Annual Report and Accounts 2012
Introduction
At Redrow we take pride in delivering quality homes to
our customers and value to our shareholders.
Contents
About Redrow
About Redrow
Redrow plc Annual Report
and Accounts 2012 01
Introduction
Contents
A snapshot of our three years to June 2012
01
01
02
04 Why Redrow
06 Our markets - a year in view
08
Chairman’s statement
12 Our Strategy
14 Our Business Model
16
18 Operating review
24
28
30
Financial review
Risks
Corporate Responsibility review
Key Performance Indicators
Board of Directors
38
Corporate Governance statement
40
44
Audit Committee report
47 Nomination Committee report
48
49 Directors’ Remuneration report
57 Directors’ report
Corporate Responsibility Committee report
Statement of Directors’ responsibilities
Independent Auditors’ report to the members of Redrow plc
Consolidated income statement
Consolidated statement of comprehensive income
Balance sheets
Statement of changes in equity
The statement of cash flows
Accounting policies
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61
62
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65
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71 Notes to the financial statements
96 Notice of AGM
100 Corporate & shareholder information
101 Five year summary
Financial
Highlights
for 2012
Revenue
Profit before tax
Redrow online
£478.9m
£43.0m
+£26.2m
+6%
+£17.7m
+70%
Adjusted earnings per share *
Return on capital employed
10.8p
+80%
* Excludes deferred tax rate change impact
8.7%
+43%
An online, interactive version of
our Report can be found at
redrowplc.co.uk/investorrelations
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02 Redrow plc Annual Report
and Accounts 2012
A snapshot of our three
years to June 2012
About Redrow
About Redrow
Redrow plc Annual Report
and Accounts 2012 03
The New Heritage Collection
launch at Bonhams, London
MARCH 2009
Return of founder
Steve Morgan
SEPTEMBER 2009
Rights issue to re-establish
appropriate capital structure
FEBRUARY 2010
Launch of the New Heritage
Collection of family homes
AUGUST 2010
Establish London division
JUNE 2011
Sale of Scottish business
FEBRUARY 2012
HBF 5 star Customer Service
award won for the second
year running
APRIL/MAY 2012
Further capital raised
following strategic review of
land opportunities
DECEMBER 2010
Acquired first London site
DECEMBER 2011
6 London sites acquired
in total with GDV (Gross
Development Value) of £300m
The Walpole Collection, Ealing, London
Kingston Riverside, Kingston upon Thames
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Land at Woodford,
Manchester
JUNE 2012
70% increase in
profit before tax
04 Redrow plc Annual Report
and Accounts 2012
Why Redrow
We have a
strong balance sheet
to underpin our
performance and allow
us to take advantage
of opportunities
About Redrow
About Redrow
Redrow plc Annual Report
and Accounts 2012 05
We retain an
entrepreneurial
spirit and the
confidence to trust
our instincts
We are
committed to high
standards of Health
and Safety on our
developments
We build quality
homes recognisable
by their distinctive
design and attention
to detail
We are committed
to making our
business successful
now and in the future
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North
Revenue:
£145.5m
22%
Central
Revenue:
£134.3m
13%
South
Revenue:
£199.1m
9%
Bob Sayers, Redrow’s Health & Safety Director receiving the
RoSPA Gold Medal Award
Read
more on
Page 20
Our revenue
(£m)
396.9
Our order book
(£m)
Total current land
(No. of plots)
Total forward land pull through
(No. of plots)
n Owned land n Contracted land
Transfer to current land
452.7
478.9
152
98
114
Jun 2010
Jun 2011
Jun 2012
Jun 2010
Jun 2011
Jun 2012
Total 13,170
11,600
Total 11,190
9,520
114
1,570
Jun 2010
1,670
Jun 2011
Total 12,356
10,704
98
1,652
Jun 2012
1,991
338
Jun 2010
207
Jun 2011
Jun 2012
06 Redrow plc Annual Report
and Accounts 2012
Our markets
- a year
in view
Mortgage approvals
No. (’000)
1,259
Business review
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Redrow plc Annual Report
and Accounts 2012 07
Gross mortgage lending
£(m)
10 year average
House prices
Halifax House Price Index Average Price £(’000)
515
597
575
593
400,000
300,000
200,000
100,000
0
166
165
164
163
162
161
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159
158
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12
Source: Bank of England
Source: Bank of England
Source: Halifax
OCTOBER 2011
The Office for National Statistics published
its 2010-based population projections which
showed the UK population is projected to
rise by 4.9m from an estimated 62.3m by
2020 and to 73.2m over the 25 year period
to mid-2035. Natural increase accounted for
56% of the projected increase.
NOVEMBER 2011
Localism Bill received Royal Assent and
became the Localism Act 2011. It included
wide ranging powers and governance for
local authorities, community engagement,
planning and housing including the abolition
of the regional tier plans, community
infrastructure levy (CIL), neighbourhood
planning and consultation, local plan reform,
community right to build and community
right to buy.
NOVEMBER 2011
Government launched £400m ‘Get Britain
Building Fund’ to get build started on stalled
sites with planning permission.
Government launched ‘Growing Places
Fund’ a £500m investment fund for LEP’s
and Local Authorities to boost local
economies and address local housing
supply.
MARCH 2012
NewBuy was introduced in a bid to
kick-start the housing market, with
participating lenders providing up to 95%
mortgages for buyers who meet their
qualifying criteria. The lenders are protected
by a Mortgage Indemnity Guarantee (MIG)
jointly funded by housebuilders and the
Government.
MARCH 2012
The National Planning Policy Framework
(NPPF) was published revoking and replacing
over a thousand pages of planning policy
with around fifty pages. The NPPF is the
most significant change in planning policy for
over a decade and introduces a presumption
in favour of sustainable development. In
assessing and determining development
proposals local planning authorities should
apply the presumption particularly if a local
authority cannot demonstrate a five year
housing land supply.
Read
more on
Page 21
Read
more on
Page 30
SEPTEMBER 2012
On 5 September 2012 the Government
announced a major housing and planning
package “Housing and Growth” which included
measures to stimulate the economy by
supporting local economic growth and
removing barriers that stop local businesses
creating jobs and getting Britain building again.
Measures included increasing investment in the
private rented sector, affordable housing
guarantees, helping first time buyers,
accelerating large housing schemes, getting
surplus public sector land back into use,
reducing planning delays, reducing the
cumulative burden of red tape, helping home
owners improve their homes and getting empty
offices back into use.
Unemployment (England & Wales)
No. Unemployed (’000)
NHBC Build Starts (England & Wales)
No. (’000)
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2,500
2,400
2,300
2,200
2,100
2,000
30
25
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15
10
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0
Jun 10
Sep 10
Dec 10
Mar 11
Jun 11
Sep 11
Dec 11
Mar 12
Jun 12
Jun 10
Sep 10
Dec 10
Mar 11
Jun 11
Sep 11
Dec 11
Mar 12
Jun 12
Source: Office of National Statistics
Source: Office of National Statistics
08 Redrow plc Annual Report
and Accounts 2012
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Redrow plc Annual Report
and Accounts 2012 09
Chairman’s
statement
The New Heritage Collection is now firmly established as
our primary brand and accounted for 67% of our private
turnover during the year.
The Buckingham
housetype from
the New Heritage
Collection
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Steve Morgan
Chairman
Introduction
The higher operating profit, combined with the lower interest
I am pleased to report that the Group has delivered its third
expense, resulted in a pre-tax profit up 70% to £43m and an
consecutive year of significant growth in profitability despite the
adjusted earnings per share up 80% to 10.8p (2011: 6.0p).
challenging market conditions. During the year we have further
As reported in the placing and open offer document issued in
strengthened the balance sheet through a £78m share placing
April 2012, the Board is not proposing a dividend for the 2012
and open offer, which was concluded in May 2012.
financial year but, subject to economic circumstances, the Board
intends to resume the payment of dividends in the current
Financial Results
financial year.
Group revenue increased 5.8% to £479m for the financial year,
predominantly due to a 15% increase in our average selling price
Market
from £164,800 to £189,900. The average selling price of private
The housing market has been stable throughout the last financial
homes increased by 17% to £204,100. Legal completions for the
year. Sales rate per outlet per week increased from 0.54 in 2011
year were marginally up to 2,458. In the year to 2011 we
to 0.58 in 2012. Excluding London, the value of private
completed 2,424 homes, excluding the Scottish operation which
reservations rose by 4% from £416m to £434m, due a change in
was sold during that year.
mix towards larger family homes.
Gross margins rose from 14.2% to 17.3% due to an increasing
The New Heritage Collection is now firmly established as our
proportion of our sales being generated from sites purchased
primary brand and accounted for 67% of our private turnover
since the downturn, on which more normal margins are being
during the year (2011: 35%). The average selling price of a New
generated, together with improved product mix and stable build
Heritage home is now £215,100, an increase of 7% on the
costs. We also benefited from £12.2m of land and freehold
previous year.
reversion sales at very good margins.
As a result of the increasing gross margins and land sale
year with 82 outlets, up from 74 last year. We are planning a
contribution, operating profit rose 54% to £48m, representing a
further increase to over 90 outlets by the end of the current
The opening of new outlets remains a priority and we ended the
10% margin (2011: 6.9%). This was achieved despite the ongoing
financial year.
overhead investment in our new London Division.
10 Redrow plc Annual Report
and Accounts 2012
Chairman’s
statement
(continued)
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Redrow plc Annual Report
and Accounts 2012 11
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We completed the first two houses in our London Division at
As stated above, the Group’s forward land bank contributed
Current Trading and Outlook
Ealing and commenced construction on our first two major
2,000 plots to current land. Several new opportunities have been
Reservations per outlet in the current year are running
flatted schemes, One Commercial Street in Aldgate and Kingston
secured and the forward land bank now stands at 22,800 plots,
fractionally ahead of last year at 0.55 sales per outlet (2011:
Riverside in Kingston upon Thames. The sales launch of the two
an increase of 650 plots over last year. Of this total, 8,700 plots
0.54). In the year to date we have been selling on an average of
schemes were successfully received both in the UK as well as
have been allocated in adopted or emerging Local Plans.
84 outlets (2011: 73) and as a result we have secured 507
overseas and I am pleased to report that at the end of June we
had over 70 reservations across the two sites with a total value
Mortgages
private reservations in the first 11 weeks, some 16% ahead of
last year.
of £34m.
Balance Sheet
Unfortunately mortgage availability, or should I say, lack of it,
remains the main drag to housing market recovery. The spring
Despite the encouraging start to the year and the recent
saw the introduction of the Government sponsored NewBuy
Government Housing and Growth announcement, the outlook
In May 2012 we further strengthened our balance sheet with the
scheme, a Mortgage Indemnity Guarantee (MIG) which provides
for the industry remains challenging. Supply of mortgages,
successful placing and open offer, which raised a net £78m. This
purchasers of new homes with the ability to secure a 95%
although slightly improved on last year, remains a significant
had the effect of reducing our gearing to just 2% by the year
mortgage. The initiative has been strongly welcomed by the
constraint, as does public confidence due to the country’s fragile
end. Gearing has risen substantially during the current financial
industry; unfortunately, however, the rates being offered by
economic state. Nevertheless, we have an excellent product
year as we continue to invest in the business by increasing the
lenders still do not reflect the lower risk profile of the scheme
range and a strong pipeline of new sites, which gives me every
work in progress in London and taking advantage of appropriate
and as such NewBuy has not yet enjoyed the success it deserves.
confidence that Redrow will continue along its path of improving
land opportunities.
Land and Planning
In more normal times new home sales have fluctuated between
11-15% of total housing transactions; ironically, during the last
performance.
We enjoyed a number of land successes during the year and have
four years, that percentage has increased. The new homes market
secured a total of 4,100 plots, largely on the back of a significant
needs a buoyant second hand market in order to obtain a
2,000 plot contribution from forward land. The land bank at the
meaningful growth and deliver the increasing numbers that the
end of June 2012 equates to 12,350 plots (June 2011: 11,190
Government, and indeed the country, desperately needs. In order
Steve Morgan
Chairman
plots). The average plot cost is £50,000, including central London
for the housing market to make a full recovery there would need
18 September 2012
and £44,000, excluding central London. The increase in average
to be a MIG similar to NewBuy available to the second hand
plot cost over the last few years reflects Redrow’s continuing
market.
movement to re-establish ourselves as a premium mid-market
home builder of larger than average, high specification, homes.
People
Since my return to the business just over three years ago we
Despite the increasing land bank the Group still retains several
have initiated the reintroduction of apprentices of all types, a
sites where it is not economic to develop. We strongly welcome,
graduate training programme and numerous management
therefore, the Government’s housing initiative announced two
trainee programmes. This represents a large investment in our
weeks ago which relaxes the requirement for affordable housing
people and just over 11% of our total workforce are now
on those sites where viability is in question. This, together with
trainees. I am delighted that Redrow is once again at the
other initiatives, particularly the extension of FirstBuy, will, I
forefront of our industry for training its people.
believe, have a positive effect on the delivery of new homes.
Planning remains a major obstacle to development despite the
Redrow has continued to make excellent progress during the last
Government’s best efforts with the publication of the National
year, primarily due to the ongoing efforts of our people. I would
Planning Policy Framework. The Government is determined that
like to thank them for their hard work during the year and their
planning ceases to be a major obstacle to growth and we
continued support in the successful delivery of our strategic
strongly welcome the recent initiatives.
goals.
