
1
1
4
94
100
%
2
<1
<1
87
<1
10
1
Number
1,539
9
1
%
57
<1
<1
Holding
2,641,930
15,545
41,912
1,038
38 106,994,629
41
46
29
2
2
1
273,766
11,775,170
1,424,876
2,703
100
123,167,828
100
28 November 2019
29 November 2019
10 December 2019
13 December 2019
8 January 2020
7 February 2020
25 March 2020
121
Bellway p.l.c. Annual Report and Accounts 2019Other Information Notes
122
Bellway p.l.c. Annual Report and Accounts 2019 Designed and produced by Radley Yeldar www.ry.com
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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.bellwayplc.co.uk