Building for
the future
Bellway p.l.c.
Annual Report and Accounts 2020
Financial and Strategic Summary
Group revenue (£m)
3,213.2
2,957.7
Profit before taxation (£m)
641.1
662.6
£2,225.4m
(30.7%)
2,225.4
£236.7m
(64.3%)
236.7
2018
2019
2020
2018
2019
2020
Average selling price (£)
284,937
291,968
293,054
£293,054
+0.4%
Order book value as at
31 July (£m)(~)
£1,760.2m
1,760.2
1,301.1
1,223.9
2018
2019
2020
+43.8%
2018
2019
2020
Plots contracted in the
year (plots)
11,921 plots
(9.1%)
12,962
13,113
11,921
Owned and controlled land
bank (plots)
44,589 plots
41,077
42,721
44,589
2018
2019
2020
+4.4%
2018
2019
2020
In this report
About Us
IFC Financial and
Strategic Summary
In this report
IFC
1 Who we are
2 Why Bellway
Strategic Report
Principal KPIs
4
Chairman’s Statement
5
8
Our Marketplace
10 COVID-19 -Our Journey
Key Stakeholder
12
Relationships
16 Our Business Model
24
26 Operating Review
32
36 Principal Risks
40 Risk Management
42 Going Concern and Long-
Financial Review
Strategy
Accounts
104 Group Income Statement
104 Statements of
Comprehensive Income
105 Statements of Changes
in Equity
107 Balance Sheets
108 Cash Flow Statements
109 Accounting Policies
115 Notes to the Accounts
Other Information
133 Five Year Record
134 Alternative
Performance Measures
137 Glossary
139 Advisers and Group
General Counsel &
Company Secretary
140 Shareholder Analysis
140 Financial Calendar
Governance
52 Board of Directors and
Group General Counsel
& Company Secretary
54 Chairman’s Statement on
Corporate Governance
56 Board Leadership and
Company Purpose
58 Division of Responsibilities
60 Nomination
Committee Report
62 Audit Committee Report
72
Remuneration
Committee Report
93 Directors’ Report
97
Independent
Auditor’s Report
Term Viability Statements
43 Corporate Responsibility
For further details on our business please visit:
www.bellwayplc.co.uk
Note:
Unless otherwise stated all numbers throughout the Annual Report and Accounts
exclude joint ventures.
~
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 134 to 136.
Throughout this report ‘~’ refers to alternative performance measures.
Who we are
A
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We are building
for the future of…
…our customers.
We are building quality
and sustainable homes.
…our people.
We are building careers
for almost 3,000 people.
…our communities.
We build trust by working in a
sustainable and responsible way.
…our shareholders.
We are building value.
Bellway p.l.c.
Annual Report and Accounts 2020
1
Why Bellway
Our homes
We build high quality homes designed to complement
the style of existing local architecture in communities,
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 individual requirements.
We also provide homes to housing associations for
social housing.
Our focus is to provide desirable, traditional family
housing across all our divisions and in addition provide
apartments in the more affordable outer commuter
zones of London.
Our brands
Bellway and Ashberry are the main brands we use to sell
our homes with Bellway being the most recognisable
brand. Our Ashberry brand, which was launched a
few years ago, is only offered on larger sites, with the
purpose of providing two differentiated outlets and
therefore offering greater customer choice. This has the
advantage of improving sales rates, often more than can
be achieved through using two Bellway outlets, with a
resultant improvement in return on capital employed
(‘RoCE’). We will plot different house types and/or
elevations and offer different internal specifications for
each brand, with little differentiation in standard of finish
or pricing.
Bellway London was launched in 2018 to provide the
London market with a modern and consistent identity
that is recognisable across the capital. This covers all of
our developments in London boroughs, with our main
focus being outer London boroughs and commuter
towns within the M25. Properties range from one-
bedroom apartments to four-bedroom townhouses.
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 an 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 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 the environment in which
they want to live. All of our customers are treated to
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 Bellway to a friend buying a new home.
Our Customer First Committee drives improvements to
quality and works to develop and share best practice
across the Group to further enhance our service
to customers.
Award Winning Homes
5 Star
Rating from the Home Builders
Federation Customer
Satisfaction survey
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Annual Report and Accounts 2020
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Our capacity for growth
Despite these challenging times, Bellway is in a robust
position, with a motivated and dedicated workforce.
It benefits from a strong, ungeared balance sheet, a
record order book and has the capability to respond
to evolving market conditions. Our underlying
operational strength and focus on quality, together with
a conservative and responsible approach to managing
the business, will serve the Group well over the
longer term.
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 Group teams.
Mature divisions
Newer divisions
Not to scale
Bellway p.l.c.
Annual Report and Accounts 2020
3
Principal KPIs
The Group has seven
principal KPIs, which are
shown below. Our secondary
performance measures,
which support these KPIs,
are shown on pages 18 to 22.
Number of homes sold (homes)
10,307
10,892
7,522 homes
(30.9%)
7,522
2018
2019
2020
This KPI demonstrates how well the business model is able to support
the Group’s strategy of delivering volume growth.
Operating profit (£m)(1) (~)
652.9
674.9
Operating margin (%)(1) (~)
22.1
21.0
£321.7m
(52.3%)
321.7
14.5%
(650bps)
14.5
2018
2019
2020
2018
2019
2020
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.
Operating margin demonstrates how efficiently the business is
being operated.
Return on capital employed (%)(1) (~)
27.2
24.7
Earnings per ordinary share (p)
423.4
437.8
10.8%
(1,390bps)
10.8
2018
2019
2020
156.6p
(64.2%)
156.6
2018
2019
2020
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)(~)
2,372
2,427
2,079
Total dividend per ordinary
share (p)
143.0
150.4
2,427p
+2.3%
50.0p
(66.8%)
2018
2019
2020
50.0
2018
2019
2020
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 2020 final dividend figure is proposed.
Note:
1
Before exceptional items (note 3, page 115 to 116).
~
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 134 to 136. Throughout this report ‘~’
refers to alternative performance measures.
4
Bellway p.l.c.
Annual Report and Accounts 2020
Link to remuneration – see pages 72 to 92.
Chairman’s Statement
Paul Hampden Smith
Chairman
Introduction
After reporting a strong set of Interim Results in March,
COVID-19 led to an unprecedented period of disruption,
with a significant negative impact on our full year
financial performance.
Nevertheless, with its long-term and conservative approach
to managing the business, Bellway is in a robust position,
benefiting from a resilient balance sheet. Not only can the
Group protect shareholder value during times of uncertainty,
but together with its underlying operational strength, Bellway
is well placed to continue investment in its long-term
growth strategy.
A swift and responsible approach to COVID-19
The introduction of ‘lockdown’ measures in March resulted in
the priorities of the business being quickly reshaped, with the
Board taking several actions intended to ensure safe working
practices, support our colleagues and preserve the Group’s
liquidity and balance sheet strength.
We began the gradual process of resuming limited
construction activity in early May, followed by a measured
reopening of onsite sales centres later in the month.
Significant investment in IT over recent years enabled most of
our office-based employees to work effectively from home,
thereby supporting the reopening of all previously active
sales outlets by the end of June.
A moratorium on all new land deals was initially introduced,
with the intention of preserving liquidity and balance sheet
value until such time as market conditions became clearer.
Subsequently, the improving sales market has enabled
Bellway to recommence land buying activity in a disciplined
manner, thereby supporting the recovery and longer-term
growth at attractive rates of return.
With its long-term and conservative
approach to managing the business,
Bellway is in a robust position, benefiting
from a resilient balance sheet.
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Placing customers first
Our continued prioritisation of both build quality and
customer service resulted in the Group being recognised
as a five-star homebuilder by the Home Builders Federation
(‘HBF’) for the fourth consecutive year, a testament to our
significant and continued efforts in this crucial aspect of
the business. In addition, 44 of our site managers were
recognised for their focus on quality, obtaining National
Home Building Council (‘NHBC’) ‘Pride in the Job’ Awards
which underline the high standard of their work.
Despite the disruption to the business during the ‘lockdown’,
our internal ‘Customer First’ initiative is gathering momentum
and will help us further build upon our reputation as a
leading national homebuilder in the years ahead.
Resilience of our people
The hard work, dedication and efforts of those who have
worked for, and with, Bellway over the past year have
enabled us to respond positively to the challenges of
COVID-19. Their resilience and flexibility in quickly adapting
to new methods of working have served the Group well and
have undoubtedly kept the business in operation.
On behalf of the Board, I would like to express our
gratitude to all those who have contributed for their hard
work, support and ongoing commitment, in this year of
unforeseen challenges.
Bellway p.l.c.
Annual Report and Accounts 2020
5
Chairman’s Statement continued
Economic uncertainty remains but underlying
demand is strong
As the country emerges from the initial extended national
‘lockdown’ and adapts to ongoing restrictions at both
a national and local level, there is substantial economic
damage and an ongoing threat of a more widespread
resurgence in the virus. In addition, we are yet to see
the extent to which unemployment will rise as the
unprecedented support offered by the Government’s
Coronavirus Job Retention Scheme (‘CJRS’) ends and is
replaced with the Job Support Scheme (‘JSS’). The Board also
recognises the risk posed by the uncertain outcome of future
trade deals with both the European Union and the rest of
the world.
Notwithstanding this, there remains an imbalance between
the supply and demand of affordably priced, good quality
housing, across many parts of the country. As a result of
this underlying requirement for new homes, customer
interest is strong and, for those with access to adequate
deposits, affordability is good, supported by historically low
interest rates.
The lending institutions continue to process mortgages, but
there has been a considerable contraction in higher loan-
to- value lending, as banks have re-allocated their internal
resources during ‘lockdown’. In that regard, Government
stimuli, such as the current stamp duty holiday and the
Help-to-Buy shared equity scheme are important, providing a
valuable deposit contribution to those looking to access the
housing ladder. A continuation of these schemes not only
encourages home ownership, helping the housing sector
to boost output, but also creates employment and aids the
wider economic recovery.
Dividend payments resumed
Given the unprecedented uncertainty and the extent of
‘Iockdown’ restrictions, which had a substantial downward
effect on completions, the Board previously announced the
cancellation of the interim dividend, instead prioritising cash
generation and the continued health of the balance sheet.
Since reopening sites, the sales market has remained resilient
and the strong order book has enabled Bellway to continue
its focus on cash collection. Recognising the dividend as
an important component of shareholder returns, the Board
is therefore recommending the payment of a reduced final
dividend of 50.0p per share (2019 – 100.0p). This will continue
Bellway’s unbroken record of annual dividend payments,
which was also maintained throughout the global financial
crisis of 2008 to 2009, while retaining the underlying strength
of the Group’s balance sheet.
In light of the economic backdrop, the Board will keep
the Company’s dividend policy under review. Subject to
unforeseen circumstances, however, the Board expects to
increase the quantum of future dividend payments over
time, commensurate with the Group’s recovery in earnings.
This approach will balance ongoing shareholder returns with
growth, arising from opportunities in the land market.
Looking ahead
Despite these challenging times, Bellway is in a robust
position, with a motivated and dedicated workforce.
It benefits from a strong, ungeared balance sheet, a record
order book and has the capability to respond to evolving
market conditions. Our underlying operational strength
and focus on quality, together with a conservative and
responsible approach to managing the business, will serve
the Group well over the longer-term.
Paul Hampden Smith
Chairman
19 October 2020
6
Bellway p.l.c.
Annual Report and Accounts 2020
Building for the future...
...for our people
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Graduate Programme
January 2020 saw the first ever cohort of graduates join
Bellway on our Graduate Programme. 38 graduates
joined the business across all disciplines from head
office to site roles. Bellway continues to focus on gender
equality and diversity at all levels of the organisation;
50% of the graduates on the programme were female
and 13.2% were from a BAME background. The two-year
programme allows graduates to specialise in a field whilst
undertaking cycles of experience outside of this area to
generate a well-rounded knowledge of the business.
The programme has been such a success that the
recruitment process is already well underway for the
September 2021 intake.
38
Graduate recruits
50%
Female graduates
Bellway p.l.c.
Annual Report and Accounts 2020
7
Our Marketplace
Despite the challenges arising from COVID-19, conditions in the new
build UK housing market remain positive, with strong demand for
affordably priced homes, good access to affordable mortgage finan e
and the continued availability of Help to Buy.
As highlighted in the Chairman’s Statement on page 6,
conditions in the wider economy have changed as the
country emerges from the initial extended COVID-19
‘lockdown’ and adapts to ongoing restrictions at both a
national and local level. There is substantial economic
damage and an ongoing threat of a more widespread
resurgence in the virus. We are yet to see the extent to which
unemployment will rise as the unprecedented support
offered by the Government’s CJRS ends and is replaced with
the JSS. In addition, a risk is posed by the uncertain outcome
of future trade deals with both the European Union and the
rest of the world.
Despite these headwinds, we believe that the market
fundamentals for housebuilders remain positive, as set
out below.
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 at the bottom of the page demonstrates the
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.
Since the COVID-19 ‘lockdown’ commenced, the lending
institutions have continued to process mortgages, but there
has been a considerable contraction in higher loan-to-value
lending, as banks have re-allocated their internal resources
during this period.
The Government announcement that the equity loan
element of the Help to Buy scheme in England will be
supported up to 31 March 2023, although with lower regional
limits, provides certainty for the new build housing market
and will greatly assist purchasers of new homes.
Help to Buy now accounts for 29% of all homes sold in the
new build sector, and 35% of homes we sold in the year.
Undoubtedly, this has helped boost new build output, which
represents an increasing proportion of the overall market.
The continued success and extension of the Help to Buy
scheme supports market confidence which, coupled with
low interest rates, mean lenders are offering a range of
competitive products to buyers. The Mortgage Market Review
has resulted in a more sustainable mortgage market.
The stamp duty holiday
The Government has temporarily increased the stamp duty
threshold on which no tax is payable to £500,000 for property
sales in England and Northern Ireland, until 31 March 2021.
This will save buyers up to £15,000, if they are buying a
property of £500,000 or less.
Affordability of houses in the UK
10
9
8
7
6
5
4
3
2
1
0
i
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n
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p
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s
u
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H
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Source: Halifax
House price to earnings
Mortgage repayments to earnings
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Annual Report and Accounts 2020
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Demand
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, particularly since the ‘lockdown’, as there is
generally less competition due to reduced liquidity across the
country. House prices remain 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.
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 to 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.
Planning permissions granted
in England, Scotland and Wales
500
450
400
350
300
250
200
150
100
447
431
415
323
288
267
241
205
202
217
2010
2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: HBF New Housing Pipeline Report (Q1 2020 - Published August 2020)
Further changes as a result of the revised NPPF, published in
February 2019, 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 uplift 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.
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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, 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. Prior to entering
‘lockdown’, the Group reported that industry-wide build cost
increases were having a moderating effect on the operating
margin, currently cost inflation is negligible for both labour
and materials.
Summary of market backdrop
There is wider economic uncertainty due to COVID-19, but
the market fundamentals for Bellway remain strong with:
• The ongoing imbalance between supply and demand for
affordably priced, good quality homes continuing to be a
feature across many parts of the country.
• Strong demand for new homes continues to be supported
by the ongoing availability of Help to Buy, together with an
environment of low interest rates.
• The land market remaining attractive and the planning
environment favourable, with the Group continuing to
identify value-enhancing opportunities which meet or
exceed our requirements in respect of both gross margin
and RoCE.
• Cross-party support to deliver an increased supply of
new homes.
Bellway is mindful of the wider economic uncertainty caused
by COVID-19, but continues to draw upon these sector-
specific 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.
Bellway p.l.c.
Annual Report and Accounts 2020
9
COVID-19 – Our Journey
COVID-19 has had a significant and unp ecedented effect on the
world as a whole. We set out below an insight into Bellway’s efforts
to support our employees, customers, suppliers, subcontractors and
other stakeholders during this period.
Early warnings
By mid-March we
were having regular
management team
meetings to prepare the
Group. We implemented
a rotation system to
minimise the number of
staff in the office to ensure
their safety.
Communication
is key
Throughout the
pandemic we ensured our
colleagues were provided
with regular updates
from our Chief Executive,
including a dedicated
video message in April,
and from Group HR and
Group Technical teams.
PREVENT THE SPREAD
OF CORONAVIRUS
WASH YOUR HANDS
FREQUENTLY
Closing our offices
and sites
Following the UK Prime
Minister’s announcement
on 23 March, we followed
Government guidelines
and closed our divisional
and site offices with
immediate effect. All onsite
construction activity
ceased by 27 March.
We assured employees
from the outset that they
would be paid in full.
The little book of
coping
Mary O’Neill & Charlotte Knight
Stay home stay safe
The Group HR team
developed a series of
information and tips for
employees, starting with
a Homeworking – ‘Work
Smart Work Safe’ guide.
This was then followed
by a regular flow of
guides on various topics
throughout ‘lockdown’.
Safeguarding careers
Bellway was amongst
one of the few companies
who having put 75% of
its staff on furlough still
continued to pay full
basic salary from its own
resources, therefore
not obtaining any CJRS
grant funding.
A phased and
cautious return
The construction industry
is a significant contributor
to the UK economy and
as such, the Government
issued guidance stating
that sites should continue
to operate where
they comply with the
Construction Leadership
Council’s Site Operating
Procedures and Public
Health England guidance.
We responded by
recommencing some
construction work, initially
on a phased basis, from
4 May 2020.
Keep a
2m Distance
Your health, safety and general wellbeing is my priority and
will remain so as we move through our recovery plans.
Jason Honeyman, one of the reassuring messages from our Group Chief Executive
10
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Annual Report and Accounts 2020
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Mental wellbeing
We dedicated the full
month of May to highlight
the importance of mental
wellbeing with our Group
HR department providing
colleagues with useful
guidance and links to
ensure they looked after
both their physical and
mental wellbeing.
Supporting the
economy
We unfurloughed the
remainder of our
workforce in mid-May,
and continued to have
staff working from home
where possible whilst
ensuring the highest
standards of safety and
social distancing in both
our offices and sites to
do our part in supporting
the recovery of the
UK housing and
broader economy.
Our Group HR team
continued to provide
all employees with
updated and useful
communications on
topics such as ‘Back to
Work’ and ‘COVID Safe’
working procedures.
Looking Forward
Bellway continues to monitor Government
guidelines on all aspects of operations.
Our priority is ensuring the safety
of all our employees, customers,
suppliers and subcontractors.
I would like to take the opportunity to thank you
all for your extraordinary efforts in the face of such
unusual and unprecedented circumstances.
Jason Honeyman, Group Chief Executive
Bellway p.l.c.
Annual Report and Accounts 2020
11
Key Stakeholder Relationships
Maintaining good relationships with our stakeholders is important to
what we do.
The Board of Directors confirm that during the year under review, it has acted to promote the long-term success of the
Company for the benefit of shareholders, whilst having due regard to the matters set out in section 172(1)(a) to (f) of the
Companies Act 2006, being:
(a) the likely consequences of any decision in the long term,
(b) the interests of the Group’s employees,
(c) the need to foster the Group’s business relationships with suppliers, customers and others,
(d) the impact of the Group’s operations on the community and the environment,
(e) the desirability of the Group maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly between members of the Group.
On pages 12 to 15 we set out how we have engaged with various stakeholders during the year, the key issues raised
and outcomes.
Outcomes
We achieved 5 star homebuilder status in the national HBF awards
for the fourth consecutive year. This reflects our commitment
to delivering exceptional quality as standard to our customers,
throughout our construction process, in the homes we create, and in
our aftercare and customer service.
To be voted a 5 star homebuilder is an honour because it is
independently decided by our customers – more than 9 out of 10 of
whom would recommend us to a friend.
Our focus on customer service excellence has led to the launch
of our new ‘Customer First’ programme. The programme is being
developed following extensive consultation with customers in order
to understand where we get things right and importantly where we
can improve to meet and exceed their requirements.
We have created our new standard house type range, The Artisan
Collection, which has been developed using feedback from our
customers to create a new generation of properties which are suited
to homebuyers reflecting our expertise in delivering the highest
standard of modern living.
At the start of FY20, Bellway launched on social media channels,
giving customers the opportunity to engage with our brand and
share their experiences of buying a home from Bellway.
Customers
How we engage
We pride ourselves on our excellent customer service and place our
customers first. Our reputation is built on trust and we help thousands
of people to buy their dream home every year.
Our highly trained and dedicated team of Sales Advisers engage
and communicate with customers from the first time they contact
us, throughout the sales process and ensure their moving-in day is a
memorable one.
Once our customers have moved into their new home, our
Customer Charter sets out the process of engagement to ensure the
after-sales experience continues to be a positive one.
Our Sales Advisers receive feedback from customers throughout the
process and we place significant emphasis on the HBF Customer
Satisfaction Survey. This annual survey allows our customers
the opportunity to rate us on build quality, design, sales and
customer care.
We use a variety of different channels to allow customers to engage
with us via their preferred method.
We analyse how our customers engage with us through marketing
data to ensure we are responding to their needs.
We drive engagement through social media channels to encourage
customers to enter into discussion with our official accounts and
share content about their experience.
Key issues raised
• Customer service
• Affordability and supply of housing
• Sustainability and efficiency of homes
• Quality of construction
• Innovation
• Legacy building and safety improvements
• Help to Buy
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Colleagues
How we engage
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 other stakeholders.
Our employees receive regular communications and training in
relation to changes to policies, procedures, services and advice.
We promote quarterly Employee Listening Groups which we use to
gain feedback from employees in order to improve processes and
procedures within the business. These are reported to the Board to
agree follow-up action.
The focus of our dedicated Group HR team continues to be on the
attraction, development and retention of talent across the business,
and improving the diversity of our workforce.
Senior management regularly present to the Board and divisional
visits by directors help to inform the Board of matters important to
our employees.
Key issues raised
• Wellbeing
• Employee communications
• Flexible working
• Diversity and inclusion
• Employee benefits
Shareholders
How we engage
As a publicly listed company we need to provide our shareholders
with fair and balanced information on the business in order to instil
trust and allow informed investment decisions to be made.
Our executive management team meets with major shareholders
and analysts at least twice a year to discuss interim and full year
financial results and we provide trading updates to investors to
update them on progress within the business.
Executive directors develop external relationships with institutional
investors, prospective investors and analysts – particularly when we
release results to the City via meetings and phone calls.
The Board receives reports from its brokers and PR advisers following
our trading updates, interim and full year results and presentations
that provide feedback from investors and analysts. We regularly
communicate with our brokers to understand the positioning of the
business to the investor community.
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 Chair of the Audit Committee wrote to our top
12 shareholders to inform them of the outcome of the external audit
tender process.
Our Senior Independent Director is available to attend meetings with
major shareholders.
Our corporate website is updated on a timely basis.
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Outcomes
Our Employee Listening Groups have resulted in several new policies
being introduced relating to flexible working.
We have made improvements to employee communications by
introducing a centralised Group strategy to enable a more consistent
level of communication for key Group-wide initiatives. As part
of this strategy we have recruited an experienced Group Head
of Communications.
Our focus on employee wellbeing has received a positive reaction
from employees with the introduction of mental health first aiders,
training and awareness raising campaigns, all having a positive
impact, particularly during ‘lockdown’.
Our focus on diversity and inclusion saw the Group awarded
The Financial Times Diversity Leaders 2020 award, where we ranked
286 out of 700 companies across Europe. Following employee
feedback, the Group is looking to implement several diversity and
inclusion groups which will help drive further improvements across
the business, primarily focusing on gender and race diversity.
The Group has increased the number of graduates, trainees and
apprentices across the business by 42% to develop and grow new
talent. At the end of FY20 we had 8.3% of colleagues in a ‘learning
and earning’ position.
Shareholders will have the opportunity to ask questions in advance
of the ‘closed door’ virtual AGM. Where possible the Board will
respond before the meeting or during the course of the AGM.
Shareholders will be able to listen to the AGM live via a web-link.
Key issues raised
• Business ethics and corporate governance
• Remuneration policies
• General market conditions, including affordability, Help to Buy
and the land market
• Expected recovery following the COVID-19 ‘lockdown’
• Dividend policy
• Quality and customer care
• Public policy
• The environment and sustainability
Outcomes
We have provided additional information in announcements to cover
points raised during these meetings and we have demonstrated
our financial position and performance through interim and full year
results, trading updates and our Annual Report.
The Board understands shareholder sentiment and the Group has
delivered TSR above the median in both the last 12 months and
three years.
The business continues to deliver cost savings through standard
house type range and Bellway 2020.
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Annual Report and Accounts 2020
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Key Stakeholder Relationships continued
Partners
How we engage
Our size means we can engage with our suppliers and subcontractors
in order to work with them in helping achieve our goals and bring
efficiencies to all parties where possible.
We regularly hold meetings and communicate with our suppliers
and subcontractors, 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 team oversees the development of our
relationships with and management of our supply chain.
The impact of COVID-19 on our supply chains and subcontractors
has meant we have had to work closely with all of our partners to
ensure the supply of trades and essential construction materials
to sites.
We strive to maintain long-term working relationships with reputable
subcontractors to reduce health and safety risks and to ensure the
availability and quality of materials and labour and further strengthen
the long-term interests of our business.
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 local teams of specialist land buyers work directly with private
landowners, commercial vendors and the public sector to realise
land opportunities. They can consider any site regardless of current
planning status, and have direct access to substantial funds.
This allows for highly competitive offers to be arrived at quickly,
subject to the appropriate approval process.
Through our divisional 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.
Key issues raised
• COVID-19
• Health and safety
• Efficiencies and environmental management
• Land and planning
• Affordable housing
• Supply chain management
Outcomes
Improving our relationship with suppliers by engaging with them
regularly as we build on new developments.
Increase in the use of the Artisan standard house type range
has brought efficiencies through standardisation to supply chain
and subcontractors.
Improved health and safety and COVID-19 working practices have
received positive feedback from subcontractors and suppliers.
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Our communities
How we engage
Bellway recognises the impact on the local communities in which we
develop and therefore we actively seek engagement with them to
ensure we demonstrate the value we can bring through investment,
job creation and the provision of safe and secure homes.
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.
Key issues raised
• Affordability and the supply of housing
• Planning and community engagement
• Jobs and skills
• Biodiversity
• Home efficiency
• Environmental issues
We utilise local PR activity and digital media to engage communities
on proposed developments in order to communicate our plans.
• Impact on existing communities and infrastructure
• Charitable giving
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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 landowners are taken into account as
far as is reasonable and practicable.
We operate the Considerate Constructors Scheme on developments
where appropriate.
We also have a Group-wide charitable partnership with Cancer
Research UK, which has been running for four years. Our fundraising
activity is supported by our 22 divisions with colleagues, suppliers
and subcontractors participating in various fundraising events
throughout the year.
Our divisions also engage with local community organisations in
supporting charitable fundraising activities and community initiatives.
The Group matches any fundraising done by employees in order to
encourage community engagement.
Government and regulators
How we engage
Our relationship with national and local government, regulators and
key housing industry representative bodies is vitally important as
policies and regulatory changes provide opportunities and risks for
our business.
National 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 Greater London Authority (‘GLA’)
and London Borough Councils, and elsewhere engage at a senior
level with both the Welsh Assembly and the 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, HM
Treasury and The Cabinet Office to address the pressing issues of
accelerating housing delivery, fire safety remediation post Grenfell,
widening home ownership opportunity and the regeneration
of communities.
Bellway maintains 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.
Outcomes
The number of housing completions was 7,522 of which 22%
were social housing, providing much needed affordable homes to
communities throughout the UK.
We are able to respond to local community queries relating to
planning applications whilst demonstrating our consideration for
local issues as part of the process.
We are able to provide skilled jobs within local communities.
To date, over £1.6 million has been raised and donated to our charity
partner, Cancer Research UK since Aug 2016.
Our employees have continued to engage in local fundraising
activities with £110,551 being raised during FY20, an increase on
previous years despite the impact of COVID-19.
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 GLA London Development Panel.
We also engage and respond to Government directly and through
our membership of industry trade organisations.
Key issues raised
• Help to Buy
• Fire safety
• Local planning issues
• Construction and environmental issues
• Leasehold reform
Outcomes
We responded to national, regional and local government policies,
regulatory changes and provide affordable homes to meet
local needs.
We are able to work with relevant government departments in
delivering programmes such as Help to Buy in order to enable more
people to own their own homes.
We are able to contribute to the regeneration of local communities
through proactive engagement with Local Authorities.
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Our 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
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 pending DPP,
with development expected
to commence within the next
three years.
iii) Strategic land, which is longer-
term plots typically held
under option.
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.
• Our priority is the health and
safety of our employees,
subcontractors and visitors to any
of our locations.
• Our divisional and Group
• We strive to maintain long-
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
Group planning teams progress
a combination of medium-term
‘pipeline’ land and land from our
strategic land bank through the
planning system.
For more information see page 19.
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.
For more information see page 20.
by our divisional and Group
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.
For more information see page 18.
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Delivering an
excellent customer
experience
What we do
• From the moment our customers
first engage with 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 First Committee
continues to drive future
improvements to quality and
customer care.
• We work hard to retain our HBF 5
star homebuilder status.
For more information see page 21.
Investing in
our people
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 were
pleased to welcome our first
ever cohort of graduates on our
graduate training programme
‘Great Careers Built With Us’ in
January 2020.
• 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.
For more information see page 22.
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How we are building
for the future
• Earnings for employees
of £180.1 million
(2019 – £188.2 million).
• Payments to
subcontractors and
suppliers of £1.4 billion
(2019 – £1.7 billion).
• Investment in
communities
of £60.5 million
(2019 – £77.3 million).
• Payments to national
and local government
of £135.4 million
(2019 – £210.9 million).
• Dividends to
shareholders
of £123.1 million
(2019 – £178.9 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
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Annual Report and Accounts 2020
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Sufficient land bank of plots
with DPP
Not achieved
Achieved
Achieved
Not
Achieved
2018
2019
2020
Gross margin (%)(2)(~)
25.6(1)
24.6
19.0%
(560bps)
RoCE (%)(2)(~)
10.8%
(1,390bps)
19.0
2018
2019
2020
27.2
24.7
10.8
2018
2019
2020
Note:
1. Restated following the adoption of IFRS 15 ‘Revenue from contracts with customers’.
2. Pre-exceptional.
Link to remuneration – see pages 72 to 92.
Our Business Model continued
Selecting the right land
What we do and how we manage risk
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 43 to 50.
The risks
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 36 to 39.
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 regularly review the
pipeline to ensure that our land bank remains appropriate.
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Managing the planning process
What we do and how we manage risk
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
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 43 to 50.
The risks
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 36 to 39.
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.
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Number of plots acquired
with DPP (plots)
4,845
1,630plots
+154.3%
1,630
641
2018
2019
2020
Number of plots converted from
medium-term ‘pipeline’ (plots)
7,760 plots
(20.8%)
9,795
7,760
6,684
2018
2019
2020
Number of plots in 'pipeline’
(plots)
16,300
16,300
14,200
16,300 plots
0.0%
2018
2019
2020
Number of plots in strategic
land bank – longer-term
interests (plots)
18,400 plots
+9.5%
18,400
16,800
11,900
Number of plots in strategic
land bank – positive planning
status (plots)
9,100 plots
8,500
8,800
9,100
2018
2019
2020
+3.4%
2018
2019
2020
Number of plots in owned
and controlled land bank
with DPP (plots)
28,289 plots
+7.1%
26,877
26,421
28,289
2018
2019
2020
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NHBC health and safety
incident rate
0.867
0.856
0.714
0.714
(16.6%)
2018
2019
2020
Number of NHBC Pride in the
Job Awards (awards)
49
42
44
44 awards
+4.8%
2018
2019
2020
Number of RIDDOR seven-day
reportable incidents per 100,000
site operatives (accidents)
404.02
324.87
203.12 accidents
(37.5%)
203.12
2018
2019
2020
Number of NHBC Health and
Safety Awards (awards)
12
11
n/a due to COVID-19
2018
2019
n/a
2020
Our Business Model continued
Constructing the right product
What we do and how we manage risk
Experienced construction people, strong relationships with
skilled subcontractors 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
The health and safety of everyone who works on and visits
any of our locations is paramount.