12 Redrow plc Annual Report
and Accounts 2012
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Redrow plc Annual Report
and Accounts 2012 13
Our strategy
Our aim is to be the premium brand in the sector, by
delivering a high quality product to our customers.
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Goal
Deliver long term
sustainable value
Financial
Objectives
Improve ROCE
Focus on Revenue Growth
Key Strategic
Priorities
Increase Margin
Raise ASP
Maintain Quality Land Bank
Read
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Page
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Growth
Drivers
Expansion into London
Improve Share of
Housing Market
Core
Principles
Quality Product
Excellent Customer Service
Training for the Future
Sustainability
High standards in
Health and Safety
The Ruthin housetype from the
New Heritage Collection
14 Redrow plc Annual Report
and Accounts 2012
Our
Business
Model
Business review
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Redrow plc Annual Report
and Accounts 2012 15
Source the
right land at the
right price
+
Add value
during the
planning
process
+
Strategic
supplier &
subcontractor
relationships
Committed
and skilled
Redrow people
+
+
Quality
of build
+
Targeted &
measured
marketing
+
Knowledgeable
customer
focused
sales teams
+
Satisfied
customers
=
QUALITY
PRIDE
VALUE
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Land
Land is a key raw material for
our business; the quality not
just the quantity of our land
bank is fundamental to
delivering sustainable and
profitable growth.
Our land purchase strategy
encompasses three elements:
n Identification of and
investment in forward/
strategic land where we can
use our master planning
skills to unlock value
n Investment in medium
term land where we can
add value by resolving
legal, planning and
technical issues
n Purchase of consented
land with short term
return opportunities
KPIs
n No. of plots in forward
land bank
n No. of plots in current land
bank
Other performance
indicators
n No. of years supply in
current land bank
Planning & Design
Redrow has an experienced
planning team interpreting,
monitoring and anticipating
planning policy.
This team complements the
work of the land, technical
and design teams within the
Divisional businesses to
optimise opportunities and
returns.
Redrow also has experienced
centrally based technical,
design and sustainability
functions responsible for
ongoing product
development and design.
Relationships
The importance of working
closely with suppliers and
subcontractors and
maintaining a strong supply
chain are principles that have
long been established within
Redrow.
Redrow has an experienced
centrally based commercial
and sustainability functions
responsible for sourcing key
raw materials and new
improved products.
People
Redrow depends on the
commitment, skill and
enthusiasm of its employees
to deliver our business
objectives.
Redrow has an in-house
training centre which delivers
bespoke training courses
including management
development courses.
Redrow is proud of its
apprentice, graduate training
and industrial placement
programmes reflecting its
investment in the future.
Build
Quality of build is an
important aspect of our
ability to deliver quality
homes to our customers.
Through our quality control
processes, enhanced by the
development of technological
support and the use of
experienced subcontractors
and site management,
Redrow endeavours to deliver
well built homes on
programme in a safe
environment for our
employees and contractors to
work in.
Customers
Redrow understands how
important their home is to
our customers and potential
customers.
Redrow is committed to
delivering a high quality
home and providing a high
standard of customer service
throughout the purchasing
process and beyond.
Outcome
At Redrow, all the individual elements of our business model
combine to make Redrow stronger than the sum of its individual
parts.
This helps us deliver value to our customers, shareholders and
other stakeholders.
To this end, earnings per share* grew by 80% and return on
capital employed by 43% in the year ended 30 June 2012.
Marketing
Our core marketing strategy
is to continue to increase
brand awareness, understand
our customer expectations
and deliver effective
communication.
We use a variety of channels
to deliver marketing
messages. With increased
focus on digital platforms,
monitoring and analytical
tools, we are able to measure
the performance of our
marketing activities. We are
constantly reviewing and
refining them to deliver value
to our customers and the
business.
Sales
Well informed and
approachable sales teams are
important to delivering an
appropriate house purchase
experience for our customers.
Sales staff undergo regular
training to ensure they
remain well informed about
the attributes of our homes,
customer choice options and
finance initiatives such as
NewBuy. Sales conferences
are held annually and are
attended by all sales
personnel.
Sales performance by
development is monitored
weekly as part of our weekly
performance reporting
process.
KPIs
n Forward land pull through
KPIs
n Proportion of timber
products sourced from
category 3 or above (WWF
classification)
KPIs
n No. of training days
delivered
KPIs
n Average reportable items
per NHBC inspection
n Staff turnover rates
n Accident incident rate
KPIs
n No. of active outlets
KPIs
n Customer satisfaction rate
n Private reservation rate per
n Customer
outlet
recommendation rate
KPIs
n ROCE
n EPS
n Net asset value per share
Read
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Page
16 & 17
Other performance
indicators
n No. of planning
permissions granted per
annum
Other performance
indicators
n Purchases under central
contract
Other performance
indicators
n Proportion of apprentices
Other performance
indicators
n RoSPA rating
Other performance
indicators
n No. of visitors per outlet
Other performance
indicators
n Visitor conversion rates
n Proportion of site
n RIDDOR
n No. of visitors to website
n Cancellation rate
managers winning NHBC
awards
n Email open & click -
n Mystery shopper scores
through rates
Other performance
indicators
n HBF Home builder
customer satisfaction
rating
Other performance indicators
n Operating margin
n Operating cash flow
* Excludes deferred tax rate change impact
16 Redrow plc Annual Report
and Accounts 2012
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Redrow plc Annual Report
and Accounts 2012 17
Key Performance Indicators (KPI’s)
Land and planning
How we performed
n We increased our current
land bank to support
future growth
How we measure it
n The number of plots in the
current land bank
n This represents a threefold
increase in the number of
outlets pulled through
n No. of plots pulled through from
forward land bank to current
land bank in year
n This represents a net
increase of 640 plots
n The number of plots in the
forward land bank
2012
12,356 plots
2011
11,190 plots
1,991 plots
207 plots
22,790 plots
22,150 plots
Why this matters
The land bank is
the foundation for
our future business
performance
Outlets
Why this matters
How we performed
How we measure it
Outlets define our
potential to reach
customers
n We increased our outlets
n The average number of
in the year
n The value of our order
book increased by over
33% year on year
developments on which we are
actively selling
n The value of private homes
reserved or exchanged at the
end of the period that are due to
legally complete in the future
2012
73
2011
701
£152m
£114m
n We increased our rate
n Private reservation rate achieved
per week
per outlet per week
0.58
0.54
Return on capital employed (ROCE)
Why this matters
How we performed
How we measure it
We monitor how
effectively we use our
capital base with the
objective of delivering
ROCE in excess of our
comparable cost of capital
n We improved our
n Operating profit as a
performance by 43%
in the year
percentage of the average of
opening and closing capital
employed
2012
8.7%
2011
6.1%
Earnings per share (EPS)
Why this matters
How we performed
How we measure it
Redrow regards
growth in Earnings
per Share as an
important objective
for our shareholders
n We improved our
performance
significantly in the year
n Profit attributable to ordinary
equity shareholders divided by the
weighted average number of
ordinary shares in issue during
the year
n Adjusted prior to deferred tax rate
change
2012
9.7p
10.8p
2011
4.4p
6.0p
Net asset value per share
Why this matters
How we performed
How we measure it
n We increased our net
n Net assets divided by number of
asset value by 5% in the
year
ordinary shares in issue
We monitor how
effective our
operations have
been in generating
shareholder value
Customers
Why this matters
How we performed
How we measure it
n We maintained our high
customer satisfaction
and recommendation
levels in the year
n The percentage of customers
who are satisfied with their
overall purchase experience
including quality of their home
n The percentage of customers
who would recommend Redrow
to a friend
We aim to provide
our customers with
a home they are
proud of and to
deliver improving
levels of customer
service that
enhance our
reputation in the
marketplace
Build
Why this matters
How we performed
How we measure it
n The average number of
reportable items per NHBC
inspection
n Accident incident rate
n There was a 24%
improvement in
reportable item
performance
n The 27% reduction in the
accident rate reflects the
impact of new initiatives
aimed at reducing slip
and trip injuries
We aim to build
our homes well
and safely and
therefore monitor
construction
quality and
accident rates
Employees
2012
£1.52
2011
£1.45*
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2012
94%
97%
2012
0.19
495
2011
93%
96%
2011
0.25
685
Why this matters
How we performed
How we measure it
Redrow looks to be
regarded as an
employer of choice
in the industry and
therefore we
monitor our staff
turnover
n Increase reflects
increased mobility in job
market
n Number of staff leaving as a
proportion of total staff
n We increased our training
n No. of training days
days in the year
2012
10.4%
2011
7.6%
2,302 days
2,267 days
1 Comparator excludes Scotland
* Adjusted for recent share issue
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Redrow plc Annual Report
and Accounts 2012 19
The market recovered at the start of the calendar year
and we had considerably more success opening new
outlets.
Steeple Chase,
Calne, Wiltshire
The Group Accident
Incident rate fell by
27%
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18 Redrow plc Annual Report
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Operating
review
A closing private
order book of
£152m
John Tutte
Group Managing Director
The Average Selling
price of the New Heritage
Collection increased by
7%
Hedera Green,
Royston, Hertfordshire
Branwell Gardens,
Guiseley, Yorkshire
Introduction
The strong financial performance in 2012 is a measure of the
success of the strategic changes implemented across the
business in 2010 and 2011, particularly the introduction of the
New Heritage Collection which has been central to the Group’s
growth in turnover, average selling price and profit. The average
selling price, including social housing, has increased from
£137,400 in 2009 to £189,900 in 2012 with private housing
rising to £204,100 as a result of building larger and higher
specified homes in better locations. The average selling price is
set to increase further, albeit at a slower pace, as we continue to
open new outlets in higher priced areas and completions come
through in the London division.
Build costs remained relatively stable throughout the year with
price pressures on certain materials being offset by economies
elsewhere. Operating expenses increased largely due to
investment in overheads in the London division and to a lesser
extent, elsewhere to meet the growth in outlets.
Sales and Marketing
The first-half of the year was challenging for two reasons, there
was a slower than expected upturn in the autumn sales market
and bringing new outlets on-stream proved to be frustrating. The
volume of reservations was fairly flat compared to the previous
year and the number of outlets remained stubbornly static: in
the first-half we opened five new outlets and closed six. In spite
of this, the value of reservations was comfortably ahead due to
the increase in average selling price.
The second-half saw a change in fortunes. The market recovered
at the start of the calendar year and we had considerably more
success opening new outlets: in the second-half we opened 24
and closed 15.
In the first-half we secured £180m of reservations and averaged
0.50 reservations per outlet per week, by comparison in the
second-half we took £292.0m of reservations and averaged 0.66
per outlet per week. We closed the year with a private order
Private Average Selling Price
(£’000)
New Heritage Collection Private Average Selling Price
(£)
204.1
215,100
174.1
154.8
201,900
180,600
Jun 2010
Jun 2011
Jun 2012
Jun 2010
Jun 2011
Jun 2012
20 Redrow plc Annual Report
and Accounts 2012
Operating
review
(continued)
Business review
Business review
Redrow plc Annual Report
and Accounts 2012 21
book of £152m including £34m of reservations on outlets in the
London division: like-for-like, the value of the order book closed
4% ahead.
There was relatively strong revenue growth across all regions.
The North performed particularly well and grew to represent
30% of the Group’s turnover, slightly ahead of the Central
region: the South remained the largest region representing 42%
of turnover.
The use of Part Exchange continues to increase as we shift more
of the business towards the trade-up market; in 2012 it
accounted for 16% of private sales. We maintain tight
management controls over Part Exchange and held £9.7m of
stock at the year-end (2011: £7.2m). We also continued to use
‘shared equity’ in 2012 particularly through the Government
sponsored HomeBuy and FirstBuy schemes and where we have
partnership arrangements with local authorities. We also
introduced NewBuy, the Government-backed mortgage
indemnity scheme, immediately following its launch in March.
The take-up so far has been disappointing with just 63
customers choosing to use the scheme with many more
discouraged by the high interest rates charged by most of the
participating lenders.
The New Heritage Collection accounted for 67% of private
revenue in 2012 compared to 35% in the previous year, a
proportion that is expected to rise further. The average selling
price of the New Heritage Collection increased by 7% to
£215,100 in 2012.
We continue to fine-tune the New Heritage Collection in
response to customer feedback and opportunities to make build
cost savings without compromising the appeal and quality of the
product. We have also expanded the Collection to ensure we are
able to offer a wider choice of types across all price ranges.
Our new Regent Collection is an attractive higher density
product designed to be plotted more formally, particularly in
urban areas. The Regent Collection has traditional Regency styled
elevations complemented by interiors designed for modern-day
living. We expect to have our first schemes underway in 2013.
Quality with Responsibility
At the heart of our operation is a determination to safely and
responsibly build homes of the highest standard for our
customers. We closely monitor and measure quality, Health and
Safety, our impact on the environment and levels of customer
satisfaction.
Published national house price indices reported prices falling
slightly over the year with some regions fairing worse than
others. Our experience was that prices were generally stable
across much of our operating area. The cancellation rate was
18% and in-line with the previous year.
Our key quality measure in addition to our own inspection
regime, is the number of NHBC ‘Reportable Items’ per inspection:
in 2012 this was 0.19 (2011: 0.25). The number of our Site
Managers winning NHBC Pride in the Job Awards rose to a
record 14.
Digital marketing is now the dominant source of enquiries and
leads into the business. We launched an upgraded website in the
second-half which helped to increase enquiries and leads to our
developments. The new website is more interactive, easier to
navigate and contains significantly more video content with links
to our own internet TV channel, RedrowTV.
Product and Design
Apartments accounted for less than 10% of private sales
turnover in 2012 (2011: 19.7%) as the revenue from houses
increased by 23% to represent over 90% of sales. This trend will
reverse over time as more apartment schemes come on-stream,
particularly in and around London.
Social housing accounted for 13.5% of unit sales and just 7% of
revenue, similar to the previous year: we expect to see levels of
social housing gradually increase as new sites come on-stream.
The average selling price of social housing completions was
£98,700 (2011: £100,000).
By all measures we improved our Health and Safety performance
in what was a busy year for the build teams. Reportable and First
Aid accidents decreased by over 20% of which only eight were
classified as ‘major’, a 27% decrease. The Group Accident
Incident Rate (AIR) also fell by 27% and is below the
construction industry average. The Group was awarded its third
Gold Medal by RoSPA for achieving seven consecutive Gold
Awards. The Gold Medal is widely recognised as the most
prestigious Health and Safety award.
We take seriously our responsibility to minimise the impact of
our business on the environment. We regularly monitor our
carbon footprint and look at ways to ensure any increase in
emissions is at a slower pace than the overall growth in output
of the business. We responsibly procure materials and last year
we maintained our excellent performance in buying our timber
from well managed sources: 99.3% of timber products used on
our sites were classified ‘Licensed Source – Credibly Certified’ by
WWF.
NewBuy
95% Mortgages
Redrow was one of the first home builders to offer NewBuy,
the Government backed initiative. This was launched in
March this year in order to help kick-start the housing
market, with participating lenders providing up to 95%
mortgages for buyers who meet their qualifying criteria.
The lenders are protected by a Mortgage Indemnity
Guarantee (MIG) jointly funded by Redrow and the
Government.
The scheme is aimed to improve liquidity in the market,
particularly helping those buying a home for the first time or
with low levels of equity in their current home. NewBuy is
available on all new Redrow homes in England priced up to
£500,000.
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Redrow Customers Holly and Shaun Murdoch moved from a
two-bedroom rented flat, into a brand new four-bedroom home on
Redrow’s development in St. Neots, Cambridgeshire with only a 5%
deposit using the NewBuy scheme
We continued to maintain high levels of customer satisfaction
throughout the year. Our own independent telephone surveys
that managed to obtain feedback from over 70% of our
customers, recorded 94% (2011: 93%) were very satisfied or
satisfied with their new home and 97% (2011: 96%) would
recommend us to a friend. Our leading customer satisfaction
position was further endorsed by once again receiving a five star
award in the most recent HBF National New Home Customer
Satisfaction Survey. Amongst many other awards received in the
year, we were voted ‘Best Large Housebuilder’ by What House?
Land and Planning
We added 3,642 plots to the owned land bank in the year which
after deducting legal completions, increased the owned land
bank to 10,704 (2011: 9,520). At the end of the year we held
1,652 plots under contract, a similar level to the previous year
(2011: 1,670). The Current land bank remains weighted to the
south representing 43% of plots owned or held under contract.
We had a very successful year in pulling-through plots from the
Forward into the Current land bank. We transferred 1,991 plots
(2011: 207) to the Current land bank across nine sites. We also
added over 2,600 plots through options or freehold purchases
after taking into account a strategic review that identified a
number of sites where the prospects for delivery had
deteriorated. At the end of the year we held c.22,800 plots in the
Forward land bank that are either allocated or have a realistic
prospect of coming forward. Although pulling through Forward
land remains a lengthy and unpredictable process, we expect to
have another successful year in 2013.
The National Planning Policy Framework (NPPF) was introduced
earlier in the year and sets out to deliver a more efficient locally
based planning system. Central to its success will be the extent
to which local authorities embrace the policy and timely produce
Local Development Frameworks that recognise the underlying
level of demand for housing in their areas. We are optimistic the
NPPF will lead to a better planning system; meanwhile, there are
grey areas over interpretation that will only be resolved through
the appeals process. We have already had appeals successfully
upheld and have a number of decisions pending.
22 Redrow plc Annual Report
and Accounts 2012
Operating
review
(continued)
London
The London division achieved its first completions in 2012 at
Ealing and commenced construction at One Commercial Street,
Aldgate and at Kingston Riverside. It also gained planning
permission to convert Connaught Place, W2 into a development
of luxury apartments.
One Commercial Street is a mixed-use high rise scheme
consisting of retail and office space and residential apartments.
The residential element was successfully launched overseas in
the Far East earlier in the year and was 40% sold at the year-end.
Completions are expected to come through in 2014.
Kingston Riverside was successfully launched in the UK in the
late spring and is selling steadily to the local market. Kingston
Heights, a further phase that targets a different market segment
is expected to be launched in 2013.
The London division remains on-track to contribute to Group
profits in financial year 2014 with the first legal completions
expected from Kingston in the first-half of that year.
Harrow
Harrow performed strongly in the year making good progress on
planning, bringing forward sites for development and acquiring
new land.
Planning permission for c.350 plots was achieved at appeal on
the option it holds at Horsforth, Leeds and it has a number of
other sites pending decisions. It also completed the remediation
of the South Cerney site in the Cotswolds which has now been
transferred to the Homes’ division. Physical remediation works
are complete at Hauxton near Cambridge and currently the
subject of on-going monitoring. The site is held under an Option
which is expected to be exercised in 2013.
The business has acquired a further four sites with capacity for
c.1,000 plots. Most notable of the acquisitions is the Woodford
Aerodrome near Stockport where consent is being sought to
create a new Garden Village of 550 homes on the land we own
together with supporting community infrastructure.
Harrow oversees the Group’s modest legacy of commercial
interests and managed to achieve a small number of disposals
during the year.
Business review
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Redrow plc Annual Report
and Accounts 2012 23
Apprentices Case Study
One Commercial Street, London
Redrow has 69 apprentices at June 2012, 21% of whom
are studying towards an advanced level within their
respective trades. These consist of 25 prospective
bricklayers, carpenters, plumbers and electricians who
joined the programme during the year to June 2012 and
we plan a further intake of 20 in September 2012.
Many of our successful apprentices are offered
permanent positions with our subcontractors on
completion of their apprenticeships. A number are
accepted onto our trainee assistant site manager
programme, which produced six assistant site managers
this year.
Redrow made a dramatic entry into the prime London
residential market with the launch of its One Commercial
Street development in Aldgate, one of London’s up and
coming hotspots.
The site was acquired in January 2012 and is located on the
edge of the City of London, in Zone 1 and is a distinctive
landmark 21 storey building. The ground to 6th floor
contains over 100,000 sq. ft. of Retail and Commercial space.
Floors 7 to 11 are occupied by 70 Affordable homes and
floors 12 to 21 will be 137 Private properties. The private
dwellings are a collection of studios, 1, 2 and 3 bedroom
luxury apartments and penthouses. In addition the site
benefits from secure basement car parking.
Redrow acquired the site in a partially completed state. The
concrete frame of the building had been constructed by the
previous owners to the 11th floor with Redrow
recommencing work on site in March 2012. Completion of
the building is anticipated in the summer of 2014.
Following a successful launch in the Far East in February this
year, over 40% of the private properties were exchanged for
sale. One Commercial Street was then launched in the UK at
a spectacular event at The Gherkin. A contract with Network
Stadium Housing Association Ltd for the Affordable
apartments was exchanged in March 2012.
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One Commercial Street, Aldgate
People
We continue to create new jobs to meet the planned growth of
the business. Our directly employed workforce has increased to
952 (2011: 888), including five Graduate Trainees and 69
Apprentices at June 2012 as we expand opportunities for young
people to join our industry. We plan a further intake of five
Graduate Trainees and 20 Apprentices in September 2012.
have a dedicated training team based at our purpose built
facility in the Midlands and completed 2,302 days of training in
the year (2011: 2,267).
Some of this year's new intake of 20 apprentices, bringing the
number recruited in the last 10 years to more than 250
We are committed to having a skilled workforce and developing
our future managers and leaders from within the business. We
John Tutte
Group Managing Director
18 September 2012
Business review
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Redrow plc Annual Report
and Accounts 2012 25
It is pleasing to report that operating margin has
increased by over threefold between 2010 and 2012 as
we continue to make significant strides forward in
returning our operating margin to pre downturn levels.
The Cambridge housetype
at Cawston Grange, Rugby,
West Midlands
Earnings per share*
increased by 80% to
10.8p
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24 Redrow plc Annual Report
and Accounts 2012
Financial
review
The Group generated
turnover of
£478.9m
Barbara Richmond
Group Finance Director
The Return on Capital
Employed for 2012 is 43%
higher than 2011 levels at
8.7%
The Lodge housetype at
Wrea Green, Preston, Lancashire
Bagley Green,
Wellington, Somerset
Profit before tax and earnings per share
The Group generated turnover of £478.9m in the year ended
30 June 2012 (2011: £452.7m). This reflected a 15% increase in
the average selling price of our homes.
Operating Margin
(%)
Revenue (£m)
Residential
Land sales
Commercial
2012
2011
466.7
10.5
1.7
478.9
432.8
18.7
1.2
452.7
The Group delivered an operating profit of £48.0m
(2011: £31.2m), an increase of 54% on prior year levels and
representing a 10% operating margin (2011: 6.9%).
3.2
10
6.9
It is pleasing to report that operating margin has increased over
threefold between 2010 and 2012 as we continue to make
significant strides forward in returning our operating margin to
pre downturn levels.
EPS Growth* and ROCE
per cent
pence
Net financing costs at £5.0m were £0.9m lower than the
previous year reflecting lower bank interest costs as a result of
lower average gearing levels throughout the year.
The Group generated a profit before tax of £43.0m, a 70%
increase on the prior year (2011: £25.3m). Basic earnings per
share were 9.7p (2011: 4.4p). Basic earnings per share excluding
the impact of rate changes on our deferred tax assets were up
80% to 10.8p (2011: 6.0p).
%
10
8
6
4
2
0
15
10
5
0
p
Jun 2010
Jun 2011
Jun 2012
Jun 10
Jun 11
Jun 12
* Excludes deferred tax rate change impact
26 Redrow plc Annual Report
and Accounts 2012
Financial
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Redrow plc Annual Report
and Accounts 2012 27
The Return on Capital Employed for 2012 at 8.7% is 43% higher
than 2011 levels and we continue to focus on improving this key
performance indicator.
Tax
As a consequence of tax losses brought forward, the Group again
paid no corporation tax in the year (2011: £0.5m refund on
earlier overpayment). This situation is expected to continue in
2013.
In May, the Group successfully completed a Firm Placing and
Open Offer for 14,902,867 and 46,289,592 new shares
respectively at 130 pence per new share. This generated £78.0m
of funds net of £1.6m expenses of which £6.1m has been
credited to Share capital and £71.9m to Retained earnings.
The net asset value per share at the end of June 2012 was £1.52,
an increase of 5% on the prior year (2011: £1.45) adjusting for
the recent share issue.
The Group's tax rate for the year was 25.5% (2011: 27.5%)
before taking into account the reduction in the corporation tax
rate to 24% on deferred tax assets (£3.5m (2011: £4.8m)).
A deferred tax asset of £51.8m (2011: £63.8m) was carried at
24% at 30 June 2012, primarily in relation to brought forward
tax losses, for use against future profits. A corporation tax rate of
23% applicable from 1 April 2013 was substantively enacted on
3 July 2012. The carrying value of the deferred tax asset based
on a 23% rate would be £49.6m. The £2.2m difference between
this number and the closing balance will be charged to the
Consolidated Income Statement in the first half of the 2013
financial year.
The normalised rate of tax for the year ending 30 June 2013 is
projected to be 23.75% based on rates which are currently
substantively enacted.
Dividends
No dividends have been proposed in respect of the financial year
ended 30 June 2012 (2011: nil). However, in line with the
statement made in the prospectus for the Firm Placing and Open
Offer, subject to economic circumstances, we intend to resume
dividend payments in the 2013 financial year.
Balance Sheet
Net assets at June 2012 were £561.5m (2011: £458.6m), a 22%
increase as follows:
Our investment in land increased by £138.1m in the year to
£515.9m reflecting a 12% increase in plots owned with
residential planning permission and targeted investment in
strategic land.
Our investment in work in progress continues to be carefully
managed with the number of equivalent units in work in
progress excluding London reducing for the third consecutive
year to 1,048 units (a 15% reduction on June 2011 levels).
Equivalent units of work in progress
(No.)
1,494
1,381
1,231
1,048
Jun 2009
Jun 2010
Jun 2011
Jun 2012
Net assets at 1 July 2011
Net proceeds of Firm Placing and Open Offer
Profit for the period
IAS19 actuarial losses net of tax
Movement in share based payment
£m
458.6
78.0
30.2
(6.0)
0.7
561.5
Trade and other receivables decreased by £16.4m during the year
to £53.2m. The decrease related primarily to the receipt of
£12.3m of deferred consideration from the disposal of our
Scotland business which took place in June 2011.