Reducing waste on-site, in divisional offices and in sales
centres delivers cost savings for the business and reduces the
amount of waste sent to landfill.
Building strong long-term relationships with subcontractors,
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 43 to 50.
The risks
• Shortage of building materials at competitive prices.
• Shortage of appropriately skilled construction people
and subcontractors.
• 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 36 to 39.
How we measure our performance
The health and safety of our employees, subcontractors
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 increased by
two against last year and the NHBC Health and Safety Awards
were cancelled due to the COVID-19 pandemic.
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Delivering an excellent customer experience
What we do and how we manage risk
Our well-trained and motivated team members throughout all
disciplines within the business have the necessary skills and
enthusiasm to deliver the highest levels of customer service.
We also rely on our construction teams being committed to
build quality homes to be proud of.
Alignment with our corporate responsibility pillars
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 43 to 50.
The risks
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 First project, seek to reduce
the impact of all of these risks.
These risks are not regarded as principal risks and so have
not been included in our principal risk table on pages 36
to 39. These risks have not changed during the year.
How we measure our performance
We have chosen the following KPIs as they demonstrate
progress made in delivering our strategy of volume growth
alongside customer satisfaction. These include “Would
Recommend a Friend” and Overall Satisfaction which is
measured as an average across six more detailed KPIs.
This remains an integral part of the bonus matrix for relevant
Bellway employees, including the executive directors.
Our, recommend a friend, score has increased by 0.5% from
the previous year. While the survey year completed on the
30 September 2020, customers who completed on this date
have until 17 February 2021 to return their surveys. The trend
from previous years has shown a minimal drop-off during this
period and we therefore remain confident that we will retain
our 5 star status when the results are announced in March
2021. Understandably, due to COVID-19 we were unable
to build as many homes this year which reflects the drop
in the reservation rate, however the order book value has
increased significantly.
Customer satisfaction score (%)
86.0
86.4
85.5
85.5%
(90bps)
2018
2019
2020
Number of homes sold (homes)
10,307
10,892
7,522 homes
(30.9%)
7,522
2018
2019
2020
Reservations rate (homes
per week)
200
210
178
178 homes per week
(15.2%)
2018
2019
2020
HBF homebuilder status (star)
5
5
5
5 star
No change
2018
2019
2020
Order book value at 31 July (£m)(~)
1,760.2
£1,760.2m
+43.8%
1,301.1
1,223.9
2018
2019
2020
Annual Report and Accounts 2020 21
Bellway p.l.c.
Our Business Model continued
Investing in our people
What we do and how we manage risk
Our skilled, professional and dedicated employees are
provided with the right level of training, support and
resources to succeed. We also rely on our dedicated Group
HR team, which focuses 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
We have continued with our employee listening groups,
made further improvements in training and development and
have improved parental leave. We have designated Diversity
and Inclusion Champions in all operating divisions as well as
mandatory diversity and inclusion training for all employees.
For more information see pages 43 to 50.
The risks
The inability to attract and retain appropriate people remains
a principal risk to the business. There has been a decrease
in this risk during the year due to the strengthening of the
recruitment and engagement process.
For more information see pages 36 to 39.
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 in the first 12 months of employment still remains
above where we would like it to be, and we are taking
steps to address this (see our strategy on page 25). 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 Group HR team to ensure these policies
are adhered to, and any concerns are reported through
our whistleblowing hotline (see pages 47 and 71 for further
information). The Board continues its focus on the number of
women in its senior management team with an increase in
female presence to 19.7% (2019 – 18.9%).
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Annual Report and Accounts 2020
Employees who have worked for
the Group for 10 years or more (%)
16.4
15.1
16.4
16.4%
+130bps
2018
2019
2020
Number of graduates, trainees
and apprentices (number)
258
181
182
258
+42.0%
2018
2019
2020
Training days per employee
(days)
5.1
4.7
4.1
4.1 days
(19.6%)
2018
2019
2020
Employee turnover (%)
21.4
22.4
20.1
20.1%
(230bps)
2018
2019
2020
Senior management gender
split (%)
18.9
19.7
13.8
19.7%
+70bps
2018
2019
2020
Building for the future...
...for our people
and the environment
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Bellway Group Office
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Employees
New Group Office
In August 2020 Bellway moved to our new purpose-built
Group Office, Woolsington House in Newcastle upon
Tyne. This was a significant milestone in the history of
Bellway after being based at Seaton Burn House for
nearly 30 years.
Woolsington House was developed with sustainability
and staff wellbeing at its heart. Solar reflective glass helps
keep the building cool in the summer and proximity to
public transport will contribute to the management of
our carbon footprint.
Staff benefit from indoor and outdoor exercise space
as well as a social hub for meetings and downtime.
The facility also houses our brand-new Bellway Academy
which further enhances our commitment to the
development of all colleagues.
Annual Report and Accounts 2020 23
Bellway p.l.c.
Strategy
Bellway’s strategy is to grow shareholder value through sustainable and
disciplined volume growth, utilising the Group’s operational and balance
sheet capacity, combined with a strong focus on RoCE.
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 18 to 22.
• We are about to launch
a dedicated Bellway
London website specifically
designed around the
unique requirements of the
London market.
Our plans for 2020/21
• We will remain focused on
improving the service we
provide to our customers
which we are confident
will have the added benefit
of retaining 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.
• As a result of the customer-
focused project which is
currently in progress, we aim
to become the market leader
in customer service levels,
putting our customers at
the heart of every aspect of
our business.
Strengthening
the brand
Overview
Bellway maintains its
reputation for building
quality homes in desirable
locations at attainable prices.
By personally guiding our
customers through the
buying process, we ensure
buying their new Bellway
home is a memorable
experience, individual to
their needs. We work hard
to ensure that a high level of
customer service continues
throughout the completion
process and beyond.
How we performed in
2019/20
• We retained our HBF 5 star
homebuilder status.
• We have embarked
on a Customer First
project to review and
improve all aspects of the
customer journey.
• We continue to review and
improve our website, recently
making changes to expand
the information available
to our customers and to
enhance the user experience.
Volume growth
Overview
Delivering disciplined
growth through our
national divisional structure,
selecting the right land
and managing the
planning process despite
COVID-19 headwinds.
How we performed in
2019/20
• Prior to the onset of
COVID-19, our land teams
were successful in buying
compelling opportunities, in
good quality locations, with
their efforts including the
acquisition of a small number
of larger ‘anchor’ sites.
• With the onset of COVID-19,
the Board initially introduced
a moratorium on all new land
contracts with the intention of
preserving liquidity until such
time as market conditions
became clearer.
• The COVID-19 ‘lockdown’
resulted in a rapid decline
in reservations.
• Sales demand began to
resume, commensurate
with our gradual and
cautious programme of
site reopenings.
• We continued to focus our
land buying in areas of strong
customer demand and in
sustainable locations.
Our plans for 2020/21
• 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.
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
2019/20
• 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.
• We have increased the
use of technology to
improve benchmarking and
secure savings.
• We continued to implement
our BWY2020 cost-
saving initiative.
• We have introduced detailed
value-engineering reviews of
our sites and best practice is
being shared across divisions.
Our plans for 2020/21
• We will continue to design
and develop the introduction
of standard house types into
The Artisan Collection.
• We will ensure the
momentum from our
BWY2020 initiative is
maintained and new
cost-saving initiatives are
introduced, whilst improving
standardisation and
procurement efficiencies.
• We will continue to research
and trial the use of innovative
new products.
• We will train our divisions
on cost control and
commercial fundamentals.
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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
2019/20
• We have launched a new
graduate recruitment
programme with 38
new graduates.
• We have updated and
refined our divisional
management progression
and retention plan.
• We have continued to
improve our focus of
diversity and inclusion across
the Group.
• We have continued to use
employee listening groups.
• We have trained 160 Mental
Health First Aiders across
the Group.
• We have continued with the
Bellway Employee Awards
celebrating apprenticeship,
graduate and long service
achievements across
the Group.
Our plans for 2020/21
• We will continue to improve
the focus on diversity and
inclusion across the Group.
• We will continue to promote
the benefit of employee
listening groups and
conduct our first employee
engagement survey.
• We will continue to train
Mental Health First Aiders
and roll out Mental Health
Awareness training across
the Group.
• We will continue to invest
in the Bellway Academy,
site manager training and
apprenticeships and graduate
training programmes.
Value creation
through capital
and dividend
growth
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
dividend payments.
How we performed
in 2019/20
• Until the onset of COVID-19,
Bellway continued to invest
capital into land and work
in progress in areas with
high demand, without
compromising the RoCE
and margin requirements, to
ensure that the Group is well
placed to deliver growth.
• Following the onset of
COVID-19, a short moratorium
was introduced, with the
intention of preserving
liquidity until such time as
market conditions became
clearer. When construction
sites reopened, the initial
focus was on completing
homes that were largely built
to convert inventory into
cash and to train our staff
how to work within COVID-19
safe parameters.
• Paid dividends of £123.1 million.
• Increased NAV by 2.3% to
2,427p.
Our plans for 2020/21
• 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 2019/20 dividend is
approved, the total dividend
will be covered by earnings by
3.1 times.
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
2019/20
• 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.
• We have maintained RoCE
as a key assessment when
buying land.
• We have closely monitored
and controlled work-in-
progress.
Our plans for 2020/21
• We will continue to maintain
a focus on balance sheet
management, with particular
emphasis on large capital-
intensive sites.
• We will continue to maintain
RoCE as a key assessment
when buying land.
• We will continue to monitor
and control work-in-progress.
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Maintaining
a flexible
capital structure
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.
How we performed in
2019/20
• We extended the maturity
date of bank debt tranches
totalling £125 million, which
were otherwise due to expire
by 31 July 2020.
• Obtained eligible issuer status
for the Government’s Covid
Corporate Financing Facility
(‘CCFF’), subject to continuing
compliance with the Bank of
England’s eligibility criteria,
with an undrawn issuer limit
of £300 million.
• We have maintained
our other current
banking arrangements.
• We have maintained
our current investor
relations activities.
Our plans for 2020/21
• We will maintain our current
banking arrangements.
• We will maintain our current
investor relations activities.
Annual Report and Accounts 2020 25
Bellway p.l.c.
Operating Review
Jason Honeyman
Group Chief Executive
COVID-19 response
Bellway reported a strong set of Interim Results for the half
year ended 31 January 2020, delivering further volume and
revenue growth, while making additional investment in land
to continue its long-term growth strategy.
As ‘lockdown’ restrictions were introduced across the
country, Bellway responded quickly and purposefully, taking
action to support and ensure the safety of our colleagues
and maintain balance sheet strength. In doing so, the Board
introduced measures including:
• Paying all employees full basic pay from our own
resources, without making a claim for grant monies under
the Government’s CJRS;
• Launching several internal wellbeing and mental health
campaigns to support employees during the pandemic;
• Closing all sites and sales centres by 27 March;
• Deferring discretionary land expenditure;
• Obtaining eligible issuer status for the Government’s Covid
Corporate Financing Facility (‘CCFF’), subject to continuing
compliance with the Bank of England’s eligibility criteria,
with an undrawn issuer limit of £300 million;
• Extending the maturity date of bank debt tranches totalling
£125 million, which were otherwise due to expire by
31 July 2020;
• A voluntary 20% reduction in base salary and fees for all
Board members during April and May. The saving was
donated to various charities and a matching contribution
was made by Bellway to its national charity partner, Cancer
Research UK; and
• Postponing and then subsequently cancelling the payment
of the interim dividend to preserve liquidity.
After working carefully and collaboratively with our supply
chain partners, and closely following Government guidelines,
construction activity has recommenced across all our sites,
with strict social distancing measures in place. In addition,
all sales outlets reopened by the end of June and all
office-based employees had either returned to work on a
rotational basis or, given evolving Government guidance,
have continued to support our construction efforts via
homeworking. Our approach has been carefully considered,
with firm protocols and enhanced safety procedures to
ensure the health and wellbeing of our colleagues.
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Despite the wider economic uncertainty,
the fundamentals of the business are
robust. Our strong balance sheet not only
instils confidence in times of uncertainty,
but it also provides substantial capacity
for disciplined land and work-in-
progress investment.
Market backdrop
Bellway enjoyed a strong trading performance in the earlier
part of the financial year. Reservations in the period from
1 August 2019, until the Prime Minister’s announcement
introducing widespread ‘lockdown’ restrictions on 23 March
2020, averaged 211 per week (1 August 2018 to 24 March
2019 – 201), a rise of 5% compared to the same period in the
prior year. Thereafter, the reservation rate rapidly declined as
the country entered ‘lockdown’ and our sales presence was
limited to telephone and online customer interactions.
Sales demand then began to resume, commensurate
with our gradual programme of site re-openings, which
commenced on 18 May, following the easing of Government
restrictions. In addition, the temporary stamp duty holiday,
effective from 8 July, and the subsequent resurgence in
the second-hand market, have since helped to boost
customer confidence. As a result, private sales demand
continued to gather pace and reservations throughout the
typically quiet month of July averaged 140 per week (July
2019 – 162 per week), 13.6% below the same period last year.
Upward momentum has continued and resulted in overall
average weekly sales rising by 30.6% to 239 per week in
the first nine weeks of the new financial year (1 August to
29 September 2019 – 183 per week). This performance has
been achieved while still operating an appointment-only
system in our sales centres in order to maintain safe social
distancing, thereby protecting our customers and colleagues.
Overall, for the full year ended 31 July 2020, reservations
averaged 178 per week (2019 – 210 per week), a decline of
15.2%. Selling prices have remained firm, with no discernible
movement throughout the year.
Lending institutions continue to process mortgages,
although initially there were understandable delays with
regards to obtaining valuations following the introduction
of social distancing measures. In addition, there has been
a considerable reduction in the availability of higher loan-
to-value mortgages, as banks have reallocated internal
resources since the start of ‘lockdown’, not least to deal with
the increase in demand across the wider housing sector.
Help-to-Buy has therefore been an important selling tool
in assisting the Group to maintain its reservation rate, with
57% of customers accessing this scheme in the period since
23 March, an increase compared to the full year average of
40% (2019 – 35%).
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The table below shows the number and average selling price
of homes completed in the year, analysed geographically,
between private and social homes:
Site Safety
Homes sold (number)
Private
Social
Total
2020
2019
3,182
2,669
5,851
4,397
4,045
8,442
2020
526
1,145
1,671
2019
803
1,647
2,450
2020
2019
3,708
3,814
5,200
5,692
7,522
10,892
Average selling price (£000)
Private
Social
Total
2020
2019
2020
281.8
394.0
332.9
264.0
409.1
333.5
112.4
172.2
153.4
2019
108.8
168.3
148.8
2020
2019
257.7
327.4
293.1
240.1
339.4
292.0
North
South
Group
North
South
Group
The Group completed the sale of 7,522 new homes (2019 –
10,892), including 6,013 which completed in the period prior
to 23 March (1 August 2018 to 24 March 2019 – 5,620). This is
a significant reduction due to the considerable effect that
COVID-19 has had on business operations.
The average selling price of completions was £293,054 (2019
– £291,968), comparable to the prior year, with the proportion
of lower value social completions remaining unchanged
at 22% (2019 – 22%). In addition, we are pleased to report
that over a quarter of our new homes were sold to first-time
buyers, with 77% of these accessing the housing ladder using
the Government’s Help-to-Buy scheme.
Aside from the constraints to trading activity as a result of
COVID-19, the market remained strong for good quality,
affordably priced homes. Our Manchester division reported a
particularly resilient performance, still managing to complete
the sale of in excess of 500 new homes in the year, despite
the prolonged period of inactivity. Likewise, our Northern
Home Counties and Essex divisions, both close to London,
but with comparatively affordable average selling prices of
around £326,000 and £299,000 respectively, also delivered
robust performances given the circumstances, each also
reporting in excess of 500 completions.
Our widespread geographical presence, with 22 divisions
covering England, Scotland and Wales is a strength, enabling
the Group to pursue land opportunities in areas of strong
demand, while limiting exposure to localised market volatility.
Additional brands to support demand
In addition to our core Bellway brand, Bellway also trades
using the Bellway London and Ashberry brands. The Group
has recently centralised its marketing function to support
divisions with brand consistency across all marketing
channels, thereby allowing us to achieve a more cost-
effective deployment of resources across the Group.
Creating industry-
leading safety guidance
for our site workers and
construction partners
Safety is a core principle of how we do business and
the wellbeing of everyone who works for and with
Bellway is the number one priority for the Company.
We work with all our employees and subcontractors
to ensure that safe working practices are promoted
and embedded on all of our sites, utilising training,
toolbox talks, informal and formal inspections and
the sharing of best practice.
0.714
NHBC health and safety incident rate
Our Bellway London brand is intended to provide the
London market, where our output is generally low-to-mid-
rise apartments, with a modern and consistent identity,
that is recognisable across the Capital. While there have
been opportunities for investment in London, the trading
environment there has remained more challenging, with
overall demand generally less pronounced. This is particularly
the case for properties close to the £600,000 London Help-
to-Buy price cap, where affordability is a constraint for some
purchasers. As a result, the Board has reduced invested
capital in London over recent years to focus on opportunities
elsewhere in the Group.
Annual Report and Accounts 2020 27
Bellway p.l.c.
Operating Review continued
Nonetheless, London remains an integral part of our
business, accounting for 6% of completions (2019 – 9%), with
an overall average selling price of £449,466 (2019 – £499,617).
This reflects our focus on more affordable outer commuter
zones, such as our developments at Poplar, Bexleyheath and
Hornchurch, where demand is stronger.
Our Ashberry brand is only offered on larger sites, with the
purpose of providing two differentiated outlets and therefore
greater customer choice. This has the advantage of improving
sales rates, often more than can be achieved through using
two Bellway outlets, with a resultant improvement in return
on capital employed (‘RoCE’). Our Ashberry brand continues
to make an important contribution to output, accounting for
5.7% of completions (2019 – 5.2%).
The cost environment
Prior to entering ‘lockdown’, the Group reported that
industry-wide build cost increases were having a moderating
effect on the operating margin. These pressures were most
pronounced in and around London and the South East, with
rising subcontract tender prices experienced across several
trades and developments.
In addition, amendments to building regulations, effective
from August 2019, resulted in design and material changes
for new apartment blocks, particularly those over 18 metres
in height. This has had a further negative effect on site
margins in the year, as projected whole site cost estimates
were updated to reflect the additional costs associated with
ensuring that building envelopes fully comply with revised fire
safety regulations. In some cases, the amended elevational
designs required alterations to extant planning permissions.
This process has caused delays in site commencement dates
which, in an environment where revenues have generally
been flat and subcontract prices have been rising, has
resulted in a further deterioration in site margins.
The Group has consulted with the Government in respect of
new building regulations that are now likely to be effective
for sites where construction commences in the new calendar
year. These evolving standards are intended to improve the
energy efficiency of new homes, whilst encouraging lower
carbon heating solutions. The estimated cost of achieving
these standards is likely to be £3,000 to £4,000 per plot,
depending upon the outcome of the consultation.
In relation to COVID-19, an incremental, exceptional charge
of £14.5 million was recognised in relation to abnormal, non-
productive site-based costs arising from the interruption
to construction activity, which would have ordinarily been
capitalised into work-in-progress. These costs were borne
during the period when developments were closed, with
the period of inactivity typically lasting between six weeks
and three months. This reflects the gradual roll-out of safe
working practices across the Group, which was in line
with the separate guidance applying to the jurisdictions
of England, Scotland and Wales. The deployment of these
safe working practices will help to mitigate the likelihood of
incurring further significant non-productive site-based costs,
notwithstanding the possible risk of an additional nationwide
or localised ‘lockdown’.
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Further costs arising from extended site durations, together
with enhanced health and safety requirements relating to
social distancing measures, have led to an additional non-
exceptional charge of £18.9 million. These incremental site-
based costs will continue to influence the operating margin
in the year ahead, but with production capacity currently
around 85% to 90% and improving, we are hopeful that the
negative impact will gradually reduce, save for the risk of
additional localised ‘lockdowns’.
Bellway has continued to progress a number of initiatives,
such as the roll-out of COINS, an industry-leading accounting
and valuation software solution, and our BWY2020 cost-
saving programme, designed to reinforce a culture of cost
control, while improving processes across the business.
Going forward, the Board is continuing to prioritise several
further cost control initiatives in order to help lessen potential
cost pressures in the future. Our centralised procurement
team is working with supply chain partners in order to secure
future material availability at competitive rates. We are also
working collaboratively with our divisional subcontractors,
with the intention of mitigating labour cost pressures, given
the wider uncertainty in the economic environment.
Furthermore, our increased use of the ‘Artisan Collection’
standard house type range will contribute to greater
efficiencies in the years ahead, as familiarity with working
drawings reduces design fees and aids construction
rates. The house types have been well received by our
customers, with the range now plotted across 21,000 plots on
164 developments.
We will build upon all these initiatives, preserving quality, but
with a renewed commercial focus, particularly in the areas
of groundwork engineering solutions, professional fees and
layout optimisation.
Legacy building safety improvements
The Grenfell tragedy understandably increased the focus
on fire safety across the industry and more specifically on
apartment blocks, with subsequent Government guidance
setting out detailed processes to ensure adequate fire
protection measures and limit combustibility in external wall
systems on buildings.
As a consequence, the document ‘Advice for Building
Owners of Multi-storey, Multi-occupied Residential Buildings’
was issued by the Ministry of Housing, Communities and
Local Government (‘MHCLG’) in January 2020. This required
that all buildings above 18 metres in height should be risk
assessed to determine whether the presence of potentially
combustible materials could contribute to external fire
spread, in which case they may need to be replaced.
This consolidated advice note clarifies the Government’s
interpretation of the building regulations insofar as it is
applicable to properties pre-dating its issuance.
Total land bank
71,889
+5.2%
As previously reported, Bellway has identified a number
of developments, which were given building regulation
approval at the time of construction, where the building
materials used may not fully comply with this most recent
Government guidance. As a responsible developer,
we have undertaken further site-by-site assessments of
our portfolio of legacy apartment schemes, reviewing
the specific circumstances of each building individually.
While ascertaining legal liability is a complex process, we
have used these reviews to determine whether any safety
improvements are needed in order to reflect the current
guidance. As a result of this evaluation, Bellway has made an
additional provision and recognised an exceptional charge
of £46.8 million as part of its commitment to help building
owners where fire remedial works are required.
We understand that by adopting this proactive and
responsible approach there could be some disruption
to customers as remediation works are undertaken.
We therefore apologise to all customers affected.
Going forward, Bellway has renewed its efforts to ensure that
all future apartment schemes fully comply with the most up-
to-date interpretation of building regulations.
A considered approach to land buying
Prior to the onset of COVID-19, our land teams were
successful in buying compelling opportunities, in good
quality locations, with their efforts including the acquisition of
a small number of larger sites. The purpose was to carefully
extend the land supply in established divisions and in areas
with high demand, without increasing the overall risk profile
of the business.
With the onset of COVID-19, the Board initially introduced
a moratorium on all new land contracts, with the intention
of preserving liquidity until such time as market conditions
became clearer. It also aborted or indefinitely suspended
several land deals, resulting in an exceptional charge of
£9.9 million, where it assessed that the expected financial
returns were insufficient given the required capital outlay and
the evolving risk profile in the wider market.
While there is still uncertainty with regards to the future
economic outlook, the strengthening sales rate has allowed
Bellway to cautiously resume its land buying activity, securing
an additional 14 sites in good locations since the introduction
of ‘lockdown’ measures until 31 July 2020.
Overall, for the year ended 31 July 2020, Bellway exchanged
contracts to acquire 11,921 plots (2019 – 13,113 plots), across 68
sites (2019 – 93 sites), with a wide geographical spread and
a total contract value of £762.4 million (2019 – £782.0 million).
The expected average selling price of the contracted plots,
assessed at the time of acquisition, is under £280,000, slightly
lower than the average selling price achieved in the period.
The intention of this land buying approach is to ensure that
future sales outlets offer our customers an affordable product,
with less reliance on Help-to-Buy. This should help to mitigate
any potential downward effect on sales rates that may arise
as the Help-to-Buy rules change in the new calendar year.
Notwithstanding this land buying approach, the Board still
expects that the overall average selling price in the current
financial year will be around £290,000.
The table below analyses the Group’s land holdings:
Owned and controlled plots
DPP: plots with implementable detailed
planning permission
Pipeline: plots pending an implementable
DPP
Total owned and controlled plots
Strategic land holdings
Total land bank
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16,300 16,300
44,589
42,721
27,300 25,600
71,889 68,321
The total owned and controlled land bank represents
5.9 years forward land supply (2019 – 3.9 years), with the
increase a result of the reduction in completions during
the year. There are 28,289 plots (2019 – 26,421 plots) with an
implementable detailed planning permission (‘DPP’) and
this includes all required plots to meet the current year’s
anticipated legal completion forecast. This healthy position
enables the Group to be selective when acquiring land in
the year ahead, yet with the support of a strong underlying
balance sheet, Bellway has substantial resource in order to
target further, high-return opportunities in the land market.
As well as investing in land that meets the Group’s immediate
needs, we have also continued to invest in our strategic land
bank, entering into option agreements to buy an additional
15 sites (2019 – 29 sites) throughout the country. As a result,
the Group’s strategic land bank now comprises 27,300 plots
(2019 – 25,600), providing a useful long-term source of future
land supply.
Quality and our Customer First agenda
We continue to work hard to ensure that the Bellway
brand is one which our customers can trust. Our approach
is to nurture a culture of excellent service throughout
the organisation which, in turn, enables us to meet
our customers’ expectations with the delivery of high-
quality homes.
We are therefore proud to have been recognised as a
five-star homebuilder in the HBF’s Customer Satisfaction
survey for the fourth consecutive year. In addition, the
high standards achieved by our Site Managers were again
recognised, with 44 committed individuals receiving NHBC
‘Pride in the Job’ Awards (2019 – 42), a testament to their
dedication to building a high-quality product. The Group
also continues to focus on improving an extended range of
metrics, such as Construction Quality Review scores (‘CQRs’),
which have improved to 80.2% in the year (2019 – 75.2%).
We recognise that there is more to do, and in that regard,
we are pleased to report that our ‘Customer First’ initiative,
launched in the first half of the financial year, is gathering
momentum. The purpose is to re-emphasise the importance
of every customer’s experience to all individuals across our
organisation, whatever their role. In doing so, our aim is to
further improve the customer journey, instilling confidence
and a consistent level of quality and service, from the
initial site visit, through to our post-completion aftercare
provision. Initiatives include clearer, more timely customer
communications throughout the buying process and more
widespread training across a range of different roles. We are
also making further investment in our online customer care
system in order to better manage our aftercare service.
Annual Report and Accounts 2020 29
Bellway p.l.c.
Operating Review continued
Homes sold on a leasehold basis
During the year, the Competition and Markets Authority
(‘CMA’) commenced an investigation into the provision of
leasehold housing and has since reported its initial findings in
relation to potential contraventions of consumer protection
law concerning ground rents and mis-selling of leasehold
properties. The CMA has not launched an enforcement
action against Bellway, but the Group does retain assets
with a cost of £3.0 million in relation to houses that were
historically sold on a leasehold basis. While the terms of these
leases do not include onerous ground rent doubling clauses,
the market demand for bulk freehold portfolio disposals
in relation to houses is now severely limited. The Board
therefore considers that these assets are impaired and has
recognised a charge of £3.0 million during the year.
In line with Government guidance, Bellway has not sold
houses on a leasehold basis since January 2018.
A safe working environment
Ensuring the health and safety of our colleagues and site
visitors remains a priority for Bellway, with additional focus
during the year as a result of the increased risk profile arising
from COVID-19.
With the initial reopening of construction sites in May,
and after considering guidance from Government and the
Construction Leadership Council, our working practices
adapted considerably to address the issues posed by the
pandemic. Measures such as enhanced training procedures,
the introduction of site marshalls, a restriction in the number
of workers allowed on site, additional sanitising stations,
prominent signage and clearly marked-out access and egress
routes were amongst several introduced to ensure safe
social distancing and help prevent the spread of the virus.
The Board recognises the potential requirement to adjust
working practices on a regional basis as localised ‘lockdown’
measures continue to evolve.
The importance of good mental health amongst our
workforce has also grown in prominence since the onset
of COVID-19. Recognising the prevalence of mental health
concerns in the wider construction sector, Bellway has
enhanced its efforts in this important area, building upon
the initiatives already in place. As a result, we have trained
an additional 160 Mental Health First Aiders in the year and
have deployed widespread training courses and awareness
campaigns to promote good mental and physical health.
More widely within the business, our internal health and
safety team continue to work alongside the NHBC to help
promote high standards and safe working practices across
all our sites. This year’s NHBC Health and Safety Awards were
cancelled due to the pandemic, but we continue to use
several KPIs to monitor onsite performance. In that regard,
we have again reduced the time from lost accidents, with a
further reduction in the seven-day reportable incident rate.
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Attracting talent for the longer term
Our colleagues have shown great resilience throughout the
pandemic, quickly adapting to new methods of working,
while balancing the challenges of family life with ongoing
professional commitments. Our significant investment in IT
systems over recent years has enabled the Group to respond
effectively to remote working requirements and in doing so,
revise previously established routines.
Throughout ‘lockdown’, we have supported our colleagues
with full basic pay from our own resources, without making
a grant claim using the Government’s CJRS. In addition, we
have introduced several support initiatives, including flexible
working, to help balance work and family responsibilities and
we intend to evolve these further in the year ahead.
Bellway is also committed to becoming a more diverse
and inclusive employer, enabling individuals with different
experiences and from varied backgrounds to succeed in their
career. Through our employee ‘listening groups’, we continue
to gain feedback from our colleagues, with this contributing
to the development of several initiatives intended to widen
both gender and race diversity. We have launched our first
ever employee engagement survey and the initial feedback
is very positive. We look forward to reviewing the full results in
the first half of the new financial year.
We also have a focus on ensuring that Bellway has the
right skills to grow in the future. In that regard, the number
of apprentices, graduates and trainees across our business
has risen by 42% to 258 (2019 – 182), with the result that 8.3%
of the workforce (2019 – 6.1%) are now employed in these
crucial developmental roles and are therefore able to benefit
from the investment in our new Bellway Training Academy.
The rise has been bolstered by the successful introduction
of our two-year graduate programme ‘Great Careers Built
With Us’, launched in January. This year’s annual intake
included 38 new graduates across a range of disciplines
and had an equal gender split, with 13.2% from ethnic
minority backgrounds.
In response to reduced output and the suspension of
divisional expansion plans, Bellway has undertaken a
measured and responsible workforce rationalisation
programme. Notwithstanding this, the Group continues to
adopt a long-term approach, retaining both the skills and
workforce to respond positively as the market recovers.
A sustainable approach to building new homes
Bellway is committed to being a responsible homebuilder,
operating in an ethical and sustainable manner for all its
stakeholders, including customers, employees, shareholders,
suppliers and local communities.
Energy efficiency and carbon reduction remain a focus for
the business. Notwithstanding this, although there was a
significant reduction in total output, scope 1 and 2 carbon
emissions increased to 2.8 tonnes per legal completion (2019
– 2.4 tonnes). This is primarily a reflection of continued carbon
production from offices, owned part-exchange properties
and showhomes during the ‘lockdown’ period. We expect to
improve on this measure in the year ahead as output begins
to rise.
We are taking positive actions such as sourcing our
office electricity, where possible, from Renewable Energy
Guarantee of Origin (‘REGO’) suppliers, building upon our
work last year, when we commenced sourcing construction-
site compound electricity from REGO suppliers. In doing
so, we estimate that this has saved a further 1,800 tonnes of
carbon in the year. Bellway has also been trialling a generator
fitted with photovoltaic panels to determine whether this
technology can deliver further cost-effective carbon savings
on those construction sites which are not yet connected to
the National Grid.
All timber purchased by Bellway is from sustainable sources
and we mandate that all supplies have Forest Stewardship
Council (‘FSC’) or Programme for the Endorsement of Forest
Certification (‘PEFC’) timber certification. As a result, Bellway
holds the highest rank in the World Wildlife Foundation’s
(‘WWF’) Timber Scorecard 2019.