Capital employed increased by £41.5m to £575.5m mainly due
to increases in land holdings.
Our net realisable value (NRV) provision reduced by £46.8m to
£111.5m in the year due to legal completions and land sales.
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(i) Liquidity
The Group regularly prepares and reviews its cash flow
forecasts which are used to manage liquidity risks in
conjunction with the maintenance of appropriate committed
banking facilities to ensure adequate headroom.
Facilities are kept under regular review and the Group
maintains regular contact with its banks and other financial
institutions. This ensures Redrow remains attuned to new
developments and opportunities and that our facilities
remain aligned to our strategic and operational objectives
and market conditions.
Our current banking syndicate comprises four banks and in
addition to our committed facilities, Redrow also has further
uncommitted bank facilities which are used to assist day to
day cash management.
(ii) Interest rate risk
The Group is exposed to interest rate risk as it borrows
money at floating rates. Redrow uses simple risk
management products, notably sterling denominated
interest rate swaps, as appropriate to manage this risk. Such
products are not used for speculative or trading purposes.
Redrow regularly reviews its hedging requirements.
During the year the Board decided, taking into
account current predicted LIBOR rates and the
pricing of interest rate swaps, to take out £20m
of two year sterling interest rate swaps.
They have a neutral value at 30 June 2012.
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Financial management at Redrow is conducted centrally
using policies approved by the Board.
Barbara Richmond
Group Finance Director
18 September 2012
Profile of provisioned plots
(%)
n Unprovisioned plots n Provisioned plots
100
80
60
40
20
0
Dec 2011
Jun 2012
Jun 2013
Jun 2014
Jun 2015
Land creditors increased by £63.5m to £108.3m in the year as a
result of c.60% of land purchases in the year including some
element of deferred purchase consideration.
Pensions
Redrow closed both the defined benefit and defined contribution
sections of The Redrow Staff Pension Scheme (The Scheme) to
future accrual with effect from 1 March 2012. New pension
benefits from this date are being provided via the Redrow Group
Personal Pension Plan (GPP) which is a type of defined
contribution plan.
As at 30 June 2012, the Group’s financial statements showed a
£2.6m deficit (2011: £5.0m surplus) in respect of the defined
benefits section of The Scheme, as calculated in accordance with
IAS19. The £7.6m movement from last year is due to an increase
in defined benefit obligations resulting from changes in bond
yields.
Cash flow and Net Debt
Net debt decreased by £61.4m to £14.0m during the year, with
gearing at 2% at the year-end (2011: 16%). This reflects the
timing of the receipt of proceeds from the Firm Placing and
Open Offer in May. Gearing has increased since June 2012 and is
expected to rise going forward due to investment in new land to
grow the business.
Financing and Treasury Management
Redrow is a UK based housebuilder and therefore the main focus
of its financial risk management surrounds the management of
liquidity and interest rate risk.
28 Redrow plc Annual Report
and Accounts 2012
Risks
Lending criteria and deposit requirements for mortgages
remain key issues in the current environment.
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Redrow plc Annual Report
and Accounts 2012 29
Risk
Description
How we manage our risks
Change
Risk
Description
How we manage our risks
Change
n Availability of
mortgage
finance
Lending criteria and deposit
requirements for mortgages
remain key issues in the
current environment
n Proactively engage with Government, lenders
and insurers to encourage a return to normal
market conditions in the new and second hand
housing market
n Proactive approach to the management of the
mortgage valuation process
n Participate in the development and introduction
of NewBuy
n Housing market
conditions
The conditions within the UK
housing market are
fundamental to Redrow’s
business performance
n Close monitoring of, and proactive management
response to, lead indicators of the housing
market
n Regional spread of operations diversifies risk to
local markets
n Planning and
regulatory
environment
The ability to respond and
adapt to the changing planning
and regulatory environment is
key to Redrow’s future
business performance
n Close monitoring of planning environment by
experienced management team
n Local knowledge of Divisional planning and
technical teams
n Well prepared, high quality planning submissions
addressing local concerns and demonstrating
good design
n Land procurement
The ability to purchase land
suitable for our products and
the timing of future land
purchases are fundamental to
the Group’s future
performance
n Clearly defined strategy and long term focus on
forward land
n Close monitoring of market conditions by
experienced management team
n Strong and knowledgeable land, planning and
technical teams with good local knowledge
n Appropriateness of
product
The failure to design and build
a desirable product for our
customers at the appropriate
price may undermine Redrow’s
ability to fulfil its business
objectives
n Our product and product mix on sites is kept
under review to ensure it is appropriate for the
market
n Design is an integral element of our business
n We proactively seek to understand customer
requirements and explain the advantages of new
homes
Note: Change arrows reflect movement in underlying risks
‘
‘
‘
‘
‘
n Liquidity and
funding
The Group requires
appropriate facilities for its
short term liquidity and long
term funding needs
n Bank facilities with appropriate covenants and
headroom for a range of market conditions
‘
n Capital structure regularly reviewed
n Regular contact and communication with
shareholders and relationship banks
n Regular preparation of strategic plans
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n Health and
safety/
environment
A significant Health and Safety
or environmental incident may
put people, the environment
and Redrow’s reputation at risk
n Dedicated Health and Safety team operates
across the Group to ensure appropriate
standards are applied
n Regular site inspections and audits
n All staff receive appropriate training through
in-house and external programmes
n Close monitoring of environmental regularity
requirements by experienced management
n Attracting and
retaining staff
The loss of key staff and our
failure to attract high quality
employees may inhibit
Redrow’s ability to achieve its
business objectives
n Structured training programmes
n Remuneration strategy regularly reviewed
n Graduate training programme
n Apprentice training programme
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n Key supplier,
main contractor
or subcontractor
failure
The failure of a key supplier,
main contractor or
subcontractor may disrupt
Redrow’s ability to manage its
production process in an
efficient and cost effective way
n Use of suppliers, main contractors and
subcontractors with strong track record and
reputation
n Close monitoring of supplier, main contractor
and subcontractor quality and performance
through annual assessments
n Monitoring of new product innovation in the
market place
‘
‘
‘
n Fraud/uninsured
losses
A significant fraud or
uninsured loss could damage
the financial performance of
the business
n Systems, policies and procedures designed to
segregate duties and minimise opportunity for
fraud
‘
n Business process reviews
n Regular management reporting and challenge
n Regular review of insurances and insurance strategy
Redrow has a long track record of engagement in policy
development within the housebuilding industry.
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Redrow plc Annual Report
and Accounts 2012 31
Good urban design is at the
heart of a sustainable
community development,
providing identity, creating a
sense of place and promoting
community spirit
92%
of site waste
diverted from landfill
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30 Redrow plc Annual Report
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Corporate
Responsibility
review
99.3%
of timber products
from licensed source,
progressing to certification
or credibly certified
The Factory Youth Zone in North
Manchester were awarded £25,000 for
three years from The Redrow Foundation
to help provide a range of sporting,
recreational and entertainment
opportunities for local young people
8,191
pallets collected
from sites, 195 tonnes
of timber recycled
Acorn Children’s Hospice in the West
Midlands received a donation from
The Redrow Foundation in support of
their ‘Now Is The Time’ appeal
This year has seen an unprecedented level of Government
dialogue with the industry on a range of proposed changes to
key standards, policies and regulations, crucial to the future
delivery of new homes and closely linked to sustainable
performance. Redrow has a long track record of engagement in
policy development within the housebuilding industry and once
again we have been heavily involved in contributing to collective
industry response to no less than 14 consultations as well as
making our own formal submissions and lobbying at all levels.
National Planning Policy Framework
Foremost amongst these is the National Planning Policy
Framework (NPPF), which was published in March. Constituting
the biggest change to England’s planning policy for many years,
at the heart of the document is a presumption in favour of
sustainable development, an expanded definition of
sustainability and acknowledgement of the role to be played by
planning in mitigating and adapting to climate change, making
reference to the five ‘guiding principles’ for sustainable
development set out in the Government’s strategy document
‘Securing the Future – delivering UK sustainable development
strategy’:
n
n
n
n
n
living within the planet’s environmental limits
ensuring a strong, healthy and just society
achieving a sustainable economy
promoting good governance
using sound science responsibly
The ‘Framework’ reinforces the effective re-use of brownfield
land provided that it is not of high environmental value. It
promotes good, energy efficient design and clearly spells out to
all involved the need for proactive engagement to deliver the
vision of sustainability promoted by the policy.
These are values well established in Redrow’s own policy
development and reflected in our in-house expertise and our
products. We look forward to practical and positive engagement
with planning authorities as the new framework is implemented
and await publication of the revised Building For Life standards
which will potentially offer an improved tool with which our
stakeholders can measure the sustainability of our
developments.
Foul and Surface Water Drainage
Views were also sought by English and Welsh Governments on
measures arising from the Flood and Water Management Act
2010 concerning adoption procedures and new national build
standards for foul water sewers and lateral drains, and in England
only, implementation of mandatory Sustainable Drainage
Systems. The consultation highlighted impracticalities and
inconsistencies within the drafting and as a result of the depth
of concern raised by the industry, the Department for
Environment, Food and Rural Affairs (DEFRA) delayed
implementation of new standards in England in order to further
assess the measures proposed.
Irrespective of the issues identified, the Welsh Government
intends to push ahead with implementation of new foul water
construction standards in October 2012. Redrow will of course
engage with the water companies to implement the proposals as
smoothly as possible and try to ensure that consistency is
maintained with English standards and construction of much
needed new homes in Wales is not unnecessarily delayed.
Energy and Zero Carbon
The third major strand of consultation has concerned various
aspects of energy policy associated with the Government’s
stepped programme towards the Zero Carbon Homes target of
2016.
32 Redrow plc Annual Report
and Accounts 2012
Corporate
Responsibility
review
(continued)
Business review
Business review
Redrow plc Annual Report
and Accounts 2012 33
Minor changes were proposed to the Standard Assessment
Procedure (SAP), the UK Government's recommended method
for measuring the energy rating of residential buildings, in
support of the Green Deal, but, urgently required revisions
previously identified by the Zero Carbon Hub were deferred, a
delay potentially compromising the Government’s own
timescale to Zero Carbon.
An extensive consultation was also published on proposals for
the 2013 Building Regulations Part L (Conservation of Fuel and
Power) posing a number of serious challenges for both builders
and manufacturers. Because of the pace of change of regulation
there is currently a lack of robust “in the field” corroborative
data normally associated with technical development of any
product.
We are keen to ensure that the homes we build exceed our
customers’ expectations and together with many within the
industry, Redrow is supporting a call to Government to
thoroughly test the adequacy of the software tools and data
inputs which shape our specifications before setting new
performance targets.
The outcomes from these consultations will be published in due
course and detailed dialogue with the Government on these
important sustainability matters seems set to continue into
2013. Redrow contributed to work co-ordinated by the Home
Builders federation (HBF) highlighting potential improvements
which could be delivered in the accuracy and robustness of
outputs as well as submitting our own consultation response.
Similar ongoing engagement is anticipated this year with the
Welsh Government, which took over responsibility for building
regulations in Wales from the UK Government on 31 December
2011. During the year we raised concerns with senior Assembly
Ministers over the cumulative impact of policy proposals and the
associated effects on scheme viability which have the potential
to seriously challenge the delivery of new homes in Wales.
We will be submitting a response to the Welsh Government
consultation in respect of the first planned change to the
Building Regulations under devolution which involve new carbon
emissions targets announced for Part L (Conservation of fuel and
power). The consultation was launched at the end of July and will
close in October.
Equally as important as our involvement in shaping future policy
is our commitment to progressive delivery on all aspects of
corporate responsibility in our day-to-day business activity.
Amongst many examples of our success this year we can list, the
Redrow Graduate Programme, another set of award winning
health and safety statistics and excellent customer survey
results. Elsewhere we have made refinements to data capture for
our carbon footprint reporting, introduced initiatives to reduce
energy consumption in our offices as well as the homes we build,
engaged with WRAP (Waste and Resources Action Programme)
to seek improvements in waste reduction through design and
procurement, and as ever, have been involved in many initiatives
at local level to support those communities in which we work.
Health and safety
We have maintained our high standards in this most important
area of the business and have been rewarded with the
presentation of a RoSPA Gold Medal Award for Occupational
Health and Safety for the third consecutive year. This follows
receipt of a Gold Award for our submission for the seventh
consecutive year from RoSPA’s independent adjudication body.
David Rawlins, awards manager at the Royal Society for the
Prevention of Accidents (RoSPA), a safety charity with a 95-year
history, said,” The RoSPA Award programme provides
well-deserved recognition for the winners and spurs on other
organisations to raise their standards of accident and ill health
prevention. We congratulate Redrow Homes on its success and
encourage it, and all other winners , to remain committed to
safety and health, an approach that is well recognised to be good
for workers and the bottom line.”
Amongst the key performance indicators underpinning this
performance we can include:
n An Accident Incident Rate (AIR) which has decreased from
685 to 495 a 27% reduction mainly due to new initiatives
aimed at reducing slip and trip injuries
n No Enforcement Notices
n No Prohibition Notices
n No Improvement Notices
n
99.7% of persons on Redrow sites including relevant
employees have a CSCS card
Heat Loss Performance
Reduction in energy consumption is clearly a growing concern
for all of us, not least because of escalating fuel prices. Work
undertaken by the Building Research Establishment (BRE) on the
heat loss from the average dwelling since the 1970’s illustrates
the considerable reduction achieved by new homes in
comparison to the average older home. Redrow’s average
product built to 2010 standards offers a 53% improvement over
homes built in the 1970’s and a 35% improvement over homes
built just 10 years ago, providing our customers with potential
for significant fuel bill savings which cannot practically or cost
effectively be matched in refurbished older homes.
The NHBC Foundation and Zero Carbon Hub recently calculated
that living in an energy efficient four bedroomed detached home
built to these standards could be 55% cheaper to run compared
to an ‘upgraded’ Victorian home, saving £1,312/annum.
increases in site related fuel consumption. However, overall
carbon emissions have to some extent been offset by reductions
in Scope 2 emissions resulting from ongoing energy saving
initiatives. For instance, at our head office at St David’s Park a
combination of changes to the lighting system initiated during
refurbishment three years ago, together with subsequent
systematic replacement of worn out lamps with low energy
alternatives and a programme of modernising and rationalisation
of printing and photocopying devices has delivered a reduction
of around 15% in electricity consumption, a saving of 46 tonnes
of CO2 and a cost saving of approx. £7k/annum.
B
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Heat Loss for the Average Dwelling
(Fabric Heat Loss (W/K))
)
K
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(
s
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t
a
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H
c
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b
a
F
400
350
300
250
200
150
100
50
0
To maximise energy savings around the company, the first of a
series of energy audits have been undertaken at our Eastern and
South Midlands divisional offices as well as St David’s Park
identifying a number of measures which could deliver additional
savings of around £11k/annum and 36 tonnes CO2e/annum.
Energy audits for all our offices are programmed to be complete
by late summer, 2012.
Scope 1 and Scope 2 Carbon Emissions Tonnes per
Annum (DEFRA Definitions)
n Scope 1 n Scope 2
53% more
efficient
1972
1982
1992
2002
Redrow
2012
Thermal Imaging
In our effort to continually improve our products we have
instituted a thermal imaging test programme to assess our
construction details, enabling us to focus on potential areas for
further performance enhancement and research appropriate
solutions.
Carbon Footprint
For the fifth year Redrow has voluntarily submitted carbon
footprint data to the Carbon Disclosure Project (CDP) with
continuous refinements in data collection enabling us to reduce
the uncertainty in our reporting to CDP’s category of ‘more than
5%, but less than 10%’. The results for the financial year ending
June 2011 show that our Scope 1 and 2 emissions have
increased by 11.8% reflecting increased output activity
associated with the gradual recovery from recession, generating
9,000
8,000
7,000
6,000
s
e
n
n
o
T
5,000
4,000
3,000
2,000
1,000
0
2006
2007
2008
2009
2010
2011
Note: no data collated for 2008
Energy saving lamps have also been introduced into our show
homes and marketing suites, producing typical savings of around
£1,400/annum/outlet.
34 Redrow plc Annual Report
and Accounts 2012
Corporate
Responsibility
review
(continued)
Business review
Business review
Redrow plc Annual Report
and Accounts 2012 35
Graduates in Construction
“The fact that over a million 16 to 24 year olds in the UK are out of work is a disgrace.
At Redrow we’re doing our bit to help through initiatives like apprenticeships and graduate
training programmes…”
Steve Morgan, Chairman - February 2012
Sustainable Procurement
In conjunction with the Global Forest Trade Network (GFTN) we
have continued to work with our supply chain to ensure our
purchasing policy is adhered to and procurement levels are
maintained. In the calendar year ending 2011, we achieved
further improvement with 99.3% of timber products used on our
sites classified ‘Licensed Source, Progressing to Certification or
Credibly Certified’. The priorities included within our agreed
Action Plan for 2012 are:
n On-going review and development of process, specification
and procedures in order to tighten procurement, particularly
plywood products
n Maintain communication with the roof truss industry to
promote the benefits of FSC certification
n Continue dialogue with paper suppliers on bringing the
remaining element of non-FSC paper into line cost
effectively
n Maintain the focus of Buyers within Redrow to ensure they
maintain contact with local suppliers
n
Ensure our new buying system software aids control of
timber procurement with improved real time reporting and
cumulative performance data for suppliers
In support of our timber procurement policy and as part of an
initiative to reduce packaging and timber waste we have joined
forces with Scott ELM, a division of the newly rebranded Scott
Group, to launch a specialist pallet repatriation service for all our
building projects across the UK.
All suppliers to Redrow are required to mark pallets with an
identifier that will enable Scott ELM to return them to source. In
the calendar year ending 2011, the first full year of operation of
the scheme, 8,191 pallets were collected from our sites and 195
tonnes of timber were recycled.
Waste Management
Momentum was also maintained in our site waste management
activity, where site waste diverted from landfill now exceeds
92%, a 2% improvement over last year.
In the financial year ending June 2012 we produced 8.7 tonnes
of waste/100 m2 of developed floor area against an industry
average Environmental Performance indicator (EPI) of 19.2
m3/100 m2 which equates to just under 12 tonnes/100m2 of
developed floor area.
Site waste diverted from landfill
(%)
Usage of Timber
(GFTN categories)
n Legal origin confirmed or credibly certified
86
90
92
74
65
%
100
90
80
70
60
50
40
30
20
10
0
88.6
83.5
81.7
81.4
95.9
91.4
91.8
98.5
99.3
2008
2009
2010
2011
2012
2003
2004
2005
2006
2007
2008
2009
2010
2011
To assist us in identifying ways in which we could further reduce
and divert waste from landfill through design, during the year we
took the opportunity to engage with Waste and Resources Action
Programme (WRAP) in a Housing Design Review Workshop
which at the same time gave useful insight into WRAP’s Design
Review Methodology which we can employ in the future. WRAP
is funded by all four governments across the UK to run
programmes designed to focus on preventing waste.
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Redrow recognises the importance of investing in people for the
future of the business. We strongly believe that well trained
employees have been, and will continue to be, essential to our
success. Our strong track record in training and developing the
skills of our employees contributed to Redrow’s inclusion in
Building magazine’s 2011 Good Employer Guide, a list of the top
61 construction or construction related businesses to work for in
the UK. Judges described career progression as one of Redrow’s
‘standout benefits’.
A crucial element of our policy is our commitment to attract and
train youngsters both through the apprenticeship route and the
academic route via our Graduate Training Programme and
currently 1 in 7 of our employees are aged 24 or under. These
schemes are demanding and designed to be challenging to
encourage candidates to meet their full potential in their careers
as exemplified by the Graduate Training Programme.
This intensive 15 month programme affords insight into all
aspects of the business, enabling a holistic understanding and
presenting opportunities for early responsibility and equal
chance of success for young women. As a result places are
sought after and competition is tough.
The recruitment process involves a telephone interview and
verbal and numeric on-line tests. Candidates are then invited to
an assessment day at which they will be interviewed, take a 2¼
hour exam and engage in a group debate. This is followed by a
final interview and presentation to the Managing Director of the
prospective Redrow division within which they will work. To give
some perspective to this process there were in excess of 600
applications for this year’s intake of six places.
Redrow’s Graduates undertook an
intensive project for the Liverpool
Habitat for Humanity charity as part
of their programme
Successful graduates then benefit from working in a live
environment as part of a divisional team. They gain experience in
each Divisional and Group discipline, undertake training courses
and are tasked with specific assignments. Throughout the
process their progress is monitored and reviewed.
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Assignments
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At the end of the 15 month programme the graduates will have
a broad based and in-depth understanding of the business and
the interactions within it. They will have been able to combine
the core skills learned at university with practical applications
and developed maturity and discipline but they will also bring
the enthusiasm and fresh thinking required to push Redrow
forward.
“This scheme is all about home growing talent, educating them in the ‘Redrow Way’ and
also gives young people the opportunity to become managers of the future.”
Steve Morgan, Chairman - February 2012
Business review
Business review
Redrow plc Annual Report
and Accounts 2012 37
36 Redrow plc Annual Report
and Accounts 2012
Corporate
Responsibility
review
(continued)
Liverpool Habitat for Humanity
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Following the workshop WRAP provided us with guidance for
enhancements to procurement documentation and have
undertaken a Net Waste Tool assessment of three housetypes
from the New Heritage Collection. The resulting reports will
identify the forecast waste and possible cost savings and can
then become drivers to monitor subcontract skip waste.
sensitivity of the site and providing benefits for a wide range of
species including birds, bats, badgers and amphibians. The three
phase programme will provide 47 new ponds with an overall
total habitat of over 1Ha, designed to provide a greatly
enhanced breeding habitat for the newts, as well as
incorporating areas of woodland and terrestrial habitat.
Community Engagement
Our pride is not limited to the quality of our products and
service, it also extends to our involvement within the
community at grass roots level in schemes like Liverpool Habitat
for Humanity supporting local people and organisations as well
as the development of local infrastructure.
For the first time, this year the trustees of the Redrow
Foundation invited staff across the Group to nominate registered
charities in keeping with the Foundation’s stated charitable
objectives.
As a result a total of £93,000 was donated this year to a variety
of organisations, bringing the cumulative total of contribution
made to date by the Foundation to over £390,000.
Customer Satisfaction
Delighting our customers with the quality of their new homes
and their buying experience in its entirety is one of Redrow’s
principal objectives.
2011 saw recognition of the quality of our New Heritage
Collection with receipt of the Gold award in the Best Large
Housebuilder in the What House? awards. The judges’
commentary made special reference to the high specification
interiors and kerb appeal of our products and noted that “ The
New Heritage Collection has sold by the simple expedient of
being what the buyers want”.
Our efforts were further rewarded by our customers who
indicated their appreciation in the annual HBF Customer
Satisfaction Survey in which we retained our top 5 star rating
showing that over 90% of our customers were satisfied with the
quality of their new home and would recommend us to a friend.
Some of our customers also played an important role in
contributing to our marketing campaign ‘Our Pride ~ Your Joy’
which scooped Best marketing Initiative in the 2011
Housebuilder Awards.
Nature Conservation
One of the major concerns communities have when we work in
their neighbourhoods is the conservation of wildlife and
associated habitats within the area of development, a
responsibility which Redrow takes very seriously. Our scheme at
Buckley, North Wales demonstrates how involved these works
often are.
The site, which will deliver around 300 new homes formerly
consisted of three main areas, a brickworks building and yard, a
clay pits/quarry area, and a site of special scientific interest
(SSSI)/special area of conservation (SAC) part of which is
occupied by a large lagoon produced as a result of quarrying
activities.
Working closely with Flintshire County Council, the Countryside
Council for Wales, Welsh Assembly Government and local wildlife
groups, detailed mitigation measures and long term
management proposals have been prepared recognising the
Grant Strong adds the
finishing touches to the
Marketing Suite
Philippa Vickery and Leanne Allen tending to the landscaping of the new
Marketing area
Two of Habitats younger
residents, Vanessa and Floyd
meet Redrow’s health &
safety mascot Buster Bear
One of the intensive projects undertaken by this year’s
Graduate Trainee intake has involved working with Liverpool
Habitat for Humanity (LHFH), in Granby-Toxteth. The charity
is responsible for 32 low-cost homes off Kingsley Road,
mostly built by volunteers including the future home owners
themselves. The Graduates’ task was to transform an
unoccupied house into a marketing area for would-be home
owners, incorporating office space for LHFH staff and a
viewing gallery where children can learn about construction
and see progress on site from the safety of an upstairs
bedroom, whilst externally, the gardens were landscaped.
Much needed marketing material and signage was also
procured.
The task involved co-ordinated teamwork, testing
communication, negotiation and programming skills as well
as hands on work painting and landscaping and gave valuable
experience of the supply side of the business as materials,
services and gifts in kind were sought from a raft of Redrow
suppliers.
Three weeks of preparation were permitted to plan the work
and source materials which in itself was a challenge as they
work in different Redrow divisions. They then came together
in Liverpool for four days of intensive work to put all their
plans into practice.
Liza Parry, executive director for LHFH, said: “This has been
fantastic for us and the new marketing suite will be a major
asset for the charity. We’ve recently formed a new
partnership with Cosmopolitan Housing Association, which is
helping to fund construction of our remaining 23 homes;
we’ve had the Territorial Army on site helping to dig drains
and build a road to service the homes; and now we have a
clean, attractive and welcoming environment in which we
can talk to prospective home owners, take them through the
plans and hopefully sign them up to start helping to build
their own home.”
LHFH is an affiliate of the international Habitat for Humanity
organisation, a global charity that is supported in the UK by
the Home Builders’ Federation. The international charity has
built more than 500,000 homes around the world, has
projects in approximately 80 different countries and is
dedicated to the elimination of housing poverty.
In Liverpool, families are able to reduce the cost of home
ownership by investing 500 hours of ‘sweat equity’,
physically working on site, in lieu of a £10,000 cash down-
payment. The charity is actively recruiting home owners for
the 23 of its 32 homes still to be built, on land that was
donated by the Roman Catholic Archdiocese.