Our efforts to reduce the proportion of construction waste
sent to landfill have also continued, with 99.1% of waste being
reused on site, diverted to recycling or used as refuse derived
fuel (2019 – 98.4%).
Lastly, while in its early stages, Bellway has undertaken a
review to understand the impact of single-use plastic in the
business, with the intention that we will reduce usage in
future years.
Charitable support
We are committed to continuing our support for local and
national charities, as well as the communities in which
we develop.
Our support for Cancer Research UK (‘CRUK’), our national
charity partner, is more important than ever, and despite
COVID-19, our colleagues and business partners were
still able to raise and donate £328,000 to CRUK (2019 –
£495,000), taking total donations over the past four years to a
noteworthy £1.6 million.
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 £537,000 (2019 – £755,000), of which £237,000
(2019 – £392,000) was raised by employees, subcontractors
and suppliers.
We recognise that donations were reduced during the
‘lockdown’ period, during which charitable fundraising events
were frequently curtailed, and we hope to resume our activity
to previous levels in the year ahead.
Recent trading
The reduction in the number of completions contributed to
the Group ending the year with a substantial forward order
book, comprising 6,588 homes (2019 – 4,878 homes) with a
value of £1,760.2 million (2019 – £1,223.9 million). In the first
nine weeks of the new financial year, trading has been robust,
with overall average weekly reservations rising by 30.6% to
239 per week (1 August to 29 September 2019 – 183 per week).
Site numbers at the start of the new year were modestly
ahead at 276 (2019 – 271). Pent-up demand arising from
the prolonged period of lockdown inactivity, together with
Government support through the stamp duty holiday and
provision of Help-to-Buy, have contributed to this reassuringly
strong performance.
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As a result of this positive start, the order book at 4 October
was further strengthened, rising by 42.5% to £1,869.6 million
(29 September 2019 – £1,311.6 million) and comprises 6,624
homes (29 September 2019 – 5,190 homes). This growth
has been achieved notwithstanding the higher number of
completions recorded in this short trading period.
Outlook
The exceptionally strong forward sales position offers
resilience for the year ahead, providing some operational
certainty and visibility with regards to cash generation in the
coming months. Output for the full year will depend upon
the continuation of sales demand, which could be affected
by sector-wide risks such as rising unemployment and the
forthcoming changes in both the stamp duty and Help-
to-Buy rules. The Board also recognises the risk posed by
the uncertain outcome of future trade deals with both the
European Union and the rest of the world.
Nevertheless, productivity, currently running at 85% to 90% of
output achieved in the year ended 31 July 2019, is continuing
to improve. Subject to the risk of a further widespread
‘lockdown’, this should enable the Group to complete the
sale of around 9,000 homes for the year ending 31 July 2021.
The strong order book and investment in work-in-progress
is likely to mean that completions will be more heavily
weighted towards the first half trading period than is the case
in a typical year.
Despite the wider economic uncertainty, the fundamentals
of the business are robust. Our strong balance sheet not only
instils confidence in times of uncertainty, but it also provides
substantial capacity for disciplined land and work-in-progress
investment. There is a structural shortage of new homes in
the UK and beyond the period of recovery, Bellway, with
its long-term approach, operational strength and focus
on quality is well set to continue its long track record of
delivering growth.
Charitable donations
£537,000
+5.2%
Jason Honeyman
Group Chief Executive
19 October 2020
Annual Report and Accounts 2020 31
Bellway p.l.c.
Financial Review
Keith Adey
Group Finance Director
Operating performance
The impact of COVID-19 has been significant and ended
Bellway’s track record of ten consecutive years of revenue
growth. As a result, housing revenue fell by 30.7% to
£2,204.4 million (2019 – £3,180.1 million), principally driven by
a 30.9% reduction in the number of housing completions,
which fell to 7,522 (2019 – 10,892). The average selling price
of completions was £293,054 (2019 – £291,968), comparable
to the prior year, with the proportion of lower value social
completions remaining unchanged at 22% (2019 – 22%).
Other revenue, which includes land, commercial and ground
rent sales, reduced to £21.0 million (2019 – £33.1 million),
with the prior year benefitting from additional land sales.
Together with the reduction in housing revenue, total
revenue decreased by 30.7% to £2,225.4 million (2019 –
£3,213.2 million).
Gross profit, before considering exceptional items, fell to
£422.2 million (1) (~) (2019 – £790.2 million) representing a gross
margin of 19.0%(1) (~) (2019 – 24.6%). The decline was mainly
driven by the reduced volume output and less efficient
absorption of site overheads and selling costs. There was also
a non-exceptional charge of £18.9 million in relation to site
extensions and enhanced health and safety requirements
due to COVID-19. Costs associated with extended site
durations are expected to be ongoing, resulting in lower
anticipated future site margins and this will continue to
influence the operating margin in the year ahead.
The Group did not benefit from any grant income under the
CJRS, instead supporting colleagues on full basic pay from its
own resources throughout the pandemic.
The costs of rising subcontract tender prices across a variety
of trades and several developments, particularly in and
around London and the South East, together with costs
associated with complying with revised building regulations
in relation to fire safety and expected new carbon reduction
targets, had a further negative effect on the gross margin.
Gross profit is also stated after a charge of £3.0 million in
relation to the impairment of ground rents assets relating to
houses historically sold on a leasehold basis.
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Annual Report and Accounts 2020
Beyond the present uncertainty, industry
fundamentals remain positive, with
continued underlying demand for
affordably priced new homes.
Other operating income and expenses, which net to an
expense of £3.1 million (2019 – £5.6 million), relate to the
cost of running our part-exchange programme, with activity
initially suspended as transactions in the wider housing
market declined substantially with the onset of ‘lockdown’
restrictions.
The pre-exceptional administrative expense reduced
significantly to £97.4 million(1) (2019 – £109.7 million), primarily
reflecting a cessation of payments arising under the staff and
divisional management incentive schemes. As a proportion
of revenue, administrative expenses were 4.4%(1) (~) (2019 –
3.4%), with this run rate expected to continue at a similar level
in the new financial year.
Overall, pre-exceptional operating profit reduced by 52.3%
to £321.7 million(1) (~) (2019 – £674.9 million) and the pre-
exceptional operating margin was 14.5%(1) (~) (2019 – 21.0%).
Group revenue (£m)
3,213.2
2,957.7
£2,225.4m
(30.7%)
2,225.4
2018
2019
2020
Profit before taxation (£m)
641.1
662.6
£236.7m
(64.3%)
236.7
2018
2019
2020
Exceptional items
COVID-19 costs
The Group incurred total exceptional COVID-19 related costs
of £25.8 million, comprising £14.5 million of abnormal, non-
productive site-based costs arising from the interruption
in construction activity, which would have ordinarily been
capitalised into work-in-progress. In addition, an impairment
charge of £9.9 million was also recognised in relation
to several aborted or indefinitely suspended land deals,
where the expected financial returns were insufficient given
the evolving risk profile in the wider market. A charge of
£1.4 million was also incurred in relation to a measured
workforce rationalisation programme enacted in response
to reduced output and the suspension of divisional
expansion plans.
Legacy building safety improvements
As a responsible developer, we have undertaken further
assessments of our portfolio of legacy apartment schemes
to determine whether any safety improvements are required
to comply with the most recent Government guidance.
As a result, Bellway has incurred an exceptional charge of
£46.8 million and in doing so has put aside a provision to
help remediate certain properties, notwithstanding that those
developments secured building regulations certification
at the time of construction. This is a highly complex area,
with judgements and estimates in respect of the cost of
rectification works, and the extent of those properties within
the scope of the latest Government guidance, likely to evolve.
The Group is also pursuing recoveries from third parties, but
as these are not certain, an asset has not been recognised on
the balance sheet.
After taking these exceptional items into consideration,
reported operating profit reduced by 63.1% to £249.1 million
(2019 – £674.9 million).
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Net finance expense
The net finance expense was £13.4 million(~) (2019 –
£14.4 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, decreased to
£6.0 million (2019 – £6.3 million), principally reflecting a
reduction in LIBOR and average net bank debt, which
decreased to £55.4 million(~) (2019 – £165.4 million).
Notional interest on land acquired on deferred terms
decreased by £0.9 million to £6.9 million (2019 – £7.8 million).
Profitability
Profit before taxation, post exceptional items, fell by 64.3%
to £236.7 million (2019 – £662.6 million). The corporation tax
charge was £43.8 million (2019 – £124.0 million), reflecting an
effective tax rate of 18.5% (2019 – 18.7%).
Basic earnings per share fell by 64.2% to 156.6p per share
(2019 – 437.8p).
Net cash and financial position
Bellway has a strong balance sheet, with net cash of
£1.4 million(~) (2019 – £201.2 million), representing an ungeared
position (2019 – ungeared). Committed land obligations
remain low at £343.6 million (2019 – £297.9 million),
with £226.5 million due within the next financial year.
Including land creditors, net debt stood at £342.2 million
(2019 – £96.7 million), representing very modest adjusted
gearing of 11.4%(~) (2019 – 3.3%).
The Group has committed bank facilities of £545 million.
Since the start of ‘lockdown’, Bellway has extended the
maturity date of tranches totalling £125 million, which were
otherwise due to expire in the financial year, to July 2021.
These extensions help to ensure the ongoing liquidity of
the Group and evidence the good, long-term relationships
that Bellway has with each of its UK-based banking partners.
The Group has operated comfortably within its bank
covenants during the year.
Operating profit (£m)(1)
£321.7m
(52.3%)
652.9
674.9
Operating margin (%)(1)(~)
22.1
21.0
321.7
14.5%
(650bps)
14.5
2018
2019
2020
2018
2019
2020
Earnings per ordinary share (p)
423.4
437.8
Total dividend per ordinary
share (p)
143.0
150.4
156.6p
(64.2%)
156.6
2018
2019
2020
50.0p
(66.8%)
50.0
2018
2019
2020
Link to remuneration – see pages 72 to 92.
Annual Report and Accounts 2020 33
Bellway p.l.c.
Financial Review continued
Bellway has also been confirmed as an eligible issuer
for the CCFF, subject to continuing compliance with the
Bank of England’s eligibility criteria, with an issuer limit of
£300 million. This remains undrawn, but available as a
prudent back-up facility in the unlikely event that it is needed,
providing Bellway with access to total funds of £846.4 million.
This robust overall position ensures that the Group can
respond positively should there be a further prolonged
period of economic disruption.
Notwithstanding the significant period of inactivity when the
ability to collect completion monies was severely curtailed,
Bellway remained cash generative, producing £55.8 million
from operations in the year (2019 – £419.1 million).
Taxation payments were £107.7 million (2019 – £119.3 million)
and represented 45.5% of profit before taxation (2019 – 18.0%).
The disproportionately high cash outflow follows a one-off
change in legislation accelerating the timing of quarterly
payments. Dividend payments were £123.1 million (2019 –
£178.9 million), with the reduction a consequence of the
cancelled interim dividend which was withdrawn in order to
preserve liquidity.
The liquidity position has further improved since the year
end as the Group continues to convert its strong order book
into cash. As a result, the net cash balance at 4 October was
£61.2 million(~).
The Directors remain of the view that the Group’s financing
arrangements and balance sheet strength provide sufficient
liquidity and covenant headroom for at least the next twelve
months. They have therefore prepared the consolidated
financial statements on a going concern basis.
A robust balance sheet provides strength
and flexibility
The balance sheet principally comprises amounts invested
in land and work-in-progress, with total inventories rising by
11.1% to £3,863.0 million (2019 – £3,477.6 million). The carrying
value of land rose to £2,216.2 million (2019 – £2,004.4 million)
reflecting the lower number of completions in the period.
Work-in-progress rose by 15.2% to £1,496.1 million (2019 –
£1,298.2 million) and was 67.9% (2019 – 40.8%) as a proportion
of housing revenue. Again, the increase reflects the lower
number of completions in the second half of the financial
year, but this strong investment should help benefit the first
half of the year ending 31 July 2021.
The Group had a modest retirement benefit asset of
£1.3 million (2019 – £2.8 million) at 31 July reflecting an
ongoing commitment to fund this future, long term obligation.
Following the final dividend payment of 100.0p per share in
respect of the year ended 31 July 2019, the net asset value
rose by 2.5% to £2,994.0 million (2019 – £2,921.2 million),
representing a net asset value per share of 2,427p(~) (2019 –
2,372p).
As a result of the reduction in profitability and reduced asset
turn, RoCE reduced to 10.8%(1) (~) (2019 – 24.7%), or 9.8%(1) (~)
(2019 – 22.1%) when including land creditors as part of the
capital base. Post-tax return on equity was 6.5%(~) (2019 –
19.8%).
Beyond the present uncertainty, industry fundamentals
remain positive, with continued underlying demand for
affordably priced new homes. The evolving economic
landscape will provide challenges in the future, but the
strength of our balance sheet and flexible capital structure
ensures Bellway remains well positioned to respond
positively and position itself for a return to growth.
Keith Adey
Group Finance Director
19 October 2020
Note:
1 Before exceptional items (note 3, page 115 to 116).
~ 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 134 to 136. Throughout this report ‘~’
refers to alternative performance measures.
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Building for the future...
...for our communities
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£260,000
Value of home and interior
Ant and Dec’s Saturday Night Takeaway
During the year Bellway gave away a dream home at
the Moorfields development, Newcastle upon Tyne,
to a deserving family on Ant and Dec’s Saturday
Night Takeaway.
Petra and Simon Williams founded a charity to support
grieving parents and siblings after the devastating loss
of their baby daughter Darcey Leigh in 2017. They were
nominated for the prize by a family friend and were
surprised on the show after being plucked from
the audience.
The couple were given a fully furnished three-bedroom
home which is the biggest individual prize ever to be
given away on the ITV show.
Annual Report and Accounts 2020 35
Bellway p.l.c.
Principal Risks
The Board has completed its assessment of the Group’s emerging and principal risks.
The following ten principal risks to our business have been identifi d:
Risk and
description
Land
Inability to source
suitable land at
appropriate gross
margins and RoCE.
No change
Planning
Delays and complexity in
the planning process.
No change
Strategic
relevance
KPIs
Mitigation
• Budgeting and forecasting of growth
targets to ensure land bank supports
strategic target.
• Targeted approach to land
acquisitions, with pre-purchase
due diligence and viabilities 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-
term and strategic land to maintain an
appropriate balance of land in terms
of quantity and location.
• Insufficient land would affect
our volume growth targets.
• Failure to buy land at the
right margin would have
a detrimental effect on
future returns.
• Land bank
(with DPP).
• Number of
homes sold.
• RoCE.
• Gross margin.
• EPS.
• 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
Shortages of both
appropriately skilled
subcontractors and
building materials at
competitive prices.
No change
• Failure to secure
required and appropriate
resources causes delays
in construction, impacting
the ability to deliver volume
growth targets.
• Pricing pressure would
impact returns.
• Number of
homes sold.
• Customer
satisfaction
score.
• Employee
turnover.
• EPS.
• Systems are in place to select,
appoint, monitor, manage and
build long-term relationships with our
subcontractors and suppliers.
• Competitive rates and prompt
payment for our subcontractors.
• Group-wide purchasing
arrangements are in place.
• Continued review and monitoring
of supplier and subcontractor
performance and suppliers.
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Risk and
description
Strategic
relevance
KPIs
Mitigation
• In addition to the moral
• Number of RIDDOR
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.
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.
• The impact of these external
factors would be on the
ability to sell houses and
apartments and on returns.
• Number of
homes sold.
• 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
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.
• We continue to monitor business
performance and build a robust
future-proof business with a solid
strategy and sound financial controls.
Health and safety
There are significant
health and safety
risks inherent in
the construction
process.
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.
• Uncertainty over post-
BREXIT agreements.
There is an increase in this
risk given the economic
uncertainty brought about
by the COVID-19 pandemic.
Annual Report and Accounts 2020 37
Bellway p.l.c.
Principal Risks continued
Risk and
description
Strategic
relevance
KPIs
Mitigation
• Failure to attract and retain
people with appropriate
skills will affect our ability
to perform and deliver our
volume growth target.
Human resources
Inability to attract and
retain appropriate
people.
There is a decrease
in this risk due to the
strengthening of recruitment
and engagement processes
during the period.
• Employee turnover.
• 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.
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.
No change
Legal and regulatory compliance
Failure to comply
with legislation and
regulatory
requirements.
No change
• Volume growth.
• EPS.
• Number of
homes sold.
• RoCE.
• Gross margin.
• 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.
• Changes may occur as
a result of the MHCLG’s
Building Safety Programme
and the work being
carried out by the CMA
and Government on
leasehold reform.
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• Continued development of the
Group HR team and implementation
of our people strategy.
• Centralised recruitment support and
employee engagement activities.
• Monitoring and review of staff
turnover and 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.
• Graduate, apprentice and site
manager programmes in place.
• Group-wide systems are in operation
which are centrally controlled with an
outsourced support function in place.
• Continued investment in systems.
• Regular review and testing of our
security measures, contingency plans
and IT security policies.
• Group-wide Security Committee
in place.
• In-house expertise from Group
Company Secretary, Legal, Health
and Safety and Technical functions
who advise and support divisions on
compliance and regulatory matters.
• Consultation with Government
agencies, specialist external legal
advisers and subject matter experts
(e.g. fire safety consultants) including
ongoing co-operation with the CMA.
• Strengthened Group-wide
policies, guidance and training
for key regulatory matters,
supported by reporting and
whistleblowing procedures.
• 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.
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Risk and
description
Strategic
relevance
KPIs
Mitigation
Climate change
Failure to evolve
business practices and
operations in response
to climate change
including physical
impacts, reporting
requirements and social
expectations.
New
Risk
COVID-19
Ongoing uncertainty
over the impact of
COVID-19 on the Group’s
operational and financial
performance.
New
Risk
• There is an increased focus
on the actions taken by
businesses in response
to climate change and
the disclosures made.
Failure to improve reporting
and performance in line
with new regulations
and heightened social
expectations could lead
to financial penalties and
reputational damage.
• The physical impacts of
climate change (such as
extreme weather) could
lead to disruptions within
the supply chain and
build programmes.
• The economic uncertainty
brought about by COVID-19,
in addition to the factors
below, affects construction
and sales activity which
ultimately impact the
Group’s liquidity.
– Lack of high loan-to-
value mortgages
– Government imposed
restrictions/guidance
– Maintaining social
distancing practices
– Issues in the supply chain
or high levels of staff/
subcontractor absence
• Damage to reputation
if the Group is not
perceived to be following
Government guidelines and
acting responsibly.
• Greenhouse
gas emissions.
• Carbon
emissions per
completed home.
• Continual monitoring of new and
evolving requirements as part of our
legal and regulatory compliance
framework, including the Future
Homes Standard.
• Dedicated Head of Sustainability
to assess risks relating to climate
change, monitor performance and
drive improvement.
• Investment in energy-saving
measures for offices and sites,
including transition to REGO
certified electricity.
• Procurement of materials (e.g. timber)
from sustainable sources.
• Regular review of the design and
features of new homes to increase
energy efficiency.
• EPS.
• Number of
homes sold.
• RoCE.
• Gross margin.
• Order book value.
• Land bank
(with DPP).
• Operating margin.
• Dividend per
ordinary share.
• Operating profit.
• Net asset value per
ordinary share.
• Employee turnover.
• Reservations rate.
• Strong balance sheet as at 31 July
2020 and committed bank facilities
of £545 million. The Group has
also been confirmed as an eligible
issuer for the Government’s CCFF
facility with a limit of £300 million
(currently undrawn).
• Regular review of liquidity and
cashflow at a Group level.
• Targeted spend on land and WIP, with
a focus on homes in the latter stages
of production.
• Maintenance of business resilience
plans supported by investment in IT
to enable robust homeworking.
• Safe working practices and
arrangements implemented
across offices and sites for staff,
subcontractors and customers with
Marshalls appointed to monitor
social distancing.
Emerging risks
The Group faces a number of emerging risks that have the potential to be significant to the achievement of our strategy, but
which at present cannot be fully defined and assessed. These are considered as part of our established risk management
framework, discussed by the Board regularly and elevated to principal risks when warranted. The risk from both climate change
and COVID-19 has been elevated from an emerging risk early in the 2020 financial year to a principal risk facing our business.
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Risk Management
Our established framework for managing risks has
continued to be in place across the business throughout this
financial year, with responsibility to implement the Board’s
policies on risk management and internal control sitting
with management.
Our risk management objectives continue to be:
• Assess emerging and principal 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.
Risk management framework
• 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.
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 emerging and
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.
• Approve risk treatments and actions.
• Approve risk reports for the Board.
• Review and agree risk appetite.
framework, policy and processes.
• Undertake risk management activities and
produce reports in accordance with risk
management policy.
Key
Reports to
Directs and monitors
Risk management roles and responsibilities
In all businesses, responsibility for 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
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Treat
to bring within
risk appetite
Action
mitigate risks
(where needed)
Report
monitor risks and
report progress
of mitigation
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.
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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 62 to 71.
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 3.1 times (2019 – 2.9 times).
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 15 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
£12.4 million (2019 – £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.
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 18 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 16 to the accounts).
No other security is held against any other financial assets of
the Group.
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Risk Management continued
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 2020, 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
£0.5 million (2019 – £1.7 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.
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 96.
Viability statement
In accordance with provision 31 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 required by the going concern assumption. The three-
year period is consistent with the Group’s detailed bottom-up
forecasts which assess future profitability and cash flows.
The Group’s internal forecasts have been regularly updated,
as usual, since the COVID-19 ‘lockdown’, incorporating our
actual experience along with our expected future outturn.
These incorporate lower sales volumes and slower build
rates as we continue to prioritise the health and safety of our
colleagues and site visitors as a result of the increased risk
profile arising from COVID-19. Furthermore, the base forecast
takes into consideration changes to both the Help to Buy
scheme, with effect from April 2021, and the expiry of the
stamp duty holiday, in March 2021.
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The viability assessment is based on the Group’s current
position and the potential effect of the principal risks
facing the Group, which are summarised on pages 36 to
39. The principal risks that have been incorporated into a
combination of the various scenarios include:
Risk
Relevance to scenarios
External environment –
including housing demand,
mortgage availability and
government housing policy.
Health and safety
A reduction in private
completions and private ASP
due to a decline in demand.
A nationwide COVID-19
‘lockdown’ on a similar basis
to that experienced in H2
of FY20.
The most severe but plausible downside scenario is a severe
recession. It includes the following principal assumptions:
• Private completions in H1 FY21 are supported by the strong
forward order book, but still fall to 75% of that achieved in
H1 of FY20. In the 12 months to 31 January 2022, private
completions reduce by around 50% compared to the
pre-COVID-19 ‘lockdown’ peak. This is followed by a
gradual recovery based on the lower base position.
• Private average selling price in H1 FY21 remains in line with
internal forecasts due to the strong order book position.
In the 12 months to 31 January 2022, private average selling
price reduces by 10% compared to the latest achieved
pricing. This is followed by a gradual recovery based on the
lower base position.
• These assumptions reflect the Group’s experience in the
2008/09 global financial crisis.
A number of prudent mitigating actions were incorporated
into the plausible but severe downside scenario, including:
• Plots in the land bank being replaced at the same rate that
they are utilised.
• Construction spend is reduced in line with
housing revenue.
None of the mitigating actions included within the scenarios
would hamper the long-term growth aspirations of the Group.
In addition to the various scenarios, several additional
mitigating measures remain available to management
that were not included in the scenarios. These include
withholding discretionary land spend and instead trading
out of the substantial existing land holdings, further reducing
construction spend in recognition of the strong carried
forward work-in-progress position at 31 July 2020, and
reducing or cancelling future dividend payments.
The output of this review considered the profitability, cash
flows and funding requirements of the Group over a period
of three years. The assessment included an assumption that
existing banking facilities remained in place, but were not
renewed at the end of their term.
In all the scenarios, the Group had significant headroom in
both its financial bank covenants and existing bank facilities,
did not utilise the CCFF and met its liabilities as they fall
due. 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.
Corporate Responsibility
Bellway’s aim to operate the
business in a responsible and
ethical manner goes hand in
hand with our commitment
to delivering high-quality
homes in desirable locations,
helping to address the ongoing
housing shortage in the UK.
Notwithstanding the reduced
completions this year due to the
COVID-19 ‘lockdown’, our growth
over the past fi e years has
delivered sustainable homes and
communities across the UK, as well
as providing long-term bene ts
to our customers, employees,
shareholders and supply chain.
We continue to operate our Corporate Responsibility
(‘CR’) activities under the three core pillars of environment,
construction, and society and economy. This ensures that
we consider the interests of our diverse stakeholder groups
and make positive social, environmental and economic
contributions across our business.
We operate our CR programme at a Group level via a CR
Steering Committee, led by the Group Finance Director.
This focused group of functional heads meets quarterly to
assess, discuss and manage CR-related activities across the
business, as well as monitoring relevant targets and KPIs.
Our key achievements in 2019/20
Progress has continued on our overall CR agenda and
specifically against the 13 public targets that were set for the
2019/20 year. Some key achievements are highlighted to the
right and full details of our performance can be found on our
CR website, along with our targets for the coming 2020/21
year: www.bellwayplc.co.uk/corporate-responsibility
Of our 13 public targets, six are multi-year targets that still
have at least 12 months to run while a further six targets
were achieved during the year. The final target, to develop
a schools engagement pack, was delayed by the COVID-19
pandemic and will now be completed in 2020/21.
Environment
Biodiversity and Ecology, Carbon Emissions,
Energy, Transport, Water
• Continued to reduce our carbon emissions
per employee through the introduction
of additional green energy supplied into
the business.
• Maintained our office waste diversion
above 54%.
For more information see pages 44 to 45.
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Construction
Planning, Procurement, Research and
Development, Site Management, Waste
• Continued to increase our construction waste
diversion rate to 99.1% (2019 – 98.4%).
• Achieved our HBF 5 star homebuilder status
for the fourth year running.
For more information see pages 46 to 47.
Society and Economy
Charities, Customers, Economic Development,
Employees, Health and Safety, Stakeholders
• Continued our partnership with Cancer
Research UK, increasing our 4-year total
fundraising and donation total to £1.6 million,
well on our way to achieving our 5-year target
of £2 million.
• Achieved a reduced RIDDOR seven-day
reportable incident rate per 100,000 site
operatives of 203.12 (2019 – 324.87), the fourth
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 our latest scores for
both were ‘Awareness – C’, in line with the CDP
programme global average.
For more information see pages 48 to 49.
6
targets
achieved
6
targets are multi-year
and progress will continue
into 2020/21
1
target
missed
For full details of our CR activity visit
www.bellwayplc.co.uk/
corporate-responsibility
Annual Report and Accounts 2020 43
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Corporate Responsibility continued
Environment
Climate change, protection of the environment and waste continue to
represent significant challenges th t we as a company, and society as a
whole, continues to face. They remain at the core of our CR activities
and we aim to minimise our impacts through our sustainable approach
to development.
Our targets
1
target
achieved
3
targets are
multi-year
0
targets
missed
Waste
We will assess the use of single-use plastic in our
offices, construction processes and supply chain
to understand where we can reduce or eliminate
usage by 2021.
Water
We will seek to reduce water consumption
across all households to 115 litres per person per
day by 2022.
Carbon
We will aim to reduce our direct carbon emission
intensity (scope 1 & 2) from our construction
operations, offices and business mileage by 10%
by 2022/23 (measured by CO2e per home sold;
2017/18 as a base year).
Supply chain
We will maintain 100% timber sourced from
sustainable sources and maintain our score in
the WWF Timber scorecard as 3.
Biodiversity and ecology
Housebuilding can be an intrusive process. We continue to
build a proportion of our new homes on brownfield sites, with
36% built on such land this year (2019 – 43%). This type of
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. Greenfield sites are also developed and it is in these
areas that our impact is potentially greater. We aim, wherever
possible, to mitigate these impacts as we create sustainable
and attractive places to live. New sites continue to undergo
a risk assessment in which biodiversity and ecology issues
will be included where necessary. Environmental impact
assessments are carried out if required and issues such as
biodiversity mitigation, enhancement and offsetting will
be included where necessary and in agreement with the
planning authority.
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Examples of recent measures include the provision of bat
boxes, relocation of badger sets, migration of protected
species to new habitats and the construction of on-site and
off-site ponds for both drainage and to support and promote
biodiversity. In total, 224 of our developments had Sustainable
Urban Drainage Systems implemented (2019 – 255), 186 active
sites had a biodiversity plan in place (2019 – 150) and we
planted over 12,700 trees (2019 – 17,676).
Energy
Our energy consumption continues to be a lesser financial
impact for our business compared to land, labour and
materials. However, as a responsible business we have
a duty to minimise usage where possible and to look for
greener options. In previous years we have focused on
introducing energy-saving initiatives in our site compounds,
with our telehandler fleet and in our showhomes. We are
also undertaking a trial of a generator fitted with photovoltaic
panels to understand the carbon and costs benefits of this
type of hybrid technology.
We continue to design our new homes to be energy-efficient,
allowing our customers to benefit from reduced running
costs as well as reducing the operating carbon footprint of
their new home. On average, the Dwelling Emission Rate
(a measure of energy efficiency) of new Bellway homes this
year was 4.7% better than required by the relevant building
regulations (2019 – 4.5%). All new homes benefit from energy-
efficient lighting along with double glazing and energy-
efficient ‘white goods’. We also included renewable energy
technology in 28% of our new homes (2019 – 36%), further
helping customers to reduce their energy consumption, bills
and carbon emissions.
Streamlined Energy and Carbon Reporting
(‘SECR’) disclosure for the period 1 August 2019
– 31 July 2020
We have reported on the emission sources required under the
Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 and the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 (SECR), apart from the exclusions noted below.
Methodology
We have used the operational control approach to determine
our organisational boundary for emissions purposes and
calculated these emissions based on the UK Government’s
Environmental Reporting Guidelines (2013) and emission
factors from the 2019 GHG Conversion Factors for Company
Reporting. Scope 2 emissions have been reported using both
the location-based method of calculation and, to account for
our use of renewable electricity, the market-based method
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for calculation. Our underlying energy use figure has been
reported in kWh and includes fuel used in on-site generators
and company vehicles as well as business mileage undertaken
in company vehicles. This data has been converted to kWh
using the GHG Conversion Factors for Company Reporting
(2019) and Department for Transport figures for average new car
fuel consumption.
The reported emission sources include all 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 air conditioning units in office buildings due
to immateriality and difficulty in data collection.
• Emissions from site-based combined heat and power units
for which we do not have operational control.
An element of carbon estimation is undertaken in the
following areas:
• Diesel fuel usage on a small number of sites where fuel is
provided by our groundworks contractors. Bellway’s share
of the usage is estimated based on 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.
Performance
COVID-19 has had an impact on emissions as construction
sites and divisional offices shut from late March through to early
May. Scope 1 emissions fell by 17.8% with reduced site activity
the key driver. Scope 2 emissions (market-based) fell by 20.5%
through a combination of reasons – COVID-19 shutdown,
the ongoing decarbonisation of the UK electricity mix and
our increasing use of REGO (Renewable Energy Guarantee
of Origin) electricity supplies. Our use of ‘green electricity’ has
saved 1,753 tonnes of carbon from entering the atmosphere in
the past year and discounting the benefit of our REGO supplies,
location-based Scope 2 emissions fell by 11.6%. Overall, total
Scope 1 and 2 emissions (market-based) fell by 18.4% although
with the 30.9% fall in completions (due to COVID-19 shutdown),
our carbon per home sold metric rose by 16.7% to 2.8 tonnes
(2019 – 2.4). However, with employee numbers largely static,
our market-based emissions per employee have fallen by 22.1%
to 6.7 tonnes (2019 - 8.6), broadly in line with the reduction in
absolute emissions.
For the first time (under SECR) we have reported on certain
Scope 3 emissions (waste and business mileage) and our total
underlying energy use. Waste emissions fell by 26.9% due
to the temporary shutdown of sites, while business mileage
emissions fell by 23.6% as staff were at first furloughed then
adopted remote meeting technology to adhere to social
distancing. Underlying energy use (market-based) fell by 17.7%,
while using the location-based method to remove the impact
of ‘green electricity’, the fall was 15.5%.