38 Redrow plc Annual Report
and Accounts 2012
Board of
Directors
Steve Morgan
Chairman
(A)
Alan Jackson
Non-Executive Deputy
Chairman
(ABCDE)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 39
John Tutte
Group Managing Director
(A)
Barbara Richmond
Group Finance Director
(A)
Paul Hampden Smith
Non-Executive Director
(ABCE)
Graham Cope
Company Secretary
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Steve Morgan, 59
Chairman
Barbara Richmond, 52
Group Finance Director
Paul Hampden Smith, 51
Non-Executive Director
Debbie Hewitt
Non-Executive Director
(ABCE)
Graham Cope, 48
Company Secretary
Steve Morgan founded Redrow in 1974 and led the business
from a small civil engineering contractor to become one of the
UK’s leading home builders. He floated the Company in 1994
and eventually stepped down as Chairman in November 2000,
returning to the helm in March 2009. Steve is also Chairman of
the Bridgemere Group of Companies, which includes
Wolverhampton Wanderers, Carden Leisure and Trinity Aviation.
Steve is a Fellow of the Chartered Institute of Building and holds
four Honorary Degrees. He was awarded an OBE in 1992.
Barbara joined the Board of Redrow in January 2010. Bringing
with her a proven track record, with almost 20 years’ experience
as Group Finance Director at a number of UK listed companies
including Inchcape plc, Croda International PLC and Whessoe plc.
She has a strong background in both manufacturing and retail as
well as having completed a number of major acquisitions and
disposals throughout her career. She is a Fellow of the Institute
of Chartered Accountants in England and Wales and a graduate
of the University of Manchester.
John Tutte, 56
Group Managing Director
John Tutte joined the Board of Redrow in July 2002. In
September 2009 he was promoted to Group Managing Director.
He qualified in civil engineering and has amassed more than 30
years’ experience within the industry, having previously held the
position as Chief Executive of Wilson Connolly plc.
Alan Jackson, 69
Non-Executive Deputy Chairman and Senior Independent
Director
Alan Jackson joined the Redrow Board in August 2009. He has a
wealth of experience in executive and non-executive roles and is
currently the Non-Executive Chairman of The Restaurant Group
plc. He is also a Non-Executive Director of Playtech plc.
Appointed to the Redrow Board in August 2009. Paul Hampden
Smith is a Fellow of the Institute of Chartered Accountants. He
has been Group Finance Director of Travis Perkins plc since 1996
and was previously Chairman of the Audit Committee at DX
Services plc and Polestar UK Limited.
Graham Cope joined Redrow as Head of Legal in November 2002
and was appointed Company Secretary two months later. He has
over 20 years’ experience in the housebuilding sector, either
working in-house or for clients in private practice. He qualified as
a Solicitor in 1989 and is a member of the Law Society.
Debbie Hewitt, 49
Non-Executive Director
Debbie joined the Redrow Board in August 2009. She has a
wealth of experience in executive and non-executive roles. She is
currently the Non-Executive Chairman of Moss Bros plc, Evander
Group and Whitestuff. She is also Non-Executive Director of HR
Owen plc, NCC plc, BGL and Domestic & General. She was
awarded the MBE in 2011 for services to business and the public
sector.
Committee members key
A Main Board member
B Member of the Remuneration Committee
C Member of the Audit Committee
D Member of the Corporate Responsibility Committee
E Member of the Nomination Committee
40 Redrow plc Annual Report
and Accounts 2012
Corporate
Governance
statement
The Board is committed to maintaining high standards
of corporate governance.
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 41
Governance Framework
The Board is committed to complying with corporate governance
guidelines and to maintaining high standards of corporate
governance.
The Financial Reporting Council introduced in June 2010 a new
governance code entitled ‘The UK Corporate Governance Code’ (“the
Code”). This statement, unless specifically stated, refers to the Code,
and the Company sets out details below of how it has applied the
principles of good governance as set out in Section 1 of the Code.
The Directors have considered the contents and requirements of the
Code and believe that throughout the year ended 30 June 2012 the
Company has been compliant.
The Board
Composition of the Board
The Board comprises an Executive Chairman, two further Executive
Directors and three independent Non-Executive Directors. There
have been no changes to the composition of the Board since the
publication of the 2011 Annual Report and Accounts.
A summary of the composition of the Board and its committees
during the year is set out in Table 1.
Steve Morgan as Chairman is responsible for leadership of the Board
and ensuring its effectiveness on all aspects of its role. The role of
John Tutte as Group Managing Director ensures that there is a clear
division of responsibilities at the head of the Company between the
running of the Board and the operational responsibility for the
running of the Company’s business as required by the Code.
All Non-Executive Directors holding office during the year ended
30 June 2012 were considered to be independent.
The Company Secretary acts as secretary to the Board and its
Committees and his appointment and removal is a matter for the
Board as a whole. The Company Secretary is a member of the Group
Senior Management team and all Directors have access to his advice
and services. In certain circumstances, Board Committees and
individual Directors may wish to take independent professional
advice in connection with their responsibilities and duties and, in
this regard, the Company will meet the reasonable costs and
expenses incurred.
Table 1 – List of Directors holding office during the year ended 30 June 2012
Position Number Independent Audit Remuneration Nomination Corporate
of years Committee Committee Committee Responsibility
on board in Committee
most recent
appointment
Executive Directors
Steve Morgan Chairman (i) 3
John Tutte Group Managing Director 10
Barbara Richmond Group Finance Director 2
Non-Executive Directors
Alan Jackson Non-Executive Deputy
Chairman and Senior
Independent Director 2
Chairman Chairman
Debbie Hewitt Non-Executive Director 2
Chairman
Paul Hampden Smith Non-Executive Director 2
Chairman
(i) Steve Morgan is the founder of Redrow and rejoined the Board on 23 March 2009, after an absence of over 8 years, and became Chairman
on 1 July 2009.
Board responsibilities and processes
The Board met regularly and frequently, no less than six times
during the year and maintains a close dialogue as appropriate
between meetings. Board meetings are held at Head Office or at
divisional offices when visits are frequently made to a selection of
developments accompanied by the local management team. Board
papers are distributed in advance of the meetings to allow adequate
time for review and preparation and include key strategic,
operational and financial information. Attendance by individual
directors at Board and Committee meetings held during the year
ended 30 June 2012 is set out in Table 2.
Details of internal control and risk management processes are
included in the Audit Committee report on pages 44 to 46.
Board balance and independence
The Board considers that it is of a size and has a balance of skills,
knowledge and experience that is appropriate for its business. The
Executive team provides the Board with an appropriate view of the
detail of the business and the benefit of their significant collective
experience of the UK house building industry and that enables it
and its committees to discharge their respective duties and
responsibilities effectively. The Non-Executive Directors bring a
depth of experience and understanding from outside the Group
which enables them to challenge and help develop proposals on the
Group’s strategy.
Details of the Directors’ respective experience is set out in their
profiles on pages 38 to 39.
Under the Code, at least half the Board, excluding a Non-Executive
Chairman, should comprise independent Non-Executive Directors.
The Board currently comprises three Executive and three
Non-Executive directors, in compliance with the Code.
Table 1 on page 40 provides a summary of the Company’s
assessment of the independence of the Directors.
The Board has a formal schedule of matters reserved
specifically for its decision.
The matters reserved include:
n Approval of Redrow’s long term objectives and strategy;
n Approval of the Annual Report and Accounts, preliminary
and half-yearly financial statements, interim management
statements, trading updates and the recommendation of
dividends;
n Approval of any significant changes in accounting policies
or practices;
n Any changes relating to capital structure;
n Approval of treasury policies;
n
Ensuring the maintenance of a sound system of internal
control and risk management;
n Approval of corporate acquisitions or disposals, significant
land purchases or contracts;
n Changes to the size, structure and composition of the
Board;
n Approval of significant policies, including Redrow’s health
& safety policy; and
n
Review of overall corporate governance arrangements.
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Under the Company’s Articles of Association, all Directors are
subject to re-election at their first general meeting after
appointment. The Board however complies with the provisions of
the Code on Re-election and accordingly all Directors will be
submitting themselves for re-election at the AGM. Details of the
appropriate AGM resolutions can be found on page 96.
The Board considers that each Director is able to allocate sufficient
time to the Company to discharge their responsibilities effectively.
The Board’s policy on the term of appointment for a Non-Executive
Director is that it is not normally expected that a Non-Executive
Director will serve more than six years.
Appointments and re-elections to the Board
The Board has a Nomination Committee whose terms of reference
include making recommendations to the Board on the appointment
of Executive and Non-Executive Directors. There were no new
appointments to the Board during the financial year ended 30 June
2012. The Nomination Committee report can be found on page 47.
Professional development and performance evaluation
The Board recognises that a structured appraisal process and good
training are important requirements across the Group. The Board
receives regular presentations and briefings from those responsible
for key Group disciplines. In addition, the Board maintains close
relationships with Divisional management teams.
42 Redrow plc Annual Report
and Accounts 2012
Corporate
Governance
statement
(continued)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 43
Table 2 - Attendance record of Directors at meetings during the year ended 30 June 2012
Corporate Governance Structure
Corporate
Board Audit Remuneration Nomination Responsibility
Committee Committee Committee Committee
Main Board
Total number of meetings in the year ended 30 June 2012 7 4 3 1 3
Executive Directors
Non-Executive Team
Executive Management Team
Steve Morgan 7/7
• Deputy Chairman & Senior Independent Director
• Chairman
John Tutte 7/7
Barbara Richmond 7/7
Non-Executive Directors
Alan Jackson 7/7 3/4 3/3 1/1 3/3
Debbie Hewitt 7/7 4/4 3/3 1/1
Paul Hampden Smith 7/7 4/4 3/3 1/1
All Directors undertake a comprehensive induction programme
following their first appointment. The programme for Non-Executive
Directors is specifically designed to encompass the full breadth of
business and includes visits to operating businesses.
During the year, formal appraisals of the Group Managing Director
and Group Finance Director were undertaken by the Chairman.
All independent Non-Executive Directors had an annual appraisal
conducted by the Non-Executive Deputy Chairman.
The Board undertakes a formal annual review of it own effectiveness.
For the year ended June 2012, this was undertaken using a formal
questionnaire completed by each Director and the responses were
considered collectively by the Board.
Directors’ remuneration
The Board has a Remuneration Committee whose terms of reference
include the review of Main Board remuneration policy and
agreement of the terms of employment and the granting of bonuses,
share options or share incentive plans relating to the Group’s Senior
Management.
The Remuneration report can be found on pages 49 to 56.
Capital Structure
During the year the Company undertook a Firm Placing and Open
Offer. Information on this and the capital structure of the
Company is included in the Directors’ report on page 59.
Relations with Shareholders
The Group announces its financial results half-yearly and
immediately following their publication undertakes formal
presentations to equity analysts. A formal presentation was also
made in April 2012 in respect of the Firm Placing and Open Offer
proposals. These presentations are available on the Company’s
website. In addition, the Group published an Interim Management
Statement in November 2011 and April 2012.
During the year ended June 2012, the Chairman, the Group
Managing Director, and the Group Finance Director together with
the Senior Independent Director also held a number of meetings
with significant Shareholders.
Following the full year and half-yearly results’ announcements in
September 2011 and February 2012, the Chairman, the Group
Managing Director and the Group Finance Director met current or
potential significant Shareholders. This embraced visits to London
and feedback from these meetings is independently collated and
disseminated to the Board.
The Annual General Meeting (AGM) takes place at a venue close to
the Group’s Head Office. All Directors attended the AGM on
3 November 2011. The AGM represents an opportunity for all
Shareholders attending to table questions formally during the
meeting and informally afterwards to the Company’s Directors. In
addition an EGM was held on 15 May 2012.
• Independent Non-Executive Directors
• Group Managing Director
• Group Finance Director
• Company Secretary
• Functional Heads of Department covering Human
Resources, Information Technology, Commercial,
Marketing and Finance
Committees
Operating Divisions
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• Audit
• Corporate Responsibility
• Nomination
• Remuneration
Formal notification of the AGM, through the Annual Report and
Accounts, is sent to Shareholders at least 21 working days in
advance. It is Company policy to propose a separate resolution at
the AGM on each substantive issue including the opportunity to
approve the Remuneration report.
Redrow’s website, redrowplc.co.uk, gives access to current financial
and corporate information.
Graham Cope
Company Secretary
18 September 2012
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 45
The Audit Committee’s principal responsibilities lie in
reviewing the Group’s financial reporting, overseeing the
appointment and work of the external Auditors and
reviewing Redrow’s internal control processes.
44 Redrow plc Annual Report
and Accounts 2012
Audit
Committee
report
Current Members
of the Audit Committee
n Paul Hampden Smith,
Chairman of the Audit
Committee (pictured)
n Alan Jackson
n Debbie Hewitt
The Audit Committee’s principal responsibilities lie in reviewing
the Group’s financial reporting, overseeing the appointment and
work of the external Auditors and reviewing Redrow’s internal
control processes. The terms of reference of the Committee,
which are in compliance with the Combined Code, are kept
under review. The terms of reference are available at
redrowplc.co.uk.
All the members of the Committee are independent and the
Board believes the Committee has the appropriate level of
expertise to fulfil its terms of reference.
The Committee held four meetings during the financial year
ended June 2012 and holds further meetings as appropriate.
The Group Finance Director was invited and attended each
meeting as did the external Auditors. On each occasion the
Committee had the opportunity to meet the external Auditors
without any Executive Director being present.