In addition we undertook ESOS Phase 2 during the year which
delivered a range of potential energy efficiency initiatives that
will be assessed in the coming year to determine which, if any,
are applicable for introduction into the business. During the
year we have continued installing energy-saving technology
in new compounds and maintained the use of more efficient
engines in our telehandler fleet. LED lighting continues to be
installed in showhomes and new guidance has been issued
on the use of heating in showhomes and in homes under
construction to minimise unnecessary energy usage.
Both the 2018/19 and 2019/20 emissions have been externally
verified by Zeco Energy to a ‘reasonable assurance level’
using the ISO-14064-3 verification standard.
Greenhouse Gas Emissions (‘GHG’) (tonnes of CO2e)(1)
Scope 1 – Combustion of fuel and operation of facilities (including diesel and petrol used
on-site and in company cars on Group business)
Scope 2 – Electricity purchased for our own use (market-based)(2)
Total scope 1 and 2 GHG emissions (market-based)(2)
2020
2019
16,892
4,097
20,989
20,560
5,155
25,715
Energy consumption used to calculate above emissions (kWh)
88,061,917
107,006,160
GHG intensity (market-based) per Bellway home sold
GHG intensity (market-based) per Bellway employee(3)
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 (location-based)(4)
Total scope 1 and 2 GHG emissions (location-based)(4)
2.8
6.7
16,892
4,877
21,769
2.4
8.6
20,560
5,518
26,078
Energy consumption used to calculate above emissions (kWh)
92,663,081
109,622,315
GHG intensity (location-based) per Bellway home sold
GHG intensity (location-based) per Bellway employee(3)
Scope 3 – Disposal of waste
Scope 3 – Emissions from employee business travel in non-company vehicles
Notes:
1. Carbon dioxide equivalent as per the meaning given in section 93(2) of the Climate Change Act 2008.
2. Scope 2 emissions reported using the market-based method to account for electricity supplies purchased under REGO contracts.
3. Based on the average number of employees during the year.
4.
Scope 2 emissions reported using the location-based method for total electricity used which does not account for the
zero carbon nature of electricity supplies purchased under REGO contracts.
2.9
7
1,932
1,799
2.4
8.8
2,642
2,354
Annual Report and Accounts 2020 45
Bellway p.l.c.
Corporate Responsibility continued
Construction
As the fourth largest housebuilder in the UK, Bellway is well placed to
deliver the much needed new homes to address the country’s ongoing
housing shortage. Working in partnership with local authorities,
communities, suppliers and subcontractors, we create attractive new
developments that leave a positive legacy for residents and wider society.
Our targets
2
targets
achieved
2
targets are
multi-year
0
targets
missed
Waste
We will maintain the proportion of waste
diverted from landfill on construction sites at
98% or above.
Waste
We will aim to reduce the quantity of waste we
generate (excluding groundworks 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.
Customer and quality
We will deliver quality homes and customer
satisfaction and maintain a recommend score of
at least 90% in the HBF new home buyers’
survey, equating to a five-star rating.
Communities
At Bellway our aim is not just to build new houses, it is to
create attractive and sustainable communities in which
people want to put down roots and live for many years to
come. Successful developments must meet the needs of
not just potential residents, but also of existing neighbouring
communities. Therefore we consult on new developments
through tailored engagement with local communities and
stakeholders, and where appropriate, incorporating feedback
into our plans to ensure local people have the opportunity to
help shape developments within their community.
This year we completed our assessment work on the
potential benefits of the ‘Building for Life 12’ design standards,
using The Priory development in Thringstone as a pilot.
The feedback from residents has been positive around
the design and desirability of the development, and the
process has provided insight for our teams around certain
‘placemaking’ aspects of development design. However,
the merits of a universal use of Building for Life 12 remain
unproven and we feel that opportunities afforded by our
‘Artisan’ house type programme offer a more consistent way
to deliver improved urban design.
As we build new homes, our investment in local communities
and economies extends beyond the developments we
create. Through the planning process, we provide investment
via section 106, affordable housing and community
infrastructure levy contributions. This provides additional
investment in education, healthcare facilities, sports facilities,
transport infrastructure improvements and the creation of
recreational space, and in the past year we contributed
£60.5 million (2019 – £77.3 million). Our construction activities
also deliver employment opportunities across the country
and we estimate that between 19,700 and 23,400 direct,
indirect and induced jobs were supported by Bellway in the
past year.
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Waste
One of our aims as a responsible housebuilder is to
effectively manage the resources we use in the construction
process, minimising the waste we produce, and where waste
is unavoidable, reusing or recycling to avoid landfill. Not only
is this beneficial to the environment, it also delivers a business
benefit through cost and efficiency savings.
We continue our focus on waste diversion to ensure as little
waste as possible enters landfill. For the current year our
diversion rate was 99.1% (2019 – 98.4%), the sixth year we have
improved our rate, achieving our target of maintaining rates
at 98% or above. There remains the potential for some small
improvements in certain divisions, which will be targeted
in 2021.
We have also continued work on reducing the amount of
waste we generate. This year the focus has been on rubble
waste, with divisions, where possible, instructed to look into
crushing rubble, aggregate and demolition waste on-site for
reuse in road and pavement foundation. Our target to reduce
‘waste per home built’ by 2021 is ongoing with the metric
currently at 11.18 tonnes (2019 – 10.97 tonnes), so more work is
required to reach the target of 9.31 tonnes.
Supply chain
Our subcontractors and suppliers are an integral part of what
makes Bellway a success. Our aim is to develop long-term
partnerships as we believe this is the best route to delivering
the high construction standards our customers expect.
Procurement continues to be managed by a central function
supported by individual divisional teams and our supply
chain spend this year was £1.4 billion (2019 – £1.7 billion),
resulting in a £1.2 billion investment in the UK economy
(based on the HBF estimating that 90% of housebuilders’
supply chain spend remains in the UK). Given that a
significant proportion of our supply chain spend is via our
divisions, this has delivered a significant boost to local
companies and communities.
We continue to audit suppliers and subcontractors on
a range of issues, including environmental issues, safety
matters, and quality and security of supply. Working with
many smaller businesses and companies local to specific
development sites, we are committed to paying our suppliers
and subcontractors 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 subcontractors 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 compliance activity is
monitored throughout the year.
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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. Those who work for and with Group
management are responsible for enforcing compliance and
additional checks are carried out via Group 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
At Bellway we pride ourselves on providing our customers
with quality homes built to a high standard. This attention
to quality has again been recognised in the NHBC Pride in
the Job Awards which recognise site managers who have
achieved the highest standards in housebuilding. This year
44 Bellway and Ashberry site managers collected Pride
in the Job awards (2019 – 42), recognising their technical
knowledge, leadership qualities and organisational skills.
The quality of our homes is also benchmarked in the NHBC
‘reportable items per inspection’ measure, and in the past
year our performance was 0.24 (2019 – 0.19), below our
internal target of 0.3.
NHBC Pride in the Job Awards
44 awards
+4.8%
Annual Report and Accounts 2020 47
Bellway p.l.c.
Corporate Responsibility continued
Society and economy
The UK housebuilding industry is a key component of the national
economy, with investment in new homes helping to drive economic
prosperity. As the UK’s fourth largest housebuilder, we are well placed
to help address the current housing shortage while delivering a range of
bene ts to our stakeholders.
Our targets
3
targets
achieved
1
target is
multi-year
1
target
missed
Health and safety
Maintain a safe working environment at our sites
and in our offices by:
• Maintaining RIDDOR rates at 2018 levels
or below.
• Delivering ‘slips, trips and falls’ and ‘working
from ladders’ safety briefings at 100% of sites
with the aim of reducing accident trends in this
area compared to 2019.
Health and wellbeing
We will train 75 Mental Health First Aiders by
July 2020.
Employee development
We will increase the number of graduates,
trainees and apprentices in the business
compared to 2019, helping to address the
industry-wide issue of skills shortages.
Community engagement
We will develop a schools engagement pack
for primary and secondary schools for use by
divisions by July 2020.
Charitable giving
We will extend our partnership with Cancer
Research UK for a further two years and aim to
increase our fundraising and donation total
across the combined five-year period to at least
£2 million by July 2021.
Economy
The importance of housebuilding to the social and economic
sustainability of the UK should not be underestimated.
According to an assessment by the HBF, housebuilding
contributed £38 billion in economic output, supported almost
700,000 direct and indirect jobs and contributed £2.7 billion in
tax revenues to central and local government in 2017(1).
We have estimated Bellway’s own role in this industry-wide
economic contribution, again using the HBF’s, Lichfield’s and
other publicly available metrics:
• £782.5 million in estimated gross value added generated by
our construction activities.
• 19,700 – 23,400 direct, indirect and induced jobs supported.
• £135.4 million contribution to public finances.
• £69.2 million in New Homes Bonus and council tax
payments to local authorities.
Customers
Delivering a quality home with exceptional service will
always be our principle aim at Bellway. The pre and post
sales experience is central to buyer satisfaction and we strive
to provide the best possible experience for each and every
customer, reinforcing our reputation as a high-quality national
homebuilder. Our continued focus in this area has seen us
retain our 5 star home builder status from the HBF for the
fourth year running (2019 – 5 star), meaning that at least 9 out
of 10 of our customers would recommend Bellway to a friend.
Affordability
With the recognised ongoing shortage of new homes in the
UK, we are seeing falling home ownership levels amongst
the younger generation with affordability often seen as
a significant obstacle to getting onto the first rung of the
property ladder. Supporting the affordability of new homes is
therefore vital to the continued success of our business, the
housing market as a whole and therefore the UK economy.
In the past year the average selling price for a Bellway home
was £293,054 (2019 – £291,968).
As part of our developments, we continue to build a
comprehensive range of houses and apartments to give
customers the choice of a new home meeting their needs
and budget, be they first-time buyers, those looking to move
as their families grow or those looking to downsize as their
circumstances change. While 6% of our new homes were
sold to unassisted first-time buyers (2019 – 7%), 35% were sold
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to those customers requiring additional help from the various
Help to Buy schemes (2019 – 36%), important government
mechanisms to support home ownership.
In total, 27% of our homes were sold to first-time buyers
(2019 – 30%), representing 2,041 individuals and families
whom Bellway helped to get their first step on the property
ladder (2019 – 3,258).
As part of our drive to create balanced, mixed and diverse
communities, we have continued to incorporate affordable
housing into developments and this year 22% of our
new homes were sold to affordable housing providers
(2019 – 22%).
Employees
Our continued reputation for delivering high-quality
homes and exceptional customer service depends upon
our employees and subcontractors. In the past year we
directly employed an average of 3,119 people (2019 – 2,980).
When we factor in the thousands who work with Bellway via
subcontractors and suppliers, or in derived jobs connected to
our operations, we estimate that between 19,700 and 23,400
people are supported by Bellway, all of whom play a role in
the continuing success of the business.
With the continuing skills shortage in the industry, Bellway
is investing for the future and has increased the number of
apprentices, graduates and trainees to 258 (2019 – 183), an
increase of 42%, and we continue to be an active member
of ‘The 5% Club’, maintaining over 5% of our workforce
employed in developmental roles. Our new two-year
Graduate Programme ‘Great Careers Built With Us’ launched
this year, with 38 new graduates working across a range
of disciplines.
RIDDOR
203.12
(37.5%)
Bellway continues to work to become a more diverse and
inclusive organisation and this year we were named Financial
Times Diversity Leaders 2020, ranking 286 out of 700
companies across Europe. Our employee listening groups
have continued to meet with a range of suggestions being
adopted by the Company, including working patterns for
sales advisers, more flexible working practices incorporating
‘core hours’ and site visit inductions for all new employees to
gain a better understanding of the business. In addition, our
work on employee wellbeing has focused on mental health,
with 160 Mental Health First Aiders trained in the year.
With the impact that COVID-19 has had on the business
over the past few months, the reduction in business activity
had led to a review of our business model and resulted in a
small number of roles across the business being put at risk
of redundancy. Overall we expect to reduce roles by around
170, although this may fall following consultations and natural
attrition and we expect this to be complete early in the new
financial year. Despite this, over the past year our employee
turnover rate has fallen to 20.8% (2019 – 22.4%), 17.2% when
removing the impact of the redundancies.
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.
Safety
Safety is a core principle of how we do business and the
wellbeing of everyone who works for and with Bellway is the
number one priority for the Company. We work with all our
employees and subcontractors to ensure that safe working
practices are promoted and embedded on all of our sites,
utilising training, toolbox talks, informal and formal inspections
and the sharing of best practice. Given the COVID-19
pandemic, the NHBC Health and Safety Awards were unable
to take place this year, as site closures and social distancing
prevented fair and accurate judging to take place.
Our continued focus on safety has seen our RIDDOR seven-
day reportable incident rate fall to 203.12 incidents per 100,000
site operatives (2019 – 324.87), the fourth year in a row that
we have successfully reduced this rate. We also consistently
outperform the industry average on the NHBC health and
safety incident rate, achieving a score of 0.714 (2019 – 0.856).
1
‘The Economic Footprint of House Building in England and Wales’ (July 2018), prepared for the HBF by Lichfields.
Annual Report and Accounts 2020 49
Bellway p.l.c.
Corporate Responsibility continued
Charitable engagement
This year we have continued our support for local and
national charities, as well as the communities in which we
develop. This is the right approach for a responsible company
to take and our aim to support those sections of society
less fortunate than ourselves remains a key aspect of our
approach to CR.
We continued our support for Cancer Research UK (‘CRUK’),
our national charity partner, as we work towards our
target of £2 million in fundraising and donations by 2021.
Our support for CRUK is more important than ever, with the
charity forecasting a £150 million fall in income as a result of
COVID-19, funds that would normally have been spent on
research into cures for cancer. The COVID-19 ‘lockdown’
severely impacted on our employees’, opportunities to
fundraise in the second half of the year, and as a result
£140,134 was raised by employees, subcontractors and
suppliers (2019 – £283,841). When combined with Bellway’s
‘double matching’ of employee fundraising, the total raised
this year was £239,820. To support CRUK in this difficult time
Bellway has made an additional donation of £88,673 to the
charity, lifting the full year total to £328,493 (2019 – £494,812).
This brings the total raised over the life of our four-year
partnership to £1,603,672.
We also support our employees when they undertake
personal fundraising for charities close to their hearts
with matched funding from the Company, and this year
employees have raised an additional £110,551, slightly up on
last year despite the COVID-19 ‘lockdown’ (2019 – £107,895).
Our divisions have also continued to support charities and
community groups local to their operating area, with some
specific focus on the NHS, local food banks and other
charities supporting communities during the pandemic.
In total, across all our charitable activities, Bellway, our
employees, subcontractors and suppliers have raised and
donated a total of £537,338 to good causes this year (2019 –
£754,793), of which £237,338 was raised by our employees,
subcontractors and suppliers (2019 – £391,736).
Looking forward
In the coming year work will continue on our existing and
new targets, and more details on our 2020 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:
• Continue work on reducing carbon emissions by 10%
by 2023.
• Fit electric vehicle charging points as standard in 50% of
new homes by 2023.
• Reduce employee business mileage by 10% through
remote meeting technology and a working from
home policy.
• Retain our HBF ‘5 star homebuilder, status’.
• Implement an employee engagement survey and achieve
a 60% response rate.
• Increase our fundraising and donation total for CRUK to at
least £2 million.
2020 has been another successful year in terms of CR
performance, notwithstanding the additional challenges that
the COVID-19 pandemic has brought. 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
Environmental matters
Employees
Social matters
Human rights
Anti-bribery and corruption
Risks
Business model
Non-financial KPIs
Pages
44 to 45
13, 17, 22 and 49
48 to 49
22, 47 and 49
47
36 to 42
16 to 22
IFC, 18 to 22
Approval of the Strategic Report
The Strategic Report was approved by the Board and signed
on its behalf by:
Jason Honeyman
Group Chief Executive
19 October 2020
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Annual Report and Accounts 2020
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Bellway p.l.c.
Governance
Contents
52 Board of Directors and Group General Counsel
and Company Secretary
54 Chairman’s Statement on Corporate Governance
56 Board Leadership and Company Purpose
58 Division of Responsibilities
60 Composition, Succession and Evaluation
62 Audit, Risk and Internal Control
72
93 Directors’ Report
97
Independent Auditor’s Report
Remuneration Report
Board of Directors and Group General Counsel
& Company Secretary
Paul Hampden Smith
Chairman
N* R
Denise Jagger
Senior Independent
Non-Executive Director
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.
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. Until 30 April 2020,
Denise was 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, and prior to this she worked 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, Chair of
the Remuneration Committee and a member of the
Audit Committee.
Pool Reinsurance Limited – non-executive director and
Chair of Remuneration Committee and Nominations and
Conflicts Committee.
University of York – Chairman and pro Chancellor.
Cumberland Lodge, Windsor Great Park – Chairman of the
Audit Committee.
St Giles Trust – Chairman.
Chairman of Dallington Lawn Tennis Club.
Jason Honeyman
Group Chief Executive
NR*
Keith Adey
Group Finance Director
NR
Appointed to the Board on 1 September 2017.
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 Group Chief Executive on 1 August 2018.
Appointed to the Board on 1 February 2012.
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.
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Annual Report and Accounts 2020
Jill Caseberry
Independent
Non-Executive Director
A N R*
Ian McHoul
Independent
Non-Executive Director
A* N R
Appointed to the Board on 1 October 2017.
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.
Appointed to the Board on 1 February 2018.
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,
Chairman of the Audit Committee and member of the
Nomination and Remuneration Committees.
Young & Co’s Brewery, P.L.C. – non-executive director and
Chairman of the Audit Committee.
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Key:
Audit Committee
A
Nomination Committee
N
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Remuneration Committee
Simon Scougall
Group General Counsel
& Company Secretary
Board Committee on Non-Executive
NR
Directors’ Remuneration
* Denotes Committee Chair
Appointed on 1 February 2016.
Background and experience
Simon, a solicitor, was appointed Group General Counsel &
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.
Annual Report and Accounts 2020 53
Bellway p.l.c.
Chairman’s Statement on Corporate Governance
The COVID-19 pandemic has had an
unprecedented impact across the
construction sector, the wider economy
and our communities. At the height of the
pandemic 75% of the Company’s workforce
were furloughed on 100% pay and no
Government support has been claimed under
the Coronavirus Job Retention Scheme.
Charitable giving
As a responsible business we are proud to support both
the local communities where we build and less fortunate
sections of society. During the year the Company gave away
the life-changing prize of a fully furnished three-bedroom
home to a deserving family with the help of Ant and Dec’s
Saturday Night Takeaway. The home on the Moorfields
development was given to the Williams family in recognition
of their charitable work establishing ‘Darcey’s Dream – My
Family and Siblings Matter’ after the devastating loss of their
baby daughter in 2017. The charity offers a range of support
services and counselling for bereaved families, with a special
focus on siblings.
Whilst the show aired there was a 112% increase in hits to
the website and the Board were delighted with the positive
response from staff and the sense of pride they felt in working
for Bellway.
The Company continues to support its national charity
partner Cancer Research UK and has raised £1.6 million
over the last four years towards the £2 million target by
August 2021. More details on the Company’s contribution to
charitable causes can be found on page 50.
Board effectiveness and evaluation
In line with the UK Corporate Governance Code, we
undertake a formal and rigorous annual evaluation of our
own performance and that of our Committees and individual
directors. We operate a three-year cycle of Chairman’s, Group
General Counsel and Company Secretary’s and externally
facilitated reviews. Bellway’s last externally facilitated
evaluation took place in 2017, and for 2020 we appointed
Trusted Advisors Partnership (‘TAP’), a specialist consultancy
which has no other business or connection to the Group or
individual directors, to facilitate the evaluation.
Paul Hampden Smith
Chairman
Dear Shareholder
COVID-19
The COVID-19 pandemic has had an unprecedented impact
across the construction sector, the wider economy and our
communities. At the height of the pandemic 75% of the
Company’s workforce were furloughed on 100% pay and no
Government support has been claimed under the CJRS. The
Board was pleased to safely welcome employees back to
work from early May 2020. In recognition of the challenges
faced by the Company during this time the Board made the
decision to take a 20% pay cut for two months. More details
on the Company’s response to COVID-19 can be found on
pages 10 to 11.
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 continue to make up 33%
of our Board. The Board also recognises the importance
of diversity beyond gender diversity and is aware of the
recommendations of the Parker Review and these will be
taken into consideration with any future Board appointments.
Our Board Diversity Policy is available to view on our website.
The Board continues to focus on gender diversity at all levels
of the Company and 2020 saw the launch of Bellway’s first
Graduate Programme. Across all disciplines, 38 graduates
joined the Company, of which 50% were women and 13%
were from a BAME background.
Training
As part of the Company’s risk culture and focus on Health
and Safety the Board is committed to ensuring the workforce
are provided with sufficient training and development to
ensure they maintain the required levels of competence.
During the COVID-19 pandemic the delivery of training
was moved online with 29,832 hours of training being
completed in April and May 2020, including NHBC webinar
training. In addition, the Site Management Programme,
Apprenticeships and Pilot Leadership and Management
Programme have continued to operate. More details on
the Company’s employee programmes can be found on
page 22.
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Having been provided with a comprehensive briefing by
the Chairman and Group General Counsel and Company
Secretary, TAP conducted an evaluation process in March
2020, involving:
We also consulted with a number of shareholders on our
Remuneration Policy. The Board receives regular updates
from our advisers on investors’ and analysts’ views on
the Company.
• Main Board and Chairman’s questionnaires and the
Chairman’s and SID’s concluding memo from the internal
2019 review, together with the concluding report from the
last external evaluation in 2017.
• Access to Board and Committee papers and minutes to
enhance TAP’s understanding of how the Board and its
Committees operate.
• Whilst unfortunately attendance and observation at the
Board and Committee meetings was not possible due to
COVID-19 restrictions, individual virtual meetings were held
with each executive and non-executive Board director and
with the Group General Counsel & Company Secretary.
TAP reviewed the Board and its Committees’ effectiveness to
fulfil its duties considering:
a. Board structure, capability and performance.
b. Quality of Board discussion and review to support the
delivery of Bellway’s sustainable growth strategy.
It was found that the Bellway p.l.c Board is well constituted
with a cohort of experienced, capable, and engaged
non-executive directors able and willing to fulfil their
responsibilities, without any conflict of interest; the Board
Committees operate well, and the Board is also well chaired.
The Board is constructive, respectful and allows for open and
honest discussion and debate.
Their report identified certain nuances to further improving
the Board’s performance, including focusing on the
long- term strategy and ensuring an effective pipeline for
executive succession. An action plan has been put in place
to address these challenges. The Board has also set targets
focused around allocating more time to the rapidly emerging
ESG agenda, non-executive director succession and the
continued development of senior executive management.
The areas highlighted for improvement in last year’s Board
evaluation and progress made are set out in the table to
the right.
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 July 2018. The Code is available, free
of charge, from the Financial Reporting Council, online at
www.frc.org.uk or by telephoning 020 7492 2300.
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.
As a result of COVID-19 there has been increased interest
from institutional investors in the Company. During the
year our executive directors hosted virtual presentations
attended by institutional investors, analysts and shareholders,
with other members of the senior management team
being present.
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. To keep
the shareholders informed we provided an additional
trading update this year around the impact of the
COVID-19 pandemic.
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 98% 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 Group Chief Executive and the Group
Finance Director.
Further information for shareholders is available on our
website at www.bellwayplc.co.uk.
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Paul Hampden Smith
Chairman
19 October 2020
Board evaluation 2018/19 update
Action
Progress
Continue to focus on
strategy as a top priority.
Introduce employee survey
with feedback to the Board.
Additional resource for Risk
and Internal Audit.
Improved visibility of
customer complaints.
Strategy is discussed at every
Board meeting and at our
annual strategy day. This work
continues to be a top priority
for the Board.
The first employee survey
was successfully launched
in August 2020. Results and
proposed action points for
approval will be put to the
Board later in the year.
The team has been
restructured with an additional
level of resource and a new
Head of Risk and Audit has
been appointed.
Now a standing agenda
item with a separate report
from the Group Head of
Customer Care.
Annual Report and Accounts 2020 55
Bellway p.l.c.
Board Leadership and Company Purpose
Corporate Governance Report
Left to Right:
Ian McHoul
Denise Jagger
Simon Scougall
Jason Honeyman
Paul Hampden Smith
Jill Caseberry
Keith Adey
Board of Directors
Audit
Committee
Nomination
Committee
Remuneration
Committee
Board Committee on
Non-Executive Directors’
Remuneration
see pages 62 to 71.
see pages 60 to 61.
see pages 72 to 92.
see page 59.
Executive Directors
Group General Counsel
and Company Secretary
Head Office Senior
Management Team
Regional Chairmen
Divisional Boards
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Annual Report and Accounts 2020
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 52 to 53. 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.
• Ensuring effective communication with shareholders.
• Ensuring the effective conduct of Board meetings and
facilitating the effective contribution of all directors and the
Group General Counsel & 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.
• Approving land purchases over specified limits in
conjunction with the wider Board.
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Group 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.
• Holding meetings with the non-executive directors without
the Chairman present.
Non-executive directors
• Constructively challenging management.
• Contributing to the development of strategy.
• Scrutinising the performance of management.
• Ensuring integrity of financial information and financial controls
and ensuring systems of risk management are robust.
• Determining appropriate levels of executive
director and Group General Counsel and Company
Secretary remuneration.
• Appointing and removing executive directors and
succession planning.
• Serving on Board committees.
Annual Report and Accounts 2020 57
Bellway p.l.c.
Division of Responsibilities
Group General Counsel & Company Secretary
• Supporting the Chairman and Group 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 Group
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.
Additionally, four formal and several informal Board meetings
were arranged in respect of the COVID-19 pandemic.
The number of committee meetings are set out in each
committee report. There were no absences from any Board
or committee meetings.
The non-executive directors formally met twice during the
year, including once without the Chairman present.
The non-executive directors meet to review the performance
of management and they also meet without the Chairman
being present to appraise his performance. This latter meeting
is 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.
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Annual Report and Accounts 2020
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 Directors and Commercial Directors
and Planning Managers which are attended by the
executive directors or members of the Group 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 and Group General Counsel &
Company Secretary regularly visited the divisions during
the year and the Chairman also visited some divisions and
met separately with the Regional Chairmen. 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 above
specified limits, contracts and agreements, communication,
Board membership and other appointments, remuneration,
delegation of authority, corporate governance matters, Group
policies and other miscellaneous items.
In addition, it has a series of matters that are dealt with at
regular Board meetings including both an operational and
a strategic review, a financial review, major land acquisitions,
major projects, risk, health and safety, HR, reporting
requirements, corporate governance and internal control
(including any whistleblowing issues).
We also receive presentations and reports from Group Office,
regional and divisional management and external advisers
throughout the year. The Board also takes a report from the
Group General Counsel & 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 &
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 Group
Chief Executive.
• Risk and internal control.
• Consideration of recommendations from the
Board committees.
• Scrutiny of reports from the Group Chief Executive, Group
Finance Director, Group General Counsel & Company
Secretary and senior management at each Board meeting.
• Considering regular reports on health and safety matters
from the Group 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 2019.
• Approval of the Annual Report and Accounts for 2018/19.
• Approval of preliminary announcement, interim results and
trading updates.
• Recommending the final dividend for 2018/19.
• Approval of tax strategy.
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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 Group 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 & 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
chair 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 Group 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 &
Company Secretary and external remuneration consultants
when required.
Annual Report and Accounts 2020 59
Bellway p.l.c.
Nomination Committee Report
Composition, Succession and Evaluation
Paul Hampden
Smith
Chairman of
the Nomination
Committee
Membership and meeting attendance
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
1 October 2017
1 February 2018
Number of
meetings
attended during
the year
2/2
2/2
2/2
2/2
Main focus in 2019/20
• To monitor the effectiveness of the recent appointments
and role changes at Board level, including my role as
Chairman of the Board.
• To continue to develop, with support from the executive
management and Group Human Resources, the
succession plan for those immediately below Board level.
• To increase the focus on diversity and inclusion throughout
the Group.
Focus areas for 2020/21
• 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
management and Group Human Resources, the
succession plan for those immediately below Board level.
The Committee’s focus during the year
was to develop, with support from the
executive management 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 Committee is aware of
the recommendations of the Parker Review and will take
these into consideration when making future Board
appointments. 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.
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Focus in 2020/21
Building on the success of the 2020 Bellway Graduate
Recruitment Programme, work has started on attracting the
best graduates for the September 2021 intake. 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
focusing 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 2020:
Male
No.
Male
%
Female
No.
Female
%
Total
No.
Total
%
Board of directors
Senior managers
4
139
Other employees
1,889
Total
2,032
67
80
70
70
2
34
821
857
33
20
6
173
30 2,710
<1
6
94
30 2,889
100
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Paul Hampden Smith
Chairman
19 October 2020
Activities in 2019/20
The Committee’s focus during the year has been on the
action plan to improve engagement and diversity within
the Group.
• The successful launch of the Bellway Graduate Recruitment
Programme saw 38 graduates join the Group across
all disciplines.
• 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.
• Each division has nominated at least one Diversity and
Inclusion Champion. All champions are completing NCFE
Level 2 Equality and Diversity qualification.
• Preparation for the launch of the first Bellway Employee
Engagement Survey. The survey gave every employee the
opportunity to provide feedback on working for Bellway.
• The following policies have been updated:
– Equality Policy
– Flexible Working Policy
• After the success of the flexi-time trial the initiative has
been rolled out for all office-based staff at Group and
divisional offices.
• Use of the Group recruitment panel to include partners
with a particular focus on improving diversity.
• We have been 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.
• 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 HR Director is a member of the HBF Equality,
Diversity and Inclusion Group that was formed 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 management and
Group Human Resources, the succession plan for those
immediately below Board level. This exercise will look to
promote diversity and inclusion where possible.
Annual Report and Accounts 2020 61
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Audit Committee Report
Audit, Risk and Internal Control
Ian McHoul
Chairman of the
Audit Committee
Number of
meetings
attended during
the year
5/5
5/5
5/5
Membership and meeting attendance
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
Main focus in 2019/20
• Financial reporting.
• Internal control and risk management.
• Audit effectiveness.
• Exceptional items including COVID-19.
• External audit tender.
Focus areas for 2020/21
• Financial reporting.
• Internal control and risk management.
• Audit effectiveness.
• Oversee transition to new external auditor.
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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.
I am pleased to provide you with our Audit Committee Report
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 focused
on the integrity of financial reporting, the quality and
effectiveness of internal controls, risk management and
reviewing the performance of the external auditor.
Committee membership and meetings
The Committee 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 Youngs & Co.’s Brewery P.L.C. and was Chief Financial
Officer of Amec Foster Wheeler plc until 2017. The Board
considers that I have recent and relevant financial experience
as required by the Code. As part of the effectiveness review
the Nomination Committee has also confirmed that it is
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 52 and 53.
The terms of reference require the Committee to meet at least
three times a year. During the year there were two additional
meetings as part of the external audit tender process, and all
members of the Committee attended each meeting.
The Chairman, Group Chief Executive, Group Finance
Director, Group General Counsel and Company Secretary,
Group Financial Controller and Group Head of Risk and Audit
attend meetings by invitation. The Committee is supported by
the Deputy Group Company Secretary who acts as secretary
to the Committee.
Representatives of KPMG LLP (‘KPMG’) attended all of the
meetings during the year, with the exception of those relating
to the external auditor appointment, 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, Group Head of Risk and Audit
and KPMG, and reported relevant information to other
members of the Committee. Following the external audit
tender process, Ernst & Young LLP (‘EY’) were present at the
March 2020 and October 2020 meetings to ensure a smooth
transition from KPMG.
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 has been in regular contact with
management since the onset of COVID-19 to consider how
COVID-19 has impacted the key judgement and accounting
areas. This has included a review of the approach taken
with regards to site valuations, land values, the treatment
of exceptional items and the presumption that the Group
remains a going concern.
In addition, the Committee met on five occasions during
the financial year. The activities undertaken at the October
2020 meeting concluded the Committee’s activities in
relation to the Group’s financial reporting for the year ended
31 July 2020.
The main activities performed by the Committee at these
meetings are described below:
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Meeting date
Activities
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.