The Committee receives regular updates on changes to
accounting standards and best practice in financial reporting and
corporate governance. The Committee invites other individuals
to attend the meetings to provide technical support and advice
as appropriate. In addition, individual members are encouraged
to attend external seminars and courses on areas relevant to
their membership of the Committee. The Committee addressed a
wide variety of issues in its meetings, including:
Month
Principal Activities
November 2011
February 2012
June 2012
September 2012
n
n
n
n
n
n
n
n
n
n
n
n
n
A review of the proposed External Audit strategy for 2011/2012 and associated fees;
A review of the effectiveness of the external audit process;
A review of the independence and objectivity of the external Auditors; and
A review of the Committee’s effectiveness.
A review of the 2011/12 half-yearly accounts including a report from the External Auditors;
A review of the Terms of Reference of the Committee; and
A review of the proposed Audit Committee timetable for calendar year 2012.
A review of the appropriateness of the Group’s accounting policies;
A review of the Group’s Whistleblowing policy;
A review of internal controls across the whole business; and
An update on Internal Audit and a review of the Internal Audit timetable for 2012/2103.
A review of the full year 2011/12 results including the Annual Report and Accounts and a report
from the External Auditors; and
Consideration of the Group risk assessment process and a going concern review.
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The Group has a widely publicised whistleblowing policy which
enables employees and other stakeholders e.g subcontractors, to
raise concerns in confidence. The Committee has arranged to
receive reports on all occasions when such issues are raised under
this policy.
Audit Independence
PricewaterhouseCoopers LLP (PwC) were appointed Auditors in
2003 having succeeded PricewaterhouseCoopers who were
appointed in 1987. The current Audit Partner from PwC
commenced his tenure following the conclusion of the 30 June
2010 audit.
The Committee has a formal policy in respect of the work of the
external Auditors. The purpose of this policy is to ensure that the
Auditor’s objectivity and independence is maintained by ensuring
both that the nature of any non-audit work undertaken and the
level of fees paid does not compromise the Auditor’s position.
Appointments in respect of non-audit work require the prior
approval of the Committee within an established budget. In
addition, no work can be undertaken by the external Auditors in
any area where there is any identifiable risk that the work of an
individual within the external audit firm or the external audit firm
generally could conflict or compromise the quality, objectivity or
independence of any audit or compliance work undertaken for
the Group.
The main non-audit work historically undertaken related to
information provided to the Company by PwC in their capacity as
Scheme Actuary of the Redrow Staff Pension Scheme. No such
work was undertaken in this financial year following the disposal
by PwC of its actuarial business to Xafinity Consulting Limited.
The Company retains a separate actuary to provide it with advice
on pension matters.
The external Auditors are not indemnified by the Company nor
has the Company purchased liability insurance for them.
Internal Controls
The Board of Directors recognises its overall responsibility for the
Group’s system of internal control and for monitoring its
effectiveness. There is an ongoing process for identifying,
evaluating and managing significant risks. However, in reviewing
the effectiveness of internal control, such systems can only
provide reasonable but not absolute assurance against material
misstatement or loss.
Key business activities including finance, land acquisition, product
design, procurement and information technology are controlled
The key features of the Group’s internal controls are as follows:
n Defined authorisation levels exist over key areas such as
land purchase, the placing of orders and contracts and
staff recruitment;
n A comprehensive prioritised risk register which is regularly
reviewed and presented to the Audit Committee;
n
n
n
The Group’s management information systems provide
weekly updates on key statistics and information in
respect of sales and production and the content of these
weekly reports is regularly reviewed to ensure it remains
appropriate;
Redrow has an in-house health and safety department and
places great emphasis on the importance of health and
safety and environmental management. The department
works closely with the operating companies to ensure
that training is provided to employees and subcontractors,
best practice is shared and appropriate actions are taken
to comply with heath and safety best practice and
legislation throughout the organisation;
The Board requires each Director in its operating divisions
to complete an annual statement on Corporate
Governance and related party transactions. The statement
is designed to provide assurance that Group policies and
procedures are being implemented and complied with in
all material respects. In addition, key functional directors
complete a Principal Controls Self Assessment
Questionnaire which is reviewed by the Board to assist in
improvements in the control framework;
n A weekly business report (WBR) comprising sales funnel
information, gross margins and order book is produced for
the Group, each division and each site and circulated
across the Group;
n A monthly reporting pack is circulated in advance and
reviewed at each of the Main, Executive and Divisional
board meetings. Annual budgets are set, with actual
performance compared against the annual budget;
n
Preparation and regular updates of Strategic Plans;
n A policy and procedures manual which covers all the
significant aspects of the Group’s operations and
describes the systems and controls that are to be applied;
and
n Daily statements of a reconciled cash position identifying
significant payments are prepared, rolling cashflow
forecasts are prepared and forecast banking covenant
compliance is tested.
46 Redrow plc Annual Report
and Accounts 2012
Audit
Committee
report
(continued)
by the Executive Directors. All activity is organised within a
defined structure with formal lines of responsibility, designated
authority levels and a structured reporting framework.
A formalised reporting structure is established within Redrow. The
Executive Directors, the Company Secretary and functional heads
of department meet monthly to discuss the Group’s key issues,
risks and opportunities. The operating companies hold monthly
board meetings which are attended on a rotational basis by the
Executive Directors.
The Group formally reviews its prioritised risk register. In addition,
the Executive Board, through its regular meetings, reviews key
areas of risk on an ongoing basis and considers whether the
internal controls identified in relation to those risks remain
appropriate.
Insurance
The Board has appointed an experienced broker to advise on and
co-ordinate all insurance matters across the Group and they liaise
closely with appropriate Redrow personnel at Head Office and
within the divisions and report directly to the Group Finance
Director.
Risk Management and Internal Audit
The Group’s risk register defines controls as prevent or detect and
identifies owners of each high level risk. Feedback on the risks and
controls is actively encouraged and is facilitated by links on the
Group’s intranet to ensure the risks listed remain relevant and
accurate. The register itself is regularly maintained and is
reviewed by the Committee annually.
The internal audit strategy is discussed and agreed with the
Committee and PwC. Suggested control improvements and any
control weaknesses identified are followed up as appropriate. The
cornerstone of the Internal Audit work undertaken is the Business
Process Reviews. A risk based programme was designed based on
the risk register. The Business Process Review programme looks to
provide assurance to the Group, by testing internal controls and
reviewing specific risks, as well as seeking out best practice and
sharing it across the Group and identifying business process
improvements. Committee Members receive an Executive
Summary of each Business Process Review report.
Paul Hampden Smith
Chairman of the Audit Committee
18 September 2012
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 47
Nomination
Committee
report
Current Members of the
Nomination Committee
n Alan Jackson,
Chairman of the Nomination
Committee (pictured)
n Paul Hampden Smith
n Debbie Hewitt
The Nomination Committee’s terms of reference are kept under
regular review being last considered in June 2012 and are
published on the Group’s website.
The Committee has met once during the year ended 30 June
2012 following the publication of the 2011 Annual Report and
Accounts and its principal business can be summarised as
follows:
1. To consider the proposed re-election of Steve Morgan as
Executive Chairman at the AGM on 12 November 2012 in
compliance with the ‘The UK Corporate Governance Code’
(“the Code”) introduced in June 2010 and after due
consideration to recommend his re-election to the Board;
2. To consider the proposed re-election of John Tutte as an
Executive Director at the AGM on 12 November 2012 in
compliance with the Code and after due consideration to
recommend his re-election to the Board;
3. To consider the proposed re-election of Barbara Richmond as
an Executive Director at the AGM on 12 November 2012 in
compliance with the Code and after due consideration to
recommend her re-election to the Board;
4. To consider the proposed re-election of Alan Jackson as
Non-Executive Deputy Chairman and Senior Independent
Director at the AGM on 12 November 2012 in compliance
with the Code and after due consideration to recommend his
re-election to the Board;
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5. To consider the proposed re-election of Paul Hampden Smith
as Non-Executive Director at the AGM on 12 November
2012 in compliance with the Code and after due
consideration to recommend his re-election to the Board;
and
6. To consider the proposed re-election of Debbie Hewitt as
Non-Executive Director at the AGM on 12 November 2012 in
compliance with the Code and after due consideration to
recommend her re-election to the Board.
The Directors were not present and did not vote when their
individual proposals were discussed.
Alan Jackson
Chairman of the Nomination Committee
18 September 2012
48 Redrow plc Annual Report
and Accounts 2012
Corporate
Responsibility
Committee
report
Current Members of the
Corporate Responsibility
Committee
n Alan Jackson,
Chairman of the Corporate
Responsibility Committee
(pictured)
n Nigel Smith,
Redrow Research and
Sustainability Director
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 49
Directors’
Remuneration
report
Current Members of the
Remuneration Committee
n Debbie Hewitt,
Chairman of the Remuneration
Committee (pictured)
n Paul Hampden Smith
Debbie Hewitt
Chairman of the
n Alan Jackson
Remuneration Committee
The Corporate Responsibility Committee’s terms of reference are
kept under regular review being last reviewed in May 2012 and
are published on the Group’s website.
7. Update on changes to Part L 2013 of the Building
Regulations, the Standard Assessment Procedure 2012
(“SAP”) and Energy Performance Certificates (“EPC’s”) and
their impact;
The Committee met three times during the year ended 30 June
2012 and its principal business can be summarised as follows:
1. A review of the terms of reference of the Committee;
8. Review of site waste management benchmarking and
procedures; and
9. A briefing on the RICS Guidance Note on the Value of
2. A review of the Company’s Environmental Management
Sustainable Features.
Standards;
The Corporate responsibility review on pages 30 to 37 provides
further information on areas of work monitored by the
Committee.
Alan Jackson
Chairman of the Corporate Responsibility Committee
18 September 2012
3. Review of external environmental benchmarking reporting
and an update on the Next Generation UK Homebuilders
Sustainability Rankings for 2011;
4. Update on the Carbon Disclosure Project, and the Renewable
Heat Initiative;
5. A review of the Flood and Water Management Act 2010 and
its impact together with updates on the responses provided
to the numerous Consultations which have been issued
during the period in respect of the proposed changes under
the Act;
6. Updates on the Devolution of Building Regulations to the
Welsh Assembly Government and attendance and
engagement with the Community Engagement Forum;
This report has been prepared in accordance with the
requirements of Schedule 8 to the Accounting Regulations under
the Companies Act 2006 and The Listing Rules. The Financial
Reporting Council introduced in June 2010 a new governance
code entitled ‘The UK Corporate Governance Code’ (“the Code”).
This report, unless specifically stated, refers to the Code, and
describes how the Board has applied the principles relating to
Directors’ remuneration in the Code. As required by the
Companies Act 2006, a resolution to approve this report will be
put to Shareholders for approval at the Annual General Meeting
to be held on 12 November 2012.
Remuneration Committee
The Remuneration Committee is comprised solely of
Non-Executive Directors and comprises Debbie Hewitt as
Chairman, Alan Jackson and Paul Hampden Smith. Details of
Committee attendance has been set out on page 42.
The Committee has agreed terms of reference detailing its
authority and responsibilities. The terms of reference of the
Committee are kept under regular review and were subject to a
comprehensive update in line with best practice in 2012. They
are published on the Group’s website and include:
n
determining and approving the remuneration policy in
respect of the Executive Chairman, Steve Morgan the
Executive Directors namely, John Tutte the Group Managing
Director and Barbara Richmond the Finance Director and the
Company Secretary, Graham Cope (“the Senior Executives”),
taking into account the context of the Company’s overall
approach to remuneration for all employees and within this
policy determining the total individual remuneration package
of each Senior Executive;
n
determining performance targets and the extent of their
achievement for both annual and long term incentive awards
operated by the Company affecting Senior Executives; and
n monitoring and approving the level and structure of
remuneration of the Managing Directors immediately below
the Senior Executives.
The Committee meets as often as is required but at least twice
per year. The Committee met three times during the course of
the financial year ended 30 June 2012.
During the year the Committee consulted with Deloitte LLP on a
range of remuneration matters. Deloitte LLP also provides the
Company with advice on taxation matters but do not have any
other connection with the Company.
The Committee addressed a variety of matters in its meetings
during the year, including:
Month
July 2011
Principal Activities
n Confirmation of 2010/11 Annual Cash
Bonus payments and targets for
2011/12;
n
Setting the targets for the LTSIP 2011;
and
n Adoption of Terms of Reference.
April 2012
n Consideration of Senior Executive
salaries;
n
Review of pension entitlements of
Senior Executives following closure of
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50 Redrow plc Annual Report
and Accounts 2012
Directors’
Remuneration
report
(continued)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 51
June 2012
the Defined Benefit Section of the
Redrow Staff Pension Scheme; and
Review of the effect of the Firm
Placing and Open Offer on Share
Schemes.
Review of Terms of Reference of
Committee;
n
n
n Committee Self-Assessment; and
n
Salary Review of the Senior
Executives.
Executive Remuneration at a Glance
Components of reward
Fixed component
Variable component
Base salary
Benefits in kind
Pension & retirement
benefits
Annual bonus
Long Term Share Incentive
Plan (LTSIP)
Save as You Earn Option
Scheme (SAYE)
Remuneration Policy
The Committee considers that in framing its remuneration policy
it has given full consideration to the provisions of Section 1 and
Schedule A of the Code.
The Committee aims to ensure that the Group provides
competitive but cost effective remuneration packages at all
levels in order to reward, retain and motivate staff who are
expected to meet high levels of performance, as well as ensuring
overall remuneration is competitive and that it attracts and
retains a high calibre of employee.