• 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
• received a paper on significant judgemental
Trafficking Statement 2019.
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.
• received a Risk and Internal Audit update.
• considered the findings of the performance
evaluation of the Committee.
December 2019
(two meetings)
The Committee:
• interviewed senior members of the proposed
external audit teams of the two firms participating
in the tender process.
• recommended to the Board the appointment of
EY as the new external auditor of the Group and
Company for the financial year beginning on
1 August 2020.
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Audit Committee Report continued
Main activities during the year continued
Meeting date
Activities
January 2020
The Committee:
• received a risk management update from the
• assessed the performance of the external auditor,
Group Head of Risk and Audit 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 2020 Internal
Audit plan.
• 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.
including obtaining an update from KPMG in
relation to the general annual Audit Quality
Review (‘AQR’) findings the firm had received
compared to their peers and understanding the
effect, if any, this had on the Bellway audit.
• reviewed the Independent Auditor Policy.
• held a private meeting with KPMG.
March 2020
The Committee:
• received a paper on significant judgemental
• received a Risk and Internal Audit update.
areas prepared by management and provided
appropriate challenge to their assumptions.
• reviewed the final draft of the 2020
Interim Announcement.
• reviewed KPMG’s audit plan, including the
proposed Group, subsidiary and divisional
materiality for the 2020 audit.
• reviewed changes to the Independent
Auditor Policy.
• reviewed a new policy in relation to the
recruitment of staff from the external auditor.
• held a private meeting with KPMG.
October 2020
The Committee:
• reviewed and challenged papers produced
by management in relation to the impact the
COVID-19 pandemic has had on key judgements
and accounting areas. These included a review of
the approach taken with regards to site valuations,
land values, the treatment of exceptional items
and the presumption that the Group remains a
going concern.
• reviewed the final draft of the 2020 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 2020 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 2020 Annual Report and
Accounts to the Board for approval.
• reviewed a paper which analysed notable items,
both exceptional and non-exceptional, that
affected profit during the year and provided
challenge of the treatment of these.
• considered and challenged management
about the use of APMs and whether they are
appropriate or whether GAAP measures would be
more relevant.
• considered a paper produced by management
setting out management’s assessment in relation
to potential risks associated with legacy building
safety improvements 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 and approved the Slavery and Human
Trafficking Statement 2020.
• received a Risk and Internal Audit update.
• reviewed the draft viability statement to appear
• considered the findings of the performance
in the 2020 Annual Report and Accounts,
together with the supporting assumptions and
financial forecasts.
• received a paper on significant judgemental
areas prepared by management and provided
appropriate challenge to their assumptions,
including what is exceptional.
evaluation of the Committee.
• received a report from KPMG on the outcomes of
the Kingman, Brydon and CMA consultations into
the audit market.
• held a private meeting with KPMG.
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Financial reporting
Significant and key financial reporting matters
The Committee confirmed that they believe the key financial
reporting judgements and issues for the Group are:
• Cost of sales recognition;
• Carrying amount of land held for development and work
in progress;
• Going concern (new);
• Legacy building safety improvement provision (new); and
• Exceptional items (new).
In addition, the Committee considers the carrying value
of investments by the Company a significant financial
reporting matter.
The table below sets out the matters considered and the action
performed by the Committee during the year in relation to
these key financial reporting judgements and issues.
Key financial judgements, issues or
significant financial reporting matter
Cost of sales recognition (Group)
Matters considered
Pre-exceptional cost of sales of
£1,803.2 million has been recognised on
housing and other revenue. Cost of sales
for completed housing sales is recognised
based on the latest whole site/phase
margin, which is derived as part of the site/
phase valuation process. These valuations
are updated frequently throughout the life
of the site/phase and include both actual
and forecast selling prices, land costs and
construction costs. The forecast costs and
revenues are estimates and are inherently
uncertain due to potential changes in
market conditions.
Action performed by the Committee
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The Committee understands the Group’s revenue and gross profit 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 gross profit
recognition and the valuation process. The Committee discussed these controls,
challenging management where appropriate.
The external auditor explained to the Committee the work they have undertaken
in relation to the systems and controls surrounding revenue recognition, gross
profit recognition and the valuation process and provided an explanation of the
detailed substantive testing performed. The Committee also reviewed a summary
prepared by KPMG explaining their findings from their work testing the design,
implementation and operating effectiveness of the Group’s systems and controls
pertaining to revenue recognition and the valuation process.
In the current year, during the ‘lockdown’ of construction sites due to COVID-19,
certain costs that would normally be capitalised in to WIP have been expensed
and included within the gross profit of housing and other revenue. Further details
are included within the exceptional expense section.
Following enquiries with management and the external auditor, the Committee
concluded that there are appropriate systems and internal controls in place to
assess and quantify both actual and forecast selling prices and costs, and that the
Group’s profit recognition policy is appropriate and has been properly applied in
these financial statements.
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Audit Committee Report continued
Key financial judgements, issues or
significant financial reporting matter
Action performed by the Committee
Carrying amount of land held for development and work in progress (Group)
Matters considered
Land and work in progress are the most
significant assets on the Group’s balance
sheet and at 31 July 2020 had a book
value of £3,712.3 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 ‘profit
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 reassessed at regular
intervals during the year.
Going concern (Group)
Matters considered
The financial statements have been
prepared on a going concern basis. If the
financial statements were not prepared
on this basis, significant adjustments
and presentational changes would be
required to the balance sheet.
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.
In the current year, impairments have been recognised in relation to certain land
balances. These are considered within the exceptional expense section.
The Committee reviewed a paper produced by management setting out
detailed forecasts and adverse scenarios against the base case. These were then
compared against the Group’s banking facilities to show the expected headroom
and bank covenant compliance.
Following a review of this paper and challenge of both management and the
external auditor, the Committee concluded that the going concern basis of
preparation continues to be appropriate in the context of the Group’s expected
funding and liquidity position.
Further details in relation to the Group’s going concern and viability assessment
can be found on pages 42 and 96.
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Key financial judgements, issues or
significant financial reporting matter
Action performed by the Committee
Exceptional items (Group)
Matters considered
An exceptional expense of £72.6 million
has been recognised in the year.
Exceptional items are those which, in the
opinion of the Board, are material by size
or nature and of such significance that
they require separate disclosure on the
face of the income statement.
The Committee understands the Group accounting policy in relation to
exceptional items, the accounting requirements of IAS 1 relating to the separate
disclosure of material items of income or expense together with the FRC Company
Guidance in relation to COVID-19 (updated 20 May 2020).
The Committee reviewed a paper produced by management using the above
frameworks, which set out the treatment of certain items as either exceptional or
non-exceptional. The Committee ensured consistent principles were established
and applied, and that the external auditor agreed with the conclusions reached
early in the reporting process.
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The Committee gave careful consideration to the judgements made in the
disclosure of exceptional items, ensuring the Annual Report and Accounts as a
whole provides a balanced view, including the presentation of GAAP measures
and APMs.
Following enquiries with management and the external auditor, the Committee
concluded that the appropriate items are disclosed as exceptional items and that
the associated disclosures in the financial statements are appropriate.
Legacy building and safety improvement provisions (Group)
Matters considered
Legacy building and safety improvement
provisions totalling £70.3 million were
recognised in the balance sheet as at
31 July 2020.
The Committee reviewed a paper setting out the latest building regulation and
Government guidance in the complex area of fire safety, the IAS 37 requirements
for recognising a provision, and how this applies to the developments that
management are currently aware of that may require replacement cladding and/
or related fire safety works.
The paper set out the utilisation of the provision during the year, estimates of the
remaining provision and the expense recognised in the income statement during
the year.
Following a review of this paper and enquiry with management and the external
auditor, the Committee concluded that the fire related provision held in the
balance sheet is appropriate.
In the current year, the recognition of the additional fire provision has been treated
as an exceptional item. This is considered within the exceptional expense section.
The carrying value of investments (Company)
Matters considered
Investments in joint ventures and
subsidiaries (‘investments’) is a significant
asset on the Company’s balance sheet
and at 31 July 2020 had a carrying value
of £37.8 million. Investments are held at
cost less impairment. The risk surrounds
the matter about whether an impairment
is required given the inherent uncertainty
involved in forecasting future cash flows
of an investment.
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.
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Audit Committee Report continued
Viability statement
In accordance with provision 31 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 by management was considered by the Committee
which set out the resilience of the Group to the emerging
and principal risks and uncertainties to various adverse
sensitivities. These scenarios included a second ‘lockdown’
due to COVID-19, a reduction in both the total number of
legal completions and private average selling price, with
overheads, land spend and construction spend reducing
accordingly. The results were then compared to the Group’s
financing facilities to ensure sufficient headroom exists.
The paper concluded that the viability statement and going
concern basis of preparation is appropriate. This was then
recommended to the Board for approval.
2020 Annual Report and Accounts: fair, balanced
and understandable
Group Risk and Audit provided a paper to the Committee
to assist them in concluding whether the 2020 Annual
Report and Accounts is fair, balanced and understandable.
This independent review of the Annual Report and Accounts
ensured the various components satisfied the requirements
when read as a whole.
In addition, the Committee performed a comprehensive
review of the Annual Report and Accounts considering items
such as:
Fair
Balanced
Understandable
• Provide a comprehensive review of
the Group’s strategy and activities
during the year which is consistent
with the business model.
• Provide a balanced view of the
performance and position of the
entity, with both significant positive
and negative points disclosed.
• The Annual Report and Accounts are
understandable and have consistent
messaging throughout.
• The narrative section is both consistent
throughout and also with the financial
results and performance.
• The key accounting judgements
considered by the Committee are
appropriately disclosed and are
consistent with those considered
by KPMG.
• There are clear links between the
strategy and KPIs.
• Market conditions are clearly
described, and the emerging and
principal risks and uncertainties are
both accurate and complete.
• All material transactions and issues
faced by the Group are included
within the financial statements and
disclosed where required.
• The KPIs and APMs have remained
consistent and there has been no
change in the methodology.
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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 emerging and principal risks facing the Group,
which are described in the Strategic Report on pages
36 to 39, 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.
In Spring 2020, the COVID-19 pandemic emerged as a new
risk. This caused disruption to the business as a result of
government imposed restrictions which adversely affected
various aspects of the Group’s operations. A number of
actions were taken to reduce this risk as set out in the
principal risks and uncertainties section on page 39.
These have been factored into the viability statement.
The continuing role of the Board is, on a systematic and
ongoing basis, to review the key emerging and principal
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.
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• 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 and audit function which, in part,
performs internal audit reviews. The Group Head of Risk and
Internal Audit has a direct reporting line into both the Group
Finance Director and myself. During the year the Risk and
Audit function undertook a number of internal audit reviews,
utilising specialists from within relevant functions. The Group
Head of Risk and Audit 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.
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Audit Committee Report continued
External audit
Audit effectiveness
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
2018/19 financial year, which was the most up-to-date
information held at the date of the review, was set at an
appropriate level for the component parts of the Group.
• discussions with management who were involved in the
financial reporting processes.
• an understanding of the findings of the Audit Quality
Review (‘AQR’) team of the FRC following their inspection
of audit firms including KPMG. This included understanding
whether any of the findings would have affected the
Bellway audit.
• an understanding of the AQR and internal KPMG quality
review findings, specifically in relation to the engagement
partner, John Pass.
• considering KPMG’s independence, objectivity and
professional scepticism.
• reviewing the performance of KPMG against their audit
strategy for the 2018/19 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 areas of improvement were
identified which have been fed back to KPMG who have
incorporated them into their audit for the year ended
31 July 2020.
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.
Audit tender
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 the Order of the Competition
and Markets Authority in relation to FTSE 350 companies,
the Company undertook a formal tender process for the
appointment of a new external auditor. The FRC’s guidance
note ‘Audit Tenders: Notes on Best Practice’ (February 2017)
was considered throughout this process.
During the year, the Committee:
• agreed the audit tender process, request for proposal and a
detailed scorecard for assessing the tenders.
• selected and invited three firms to invite to join the tender
process, although one declined.
• interviewed key members of the proposed external
audit teams.
• made a recommendation to the Board on the appointment
of the replacement external auditors.
Following the conclusion of the audit tender process, the
Board approved the appointment of EY as the Company’s
external auditor for the financial year commencing 1 August
2020, although this is subject to shareholder approval at
the Annual General Meeting to be held on 11 December
2020. Should shareholder approval be received, EY will
be appointed as external auditors at the conclusion of
that meeting.
From the start of the 2020 audit cycle, EY have sat alongside
KPMG and have attended key meetings throughout the audit
process to ensure a smooth transition.
The Committee confirms that the Company is complying
with the provisions of The Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014.
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 was updated
to bring it in line with latest guidance.
Any engagement with the external auditor needs to be
approved, in advance, by the Audit Committee.
The Group’s external auditor is not engaged for any non-
audit related services such as:
• 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.
• 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.
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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 provides written confirmation on at least an
annual basis that they remain independent. The Committee
monitors all fees paid to the external auditor at each
Committee meeting.
During the year a formal policy was introduced which
includes certain restrictions on the recruitment of employees
from the external auditor.
The Committee confirms there are no independence issues
in relation to the external auditor and that these policies have
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, both utilising a questionnaire that was
internally facilitated and via an independent, externally
facilitated assessment. No major areas of improvement
were identified.
Following a review of these results, 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. The Committee
has an appropriate and complementary set of skills and
experience that enables it to deliver the aforementioned.
Other legislative requirements
Whistleblowing
The Group’s Whistleblowing Policy is well publicised at all
locations and allows all employees and members of the
supply chain to raise concerns in confidence to either the
Group General Counsel & Company Secretary, Deputy
Group Company Secretary or, alternatively, an independent
third party. The Group encourages employees and members
of the supply chain to raise any concerns in an open
and honest way. These concerns could be in relation to
possible wrongdoing in financial reporting, breaches of
Group policies and procedures, or other matters such as
harassment, bullying, money laundering, modern slavery
or discrimination.
All whistleblowing reports are investigated and confidentially
investigated by senior, independent personnel and the
findings are reported to the Board.
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
19 October 2020
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71
The Committee continues to operate
a remuneration structure… which it
considers closely aligns management
interests with those of shareholders.
Performance and reward in 2019/20
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 management interests
with those of shareholders.
The financial performance in the year was significantly
affected by the COVID-19 pandemic. The number of
housing completions fell by 30.9% to 7,522 (2019 – 10,892),
pre-exceptional operating profit fell to £321.7 million (2019
– £674.9 million). Basic earnings per share fell by 64.2.% to
156.6p per share (2019 – 437.8p) and pre-exceptional RoCE
reduced to 10.8% (2019 – 24.7%).
In light of the COVID-19 crisis and its extraordinary impact on
the business and the wider economy, the Board of Directors
agreed to a voluntary, temporary 20% reduction in basic
salary and fees effective from 1 April until 31 May 2020, which
was donated to various charities. The Company match-
funded the donations with a contribution to its national
charity partner, Cancer Research UK, whose important work
and fundraising capacity has been adversely impacted by the
COVID-19 pandemic.
With the negative impact that COVID-19 has had on the
financial performance of the business there will be no bonus
in respect of the year. The long-term incentive plan awards
granted in November 2017 will vest at 47.7% of the maximum
award based on performance over the three financial years
to 31 July 2020. These shares are required to be held for a
further two years following vesting. The Committee considers
that these outcomes are reflective of the overall business
performance, recognising both the negative impact of the
pandemic on the business over the past year, along with the
relative outperformance of our peers over the last three years.
Remuneration Report
Remuneration Committee Report
Jill Caseberry
Chair 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 2019/20 financial year, which will be subject to a single
advisory shareholder vote at the forthcoming AGM.
In addition, given this has been the third year of operating
under the 2017 Directors’ Remuneration Policy, the Policy is
also included and is to be presented as a resolution to our
shareholders at the 2020 AGM (resolution 3). The Committee
decided that it would not be appropriate to be undertaking
this review in 2020 whilst our Company and you, our
shareholders, have other more urgent issues to deal with
due to the COVID-19 pandemic. We will however undertake
a review in 2021 taking into account developments in market
practice and corporate governance best practice, including
post-cessation shareholding requirements and bonus deferral
during 2021, with an updated Policy being presented at the
2021 AGM.
The proposals in relation to the Policy renewal are:
• We will seek approval for a renewal of the current Policy
for 12 months, making minimal changes limited to the
introduction of a new bonus metric relating to employee
engagement and a slight adjustment to the other
metric ratings.
• We will make changes to directors’ pensions so that
new appointments participate at the rate available to
the Company’s wider workforce and our Group Chief
Executive and Group Finance Director’s benefit level will fall
to that rate at the end of 2022.
• All other changes, including the introduction of formal
bonus deferral, the extension of our current post-
employment shareholding guidelines and a review of the
performance measures and targets we use in our incentive
plans will take place in conjunction with consulting with
you next year.
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How we will implement the remuneration
policy in 2020/21
There will be no increases to the directors’ salaries in 2020/21
and pension and benefits will also remain in line with the
current provision. As previously noted, the pension rates for
the directors will be aligned with those of the workforce at the
end of 2022.
The 2020/21 annual bonus will continue to be based mainly
on financial performance, with a bonus opportunity of
85.2% of salary based on operating profit. The remaining
bonus opportunity of 34.8% of salary will be based on the
same strategic measures as last year of land bank and
customer care, and supplemented for the first time by an
employee engagement measure. This new measure will
attract a bonus opportunity of 6% of basic salary and will be
based on the results of the annual employee engagement
survey. There will be a re-weighting of the land bank and
customer care metrics to 16.8% and 12% of salary respectively
to allow the inclusion of the employee metric. 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.
As we disclosed last year, whilst not a requirement of the
policy, the Group Chief Executive 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. Jason purchased
2,687 shares using his 2019 bonus in March 2020. Jason has
also agreed to invest all bonus he receives for FY21 above
90% of salary (after paying tax and national insurance) in
Bellway shares.
The Committee did not exercise discretion in relation to
Directors’ remuneration arrangements during the year.
The Committee believes that the manner in which it sets
and operates this policy is clear to executives and is aligned
to our corporate culture. We operated it with regard to risks
inherent in the business and marketplace, providing the
opportunity for executives to earn rewards in a manner which
is proportionate to the value delivered against clear targets.
The normal PSP award level is 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. However, if the share price is
significantly below the price at which awards were made
last year, the Committee will, at the time of grant, consider
whether it would be appropriate to scale the grant back.
Concluding remarks
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.
We hope you are supportive of the approach we have
taken during these unprecedented times and will support
the resolutions approving this report and the policy at the
2020 AGM.
We will be engaging with shareholders over the coming
year as we prepare an updated policy to be presented to
shareholders at the 2021 AGM. If you have any questions
or would like to discuss any remuneration-related topics,
please contact me through the Group General Counsel &
Company Secretary.
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Jill Caseberry
Chair of the Remuneration Committee
19 October 2020
Annual Report and Accounts 2020 73
Bellway p.l.c.
Remuneration Report continued
Remuneration at a glance
How remuneration links to our strategy (see pages 24 and 25 for details of our performance).
Strategic objective
Volume growth and driving
down costs
Volume growth and focus
on RoCE
Strengthening the brand
Strengthening the brand
Appointing the right people
Value creation through capital
and dividend growth
Link to remuneration
Annual bonus
Metric
Operating profit
Performance against metric
Not achieved
Annual bonus
Sufficient land bank of plots with DPP
Not achieved
Annual bonus
Annual bonus
Underpin to annual bonus
Long-term incentive plan
Achieve 5 star homebuilder status
Customer satisfaction score
Overall health and safety performance
Relative TSR against two
comparator groups
Achieved
Not achieved
Achieved
Partly achieved
How our executive directors were paid during 2019/20
Chief
Executive
Group
Finance
Director
78%
22%
67%
36%
£1,091
£740
0
0
0
£
0
£200
£400
£600
£800
£1,200
Fixed pay
Annual bonus(1)
Long-term share awards
Impact of share price fall on LTIP
£000
1. No annual bonus payable.
Bonus outcomes – see page 76
The 2019/20 bonus was based on financial and strategic targets. Whilst the strategic measures were achieved in part, given that
the threshold operating profit target was not met, there will be no payment under these metrics.
Strategic
objective
Operating profit
(pre-exceptional)
Weighting
(% of salary)
85%
Threshold
(39% pays out)
£620
million
Maximum value
(100% pays out)
£680
million
Actual(1)(2)
£322.7
million
Strategic objectives and performance against target
Payment
(% of maximum)
Payment
(% of salary)
Nil%
Nil%
Score
Land bank
The land bank of plots with DPP (available for completion in the following financial
year) fell below the base target.
Not achieved – Nil% of
salary awarded.
Customer care We retained our 5 star homebuilder status.
Achieved in full – Nil%
of salary awarded.
The Group’s customer satisfaction score in 2020 was 85.5% compared with the base
of 86.4%.
Not achieved – Nil% of
salary awarded.
We achieved a 80.2% score for our eight-week ‘standard of finish’ target compared
with the base of 82.6%.
Not achieved – Nil% of
salary awarded.
Note:
1.
For operating profit and land bank bonus purposes, targets and outcomes include joint ventures.
2. Pre-exceptional.
LTIP outcomes – see page 77
The PSP awards granted in 2017/18 were based on a three-year TSR performance for the period to 31 July 2020.
Metric
Performance condition
Threshold target
Stretch target
Actual
% vesting
50% of
awards
Relative TSR against an index of peer housebuilders
–3.7% TSR
(median)
50% of
awards
Relative TSR against the FTSE 250 (excluding
financial services companies and investment trusts)
Rank 79
(median)
Total
74
Bellway p.l.c.
Annual Report and Accounts 2020
18.8% TSR
(median
+22.5%)
Rank 40
(upper
quartile)
0.2%
Bellway
TSR
Rank 62
Bellway
18.9%
28.8%
47.7%
7/7
7/7
7/7
7/7
G
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Annual Report on Remuneration
Committee membership and activity
The Committee met seven times during the year and details of the Committee members and their attendance are set out in the
table below.
Membership and meeting attendance
Date appointed to the Committee
Number of meetings
attended during the year
Director
Jill Caseberry (Chair)
Paul Hampden Smith
Denise Jagger
Ian McHoul
1 October 2017 (appointed as Committee Chair on 13 December 2017)
1 August 2013
1 August 2013
1 February 2018
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 appointed Korn Ferry as independent external advisers following a competitive tender process on 1 January
2019. Korn Ferry 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 members of the Remuneration Consultants Group and abide
by its Code of Conduct. The Committee is satisfied that Korn Ferry are independent. The total fee paid to Korn Ferry for advice
to the committees during the year was £78,052 (2019 – £66,225 consisting of £41,043 to Korn Ferry and £25,182 to the previous
adviser, New Bridge Street). The Committee also benefited from advice received from the Group General Counsel & 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 2019/20
• 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.
• Consider impact of COVID-19 and reflect on executive remuneration
Focus areas for 2020/21
• Approve the bonus payments and long-term incentive awards vesting levels for the 2019/20 year.
• Approve the 2019/20 Remuneration Report.
• Set the bonus targets for the 2021/22 year.
• Make awards under the long-term incentive scheme.
• Review and determine the remuneration packages for the executive directors and the Group General Counsel & Company
Secretary, and the first tier of management below Board level.
• Review remuneration policies for senior management below Board level and the wider workforce.
• Conduct a review of the Directors’ Remuneration Policy for approval at the 2021 AGM.
Implementation of remuneration policy in 2019/20
The auditor is required to report on the information contained in the following part of this report.
Salary and fees for the year ended 31 July 2020
For 2019/20, Jason Honeyman received a salary of £689,000 and Keith Adey received a salary of £400,427. Following the impact
of the COVID-19 pandemic, the Board agreed a 20% reduction of salary and fees effective from 1 April until 31 May 2020, which
were donated to various charities. The Company match-funded the donations with a contribution to its national charity partner,
Cancer Research UK, whose important work and fundraising capacity has been adversely impacted by the pandemic.
Annual Report and Accounts 2020 75
Bellway p.l.c.
Remuneration Report continued
Annual bonus for the year ended 31 July 2020
The annual bonus is payable in November 2020 for performance during the year ended 31 July 2020. The performance targets
for the 2019/20 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)
85%
£620
million
£680
million
Actual(1)(4)
£322.7
million
Payment
(% of maximum)
Payment
(% of salary)
Nil%
Nil%
The threshold profit target was not met meaning there was no payout under the operating profit element. In addition, as this
threshold was not met no bonus was payable under the strategic elements.
The basis for payment of the actual bonus against the two strategic measures is set out below:
Strategic pillar
Objectives and performance against target
Land bank
Level of land bank plots with detailed planning permission (‘DPP’) (available for
completion in the following financial year) to ensure our growth aspirations are not
frustrated by land shortages in future years. A threshold payment of 10% of salary
would be triggered for a threshold number of plots with DPP, with an additional 1%
payment for further improved performance, up to a maximum of 15% of salary. The
land bank targets are commercially sensitive and will be disclosed one year in arrears.(2)
The land bank of plots with DPP (available for completion in the following financial
year) fell below the base target.
Customer care Achievement of 5 star homebuilder status (as measured by the HBF).
We retained our 5 star homebuilder status.
Overall customer satisfaction score (as measured by NHBC): No deterioration of the
previous year’s customer satisfaction score would result in a minimum payment
of 3.25% 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 6.25% of salary.
Opportunity and score
Maximum –
15% of salary
Not achieved– Nil%
of salary awarded
Maximum –
7.5% of salary
Achieved in full – Nil%
of salary awarded(3)
Maximum –
6.25% of salary
The Group’s customer satisfaction score in 2020 was 85.5% compared with the base
of 86.4%.
Not achieved – Nil%
of salary awarded
Eight-week survey ‘standard of finish’ score (as measured by NHBC): Threshold target
of 82.6% would result in a payment of 3.25% of salary, with the maximum payment of
6.25% of salary for a score of 84.1%.
Maximum –
6.25% of salary
The Group’s eight-week survey ‘standard of finish’ score in 2020 was 80.2% and below
the threshold target of 82.6%.
Not achieved – Nil%
of salary awarded
Note:
1.
For operating profit and land bank bonus purposes, targets and outcomes include joint ventures.
2. The 2018/19 base target was set at 11,675 plots with a maximum target of 11,925 plots. The actual performance achieved was 12,033 plots. .
3. Although the 5 star homebuilder status was achieved, no bonus is awarded under the strategic measures where the threshold target for operating profit is not met.
4. Pre-exceptional.
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 203.12 (2019 – 324.87); the fourth 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 0.714 (2019 – 0.856).
76
Bellway p.l.c.
Annual Report and Accounts 2020
Long-term incentives vesting in respect of performance period ended 31 July 2020
The PSP awards granted in 2017/18 were based on a three-year TSR performance for the period to 31 July 2020. The applicable
vesting percentages will be as follows:
Metric
Performance condition
Threshold target
Stretch target
Actual
% vesting
50%
of awards
Relative TSR against an index of peer housebuilders
comprising Barratt Developments PLC, The Berkeley
Group plc, Bovis Homes Group PLC, Crest Nicholson
Holdings plc, Persimmon plc, Redrow plc and Taylor
Wimpey plc (‘Index’): 25% of this part of an award
vests at the median, increasing pro-rata, to full
vesting at median +22.5% (+7.5% p.a.).
50%
of awards
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.
Total
–3.7%
TSR
(median)
18.8% TSR
(median
+22.5%)
0.2%
Bellway
TSR
18.9%
Rank 79
(median)
Rank 40
(upper
quartile)
Rank 62
Bellway
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28.8%
47.7%
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.
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 in November 2020, 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 2022.
Director
Jason Honeyman
Keith Adey
Notes:
Value on award
£000
Number
of shares
at grant
Vesting
(% of max)
Guaranteed
number of
shares to vest
Share price
change(1)
£000
Dividend
equivalent
£000
580
580
16,822
16,822
47.74
47.74
8,030
8,030
(67)
(67)
27
27
Estimated
value at
vesting(1)
£000
237
237
1.
Based on a share price of £26.19, being the average share price for the last quarter of the financial year i.e. 1 May – 31 July 2020 as a proxy for the share price at vesting. The estimated value
at vesting includes the value of dividend equivalent shares.
Bellway p.l.c.
Annual Report and Accounts 2020
77
Remuneration Report continued
Single figure of total remuneration (audited)
Salary and
fees(4)
£
Taxable
benefits(5)
£
Non-executive Chairman
Paul Hampden
Smith(1)
2020 213,962
2019
162,837
–
–
Pension(6)
£
–
–
Executive directors
Jason Honeyman(2) 2020 666,034 44,905 137,800
2019 530,000
Annual
bonus
£
Sub-total
£
Long-term
incentives(7)
£
Other
items(8)
£
Total
£
Total fixed
remuneration
£
Total variable
remuneration
£
–
–
213,962
162,837
–
–
–
–
213,962
213,962
162,837
162,837
–
–
– 848,739
237,426 4,500
1,090,665
848,739
241,926
Keith Adey
2020 387,079 33,200 80,085
– 500,364 237,426 2,250
740,040
500,364
239,676
2019 392,575
32,424
78,515 300,987
804,501
227,367 3,748
1,035,616
503,514
532,102
32,424 106,000 406,351
1,074,775
145,285
–
1,220,060
668,424
551,636
Non-executive directors
Denise Jagger(3)
2020
Jill Caseberry
Ian McHoul
Total
Notes:
67,232
65,700
67,232
68,200
67,232
64,423
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67,232
65,700
67,232
68,200
67,232
64,423
–
–
–
–
–
–
–
–
–
–
–
–
67,232
65,700
67,232
68,200
67,232
64,423
67,232
65,700
67,232
68,200
67,232
64,423
–
–
–
–
–
–
2019
2020
2019
2020
2019
2020 1,468,771
78,105 217,885
- 1,764,761 474,852 6,750 2,246,363
1,764,761
481,602
2019 1,283,735 64,848 184,515 707,338 2,240,436
372,652 3,748
2,616,836
1,533,098
1,083,738
1.
Paul Hampden Smith became Chairman on 12 December 2018. Prior to that date 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 2018/19 year was paid at a rate of £217,000 p.a.
2. Jason Honeyman was promoted to the role of Group Chief Executive with effect from 1 August 2018, with a phased increase to his salary implemented in 2019/20.
3. Denise Jagger became senior independent non-executive director on 1 November 2018 and received an additional fee from that date.
4. The 2019/20 salary and fees reflects the 20% reduction for April and May agreed by the Board due to the negative impact of the COVID-19 pandemic.
5. Taxable benefits include car allowance and health insurance and £11,705 for Jason Honeyman which relates to hotel and travel costs.
6. Pension includes both payments in lieu of pension of £207,885 and contributions to a defined contribution scheme of £10,000. None of the directors are members of the Group’s defined
benefit scheme and both of the executive directors are members of a defined contribution scheme.
7. The value of long-term incentives in 2020 reflects the vesting of the November 2017 PSP awards, which will be exercisable in 2020/21, 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 £26.19, being the average share price for the last quarter of the financial year i.e. 1 May
– 31 July 2020 as a proxy for the share price at vesting. The 2019 figures for Jason Honeyman and Keith Adey have been adjusted to reflect the actual share prices at the dates of vesting,
which took place after the publication of last year’s report.
8. Other items refer to the discount on the awards, during the year stated, under the Group’s all-employee savings-related share option scheme.
Directors’ share-based rewards and options (audited)
Details all directors’ interests in the Company share-based reward schemes are shown.
Jason Honeyman
Scheme
PSP(1),(6)
PSP(2),(6)
PSP(3)
PSP(4)
2013 SRSOS(6)
Totals
Awards/
options
held at
1 August 2019
Granted/
awarded during
the year
Exercised
during the year
Lapsed during
the year
Awards/
options
held at
31 July 2020
Exercise
price/market
price at date
of award (p)
Date of
grant/award
Exercisable/
capable of
vesting from
13,143
16,822
28,909
–
–
58,874
–
–
–
30,667
712
31,379
(4,018)
(9,125)
–
–
–
–
–
–
–
–
(4,018)
(9,125)
–
16,822
28,909
30,667
712
77,110
2,351.0
3,450.0
2,750.0
3,370.0
2,528.0
09.11.2016
09.11.2019
10.11.2017
10.11.2020
22.10.2018
22.10.2021
16.10.2019
16.10.2022
03.12.2019
01.02.2023
78
Bellway p.l.c.
Annual Report and Accounts 2020
Keith Adey
Scheme
PSP(1)
PSP(2)
PSP(3)
PSP(4)
2013 SRSOS(6),(7)
2013 SRSOS(6)
2013 SRSOS(6)
Totals
Notes:
Awards/
options
held at
1 August 2019
Granted/
awarded during
the year
Exercised
during the year
Lapsed during
the year
Awards/
options
held at
31 July 2020
Exercise
price/market
price at date
of award (p)
Date of
grant/award
Exercisable/
capable of
vesting from
20,569
16,822
21,413
–
1,099
621
–
60,524
–
–
–
17,823
–
–
356
18,179
(6,288)
(14,281)
–
–
–
(1,099)
–
–
–
–
–
–
–
–
–
16,822
21,413
17,823
–
621
356
2,351.0
3,450.0
2,750.0
3,370.0
1,378.0
2,414.4
09.11.2016
09.11.2019
10.11.2017
10.11.2020
22.10.2018
22.10.2021
16.10.2019
16.10.2022
17.11.2014
01.02.2020
03.12.2018
01.02.2024
2,528.0
03.12.2019
01.02.2023
(7,387)
(14,281)
57,035
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1. The performance period was 1 August 2016 – 31 July 2019. 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. The first part of the performance condition was vested at 0% and the second at 61.14%, so 30.57% of these awards
vested. Dividend equivalents shares were also delivered to the participants in respect of the shares vesting (J Honeyman: 584 shares / K Adey: 914 shares).
2. The performance period for the awards granted in November 2017 finished on 31 July 2020. Details of the vesting of these awards which will take place after this Report is published are set
out in full under the heading ‘Long-term incentives vesting in respect of performance period ended 31 July 2020’ above.
3. 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.
4. On 16 October 2019, 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 £1,033,478 and £600,635 respectively. The performance period is 1 August 2019 – 31 July 2022. 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 awards set out in notes 1–4 were granted for nil consideration.
6. Further details of the 2013 SRSOS are shown in the summary of outstanding share options in note 25 to the accounts.
7. The gross gain made by Keith Adey on the exercise of his 2013 SRSOS awards in 2020 was £7,264.
8. 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 78.
9. The market price of the ordinary shares at 31 July 2020 was 2,546p and the closing range during the year was 1,879p to 4,310p.
Payments to past directors (audited)
Other than payments made to Ted Ayres, as reported in previous reports, no other past director received any payments during
the year.
Payments for loss of office (audited)
No payments have been made in respect of loss of office during the 2019/20 financial year.
Statement of directors’ shareholdings and share interests (audited)
The directors’ interests (including family interests) in the ordinary share capital of the Company at 31 July 2020 are set out below:
Director
Jason Honeyman
Keith Adey
Paul Hampden Smith
Denise Jagger
Jill Caseberry
Ian McHoul
Notes:
Beneficially
owned at
31 July 2020(3)
21,707
69,762
15,842
2.462
470
–
% basic
salary held
by executive
directors in
shares(1)(2)
Shareholding
target of
200% of basic
salary met?
80
In progress
444
N/A
N/A
N/A
N/A
Yes
N/A
N/A
N/A
N/A
Beneficially
owned at
31 July 2019
Outstanding
and unvested
PSP awards
Outstanding
and unvested
share options
Share options
exercised in
the year
16,586
64,853
12,548
1,250
–
–
76,398
56,058
N/A
N/A
N/A
N/A
712
977
N/A
N/A
N/A
N/A
–
1,099
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 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. On 26 March 2020 Jason Honeyman purchased the shares in relation to 25% of his 2018/19 bonus Jason has also agreed to invest all bonus he
receives in FY21 above 90% of salary (after paying tax and national insurance) in Bellway shares.
2. The % shareholding is based on salaries as at 31 July 2020, these do not reflect the agreed 20% reduction in salaries due to COVID-19 which applied in April and May 2020.
3.
Includes shares owned by partner.
4. There has been no change in any of the above interests between 31 July 2020 and the date of this report.
Annual Report and Accounts 2020 79
Bellway p.l.c.
Remuneration Report continued
The following section of this report is not required to be audited.
Implementation of remuneration policy in 2020/21
This section sets out how the Company will implement the remuneration policy for the 2020/21 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 2020/21 targets for the executives.
Basic salaries
The Committee agreed that there shall be no salary increases for the financial year beginning 1 August 2020.
Annual bonus
For the 2020/21 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 85.2% of basic
salary achievable) and the following strategic performance measures which provide a maximum bonus opportunity of 34.8% of
basic salary. A new metric based on employee engagement will be introduced under the strategic portion, under which up to
6% of salary can be earned (the customer care weighting has been reduced to accommodate this change).
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 2021 to ensure our growth aspirations are not frustrated by land
shortages in future years.
Customer care
This will be in two parts:
• 7.2% of salary for achieving 5 star homebuilder status (as measured by the HBF).
• 4.8% of salary linked to customer satisfaction score.
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.
Employee
Targets relating to the annual employee engagement survey.
Score
Maximum –
16.8% of salary
Maximum –
12% of salary
Maximum –
6% 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. 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 2020 with a face value equivalent up 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). McCarthy & Stone has been added to the
housebuilders group. 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.
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Metric
Performance condition
50% of awards Relative TSR against a group of peer housebuilders comprising Barratt
Developments PLC, The Berkeley Group plc, Crest Nicholson Holdings plc,
McCarthy & Stone plc, Persimmon plc, Redrow plc, Taylor Wimpey plc and Vistry
Group PLC (previously called Bovis Homes Group 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
investment trusts): 25% of this part of an award vests at median, increasing pro
-rata, to full vesting at the upper quartile.
Median
Upper
quartile
Chairman and non-executive director fees from 1 August 2020
Non-executive Chairman fee
Non-executive director fee
Senior independent Non-Executive Director, Audit and Remuneration Committee
Chair fees
There were no increases in fees for the Chairman and non-executive directors.
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Fee from
1 August 2019
£
%
increase
Fee from
1 August 2020
£
221,340
58,200
11,350
0%
0%
0%
221,340
58,200
11,350
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 78). 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.
This graph shows the value, at 31 July 2020, of £100 invested in Bellway on 31 July 2010 compared with the value of £100
invested in the FTSE 250 Index and £100 invested equally in each of the other housebuilders. The other points plotted are the
values at intervening financial year ends.
Total shareholder return
Source: Datastream (Thomson Reuters)
700
600
500
400
300
200
100
)
d
e
s
a
b
e
r
(
£
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
319
252
144
163
151
118
127
119
116
340
284
174
688
666
658
633
691
680
600
596
585
466
484
419
204
205
241
261
253
223
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
31 July
2020
Bellway
Housebuilders’ Index
FTSE 250 Index
Annual Report and Accounts 2020 81
Bellway p.l.c.
Remuneration Report continued
Group Chief Executive total remuneration
The table below sets out the total remuneration for the Group 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).
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
2019(4)
1,220(2)
2020(5)
1,091
100.0%
99.3%
100.0%
91.6%
88.8%
95.8%
93.8%
0.0%
76.7%
0.0%
99.6%
0.0%
0.0%
50.0%
50.0%
100.0%
100.0%
99.8%
30.6%
47.7%
Total remuneration
(£000)
Annual bonus paid
(as % of maximum)
PSP vesting (as a %
of maximum)
Notes:
1.
John Watson held the role of Group Chief Executive up until 31 January 2013 and Ted Ayres was Group Chief Executive for the remainder of the financial year from 1 February 2013 to
31 July 2013. The total remuneration for the period as Group Chief Executive was £714,053 for John Watson and £528,500 for Ted Ayres.
2. Restated as per footnote 7 to the table on page 78.
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 Group Chief Executive on 1 August 2018.
5. The value of long-term incentives in 2020 reflects the vesting of the November 2017 PSP awards, which will be exercisable in 2020/21, 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 £26.19, being the average share price for the last quarter of the financial year i.e.
1 May – 31 July 2020 as a proxy for the shares at vesting.
Percentage change in remuneration of directors compared to workforce
The table below shows the percentage change in base salary, benefits and bonus between FY19 and FY20 in respect of the
directors of the Company and the average for all other employees. Over time, the percentage change over five years will
eventually be disclosed.
All other employees
J Honeyman (Group Chief Executive)(1)
K Adey (Group Finance Director)
P Hampden Smith (Chair)(4)
D Jagger (INED)
J Caseberry (INED)
I McHoul (INED)
% Change in salary/ fees
FY19-FY20(2)
% Change in Benefits
FY19-FY20
% Change in Bonus
FY19-FY20(3)
+2
+25.6
-1.4
+31.4
+2.3
-1.4
+4.4
Nil
+38.5
+2.4
n/a
n/a
n/a
n/a
-100
-100
-100
n/a
n/a
n/a
n/a
1. Upon appointment as Group Chief Executive, the Board had agreed a salary increase for Jason Honeyman to be implemented for the financial year beginning August 2019. Details of
Jason’s benefits are included in note 5 to the table on page 78.
2. The comparative figures used for the Board are the actual salary and fees paid as per the Single figure of remuneration table on page 78, this also reflects the 20% reduction in salary and
fees in April and May 2020 due to the COVID-19 pandemic.
3. No bonus award was made in the current financial year.
4. Paul Hampden Smith was appointed Chairman on 12 December 2018 and as such his 2018/19 total fees cover both the period he was a non-executive director and also the period he was
Chairman. The Chairman’s fee increased by 2% with effect from 1 August 2019.
CEO pay ratio
We are publishing our CEO pay ratio figures for the current year. Over time, ten-years ratios will eventually be disclosed.
Financial year
Method
2018/19
2019/20
A
A
Upper quartile
Median
Lower quartile
Pay
ratio
Total pay
and benefits
£
Salary
component
£
19:1
18:1
62,168
60,675
50,200
24,400
Pay
ratio
Total pay
and benefits
£
Salary
component
£
28:1
27:1
42,845
40,415
22,647
22,000
Pay
ratio
Total pay
and benefits
£
Salary
component
£
40:1
43:1
29,858
25,580
23,305
25,200
The pay ratios have been calculated as at 31 July 2020 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. With the exception of the annual
bonus, all other payments are included on a cash basis. The annual bonus element for the Group Chief Executive and all
other employees is the bonus earned during the 2019/20 financial year which is usually paid in November 2020. The annual
bonus earned by employees during the year will not be known until after the date of this report, therefore management’s best
estimates have been used.
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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 2019 and 31 July 2020.
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:
2020
£m
158.1
61.7
60.5
2019
£m
167.1
185.1
77.3
% charge
-5.4
-66.7
-21.7
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 2020 the Trust held 43,809 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 2020 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 0.05%
Actual 0.08%
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)
Directors’ Remuneration Policy
(binding vote at AGM on
13 December 2017)
Remuneration Report
(advisory vote at AGM on
10 December 2019)
Number
of votes
% of
votes cast
Number
of votes
% of
votes cast
84,362,645
2,206,550
97.451
2.549
92,413,256
1,301,042
98.612
1.388
86,569,195
100.000
93,714,298
100.000
Votes withheld
578,001
6,227
The main shareholders were consulted with respect to the approach to rolling over the current policy for a further year, with minimal
changes, with a full review and updated policy being tabled at the 2021 AGM. As a result of the feedback received it was agreed that
this policy would state that the directors’ pensions rate would be aligned with the workforce by the end of 2022.
At the AGM on 11 December 2020, the Company’s shareholders will have an advisory vote on the Remuneration Report and a
binding vote on the Directors’ Remuneration Policy. I hope you are supportive of the approach we have taken and understand
the rationale for the decisions we have taken.
On behalf of the Board
Jill Caseberry
Chair of the Remuneration Committee
19 October 2020
Annual Report and Accounts 2020 83
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Remuneration Report continued
Directors’ Remuneration Policy
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 2018 UK Corporate Governance
Code, UK institutional investor guidance and the Listing Rules.
The remuneration policy set out on the following pages is submitted to shareholders for approval at the AGM on 11 December
2020. It is the Company’s current intention that this Policy will only apply for one year, with a new policy being presented to
shareholders at the AGM in December 2021.
Summary of changes
Summary of changes
Pension
The new policy requires that the rate of pension for current incumbents will be aligned with the rate
applicable to the wider workforce at the end of 2022.
The recruitment policy also specifies that any new director would be appointed with a pension rate
in line with the wider workforce.
Malus and clawback
The provisions were updated in 2019 to include scenarios of corporate failure and reputational
damage and these are now formally included in the policy.
Policy principles
The Directors’ Remuneration Policy is aligned with the principles within the 2018 UK Corporate Governance Code and these
principles are taken into account in its implementation:
Principles
Considerations within the Policy
Clarity: remuneration arrangements should
be transparent and promote effective
engagement with shareholders and the
workforce.
We clearly communicate our approach to remuneration in this report and
in all communications with shareholders whilst providing transparency in
our rationale. This also allows straightforward engagement with the wider
workforce.
Simplicity: remuneration structures should
avoid complexity and their rationale and
operation should be easy to understand.
Risk: remuneration arrangements should
ensure reputational and other risks from
excessive rewards, and behavioural risks that
can arise from target-based incentive plans, are
identified and mitigated.
We have structured the Remuneration Policy to be as simple as possible, within
the confines of ensuring arrangements are in line with the business strategy,
have a robust link between pay and performance and are designed with
consideration of investor expectations.
We mitigate against these risks through a carefully designed policy which
includes a balance between financial and non-financial bonus metrics, a
Performance Share Plan which is based on long-term performance, deferral of
a portion of the annual bonus into shares, and shareholding requirements. The
Committee also has the ability to apply discretion and clawback provisions if
incentive payment levels are inappropriate.
Predictability: the range of possible values of
rewards to individual directors and any other
limits or discretions should be identified and
explained at the time of approving the policy.
We carefully consider the range of likely performance outcomes for incentive
plans when setting performance target ranges and at the time of assessment
would use discretion where necessary if the formulaic result is considered
inappropriate.
Proportionality: the link between individual
awards, the delivery of strategy and the long-
term performance of the company should
be clear. Outcomes should not reward poor
performance.
The opportunity under incentive plans is determined based on a proportion of
salary with the quantum determined to ensure that there is an appropriate link
between pay and performance.
The performance conditions applying to the incentives are aligned with the
Company’s strategy and are reviewed on an annual basis to consider whether
they are working effectively.
There are provisions to override the formula-driven outcome of incentive
plans and clawback provisions to ensure that there is not reward for poor
performance.
Alignment to culture: incentive schemes
should drive behaviours consistent with
company purpose, values and strategy.
The annual bonus is based on both financial and non-financial metrics
aligned with the strategy incentivising the profitability of the company whilst
maintaining a focus on our customers and the quality of our service.
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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.
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Decision-making process
The Committee is responsible for the determination of the Directors’ Remuneration Policy and how it is implemented.
In addressing this responsibility the Committee works with management and external advisers to develop proposals and
recommendations. The Committee considers the source of information presented to it, analyse the detail and ensures that
independent judgement is exercised when making decisions. Information is independently verified where there are conflicts of
interest and no individual is present when their remuneration is being discussed.
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 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.
Choice of performance measures and approaches to target-setting
The performance measures used in the annual bonus and long-term incentive plan are aligned with the Company’s KPIs and
the business strategy.
For the annual bonus, operating profit is an appropriate barometer of short-term performance. Customer care and land
bank are important drivers of future growth and employee metrics and maintaining a strong health and safety record is very
important to our employee base and the Group. Recognising the importance of our employees, a new metric based on
employee engagement, will be introduced this year.
The Committee believes that relative TSR is an appropriate long-term performance metric as it generates an alignment of
interest between executives and institutional shareholders by providing a reward mechanism for delivering superior stock
market performance. The TSR performance is independently calculated for the Committee by the Company’s brokers.
Targets for incentive plans are set to be stretching but achievable, taking into account internal and external reference points,
including internal forecasts and market consensus.
Annual Report and Accounts 2020 85
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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
To provide a
structure and
value that is
market competitive
Benefits
To provide a range
and value that is
market competitive
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.
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.
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.
The rate for current Directors
will be aligned with that of the
workforce at the end of 2022.
Not applicable.
Not applicable.
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.
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Component and
link to strategy
Annual bonus
To reward
achievement with
a combination
of financial and
non-financial
operational-based
performance
targets in
accordance with
Group KPIs.
Operation
Maximum opportunity
Framework to
assess performance
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 the case of corporate failure; or
(v) in the case of material
reputational damage.
120% of basic salary maximum. The bonus may be based on
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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.
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,
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.
Annual Report and Accounts 2020 87
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Remuneration Report continued
Component and
link to strategy
Operation
Long-term incentives (‘PSP’)
Maximum opportunity
Framework to
assess performance
150% of basic salary.
To encourage
long-term
value creation,
aid retention,
encourage
shareholding and
promote alignment
of interests
with shareholders.
The Company operates a PSP as its
primary long-term incentive.
Annual awards of nil-cost options or
conditional awards may be made
under the PSP to the executive
directors, at the discretion of
the Committee.
Awards normally vest three years after
grant, subject to the achievement of
stretching performance targets.
Dividend equivalents (in cash or
shares) may be payable, and will only
accrue during the vesting and holding
period on awards that ultimately vest.
The Company operates recovery
and withholding mechanisms which
allow the Company, in exceptional
circumstances, to clawback some
or all of the payments made, or
recover unvested awards, in the
following circumstances:
(i) material misstatement of results;
(ii) error in assessing a
performance condition;
(iii) gross misconduct by
the individual;
(iv) in the case of corporate failure; or
(v) in the case of material
reputational damage.
A minimum holding period of two
years applies to awards post vesting.
PSP awards are subject to
stretching three-year targets.
The current awards are
subject to relative TSR
conditions against relevant
comparator companies.
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.
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Component and
link to strategy
Operation
Maximum opportunity
Framework to
assess performance
Chairman and non-executive directors
The performance of the
non-executive directors is
assessed by the Chairman.
The senior independent non-
executive director reviews
the performance of the
Chairman in conjunction with
the directors.
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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.
Not applicable.
The remuneration of the non-
executive directors is determined
by the Board Committee on
Non-Executive Directors’
Remuneration, which comprises
the executive directors.
Fee levels are normally reviewed
annually, taking into account the time
commitment and responsibilities of
the roles including membership or
chairmanship of Board committees
and the level of fees for similar
positions in comparable companies.
Non-executive directors are not
normally entitled to any benefits 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.
Annual Report and Accounts 2020 89
Bellway p.l.c.
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.
Discretion to pay lower basic salary with incremental increases,
potentially higher than for the general workforce, as new appointee
becomes established in the role.
Pension and benefits
In accordance with Company
policies.
Bonus
In accordance with existing
schemes.
Long-term incentives
(PSP)
In accordance with Company
policies and maximum limits in
the PSP rules.
Buyout of
forfeited remuneration
The Committee may make
an award in cash or shares to
replace deferred or incentive
pay forfeited by an executive
leaving a previous employer
(and, if required, by relying on
the flexibility provided in the
Listing Rules to grant such
replacement awards).
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.
Any new director’s pension contributions will be in line with the
wider workforce. The current employer pension contribution rate is
between 5% and 10% of salary.
Depending on the timing of recruitment, bespoke targets could be
introduced for an individual within the maximum individual limits of
the annual bonus plan applicable at the time.
Pro-rating would be applied as appropriate for intra-year joiners.
An award may be made in the year of joining or, alternatively, the
award can be delayed until the following year.
Targets would normally be the same as for other directors and
grant levels consistent within the permitted individual maximum
under the rules of the plan and this policy.
Awards would, where possible, be consistent with the awards
forfeited in terms of the vehicle, structure, vesting periods, expected
value and performance conditions.
Service contracts and loss of office payment policy
The 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
Notice period from
employer
Notice period from
executive
1 September 2017
1 August 2018
1 February 2012
1 February 2012
6 months
12 months
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. Neither of the executive directors currently holds 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
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Annual Report and Accounts 2020
First appointed
as a director
Current letter
of appointment
commencement date
Current letter of
appointment
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 2023
1 February 2018
1 February 2018
31 January 2021
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.
Annual bonus
No bonus payable.
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.
Up to 12 months’ basic salary, benefits
and pension.
Payments may be phased and
subject to offsetting against alternative
income from elsewhere during the
notice period.
The Company may pay in lieu
of notice an amount equivalent
to 12 months’ salary, pension
and benefits.
For the proportion of the financial
year worked, bonus may be payable
pro-rata, subject to performance,
at the discretion of the Committee.
There will be no bonus payment
in respect of any period of notice
not worked.
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.
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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.
Annual Report and Accounts 2020 91
Bellway p.l.c.
Remuneration Report continued
Illustrations of application of current remuneration policy
The remuneration policy results in a significant portion of remuneration received by executive directors being dependent on
the Group’s performance. The chart below illustrates how the total pay opportunities for the executive directors vary under three
performance scenarios: minimum, target and maximum. The chart is indicative, as share price movement and dividend accrual
have been excluded unless otherwise noted.
Group Chief Executive
Group Finance Director
872
1,802
2,732
3,249
514
1,054
1,595
1,895
3,500
3,000
2,500
2,000
1,500
1,000
500
0
0
0
0
£
48%
38%
29%
23%
30%
25%
100%
48%
32%
27%
48%
38%
30%
25%
28%
23%
100%
49%
32%
27%
Minimum
Target
Maximum Maximum
with share
price growth
Minimum
Target
Maximum Maximum
with share
price growth
Fixed pay
Annual bonus
Long-term share awards
Notes:
1. Chart labels show proportion of total package comprised of each element.
2. Assumptions:
• Minimum: fixed pay only (salary + benefits + pension/pay in lieu of pension). Salary is based on actual for 2020/21, benefits are based on the value of actual benefits received in 2019/20
and pension/pay in lieu of pension is based on policy of 20% of salary applicable in 2020/21.
• Target: fixed pay plus 50% of maximum bonus payment plus PSP award of 150% of salary with 50% of the award vesting.
• Maximum: fixed pay plus 100% of maximum bonus payment plus PSP award of 150% of salary with 100% of the award vesting.
• Maximum with share price increase: the Maximum scenario with the impact of a 50% increase in share price on the PSP illustrated.
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Annual Report and Accounts 2020
Directors’ Report
The directors have proposed a final
ordinary dividend for the year ended
31 July 2020 of 50.0p per share.
Simon Scougall
Group General
Counsel &
Company Secretary
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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 27 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
52 to 53
Appointment and replacement of directors
58 and in the Articles
Directors’ interests
Future developments
Group undertakings
Environmental issues
s172 statement/reporting
Greenhouse gas emissions
Whistleblowing
Financial risk management
Going concern
79
31 of the Strategic Report
132
44 and 45 of the Strategic Report
12 of the Strategic Report
45 of the Strategic Report
71
41 of the Strategic Report
42 of the Strategic Report
Results and dividends
The profit for the year attributable to equity holders of the parent company amounts to £192.9 million (2019 – £538.6 million).
The directors have proposed a final ordinary dividend for the year ended 31 July 2020 of 50.0p per share (2019 – 100.0p). 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 Friday 8 January 2020 to shareholders on the Register of Members at the close of
business on Friday 27 November 2020.
Dividends paid during the year comprise the final dividend of 100.0p per share in respect of the year ended 31 July 2019.
No interim dividend was paid in respect to the year ended 31 July 2020 due to the global impact of the COVID-19 pandemic.
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.
Annual Report and Accounts 2020 93
Bellway p.l.c.
Directors’ Report continued
Major interests in shares
As at 31 July 2020 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
Polaris Capital Management, LLC
Credit Suisse Securities (Europe) Ltd
Post balance sheet events
There were no post balance sheet events.
As at 31 July 2020
As at 14 October 2020
Number of
shares with
voting rights
7,219,186
6,148,373
4,956,926
3,890,282
% total
voting rights
5.86
4.99
4.02
3.38
Number of
shares with
voting rights
n/a
6,148,373
4,956,926
3,890,282
% total
voting rights
n/a
4.99
4.02
3.38
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 2020, consisted of 123,345,834 ordinary shares of 12.5p each.
Further details of the issued capital of the Company can be found in note 19 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, 178,006 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
Friday 11 December 2020.
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Purchase of the Company’s own shares
The Company was given authority at the AGM on 11 December 2019 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 42, 42 and 96 respectively.
The Audit Committee, whose role is detailed on pages 62 to 71, has meetings at least twice a year with the Company’s auditor,
KPMG LLP.
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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, subcontractors, 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 2019, the Company commenced a tender process for the appointment of new auditors. The tender process was supervised
by the Audit Committee, who made a recommendation to the Board on the appointment of the replacement auditor.
Following the conclusion of the formal tender process, the Board approved the proposed appointment of Ernst & Young LLP
as the Company’s Auditor for the financial year commencing 1 August 2020. The appointment remains subject to approval by
shareholders at the Annual General Meeting to be held on Friday 11 December 2020, and should the resolution be passed, the
appointment will take effect from the conclusion of that meeting.
KPMG LLP were reappointed as the external auditors by shareholders at the 2019 Annual General Meeting and will resign as
auditor following the conclusion of the 2020 Annual General Meeting.
AGM – special business
Six resolutions will be proposed as special business at the AGM to be held on Friday 11 December 2020. 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.
Annual Report and Accounts 2020 95
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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 & Company Secretary
19 October 2020
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Independent Auditor’s Report
Independent Auditor’s Report to the Members of Bellway p.l.c.
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1. Our opinion is unmodified
We have audited the financial statements of Bellway p.l.c.
(“the Company”) for the year ended 31 July 2020 which
comprise the Group Income Statement, Statements of
Comprehensive Income, Statements of Changes in Equity,
Balance Sheets, Cash Flow Statements and the related notes,
including the accounting policies.
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 31July 2020 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.
We were first appointed as auditor by the Company before
1979. The period of total uninterrupted engagement is for
more than 40 financial years ended 31 July 2020. We have
fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied
to listed public interest entities. No non-audit services
prohibited by that standard were provided.
Overview
Materiality: Group financial
statements as a whole
Coverage
Key audit matters
Recurring risks
£21 million (2019: £31 million)
4.1% of normalised group profit
before tax (2019: 4.7% group profit
before tax)
100% (2019: 100%) of group
profit before tax
vs 2019
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 and
amounts owed by
Group undertakings
Event driven
New: Going concern
Annual Report and Accounts 2020 97
Bellway p.l.c.
Independent Auditor’s Report continued
2. Key audit matters: 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 decreasing order of audit
significance, 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
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
(£3,837 million; 2019: £3,428
million)
Cost of sales
(£1,803 million; 2019: £2,423
million)
Refer to page 65 (Audit
Committee Report), pages 110
and 114 (accounting policies)
and note 14 on page 122
(financial disclosures).
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. Further, the future market
uncertainties surrounding the impacts of
COVID-19 may influence market conditions.
The assessment of recoverability of
the carrying amount of land held for
development and work in progress is also
dependent on these same estimates.
The level of uncertainty from COVID-19
impacting the Group’s assessments of the
future economic environment may influence
the Group’s estimates of net realisable value.
The effect of these matters is that, as part
of our risk assessment, we determined
that the cost of sales estimate of £1,803
million and carrying amount of land held
for development and work in progress
of £3,837 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 accounting policies
note discloses the sensitivity estimated by the
Group.
Our procedures included:
• Tests 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;
• Tests 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;
• Tests 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 and external evidence
such as purchase and variation orders;
• Tests of details: For a sample of sites which, due to their
size and/or complexity, we considered at higher risk of
misstatement comparing the period end carrying amount
recorded to that determined by divisional management
and performing a comparison to the actual costs incurred
to verify that any abnormal costs or build variances
incurred, including those related to COVID 19 disruption,
have been appropriately identified and accounted for in
the period;
• Tests of details: Identifying low and negative margin sites
and assessing the completeness and accuracy of related
net realisable value provisions recorded, particularly in
light of market conditions due to COVID 19;
• 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, and corroborating the
reasons for significant variances;
• Historical comparisons: Comparing budgeted and latest
site valuations to assess the Group’s ability to accurately
forecast, and corroborating the reasons for significant
variances; and
• Assessing transparency: Assessing the adequacy of
the group’s disclosures about the degree of estimation
involved in calculating cost of sales and carrying amount
of land and work in progress.
Our results
• We found the carrying amount of land and work in
progress to be acceptable (2019 result: acceptable).
• We found the level of cost of sales recognised to be
acceptable (2019 result: acceptable).
98
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Annual Report and Accounts 2020
Going concern
Refer to page 66 (Audit
Committee Report) and
page 109 (accounting
policy)
Company: Recoverability
of parent company’s
investment in subsidiaries
and amounts owed by
Group undertakings
Investment in subsidiaries
(£37.8 million; 2019: £41.4
million)
Amounts owed by Group
undertakings
(£432.8 million; 2019:
£546.5 million)
Refer to page 110
(accounting policy)
and pages 121 and 123
(financial disclosures).
The risk
Disclosure quality
The financial statements explain how the Board
has formed a judgement that it is appropriate to
adopt the going concern basis of preparation for
the Group and parent Company.
That judgement is based on an evaluation of
the inherent risks to the Group’s and Company’s
business model and how those risks might affect
the Group’s and Company’s financial resources
or ability to continue operations over a period of
at least a year from the date of approval of the
financial statements.
The risk most likely to adversely affect the
Group’s and Company’s available financial
resources over this period was the impact of
Covid-19 on the economy as a whole leading
to a significant decrease in revenue and cash
inflows.
There are also less predictable but realistic
second order impacts, such as
• Increases in build costs or delays in build
programmes;
• Changes in government regulation and policy;
• Reductions in mortgage availability;
• Uncertainty in macro political and economic
factors; and
• The erosion of customer or supplier
confidence,
which could result in a rapid reduction of
available financial resources.
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have
been required to have been disclosed.
Low risk, high value:
The carrying amount of the parent Company’s
investments in subsidiaries represents 7%
(2019: 6%) of the Company’s total assets and
carrying amount of the amounts owed by
Group undertakings represents 83% (2019: 85%)
of the parent 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 areas that had the greatest
effect on our overall parent Company audit.
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Our response
Our procedures included:
Funding assessment:
Assessing the level of committed financing secured by the
Group as at and following the year end by reference to the
Group’s loan agreements.
Historical comparisons:
We assessed the reasonableness of the cash flow
projections by comparing the actual results to forecast
results in previous years, and corroborating the reasons for
significant variances.
Sensitivity analysis1:
• Considering sensitivities over the level of available
financial resources and headroom over debt covenants
indicated by the Group’s financial forecasts taking
account of reasonably possible (but not unrealistic)
adverse effects that could arise from the rapidly
changing and uncertain COVID-19 situation;
• Considering the key reactive measures the Group could
take in the event of a downside scenario and whether
those measures were fully in the Group’s control.
Tests of detail:
Testing the integrity of the cash flow projections and
challenging the appropriateness of the key assumptions
used therein by reference to our knowledge of the
business. Assessing the projections and assumptions by
reference to general market conditions and post year end
trading and cash flows.
Assessing transparency:
Assessing the completeness and accuracy of the matters
covered in the going concern disclosure with reference to
our audit findings from the above procedures.
Our results: We found the going concern disclosure
without any material uncertainty to be acceptable (2019
result: acceptable).
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 100% of amounts owed
by Group undertakings to identify, with reference to the
relevant debtors’ draft balance sheet, whether they have
a positive net asset value and therefore coverage of the
debt owed, as well as assessing whether those debtor
companies have historically been profit-making.
• Assessing subsidiary audits: Assessing the audit 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, including
assessing the liquidity of the assets and therefore the ability
of the subsidiary to fund the repayment of the receivable.
Our results:
• We found the group’s assessment of the recoverability
of the investment in subsidiaries and amounts owed by
Group undertakings to be acceptable (2019: acceptable).
In the prior year, we reported a Key Audit Matter in respect of the impact of uncertainties due to the UK exiting the European
Union on our audit. As a result of developments since the prior year report, including the Group’s own preparation, the relative
significance of this matter on our audit work, including in relation to the cost of sales recognition on current sites and carrying
amount of land held for development and work in progress which remains a key audit matter, has reduced. Accordingly, we no
longer consider this a key audit matter.
Annual Report and Accounts 2020 99
Bellway p.l.c.
Independent Auditor’s Report 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 £21.0 million, determined with reference to a
benchmark of normalised group profit before tax, normalised
by averaging over the last three years due to the impact
of COVID-19, of £513.4 million, of which it represents
4.1% (2019: 4.7% of group profit before tax). We revised
our evaluation of materiality as the audit progressed by
reassessing the amount and percentage of the benchmark
compared with that selected at the planning stage. This was
a result of the impact of COVID-19 and the decrease in the
forecast benchmark.
Materiality for the parent company financial statements as a
whole was set at £5.4 million (2019: £10.6 million), determined
with reference to a benchmark of company total assets, of
which it represents 1.0% (2019: 1.7%).
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding
£1.05 million (2019: £1.55 million), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
Of the Group’s nine (2019: nine) reporting components,
we subjected nine (2019: 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 (2019: 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 component materialities ranging
from £0.001 million to £20.79 million (2019: £0.001 million
to £27.0 million), having regard to the mix of size and risk
profile of the Group across the components. The work on
all of the components (2019: all components), including the
audit of the parent Company, was performed by the Group
team. The Group team performed procedures on the items
excluded from normalised group profit before tax.
Normalised profit
before tax
£513.4 million
(2019 – £662.6 million)
Profit before tax
Group materiality
Group materiality
£21 million (2019 – £31 million)
£21 million
Whole financial
statements materiality
(2019 – £31 million)
£20.79 million
Range of materiality at
ten components
(£0.001 million – £20.79 million)
(2019 – £0.001 million
to £27.0 million)
£1.05 million
Misstatements reported
to the audit committee
(2019 – £1.55 million)
Group revenue
Group profit before tax
100%
(2019 - 100%)
100
100
100%
(2019 - 100%)
100
100
Group total assets
Group profit before
exceptional items and tax
100%
(2019 - 100%)
100
100
100%
(2019 - 100%)
100
100
Full scope for Group audit purposes 2020
Residual Components 2020
Full scope for Group audit purposes 2019
Residual Components 2019
100
Bellway p.l.c.
Annual Report and Accounts 2020
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.
We identified going concern as a key audit matter (see
section 2 of this report). Based on the work described in our
response to that key audit matter, 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 accounting
policies 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 42 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
5. We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
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 emerging and 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 42 that they have carried out a robust
assessment of the emerging and principal risks facing the
Group, including those that would threaten its business
model, future performance, solvency and liquidity;
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• 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 Long-
Term 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.
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
• we have not identified material misstatements in the
by the company.
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.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in these respects.
Bellway p.l.c.
Annual Report and Accounts 2020
101
Independent Auditor’s Report continued
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
96, 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 general commercial and
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.
102
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Annual Report and Accounts 2020
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 and
other relevant construction legislation, 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
19 October 2020
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Annual Report and Accounts 2020 103
Bellway p.l.c.
Group Income Statement
for the year ended 31 July 2020
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
2020
Pre-exceptional
items
£m
2020
Exceptional
items (note 3)
£m
2020
Total
£m
2019
Total
£m
2,225.4
(1,803.2)
422.2
153.0
(156.1)
(97.4)
321.7
0.2
(13.6)
1.0
309.3
(57.6)
251.7
–
(71.9)
(71.9)
–
–
(0.7)
(72.6)
–
–
–
(72.6)
13.8
(58.8)
2,225.4
(1,875.1)
3,213.2
(2,423.0)
350.3
153.0
(156.1)
(98.1)
249.1
0.2
(13.6)
1.0
236.7
(43.8)
192.9
790.2
169.9
(175.5)
(109.7)
674.9
0.6
(15.0)
2.1
662.6
(124.0)
538.6
156.6p
156.1p
437.8p
436.4p
Note
1, 2
4
6
6
12
7
9
9
Statements of Comprehensive Income
for the year ended 31 July 2020
Profit for the period
Other comprehensive (expense)/income
Items that will not be recycled to the income statement:
Remeasurement (losses)/gains on defined benefit
pension plans
Income tax on other comprehensive expense/(income)
Other comprehensive (expense)/income for the period,
net of income tax
Total comprehensive income for the period*
* All attributable to equity holders of the parent.
Note
25
7
Group
2020
£m
192.9
Group
2019
£m
538.6
Company
2020
£m
0.9
Company
2019
£m
181.8
(1.8)
0.3
(1.5)
191.4
1.3
(0.2)
1.1
539.7
–
–
–
–
–
–
0.9
181.8
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Annual Report and Accounts 2020
Statements of Changes in Equity
at 31 July 2020
Group
Balance at 1 August 2018
Note
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
8
20
19
Credit in relation to share options
and tax thereon
7, 25
Total contributions by and
distributions to shareholders
Issued
capital
£m
15.3
Share
premium
£m
173.7
Capital
redemption
reserve
£m
20.0
Other
reserves
£m
1.5
Retained
earnings
£m
2,346.6
Total
equity
£m
2,557.1
–
–
–
–
–
–
–
–
–
–
–
–
–
2.1
–
2.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
538.6
1.1
539.7
(178.9)
(0.5)
–
1.7
538.6
1.1
539.7
(178.9)
(0.5)
2.1
1.7
(177.7)
(175.6)
A
c
c
o
u
n
t
s
Balance at 31 July 2019
15.3
175.8
20.0
1.5
2,708.6
2,921.2
Total comprehensive income for
the period
Profit for the period
Other comprehensive expense*
Total comprehensive income
for the period
Transactions with shareholders
recorded directly in equity:
Dividends on equity shares
Shares issued
8
19
Credit in relation to share options
and tax thereon
7, 25
Total contributions by and
distributions to shareholders
–
–
–
–
0.1
–
0.1
–
–
–
–
2.6
–
2.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
192.9
(1.5)
192.9
(1.5)
191.4
191.4
(123.1)
(123.1)
–
1.8
2.7
1.8
(121.3)
(118.6)
Balance at 31 July 2020
15.4
178.4
20.0
1.5
2,778.7
2,994.0
* An additional breakdown is provided in the Statements of Comprehensive Income.
Annual Report and Accounts 2020 105
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Statements of Changes in Equity continued
at 31 July 2020
Company
Note
Balance at 1 August 2018
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
8
20
19
25
Issued
capital
£m
15.3
Share
premium
£m
173.7
Capital
redemption
reserve
£m
20.0
Other
reserves
Retained
earnings
£m
2.1
£m
423.1
–
–
–
–
–
–
–
–
–
–
–
–
–
2.1
–
2.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
181.8
–
181.8
(178.9)
(0.5)
–
1.7
(177.7)
(175.6)
Total
equity
£m
634.2
181.8
–
181.8
(178.9)
(0.5)
2.1
1.7
Balance at 31 July 2019
15.3
175.8
20.0
2.1
427.2
640.4
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
8
19
25
–
–
–
–
0.1
–
0.1
–
–
–
–
2.6
–
2.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9
–
0.9
0.9
–
0.9
(123.1)
(123.1)
–
2.1
2.7
2.1
(121.0)
(118.3)
Balance at 31 July 2020
15.4
178.4
20.0
2.1
307.1
523.0
* An additional breakdown is provided in the Statements of Comprehensive Income.
106
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Annual Report and Accounts 2020
Balance Sheets
at 31 July 2020
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
Interest-bearing loans and borrowings
Corporation tax payable
Trade and other payables
Provisions
Total liabilities
Net assets
EQUITY
Issued capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Total equity
Note
Group
2020
£m
Group
2019
£m
Company
2020
£m
Company
2019
£m
10
11
12
12
13
25
14
15
22
16
13
16
17
19
20
36.7
–
–
60.8
0.5
1.3
99.3
3,863.0
69.9
51.4
3,984.3
4,083.6
131.2
2.6
133.8
50.0
1.5
834.0
70.3
955.8
1,089.6
2,994.0
15.4
178.4
20.0
1.5
2,778.7
2,994.0
29.8
–
–
49.9
0.7
2.8
83.2
3,477.6
127.9
201.2
3,806.7
3,889.9
97.2
2.2
99.4
–
66.3
803.0
–
869.3
968.7
2,921.2
15.3
175.8
20.0
1.5
2,708.6
2,921.2
–
–
37.8
–
–
–
–
–
41.4
–
–
–
37.8
41.4
–
432.8
52.7
485.5
523.3
–
–
–
–
–
0.3
–
0.3
0.3
–
546.5
52.8
599.3
640.7
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–
–
–
–
–
0.3
–
0.3
0.3
523.0
640.4
15.4
178.4
20.0
2.1
307.1
523.0
15.3
175.8
20.0
2.1
427.2
640.4
Approved by the Board of Directors on 19 October 2020 and signed on its behalf by:
Paul Hampden Smith
Director
Keith Adey
Director
Registered number 1372603
Parent Company Income Statement
In accordance with the provisions of section 408 of the Companies Act 2006, a separate Income Statement for the Company
has not been presented. The Company’s profit for the year was £0.9 million (2019 – £181.8 million).
Annual Report and Accounts 2020 107
Bellway p.l.c.
Group
2020
£m
Group
2019
£m
Company
2020
£m
Company
2019
£m
192.9
538.6
6.3
–
(0.2)
13.6
2.1
(1.0)
43.8
(385.0)
58.0
55.0
70.3
55.8
(6.0)
(107.7)
(57.9)
(8.3)
0.1
(9.9)
–
0.3
(17.8)
50.0
(3.7)
2.7
–
(123.1)
(74.1)
(149.8)
201.2
51.4
5.8
–
(0.6)
15.0
1.7
(2.1)
124.0
(206.0)
(11.9)
(45.4)
–
419.1
(7.9)
(119.3)
291.9
(5.1)
0.1
(5.7)
1.4
0.4
(8.9)
–
(3.5)
2.1
(0.5)
(178.9)
(180.8)
102.2
99.0
201.2
0.9
–
5.7
–
–
–
–
–
–
113.7
–
–
120.3
–
–
120.3
–
–
–
–
–
–
–
–
2.7
–
(123.1)
(120.4)
(0.1)
52.8
52.7
181.8
–
–
–
–
–
–
–
–
(4.5)
–
–
177.3
–
–
177.3
–
–
–
–
–
–
–
–
2.1
(0.5)
(178.9)
(177.3)
–
52.8
52.8
Note
10
12
6
6
25
12
7
12
12
8
22
Cash Flow Statements
for the year ended 31 July 2020
Cash flows from operating activities
Profit for the year
Depreciation charge
Investment impairment
Finance income
Finance expenses
Share-based payment expense
Share of post tax result of joint ventures
Income tax expense
Increase in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Increase in provisions
Cash from operations
Interest paid
Income tax paid
Net cash (outflow)/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
Increase 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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
108
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Annual Report and Accounts 2020
Accounting Policies
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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 19 October 2020, 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.
Going concern
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 26 to 31. The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review on pages 32 to 34 and the Director’s Report on page 93. The Risk
Management section on pages 40 to 42 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 2020, net cash was £1.4 million (note 22) having consumed cash of £199.8 million (see note 21) during the year, which
takes into account £55.8 million of cash from operations. The Group has operated within all its banking covenants throughout
the year. In addition, the Group has bank facilities of £545.0 million, expiring in tranches up to December 2023. Furthermore,
the Group has been confirmed as an eligible issuer for the Government’s Covid Corporate Financing Facility (‘CCFF’), subject to
continuing compliance with the Bank of England’s eligibility criteria, with an issuer limit of £300.0 million. This remains undrawn,
but available as a prudent back-up facility that can currently be initially drawn down until 22 March 2021 for a maximum
duration of 364 days thereafter.
Bellway therefore has access to total funds of £846.4 million, along with net current assets (excluding net cash) of £3,027.1 million
at 31 July 2020, providing the Group with appropriate liquidity to meet its current liabilities as they fall due.
The Group’s internal forecasts have been regularly updated, as usual, since the COVID-19 ‘lockdown’, incorporating our
actual experience along with our expected future outturn. The most up-to-date base forecast has been sensitised, setting
out the Group’s resilience to the principal risks and uncertainties in various adverse scenarios. These sensitivities include a
second ‘lockdown’ due to COVID-19, and separately a recession due to economic uncertainty and a deterioration in customer
confidence. This could lead to a reduction in both the total number of legal completions and private average selling price, with
overheads, land spend and construction spend reducing accordingly.
The most severe but plausible downside scenario is a severe recession. It includes the following principal assumptions:
– Private completions in H1 FY21 are supported by the strong forward order book, but still fall to 75% of that achieved in H1
of FY20. In the 12 months to 31 January 2022, private completions reduce by around 50% compared to the pre-COVID-19
‘lockdown’ peak. This is followed by a gradual recovery based on the lower base position.
– Private average selling price in H1 FY21 remains in line with internal forecasts due to the strong order book position. In the
12 months to 31 January 2022, private average selling price reduces by 10% compared to the latest achieved pricing. This is
followed by a gradual recovery based on the lower base position.
– These assumptions reflect the Group’s experience in the 2008/09 global financial crisis.
A number of prudent mitigating actions were incorporated into the plausible but severe downside scenario, including:
– Plots in the land bank being replaced at the same rate that they are utilised.
– Construction spend is reduced in line with housing revenue.
All of the sensitivity analyses were modelled over the period to 31 July 2024, as used for the directors’ viability assessment.
In addition to the various scenarios, several additional mitigating measures remain available to management that were not
included in the scenarios. These include withholding discretionary land spend and instead trading out of the substantial existing
land holdings, further reducing construction spend in recognition of the strong carried forward work-in-progress position at
31 July 2020, and reducing or cancelling future dividend payments.
In all the scenarios, the Group had significant headroom in both its financial bank covenants and existing bank facilities, did not
utilise the CCFF and met its liabilities as they fell due.
The directors consider that the Group is well placed to manage business and financial risks in the current economic
environment. Consequently, the directors are confident that the Group and parent company will have sufficient funds to
continue to meet its liabilities as they fall due for at least twelve months from the date of approval of these financial statements
and have therefore prepared the financial statements on a going concern basis.
Annual Report and Accounts 2020 109
Bellway p.l.c.
Accounting Policies continued
Going concern continued
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 has adopted the following interpretation and amendments for the first time in these financial statements:
– IFRIC 23 ‘Uncertainty over Income Tax Treatments’.
– Amendments to IAS 19 ‘Employee Benefits’.
– Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’.
– Annual Improvements to IFRS Standards 2015-2017 Cycle.
The adoption of these has not had a material effect on the Group’s profit for the year or equity.
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.
110
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Annual Report and Accounts 2020
Inventories continued
Options purchased in respect of land are capitalised initially at cost. Regular reviews are carried out for impairment in the value
of these options and provisions made accordingly to reflect loss of value. The impairment reviews consider the period elapsed
since the date of purchase of the option given that the option contract has not been exercised at the review date. Further, the
impairment reviews consider the remaining life of the option, taking account of any concerns over whether the remaining time
available will allow a successful exercise of the option. The carrying cost of the option at the date of exercise is included within
the cost of land purchased as a result of the option exercise.
Investments in land without the benefit of planning consent, either through the purchase of land or non-refundable deposits
paid on land purchase contracts subject to planning consent, are included initially at cost. Regular reviews are carried out for
impairment in the values of these investments and provision made to reflect any irrecoverable element. The impairment reviews
consider the existing use value of the land and assess the likelihood of achieving planning consent and the value thereof.
Trade and other receivables
Trade and other receivables are stated at their fair value at the date of initial recognition and subsequently at amortised cost less
allowances for impairment.
Consideration which is contingent on future events is recognised based on the estimated amount if it is probable and can
be reliably measured. Any subsequent changes to the fair value of the contingent consideration are recognised in 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.
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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.
Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past transaction or
event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors best
estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to the present value
where the effect is material.
Payments on account
Payments on account, measured at amortised cost, are recorded as a liability on receipt and are released to the income
statement when revenue is recognised in accordance with the Group’s revenue recognition policy.
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.
Bellway p.l.c.
Annual Report and Accounts 2020
111
Accounting Policies continued
Revenue recognition
(a) Private housing sales and land sales:
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:
Where a contract with a Registered Provider transfers both land and social housing on legal completion (‘turnkey and plot
sale contracts’ which typically represents around one third of social housing revenue), there is one performance obligation
and revenue is recognised in the income statement at a point in time when the homes are build complete and all material
contractual obligations have been fulfilled. This is when legal title is transferred.
Where a contract with a Registered Provider transfers legal title of land once foundations are in place (“design and build”
contracts’ which typically represents around two thirds of social housing revenue) and separately transfers the social housing
when they are build complete, there is a judgement as to whether the sale of land is a separate performance obligation for
the purposes of revenue recognition and consequentially whether revenue should be recognised over time or on a point-in-
time basis for the social housing units. Based on the contractual terms, notably those that enable the Group to retain control
over the land, the Group has determined that these contracts include one performance obligation which is appropriately
recognised at a point in time, when the homes are build complete and all material contractual obligations have been fulfilled.
The directors recognise that there is evolving guidance in relation to the wider application of IFRS 15 – ‘Revenue from Contracts
with Customers’. Insofar as it is relevant, they will continue to consider the appropriateness of the Group’s accounting policy,
specifically with reference to any changes in the underlying contractual terms of these agreements.
Revenue is measured at the fair value of consideration received or receivable, net of incentives.
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.
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 25.
Defined contribution pension costs are charged to the income statement in the period for which contributions are payable.
112
Bellway p.l.c.
Annual Report and Accounts 2020
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.
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.
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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 and of such significance that they
require separate disclosure on the face of the income statement.
Accounting estimates and judgements
Management considers the following to be major sources of estimation that have been made in these financial statements:
Carrying amount of land held for development and work in progress
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 is 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.
Bellway p.l.c.
Annual Report and Accounts 2020
113
Accounting Policies continued
For both the years ended 31 July 2020 and 31 July 2019, 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’s and the Board’s assessment of current market
conditions. For the year ended 31 July 2019, no exceptional charge resulted from the review. For the year ended 31 July 2020,
an exceptional item has been recognised related to the impairment of work in progress and land held for development; further
detail is given in note 3.
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 decreased by 200 basis
points, it is estimated that the quantum of housing cost of sales would increase by around 2.5%. Conversely, if housing gross
margin increased by 200 basis points it is estimated that the quantum of housing cost of sales would decrease by around 2.5%.
Legacy building safety improvements
The legacy building safety improvements provision has been set up to carry out remedial corrective works on a small number
of schemes. Management has estimated the cost of the corrective works for the current anticipated scope, but this is inherently
uncertain as the improvement works are at an early stage on most affected sites. If costs in the provision are understated by 10%,
operating profit in the period would reduce by around 3%.
Judgements
While preparing these financial statements, the major judgements which the directors consider could have a significant effect
on the financial statements when applying the Group’s accounting policies are:
• whether each site that could form part of the legacy building safety improvements provision satisfies the accounting
requirements of a provision at the balance sheet date. This is a highly complex area with judgements in respect of the extent
of those properties within the scope of Bellway’s legacy building safety improvement provision and the provision could be
extended should the latest interpretation of government guidance further evolve.
• whether items should be treated as exceptional or not, the value of such items is not considered to be an area of judgement.
The directors assessed each possible exceptional item against a framework incorporating the Group’s accounting policy,
the accounting requirements of IAS 1 ‘Presentation of Financial Statements’ relating to the separate disclosure of material
items of income or expense and the FRC Company Guidance in relation to COVID-19 (updated 20 May 2020). Further details
are included in note 3. The directors considered other items when reviewing areas of the business that could give rise to a
COVID-19 related exceptional item and concluded that neither of the following items satisfied all of the requirements of an
exceptional item:
i) Extended site durations, together with enhanced health and safety requirements relating to social distancing measures –
In addition to the costs set out in note 3, further costs arising from extended site durations, together with enhanced health
and safety requirements relating to social distancing measures, have led to an additional cost of £18.9 million in the year.
These incremental site-based costs will continue to influence the operating margin in the year ahead, but with production
capacity currently around 85% to 95% and improving, we are hopeful that the negative impact will gradually reduce, save
for the risk of additional localised ‘lockdowns’.
ii) Furloughed costs for non-site-based employees – Following our decision on 23 March to close sites, the Group furloughed
around 75% of its workforce, with this principally comprising directly employed site tradespeople, site managers and sales
advisers. We have paid these employees full basic salary throughout April and May, and although eligible Bellway has not
applied for a grant using the CJRS. The expense to the Group relating to those furloughed employees, whose cost is not
capitalised to a site, was considered in the review of possible exceptional items.
• Going concern – see earlier section on page 109.
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.
114
Bellway p.l.c.
Annual Report and Accounts 2020
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 26 to 31. The Board does not, however, consider these categories to be separate
reportable segments as it reviews the entire operations at a consolidated and divisional level when assessing performance and
making decisions about the allocation of resources.
2. 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:
(a) Private/social
Private
Social
Total housebuilding revenue
(b) North/South
North
South
Total housebuilding revenue
2020
£m
2,204.4
21.0
2,225.4
2020
£m
1,948.1
256.3
2,204.4
2020
£m
955.8
1,248.6
2,204.4
2019
£m
3,180.1
33.1
3,213.2
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2019
£m
2,815.6
364.5
3,180.1
2019
£m
1,248.3
1,931.8
3,180.1
3. Exceptional items
Exceptional items are those which, in the opinion of the Board, are material by size or nature and of such significance that they
require separate disclosure on the face of the income statement to allow the users of the financial statements to understand
the performance of the Group and make more informed decisions. Operating profit for the year ended 31 July 2020 has been
arrived at after recognising the following exceptional expenses in the income statement:
COVID-19 related exceptional items
(a) Aborted land contracts
(b) Abnormal, non-productive site-based costs arising from the interruption to construction activity
during ‘lockdown’
(c) Restructuring costs
Total COVID-19 related exceptional expense
Other exceptional items
(a) Legacy building safety improvements
Other exceptional expense
Total exceptional expense
2020
£m
9.9
14.5
1.4
25.8
46.8
46.8
72.6
2019
£m
–
–
–
–
–
–
–
Bellway p.l.c.
Annual Report and Accounts 2020
115
Notes to the Accounts continued
Exceptional items continued
£71.9 million of the total exceptional expense is recognised within cost of sales and £0.7 million, relating to a proportion of the
restructuring costs, is included within administrative expenses.
The income tax rate applied to the total exceptional expense in the income statement is the Group’s standard rate of
corporation tax, 19.0%.
COVID-19 related exceptional items
The COVID-19 pandemic materially affected the performance of the Group in several ways including delays to sales and
incremental construction costs which do not meet the definition of an exceptional item.
In addition, costs were incurred that meet the Group’s definition of an exceptional item and it is necessary to show these
items separately in order to provide additional useful information to the primary users of the financial statements about the
performance of Bellway and to allow comparability across reporting periods. This is consistent with how management has
monitored the performance of the Group during this period. A total COVID-19 related exceptional expense of £25.8 million has
been recognised in the income statement:
(a) Aborted land contracts – A full review of inventories has been performed and land impairments have been made where
the cost exceeds the expected net realisable value. Net realisable value represents the estimated selling price (in the ordinary
course of business) less all estimated costs of completion and selling overheads. As a result of this review, the Group has
impaired historic costs, including option fees, site investigation costs and planning fees relating to several land deals which
have been aborted or indefinitely suspended due to the Board’s assessment that conditions in the land market have evolved
since the onset of COVID-19. Accordingly, there is likely to be no future revenue associated with these sites and this review has
therefore resulted in a land impairment of £9.9 million. The treatment of aborted land costs is consistent with the impairment
recognised during the global financial crisis in 2008 and 2009.
(b) Abnormal, non-productive site-based costs arising from the interruption to construction activity during ‘lockdown’ –
Following the Prime Minister’s announcement on 23 March 2020, the Board took the decision to suspend construction activity.
During the ‘lockdown’ period, the Group continued to incur costs which would have ordinarily been capitalised into work-in-
progress. These costs include abnormal amounts of wasted site-based labour, materials and other production costs which did
not contribute to bringing the inventory into its current location or condition during the aforementioned period of interruption
and accordingly, they have been expensed to the income statement. The charge of £14.5 million includes £10.0 million in
relation to directly employed site-based staff, with the remaining amount of £4.5 million mainly relating to equipment hire and
additional site security during the ‘lockdown’ period. The Group did not access the CJRS government grant. The Group has
since gradually recommenced production on a phased basis and has therefore subsequently capitalised site costs in line with
its site reopening programme.
These costs were borne during the period when developments were closed, with the period of inactivity typically lasting
between six weeks and three months. This reflects the gradual roll-out of safe working practices across the Group, which was
in line with the separate guidance applying to the jurisdictions of England, Scotland and Wales. The deployment of these
safe working practices will help to mitigate the likelihood of incurring further significant non-productive site-based costs,
notwithstanding the possible risk of an additional nationwide or localised ‘lockdowns’.
(c) Restructuring costs – The Group has undertaken a modest workforce rationalisation programme in response to reduced
output and the suspension of divisional expansion plans.
The items included in the COVID-19 related exceptional expense are not material individually but are on an aggregated basis.
The directors believe it is most appropriate to consider these costs on an aggregated basis as they relate to the same event, and
presenting them on another basis could provide obscured information to the primary users of the financial statements.
Other exceptional items
(a) Legacy building safety improvements – The Grenfell tragedy understandably increased the focus on fire safety across the
industry and more specifically on apartment blocks, with subsequent government guidance setting out detailed processes to
ensure adequate fire protection measures and limit combustibility in external wall systems on buildings.
As a consequence, the document ‘Advice for Building Owners of Multi-storey, Multi-occupied Residential Buildings’ was issued
by the Ministry of Housing, Communities and Local Government (‘MHCLG’) in January 2020. This clarified that all buildings
above 18 metres in height should be risk assessed to determine whether the presence of potentially combustible materials
could contribute to external fire spread, in which case they may need to be replaced. This consolidated advice note clarifies the
Government’s interpretation of the building regulations insofar as it is applicable to properties pre-dating its issuance.
As previously reported, Bellway has identified a number of developments, which obtained building regulation approval
at the time of construction, where the building materials used may not fully comply with this most recent government
guidance. Notwithstanding the complexities in assessing legal liability, as a responsible developer, we have undertaken further
assessments of our portfolio of legacy apartment schemes to determine whether any safety improvements are required in
order to reflect the current guidance. As a result of this evaluation, Bellway has made an additional exceptional provision of
£46.8 million as part of its commitment to help building owners remediate affected properties.
This is a highly complex area with judgements and estimates in respect of the cost of rectification works and the extent of those
properties within the scope of the latest government guidance which are likely to evolve. The Group is also pursuing recoveries
from third parties, but as these are not virtually certain, no assets have been recognised on the balance sheet.
116
Bellway p.l.c.
Annual Report and Accounts 2020
4. Operating profit
Operating profit is stated after charging:
Staff costs (note 5)
Depreciation of property, plant and equipment
Hire of plant and machinery
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
2020
£m
180.1
6.3
13.6
2020
£000
35
221
8
2019
£m
188.2
5.8
14.9
2019
£000
30
195
7
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 £0.018 million (2019 – £0.020 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.
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5. Employee information
Group employment costs, including directors, comprised:
Wages and salaries
Social security
Pension costs (note 25)
Share-based payments (note 25)
2020
£m
155.2
16.6
6.2
2.1
180.1
2019
£m
164.1
16.5
6.0
1.6
188.2
The average number of persons employed by the Group during the year was 3,119 (2019 – 2,980) comprising 1,085 (2019 – 1,023)
administrative and 2,034 (2019 – 1,957) production and others employed in housebuilding and associated trading activities.
The executive directors and the Group General Counsel & Company Secretary are the only employees of the Company and
the emoluments of the executive directors are disclosed in the Directors’ Remuneration Report on pages 72 to 92.
Key management personnel remuneration, including directors, comprised:
Salaries and fees
Taxable benefits
Annual cash bonus
Pension costs
Share-based payments
2020
£m
2.9
0.2
–
0.1
1.0
4.2
2019
£m
3.0
0.2
1.9
0.2
1.0
6.3
Key management personnel, as disclosed under IAS 24 ‘Related party disclosures’, comprises the directors and other senior
operational management.
Bellway p.l.c.
Annual Report and Accounts 2020
117
Notes to the Accounts continued
6. Finance income and expenses
Interest receivable on bank deposits
Interest on fair value through profit or loss
Other interest receivable
Finance income
Interest payable on bank loans and overdrafts
Interest on deferred term land payables
Interest payable on leases
Finance expenses
7. Income tax expense
Current tax expense:
UK corporation tax
Adjustments in respect of prior years
Deferred tax expense/(income):
Origination and reversal of temporary differences
Increase in tax rate
Adjustments in respect of prior years
Total income tax expense in income statement
Reconciliation of effective tax rate:
Profit before taxation
Tax calculated at UK corporation tax rate
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
2020
£m
0.2
–
–
0.2
6.2
6.9
0.5
13.6
2020
£m
43.4
(0.2)
43.2
0.3
0.2
0.1
0.6
43.8
2019
%
19.0
–
(0.3)
–
18.7
2019
£m
0.4
0.1
0.1
0.6
6.7
7.8
0.5
15.0
2019
£m
126.2
(2.1)
124.1
(0.1)
–
–
(0.1)
124.0
2019
£000
662.6
125.9
0.2
(2.1)
–
124.0
2020
%
19.0
(0.5)
–
–
18.5
2020
£000
236.7
45.0
(1.1)
(0.2)
0.1
43.8
The deferred tax assets/(liabilities) held by the Group are valued at the substantively enacted corporation tax rate that will be
effective when they are expected to be realised. The planned reduction of the corporation tax rate to 17% was repealed in
March 2020; therefore the deferred tax assets/(liabilities) held by the Group have been revalued at 19%.
The effective tax expense is 18.5% of profit before taxation (2019 – 18.7%) and compares favourably to the Group’s standard
tax rate for the year of 19.0% (2019 – 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.
Deferred tax recognised directly in equity:
Credit/(charge) relating to remeasurements on the defined benefit pension scheme
Charge relating to equity-settled transactions
2020
£m
0.3
(0.3)
2019
£m
(0.2)
–
118
Bellway p.l.c.
Annual Report and Accounts 2020
8. Dividends on equity shares
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2019 of 100.0p per share (2018 – 95.0p)
Interim dividend for the year ended 31 July 2020 of nil per share (2019 – 50.4p)
Proposed final dividend for the year ended 31 July 2020 of 50.0p per share (2019 – 100.0p)
2020
£m
123.1
–
123.1
61.7
2019
£m
116.8
62.1
178.9
123.1
The 2020 proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 11 December
2020 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 2019, shares were held by the Bellway Employee
Share Trust (1992) (the ‘Trust’) on which dividends had been waived (see note 20).
The level of distributable reserves are sufficient in comparison to the proposed dividend.
9. 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.
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Reconciliations of the earnings and weighted average number of shares used in the calculations are outlined below:
Earnings
2020
£m
Weighted
average
number of
ordinary
shares
2020
Number
For basic earnings per ordinary share
192.9
123,205,211
Dilutive effect of options and awards
390,245
For diluted earnings per ordinary share
192.9 123,595,456
2020
p
156.6
(0.5)
156.1
Weighted
average
number of
ordinary
shares
2019
Number
2019
£m
538.6
123,012,723
398,943
538.6
123,411,666
Earnings per
share
2019
p
437.8
(1.4)
436.4
Earnings per
share
Earnings
Bellway p.l.c.
Annual Report and Accounts 2020
119
Notes to the Accounts continued
10. Property, plant and equipment
Group
Cost
At 1 August 2018
Opening right-of-use asset recognised on adoption of IFRS 16
Additions
Disposals
At 1 August 2019
Additions
Disposals
Transfer to inventories
At 31 July 2020
Depreciation
At 1 August 2018
Charge for year
On disposals
At 1 August 2019
Charge for year
On disposals
Transfer to inventories
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2019
At 31 July 2018
Land and
property
£m
Plant, fixtures
and fittings
£m
Right-of-use
assets
£m
9.6
–
1.6
–
11.2
6.8
–
(0.5)
17.5
2.4
0.3
–
2.7
0.4
–
(0.1)
3.0
14.5
8.5
7.2
15.8
–
3.6
(1.8)
17.6
1.5
(1.0)
–
18.1
9.9
2.1
(1.7)
10.3
2.4
(0.9)
–
11.8
6.3
7.3
5.9
–
14.2
3.3
(0.2)
17.3
5.5
(0.8)
–
22.0
–
3.4
(0.1)
3.3
3.5
(0.7)
–
6.1
15.9
14.0
–
Total
£m
25.4
14.2
8.5
(2.0)
46.1
13.8
(1.8)
(0.5)
57.6
12.3
5.8
(1.8)
16.3
6.3
(1.6)
(0.1)
20.9
36.7
29.8
13.1
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.
11. Investment property
Group
Cost
At 1 August 2018 and 1 August 2019
Disposals
At 31 July 2020
Depreciation
At 1 August 2018 and 1 August 2019
On disposals
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2018 and 31 July 2019
Total
£m
0.4
–
0.4
0.4
–
0.4
–
–
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 (2019 – £nil).
The Company has no investment properties.
120
Bellway p.l.c.
Annual Report and Accounts 2020
12. 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
2020
£m
–
55.5
5.3
60.8
60.8
Group
2019
£m
–
45.6
4.3
49.9
Company
2020
£m
37.8
Company
2019
£m
41.4
–
–
–
–
–
–
49.9
37.8
41.4
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 39 subsidiaries and 7 joint
arrangements. Further details are included in note 27.
During the year ended 31 July 2020, subsidiary undertakings in the Company were impaired by £5.7 million (2019 – £nil)
following an exercise to dissolve several dormant companies across the Group. This movement is offset by the share-based
payment charge of £2.1 million (2019 – £1.7 million).
Where Bellway owns 100% of the voting rights of a business, the company is considered to be controlled by Bellway and is
treated as a subsidiary.
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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
2020
£m
49.9
9.9
–
1.0
60.8
The Group’s share of the joint ventures’ net assets/(liabilities) and income/(expenses) are made up as follows:
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
2020
£m
79.3
(71.0)
(3.0)
5.3
4.3
(3.3)
1.0
–
1.0
2019
£m
43.5
5.7
(1.4)
2.1
49.9
2019
£m
57.6
(50.0)
(3.3)
4.3
8.9
(6.7)
2.2
(0.1)
2.1
Guarantees relating to the overdrafts of the joint arrangements have been given by the Company (see note 23).
The Group has assessed expected credit losses and the loss allowance for joint venture financial assets as immaterial.
Bellway p.l.c.
Annual Report and Accounts 2020
121
Notes to the Accounts continued
13. 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 2018
Income statement (charge)/credit
Charge to statement of comprehensive
income
At 31 July 2019
Reclassification
Income statement (charge)/credit
Credit to statement of comprehensive
income
Charge to equity
At 31 July 2020
Capital
allowances
Retirement
benefit assets
Share-based
payments
Inventory
£m
–
(0.1)
–
(0.1)
–
(0.4)
–
–
(0.5)
£m
(0.2)
(0.1)
(0.2)
(0.5)
–
(0.1)
0.3
–
(0.3)
£m
1.1
(0.4)
–
0.7
–
0.1
–
(0.3)
0.5
£m
–
–
–
–
(1.6)
(0.2)
–
–
(1.8)
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
Inventory
Other temporary differences
Deferred tax liabilities
Net deferred tax liability
Other
temporary
differences
£m
(2.3)
0.7
–
(1.6)
1.6
–
–
–
–
2020
£m
0.5
0.5
(0.5)
(0.3)
(1.8)
–
(2.6)
(2.1)
Total
£m
(1.4)
0.1
(0.2)
(1.5)
–
(0.6)
0.3
(0.3)
(2.1)
2019
£m
0.7
0.7
(0.1)
(0.5)
–
(1.6)
(2.2)
(1.5)
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.
14. Inventories
Group
Land
Work in progress
Showhomes
Part-exchange properties
2020
£m
2,216.2
1,496.1
124.6
26.1
3,863.0
2019
£m
2,004.4
1,298.2
125.5
49.5
3,477.6
Inventories of £1,780.7 million were expensed in the year (2019 – £2,376.1 million), including exceptional land and work in
progress impairments of £24.4 million (see note 3).
In the ordinary course of business, inventories have been written off by a net £3.5 million in the year (2019 – net write-back of
£1.0 million).
Land with a carrying value of £242.7 million (2019 – £172.3 million) was used as security for land payables (see note 16).
Land includes £1,743.3 million (2019 – £1,630.6 million) which is owned or unconditionally contracted by the Group and where
there is an implementable detailed planning permission.
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.
122
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Annual Report and Accounts 2020
15. Trade and other receivables
Current receivables
Trade receivables
Other receivables
Amounts owed by Group undertakings
Prepayments and accrued income
Group
2020
£m
32.3
32.5
–
5.1
69.9
Group
2019
£m
61.0
59.0
–
7.9
127.9
Company
2020
£m
Company
2019
£m
–
–
432.8
–
432.8
–
–
546.5
–
546.5
The Group assesses the ageing of trade receivables in accordance with the policy on page 41. None of the trade receivables are
past their due dates (2019 - nil), and are therefore all rated as low risk.
Other receivables includes £14.5 million (2019 – £28.0 million) in relation to VAT recoverable.
The Group has assessed expected credit losses and the loss allowance for trade and other receivables as immaterial.
The Company has assessed expected credit losses and the loss allowance for amounts owed by Group undertakings
as immaterial.
16. Trade and other payables
Non-current liabilities
Land payables
Lease liabilities
A
c
c
o
u
n
t
s
Group
2020
£m
117.1
14.1
131.2
Group
2019
£m
85.3
11.9
97.2
Company
2020
£m
Company
2019
£m
–
–
–
–
–
–
Land payables of £82.0 million (2019 – £57.7 million) are secured on the land to which they relate.
The carrying value of the land used for security is £80.6 million (2019 – £55.5 million).
Current liabilities
Trade payables
Land payables
Social security and other taxes
Other payables
Lease liabilities
Accrued expenses
Payments on account
Group
2020
£m
273.0
226.5
5.0
12.1
3.0
92.4
222.0
834.0
Group
2019
£m
328.6
212.6
5.1
6.9
3.0
136.8
110.0
803.0
Company
2020
£m
Company
2019
£m
–
–
–
0.3
–
–
–
0.3
–
–
–
0.3
–
–
–
0.3
Land payables of £165.6 million (2019 – £120.5 million) are secured on the land to which they relate.
The carrying value of the land used for security is £162.1 million (2019 – £116.8 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 2019 have been recognised as revenue in the current year. The approximate
transaction value allocated to the performance obligations that are unsatisfied at 31 July 2020 is £1,760.2 million (2019 –
£1,223.9 million), the majority of which is expected to be recognised as revenue during the next financial year.
Annual Report and Accounts 2020 123
Bellway p.l.c.
Notes to the Accounts continued
17. Provisions
Group
At 1 August 2019
Transfer from accrued expenses
Additions (note 3)
Utilised
At 31 July 2020
Legacy
building safety
improvements
£m
–
41.0
46.8
(17.5)
70.3
The Group has established a provision for the cost of performing fire remedial works on a small number of legacy developments.
These estimates may change over time as further information is assessed, building works progress and the interpretation of fire
safety regulations further evolve. The majority of the provision is expected to be utilised within three years, however, the timing is
uncertain so the provision has not been discounted.
This is a highly complex area with judgements and estimates in respect of the cost of rectification works and the extent of those
properties within the scope of Bellway’s legacy building safety improvement provision could be extended should the latest
interpretation of government guidance further evolve (note 23).
The Company has no provisions.
18. 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 2020
At 31 July 2019
Balance
at 31 July
£m
343.6
297.9
Total
contracted
cash payment
£m
350.0
305.2
Within 1
year or on
demand
£m
228.3
214.6
1–2 years
2–5 years
More than
5 years
£m
98.4
51.9
£m
23.3
31.0
£m
–
7.7
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)
Bank loans – floating rates
Lease liabilities
At 31 July 2020
Trade and other payables
(excluding lease liabilities)
Lease liabilities
At 31 July 2019
Balance
at 31 July
£m
Total
contracted
cash payment
£m
Within 1
year or on
demand
£m
285.1
50.0
17.1
352.2
340.6
14.9
355.5
285.1
50.1
19.3
354.5
340.6
18.2
358.8
285.1
50.1
3.4
338.6
340.6
3.3
343.9
1–2 years
2–5 years
More than
5 years
£m
–
–
3.1
3.1
–
3.2
3.2
£m
–
–
6.1
6.1
–
5.7
5.7
£m
–
–
6.7
6.7
–
6.0
6.0
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 £495.0 million (2019 – £575.0 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 2020 and 31 July 2019 for both the Group and the
Company are shown in note 22.
At 31 July 2020 the average interest rate earned on the temporary closing cash balance, excluding joint ventures, was 0.06%
(2019 – 0.61%).
124
Bellway p.l.c.
Annual Report and Accounts 2020
18. Financial instruments continued
Fair values
The carrying values of financial assets and liabilities reasonably approximate their fair values.
Financial assets and liabilities by category
Loans and receivables
Cash and cash equivalents
Financial liabilities at amortised cost
Reconciliation of liabilities arising from financing activities
Group
Bank borrowings
Lease liabilities
At 1 August
2019
£m
–
14.9
14.9
Net cash
flows
£m
50.0
(3.7)
46.3
Group
2020
£m
120.3
51.4
(695.8)
(524.1)
New
leases
£m
–
5.5
5.5
Group
2019
£m
165.6
201.2
(648.3)
(281.5)
Company
2020
£m
432.8
52.7
(0.3)
485.2
Disposals
Interest
£m
–
(0.1)
(0.1)
£m
–
0.5
0.5
Company
2019
£m
546.5
52.8
(0.3)
599.0
At 31 July
2020
£m
50.0
17.1
67.1
There were no liabilities arising from financing activities within the Company.
Bank facilities
The Group has bank facilities of £545.0 million (2019 – £575.0 million) which expire during the course of the following
financial years:
A
c
c
o
u
n
t
s
By 31 July 2020
By 31 July 2021
By 31 July 2022
By 31 July 2023
By 31 July 2024
Group
2020
£m
–
175.0
125.0
50.0
195.0
545.0
Group
2019
£m
155.0
175.0
–
50.0
195.0
575.0
Company
2020
£m
Company
2019
£m
–
–
–
–
–
–
–
–
–
–
–
–
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
2020
£m
Group
2019
£m
Company
2020
£m
Company
2019
£000
2,994.0
2,921.2
–
–
2,994.0
2,921.2
523.0
–
523.0
640.4
–
640.4
Risks
Details of the risks relating to financial instruments are set out in the Risk Management section on page 41.
19. 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
2020
Number
000
123,168
178
123,346
2020
£m
15.3
0.1
15.4
2019
Number
000
122,980
188
123,168
2019
£m
15.3
–
15.3
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.
Annual Report and Accounts 2020 125
Bellway p.l.c.
Notes to the Accounts continued
20. 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 25. These are held within retained earnings. During the period no shares
were purchased by the Trust (2019 – 20,000 shares) and the Trust transferred 20,820 (2019 – 20,911) shares to employees and
directors. The number of shares held within the Trust and on which dividends have been waived, at 31 July 2020 was 43,809
(2019 – 64,629). These shares are held within the financial statements at a cost of £1.0 million (2019 – £1.3 million). The market
value of these shares at 31 July 2020 was £1.1 million (2019 – £1.9 million).
Capital redemption reserve
On 7 April 2014 the Company redeemed 20,000,000 £1 preference shares, being all of the preference shares in issue. An amount
of £20 million, equivalent to the nominal value of the shares redeemed, was transferred to a capital redemption reserve on the
same date.
21. Reconciliation of net cash flow to net cash
Group
(Decrease)/increase in net cash and cash equivalents
Increase in bank borrowings
(Decrease)/increase in net cash from cash flows
Net cash at 1 August
Net cash at 31 July
Company
Decrease in net cash and cash equivalents
Decrease in net cash from cash flows
Net cash at 1 August
Net cash at 31 July
22. Analysis of net cash
Group
Cash and cash equivalents
Bank loans
Net cash
Company
Cash and cash equivalents
Net cash
2020
£m
(149.8)
(50.0)
(199.8)
201.2
1.4
2020
£m
(0.1)
(0.1)
52.8
52.7
Cash
flows
£m
(149.8)
(50.0)
(199.8)
Cash
flows
£m
(0.1)
(0.1)
2019
£m
102.2
–
102.2
99.0
201.2
2019
£m
–
–
52.8
52.8
At 31 July
2020
£m
51.4
(50.0)
1.4
At 31 July
2020
£m
52.7
52.7
At 1 August
2019
£m
201.2
–
201.2
At 1 August
2019
£m
52.8
52.8
23. 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 2020 there were bank overdrafts of £nil (2019 – £nil)
and loans of £50.0m (2019 – £nil). The Company has guaranteed the overdrafts of joint arrangements up to a maximum of
£0.3 million (2019 – £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.
Legacy building safety improvements
The Grenfell tragedy understandably increased the focus on fire safety across the industry and more specifically on apartment
blocks, with subsequent Government guidance setting out detailed processes to ensure adequate fire protection measures and
limit combustibility in external wall systems on buildings.
As previously reported, Bellway has identified a number of developments, which obtained building regulation approval
at the time of construction, where the building materials used may not fully comply with this most recent Government
guidance. Notwithstanding the complexities in assessing legal liability, as a responsible developer, we have undertaken further
assessments of our portfolio of legacy apartment schemes to determine whether any safety improvements are required in order
to reflect the current guidance. As a result of this evaluation, Bellway has made an additional provision of £46.8 million in order
to help building owners remediate affected properties, resulting in total outstanding remediation costs of £70.3 million (note 17).
126
Bellway p.l.c.
Annual Report and Accounts 2020
23. Contingent liabilities continued
This is a highly complex area with judgements and estimates in respect of the cost of rectification works and the extent of those
properties within the scope of Bellway’s legacy building safety improvement provision could be extended should the latest
interpretation of government guidance further evolve. The Group is also pursuing recoveries from third parties, but as there is
no certainty with regards to their collectability, an asset has not been recognised on the balance sheet.
24. Commitments
Capital commitments
Group
Contracted not provided
Authorised not contracted
2020
£m
1.4
–
2019
£m
6.4
–
Company
The commitments of the Company were £nil (2019 – £nil).
25. Employee benefits
(a) Retirement benefit assets
The Group sponsors the Bellway p.l.c. 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 p.l.c. 2008 Group Self
Invested Personal Pension Plan (‘GSIPP’) which is a defined contribution contract-based arrangement.
A
c
c
o
u
n
t
s
Contributions of £6.2 million (2019 – £6.0 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 2020.
With regard to the Scheme, regular contributions made by the employer over the financial year were £nil (2019 – £nil). The employer paid
no special contributions (2019 – £nil) and reimbursed the pension fund £0.3 million (2019 – £0.4 million) for expenses incurred by the fund.
The Group is expected to make no regular contributions during the year ending 31 July 2021.
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.
Annual Report and Accounts 2020 127
Bellway p.l.c.
Notes to the Accounts continued
25. Employee benefits continued
Movements in net defined benefit assets
Balance at 1 August
Included in the income statement
Interest (expense)/income
Past service costs
Included in other comprehensive
(expense)/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
2020
£m
(62.3)
(1.3)
–
(1.3)
(5.4)
–
(0.2)
–
(5.6)
–
2.6
2.6
2019
£m
(52.7)
(1.4)
(0.2)
(1.6)
(4.1)
(7.1)
(0.1)
–
(11.3)
–
3.3
3.3
2020
£m
65.1
1.3
–
1.3
–
–
–
3.8
3.8
0.3
(2.6)
(2.3)
67.9
2019
£m
54.0
1.4
–
1.4
–
7.1
–
5.5
12.6
0.4
(3.3)
(2.9)
65.1
2020
£m
2.8
–
–
–
(5.4)
–
(0.2)
3.8
(1.8)
0.3
–
0.3
1.3
2019
£m
1.3
–
(0.2)
(0.2)
(4.1)
–
(0.1)
5.5
1.3
0.4
–
0.4
2.8
Balance at 31 July
(66.6)
(62.3)
The weighted average duration of the defined benefit obligation at the end of the reporting period is 18 years (2019 – 18 years).
During the prior year assets and liabilities of £7.1 million relating to insurance policies annuities held by the Scheme on behalf of
the members were 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
2020
£m
28.6
2.8
4.9
23.6
8.0
–
67.9
2019
£m
29.4
2.8
5.0
20.6
7.1
0.2
65.1
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
2020
% per annum
2019
% per annum
1.50
3.40
2.80
2.35
2.10
2.80
3.10
2.30
Allowance for commutation of pension for cash at retirement
50% of maximum 50% of maximum
128
Bellway p.l.c.
Annual Report and Accounts 2020
25. Employee benefits continued
The mortality assumptions adopted at 31 July 2020 are based on the S3PxA tables and allow for future improvement in mortality.
The tables used imply the following life expectancies at age 65:
Male retiring in 2020
Female retiring in 2020
Male retiring in 2040
Female retiring in 2040
22.9 years
24.6 years
24.2 years
26.1 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 (%)
+0.10% p.a.
+0.10% p.a.
+0.10% p.a.
Decrease by 1.7
Increase by 0.1
Increase by 1.4
+1 year life expectancy
Increase by 3.8
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’), and deferred bonus plans (‘DBP’), an
employee share option scheme and Savings Related Share Option Schemes (‘SRSOS’), all of which are detailed below.
A
c
c
o
u
n
t
s
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 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 2020 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 is detailed under the long-term incentive scheme section on
pages 77 to 79 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 2020.
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
2020
Number of options
2019
Number of options
272,289
103,676
(60,565)
(45,710)
269,690
256,970
121,129
(10,339)
(95,471)
272,289
4,016
1,845
The options outstanding at 31 July 2020 have a weighted average contractual life of 1.3 years (2019 – 1.3 years).
The weighted average share price at the date of exercise for share options exercised during the year was 3,316.5p (2019 – 2,904.5p).
Annual Report and Accounts 2020 129
Bellway p.l.c.
Notes to the Accounts continued
25. 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
2020
Number of options
2019
Number of options
464,841
195,607
(68,972)
(153,116)
438,360
466,441
203,168
(91,766)
(113,002)
464,841
2,626
721
The options outstanding at 31 July 2020 have an exercise price in the range of 1,378.0p to 2,934.4p (2019 – 1,378.0p to 2,934.4p)
and have a weighted average contractual life of 2.4 years (2019 – 2.2 years). The weighted average share price at the date of
exercise for share options exercised during the year was 3,838.9p (2019 – 2,919.6p).
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 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:
2020
2019
October
2019
December
2019
December
2019
December
2019
December
2019
October
2018
November
2018
November
2018
December
2018
December
2018
Scheme
description
LTIP
LTIP
DBP
3-Year
SRSOS
5-Year
SRSOS
LTIP
LTIP
DBP
3 Year
SRSOS
5 Year
SRSOS
Grant date
16-Oct-19 11-Dec-19 11-Dec-19 03-Dec-19 03-Dec-19 22-Oct-18 22-Nov-18 22-Nov-18 03-Dec-18 03-Dec-18
0.0%
0.0%
0.0%
0.6%
0.6%
0.0%
0.0%
0.0%
0.8%
0.9%
–
–
– 2,528.0p 2,528.0p
–
–
–
2,414.4p
2,414.4p
3,370.0p
3,401.0p
3,401.0p
3,315.0p
3,315.0p
2,763.0p
2,877.0p
2,877.0p
2,561.0p
2,561.0p
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
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 16-Oct-22 11-Dec-22 11-Dec-22 01-Feb-23 01-Feb-25 22-Oct-21 22-Nov-21 22-Nov-21 01-Feb-22 01-Feb-24
Expected
volatility
Fair value
of option
25%
25%
25%
25%
30%
30%
30%
30%
30%
30%
1,656.5p 1,486.5p 2,700.0p
663.0p
729.0p
1,264.0p
1,392.5p
2,621.0p
407.0p
430.0p
The expected volatility for all models was determined by considering the volatility levels historically for the Group. Volatility levels
for more recent years were considered to have more relevance than earlier years for the period reviewed.
The Group recognised total expenses of £2.1 million (2019 – £1.7 million) in relation to equity-settled share-based payment transactions.
130
Bellway p.l.c.
Annual Report and Accounts 2020
26. 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 5. Detailed disclosure
of individual remuneration of Board members is included in the Remuneration Report on pages 72 to 92.
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
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
2020
£m
31.6
(4.5)
62.8
2019
£m
28.2
(4.5)
50.9
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
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
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
2020
£m
10.5
2019
£m
183.9
(124.2)
(179.4)
432.8
37.8
546.5
41.4
A
c
c
o
u
n
t
s
The Company has suffered no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2019 – £nil),
but impaired £1.1 million of amounts owed from Group undertakings on winding up several dormant Group entities.
Bellway p.l.c.
Annual Report and Accounts 2020
131
Notes to the Accounts continued
27. Group undertakings
The directors set out below information relating to the Group undertakings as at 31 July 2020. All of these companies are
registered in England and Wales. 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 Homes Limited
Bellway Housing Trust Limited
Bellway Properties Limited
Subsidiaries – dormant^
Ashberry Homes Limited
Bellway (Builders) Limited
Bellway City Solutions Limited
Bellway Financial Services Limited
Bellway Homes (Anglia) Limited
Bellway Homes (Hertfordshire) Limited
Bellway Homes (North Solihull) Limited
Bellway Homes (North Solihull G P Limited)
Bellway London Limited
Bellway Marine Limited
Bellway (Services) Limited
Litrose Investments Limited
Heron Electrical Contractors Limitedˆˆˆˆ
Homes2Let Limited
J. T. B. (Chapel Farm) Estates Limited
J. T. B. Estates Limited
John T. Bell & Sons (1976) Limited
Nixons Kitchens Limited
Seaton GR SPV 11 Limited
Seaton GR SPV 12 Limited
Seaton GR SPV 13 Limited
Seaton GR SPV 14 Limited
Bellway Trustee Company Limited
Seaton Fourteen Limitedˆˆˆˆ
Bellway Urban Renewals (Contracts) Limitedˆˆˆ
Bellway Urban Renewals Limitedˆˆˆ
Bulldog Premium Growth I Limited
D.F.W. Golding (Southern) Limitedˆˆˆˆ
D.F.W. Golding Limited
George Blackett Limited
Joint arrangements
Cramlington Developments Limited (50% owned,
year end of 30 June)^^/1
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)^^
Seaton Ten Limitedˆˆˆˆ
Seaton Thirteen Limited
Seaton Twelve Limited
Telvec Investments Limitedˆˆˆ
Terraces Limited
Tyneside Land & Property Company Limited
Other entities
HBF Insurance PCC Limited3
MI New Home Insurance PCC Limited3
Notes:
^
Dormant.
^^
These shares are held indirectly.
^^^ Dissolved on 29 September 2020.
^^^^ Dissolved on 6 October 2020.
1
2
3
Registered address is Persimmon House, Fulford, York, YO19 4FE.
Registered address is Council House, Manor Square, Solihull, West Midlands, B91 3QB.
Registered address is Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 4EY.
132
Bellway p.l.c.
Annual Report and Accounts 2020
Five Year Record
Income statement
Revenue
Operating profit
Net finance expenses
Share of results of joint ventures
Profit before taxation
Income tax expense
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
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)
2,225.4
321.7*
(13.4)
1.0
309.3*
(57.6)*
Profit for the year (all attributable to equity holders
of the parent)
385.6*
454.1
519.9
538.6
251.7*
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(~)
33.3
2,687.5
48.0
3,099.3
59.0
3,485.5
83.2
99.3
3,806.7
3,984.3
(96.2)
(757.6)
(118.4)
(837.6)
(84.9)
(902.5)
(99.4)
(869.3)
(133.8)
(955.8)
A
c
c
o
u
n
t
s
1,867.0
2,191.3
2,557.1
2,921.2
2,994.0
8,721
9,644
10,307
£252.8k
£260.4k
25.7%ˆ
25.7%ˆ
22.0%
22.0%
328.7p
108.0p
28.2%
28.2%
–
25.9%ˆ
25.9%ˆ
22.3%
22.3%
370.6p
122.0p
27.6%
27.6%
–
£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
7,522
£293.1k
24.6%
24.6%
21.0%
21.0%
437.8p
150.4p
24.7%
24.7%
–
19.0%
15.7%
14.5%
11.2%
156.6p
50.0p
10.8%
8.3%
–
2,372p
26,421
2,427p
28,289
Net asset value per ordinary share(~)
Land portfolio – plots with implementable DPP
1,522p
24,879
1,785p
25,655
Weighted average number of ordinary shares
122,558,261
122,511,626
122,779,199
123,012,723
123,205,211
Number of ordinary shares in issue at end of year
122,685,986
122,797,958
122,980,266
123,167,828 123,345,834
Notes:
~ APM
*
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’.
Annual Report and Accounts 2020 133
Bellway p.l.c.
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
2020
£m
2,216.2
1,496.1
2019
£m
2,004.4
1,298.2
Increase in capital invested in land and work in
progress in the year
Land creditors
(343.6)
(297.9)
Increase in capital invested in land, net of land
creditors, and work in progress in the year
2019
£m
2,004.4
1,298.2
2018
£m
2,011.9
1,115.1
(297.9)
(365.4)
Mvt
£m
211.8
197.9
409.7
(45.7)
364.0
Mvt
£m
(7.5)
183.1
175.6
67.5
243.1
• 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 19). 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.
• Pre-exceptional return on capital employed (‘RoCE’) – This is calculated as pre-exceptional 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.
2020
Capital
employed
2020
Land
creditors
£m
297.9
274.9
343.6
305.5
£m
321.7
2,921.2
3.038.9
2,994.0
2,984.7
10.8%
2020
Capital
employed
including land
creditors
£m
321.7
3,219.1
3,313.8
3,337.6
3,290.2
2019
Capital
employed
2019
Land
creditors
£m
674.9
2,557.1
2,720.4
2,921.2
2,732.9
£m
365.4
294.5
297.9
319.3
9.8%
24.7%
2019
Capital
employed
including land
creditors
£m
674.9
2,922.5
3,014.9
3,219.1
3,052.2
22.1%
Pre-exceptional operating profit
Capital employed/land creditors:
Opening
Half year
Closing
Average
Return on capital employed
134
Bellway p.l.c.
Annual Report and Accounts 2020
• Return on capital employed (‘RoCE’) – This is calculated as operating profit divided by the average capital employed.
Average capital employed is calculated based on opening, half year and closing capital employed. The calculation is shown
in the table below. The directors consider this to be an important indicator of whether the Group is achieving a sufficient
return on its investments.
Operating profit
Capital employed/land creditors:
Opening
Half year
Closing
Average
Return on capital employed
2020
Capital
employed
2020
Land
creditors
£m
297.9
274.9
343.6
305.5
£m
249.1
2,921.2
3,038.9
2,994.0
2,984.7
8.3%
2020
Capital
employed
including land
creditors
£m
249.1
3,219.1
3,313.8
3.337.6
3,290.2
2019
Capital
employed
2019
Land
creditors
£m
674.9
2,557.1
2,720.4
2,921.2
2,732.9
£m
365.4
294.5
297.9
319.3
7.6%
24.7%
2019
Capital
employed
including land
creditors
£m
674.9
2,922.5
3,014.9
3,219.1
3,052.2
22.1%
• 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
2020
£m
192.9
2019
£m
538.6
2,921.2
3,038.9
2,994.0
2,984.7
2,557.1
2,693.8
2,921.2
2,724.0
6.5%
19.8%
O
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
• Total growth in value per ordinary share – The directors use this as a proxy for the increase in shareholder value since 31 July 2017.
Net asset value per ordinary share:
At 31 July 2020
At 31 July 2017
Net asset value growth per ordinary share
Dividend paid per ordinary share:
Year ended 31 July 2020
Year ended 31 July 2019
Year ended 31 July 2018
Cumulative dividends paid per ordinary share
Total growth in value per ordinary share
2,427p
1,785p
100.0p
145.4p
132.5p
642.0p
377.9p
1,019.9p
• Annualised accounting return in NAV and dividends paid since 31 July 2017 – 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 2017 (as
detailed above) divided by the net asset value per ordinary share at 31 July 2017. The directors use this as a proxy for the
increase in shareholder value since 31 July 2017.
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 2017
Total value per ordinary share
Annualised accounting return = (2,804.9/1,785.0)^(1/3) – 1
642.0p
377.9p
1,019.9p
1,785p
2,804.9p
16.3%
Annual Report and Accounts 2020 135
Bellway p.l.c.
Alternative Performance Measures continued
• Net cash – This is the cash and cash equivalents less bank debt. The directors consider this to be a good indicator of the
financing position of the Group. This is reconciled in note 21.
• 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
2020
£m
55.8
2019
£m
419.1
364.0
243.1
419.8
662.2
• 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.
136
Bellway p.l.c.
Annual Report and Accounts 2020
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.
COVID-19
COVID-19 is a disease caused by a new strain of coronavirus. ‘CO’ stands for corona, ‘VI’ for virus, and ‘D’ for disease. Formerly,
this disease was referred to as ‘2019 novel coronavirus’ or ‘2019-nCoV’. COVID-19 has been characterised as a pandemic by the
World Health Organization.
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.
Furlough
A furlough is a temporary leave of employees due to special needs of a company or employer, which may be due to economic
conditions of a specific employer or in society as a whole. A UK-wide furlough was implemented in first half of 2020 due to the
COVID-19 pandemic. Whilst there was a government funded furlough scheme which paid 80% of an employees salary, Bellway
did not apply for this and continued to pay the 75% of the workforce which it furloughed a full basic salary from its own reserves.
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.
O
t
h
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i
n
f
o
r
m
a
t
i
o
n
Annual Report and Accounts 2020 137
Bellway p.l.c.
Glossary continued
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 134 to 136.
138
Bellway p.l.c.
Annual Report and Accounts 2020
Advisers and Group General Counsel & Company Secretary
Group General Counsel & Company Secretary and Registered Office
Simon Scougall
Bellway p.l.c.
Woolsington House
Woolsington
Newcastle Upon Tyne
NE13 8BF
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 +44 (0) 371 664 0300 Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United
Kingdom are charged at the applicable international rate. Lines are open 9.00am – 5.30pm Monday to Friday excluding bank
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
National Westminster Bank plc
Auditor
KPMG LLP
Solicitor
Slaughter and May
O
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r
i
n
f
o
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a
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Annual Report and Accounts 2020 139
Bellway p.l.c.
Shareholder Analysis
Shareholders by size of holding at 31 July 2020
0 – 2,000
2,001 – 10,000
10,001 – 50,000
50,001 and over
Total
Holdings
Number
1,913
416
183
251
Shares
Holding
1,005,576
1,842,839
4,434,381
%
69
15
7
9 116,063,038
2,763
100 123,345,834
Shareholders by type at 31 July 2020
Holdings
Shares
%
1
1
4
94
100
%
2
<1
<1
88
<1
10
<1
Number
1,567
8
1
%
57
<1
<1
Holding
2,553,670
556
1,792
1,083
39 108,293,259
37
39
28
1
1
1
207,884
11,815,816
472,857
2,763
100 123,345,834
100
26 November 2020
27 November 2020
11 December 2020
15 December 2020
8 January 2020
9 February 2021
24 March 2021
Private shareholders
Investment trusts
Pension funds
Nominee companies
Limited companies
Bank and bank nominees
Other institutions
Total
Financial Calendar
Final 2019/20 dividend – ex-dividend date
Final 2019/20 dividend – record date
AGM
DRIP election date for final 2019/20 dividend
Final 2019/19 dividend – payment date
Trading update
Announcement of 2020/21 half year results
140
Bellway p.l.c.
Annual Report and Accounts 2020
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Bellway p.l.c.
Woolsington House, Woolsington
Newcastle upon Tyne, NE13 8BF
Tel: (0191) 217 0717
www.bellwayplc.co.uk