The Remuneration Committee recognises the importance of
aligning the interests of shareholders and employees to create
maximum levels of shareholder value.
Consistent with this policy, the remuneration packages awarded
to Senior Executives are intended to reward them for their
current achievements, whilst also encouraging a focus on the
medium and long term strategy and performance of the
Company. Remuneration packages are designed to ensure that an
appropriate level of performance related remuneration is
provided. The performance related elements have clearly defined
and stretching quantitative and qualitative targets that link
rewards to business performance in the short, medium and long
term. Those elements which are performance related are set out
in further detail below.
Elements of the Remuneration Package
The main components of the remuneration package provided to
an Executive are as follows:
(i) Base salary
Salaries are reviewed as appropriate and at least once per
annum.
The Remuneration Committee considered that Senior Executive
salaries would be increased in line with the increases awarded at
the same time to the general employee population of the
Company.
The Committee agreed to increase Steve Morgan’s notional fees
from 1 July 2012 from £425,000 to £435,000 (2.4%) (see page
54); Barbara Richmond’s salary from 1 July 2012 from £257,000
to £265,000 (3.1%) and John Tutte’s salary from 1 July 2012
from £385,000 to £395,000 (2.6%).
(ii) Pension and retirement benefits
Following the closure of the Defined Benefit Section of the
Redrow Staff Pension Scheme to future accrual with effect from
1 March 2012, John Tutte became a deferred member of the
Scheme. The Remuneration Committee gave John Tutte the
option of joining the new Redrow Group Personal Pension Plan or
having a pension related salary supplement. John Tutte elected
to receive in lieu a pension allowance supplement from 1 March
2012, equivalent to 20% of salary. This supplement will not be
considered in the calculation of any future bonuses.
Barbara Richmond was not a member of the Redrow Staff
Pension Scheme and instead receives a pension allowance
supplement equivalent to 20% of salary. This supplement will
not be considered in the calculation of any future bonuses.
Steve Morgan is a pensioner member of the Redrow Staff
Pension Scheme.
John Tutte and Barbara Richmond are also covered by fixed term
group income protection and death in service benefit.
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(iii) Benefits in kind
These primarily relate to a fully expensed car or cash equivalent
car allowance and private medical insurance.
(iv) Annual bonuses
Following changes implemented during the financial year ended
June 2012, the Senior Executives had the potential to earn a cash
bonus equivalent to a maximum of 100% of their base salary,
subject to meeting targets relating to performance on and above
budget of PBT, ROCE, land bank and forward sales.
The Committee feels that this combination of measures
represents an appropriate balance between “backward looking”
financial performance and “forward looking” measures, which
support value creation over the medium to long term. The
potential payable was weighted equally across the four
measures.
In addition, as reported last year, the Senior Executives will be
required to defer 50% of any bonus earned by receiving nil cost
options in lieu of cash, half of which will vest after one year and
the remaining half after two years. No matching shares will be
awarded. The Committee believes that the introduction of
deferral into share options brings our framework into line with
best practice and it will help us to increase share ownership
throughout the executive team (including at levels below the
main board, where a similar scheme will be applied). The
Committee has retained the discretion under the rules put in
place to prevent vesting or exercise and “clawback” in the event
of gross misconduct or the material misstatement of accounts.
Taking into account this deferral, the maximum annual cash
bonus potential will be 50% of salary, with an equal amount
awarded in share options.
The Senior Executives were awarded 100% of base salary for the
performance against the bonus targets for the period ended June
2012, 50% of which was paid in cash in September 2012 and the
remaining 50% of which were deferred by the granting of
options at a price set by reference to the average share price of
the three days trading following the announcement of the
Company’s Preliminary Results on the 19 September 2012. These
options will vest, as described above, over a one and two year
period and will have no further performance conditions to vest,
except the Executive has to be employed by the Company and
not under notice. Dividends equivalents, should dividends be
paid, will be paid in respect of these options for the vesting
periods.
The Committee has also determined that the annual bonus for
the forthcoming financial year will continue to be assessed using
the following four metrics – PBT, ROCE, land bank and forward
sales, with equal weighting given to each metric.
(v) Long Term Incentives
LTSIP 2012 grant vesting in September 2015
Following the review in 2011 of the Executive Remuneration
Framework, the Committee felt that the quantum of the long
term incentive arrangements remains appropriate and as a result
each Senior Executive, with the exception of Steve Morgan, will
be awarded a grant of nil cost options under the LTSIP with a
value equivalent to 100% of their 2011 base salary.
The Committee decided that the award would, as last year, be
based on performance of EPS and ROCE, pre exceptional, with up
to 50% of any award relating to performance of each of the
criteria. The Committee believes that these two measures are
transparent, are easy to understand, track and communicate, are
cost effective to measure and fundamentally aligned to the
strategic ambitions that have been communicated to the
market:
n
n
EPS ensures that the team delivers strong “bottom line”
profitability and growth for shareholders.
ROCE provides balance by requiring that profit is delivered
efficiently from a capital perspective.
The Remuneration Committee does however have complete
discretion to adjust the number of any shares vesting from the
award if it considers that performance is not sufficiently
reflective of the general growth created by the market.
EPS for the year ending June 2015 (“x”)
Award
Nil
10.0% to 30% on sliding scales
+30% to 49.9% on sliding scales
50%
ROCE for the year ending June 2015 (“y”)
Award
x < 24p
24p x < 27p
27p < x < 30p
x < 30p
Nil
10.0% to 30% on a sliding scale
+30% to 49.9% on a sliding scale
50%
y < 14%
14% y < 16%
16% < y < 18%
y < 18%
LTSIP Phantom Share Scheme 2012
Due to the size of Steve Morgan’s shareholding, the
Remuneration Committee has decided to grant him a phantom
option under the LTSIP. This option will be paid out in cash. In all
other respects Steve Morgan’s option mirrors the terms and
conditions of the LTSIP awarded to the other Senior Executives.
52 Redrow plc Annual Report
and Accounts 2012
Directors’
Remuneration
report
(continued)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 53
EPS for the year ending June 2013 (x)*
Award
Nil
10.0% to 29.9% on sliding scales
30%
x < 14.2p
14.2p x < 17.5p
x > 17.5p
ROCE for the year ending June 2013 (y)
Award
Nil
10.0% to 29.9% on sliding scales
30%
y < 13.5%
13.5% y < 17.5%
y > 17.5%
TSR for the year ending June 2013 (z)
Award
Nil
15% to 39.9% on a sliding scale
40%
index z
z < index
index + 10.0%
z > index + 10.0%
LTSIP Phantom Share Scheme 2010
As above, due to the size of Steve Morgan’s shareholding, the
Remuneration Committee granted him a phantom option under
the LTSIP to be paid out in cash but otherwise mirroring the
terms and conditions of the LTSIP awarded to the other Senior
Executives.
LTSIP 2009 grant vesting in December 2012
In accordance with the performance conditions attached to the
2009 LTSIP grant, the performance conditions were not achieved
and, the Remuneration Committee confirmed that all of the
2009 LTSIP options will lapse in December 2012.
LTSIP 2008 vesting in November 2013
Following the changes to the LTSIP approved at the 2008 AGM,
Group Managing Director John Tutte was awarded a grant of nil
cost options under the LTSIP with a value equivalent to 200% of
his base salary as at 1 July 2008.
The options will vest five years from the date of grant of the
option, subject to the satisfaction of performance conditions.
The award was based on ROCE (33.33%), EPS (33.33%), and TSR
(33.33%) with the following performance criteria:-
If for any reason Steve Morgan’s shareholding reduces, the
Committee reserves the right to terminate the Phantom Scheme
and replace it with the LTSIP awarded to the other Senior
Executives.
LTSIP 2011 grant vesting in September 2014
John Tutte and Barbara Richmond were awarded a grant of nil
cost options under the LTSIP with a value equivalent to 100% of
their base salaries as at 1 July 2010.
The options will vest three years from the date of grant of the
option, subject to the satisfaction of performance conditions.
The award was based on ROCE (50%) and EPS (50%) with the
following performance criteria:
EPS for the year ending June 2014 (x)*
Award
Nil
10.0% to 20% on sliding scales
+20% to 49.9% on sliding scales
50%
ROCE for the year ending June 2014 (y)
Award
Nil
10.0% to 20% on a sliding scale
+20% to 49.9% on a sliding scale
50%
x < 14.2p
14.2p x < 15.9p
15.9p < x < 17.5p
x < 17.5p
y < 12%
12% y < 14%
14% < y < 16%
y < 16%
LTSIP Phantom Share Scheme 2011
As above, due to the size of Steve Morgan’s shareholding, the
Remuneration Committee granted him a phantom option under
the LTSIP to be paid out in cash but otherwise mirroring the
terms and conditions of the LTSIP awarded to the other Senior
Executives.
LTSIP 2010 grant vesting in February 2014
John Tutte and Barbara Richmond were awarded a grant of nil
cost options under the LTSIP with a value equivalent to 125% of
their base salaries as at 1 July 2009 and January 2010
respectively. The options will vest three years from the date of
grant of the option, subject to the satisfaction of performance
conditions. The award was split between ROCE (30%), EPS (30%)
and TSR (40%) with the following performance criteria:
* Amended to reflect Firm Placing and Open Offer share issue.
Directors’ Service Agreements
The service agreements of the Executive Directors provide for
formal notice to be served to terminate the agreement, by either
the Company or the Director. The notice required is six months
for Steve Morgan and twelve months for John Tutte. Barbara
Richmond is required to give the Company six months notice
whilst the Company is required to give Barbara Richmond twelve
months notice.
The agreements do not include provision for pre-determined
compensation for early termination and mitigation will be
applied to any compensation payments where considered
justified by the Remuneration Committee. No additional
compensation or extended notice period is included within the
service agreements in the event of a change of control. The
service agreements of the Executive Directors are rolling
contracts which were entered into on the following dates and
had the following unexpired notice periods as at 30 June 2012:
Name
Contract Date
Notice Period
Steve Morgan
John Tutte
Barbara Richmond
23/03/09
14/09/09
18/01/10
6 months
12 months
12 months
The Non-Executive Directors' terms of appointment, with
maturity dates, are detailed in formal letters of appointment as
follows:
Name Letter of appointment
Position
Dated Matures
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Deputy Chairman 19/08/12
and Senior
Independent
Director
Non-Executive
Debbie Hewitt
Paul Hampden Smith Non-Executive
19/08/12
19/08/12
18/08/13
18/08/13
18/08/13
EPS for the year ending June 2012 (x)
Award
Nil
10.0% to 29.9% on sliding scales
30.0%
x < 13.0p
13.0p x < 19.0p
x 19.0p
ROCE for the year ending June 2012 (y)
Award
Nil
10.0% to 29.9% on a sliding scale
30.0%
y < 13.0%
13.0% y < 17.5%
y 17.5%
TSR for the year ending June 2012 (z)
Award
Nil
15.0% to 39.9% on a sliding scale
40.0%
index z
z < index
index + 10.0%
z > index + 10.0%
(vi)The CSOP
Following approval at the AGM on 5 November 2008, the
Company granted options over 18,292 shares to each of its then
Executive Directors under the approved Company Share Option
Plan, which is approved by HM Revenue & Customs for tax
purposes. These options dated 21 November 2008 become
exercisable five years from the date of grant of the option on
21 November 2013 subject to the performance condition being
satisfied. The performance condition is the achievement of
earnings per share target of 19.25p in the financial year ending
30 June 2013.
John Tutte is the only Director who participates in this Scheme
as all other awardees have since left the Company.
(vii) SAYE
In addition to their remuneration package, all employees are
entitled to participate in the Save As You Earn (SAYE) scheme
under which employees are granted options and encouraged to
save in order to invest in Company shares.
The Senior Executives, with the exception of Steve Morgan, are
encouraged to participate in the SAYE scheme as a means of
increasing their shareholdings.
(viii) Share Ownership Guidelines
The importance of encouraging share ownership is recognised by
the Committee. Both John Tutte and Barbara Richmond are
expected to build and retain a shareholding in the Group at least
equivalent to 100% of base salary and the Company Secretary is
encouraged to have a shareholding of 75% of base salary.
54 Redrow plc Annual Report
and Accounts 2012
Directors’
Remuneration
report
(continued)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 55
Directors’ remuneration for period 2011/12
The following tables and notes constitute the audited part of the Directors’ Remuneration report.
Disclosure required under the Listings Regulations
Defined Benefit accrued entitlements
Directors’ detailed emoluments
Executive Directors
Steve Morgan (i)
John Tutte
Barbara Richmond
Non-Executive Directors
Alan Jackson
Debbie Hewitt
Paul Hampden Smith
Basic salary
and fees
£000
(ii)
Benefits
£000
(ii)
Car
allowance
£000
Pension
allowance
£000
15
385
257
90
45
45
837
4
1
14
-
-
-
19
-
15
-
-
-
-
15
Bonus
£000
-
193
129
-
-
-
Total
2012
£000
19
620
451
90
45
45
Total
2011
£000
18
532
407
90
45
45
-
26
51
-
-
-
77
322
1,270
1,137
(i)
Steve Morgan draws a nominal salary of £15,000 per annum which he donates via Payroll Giving to the Morgan Foundation. The Company also
made a donation to the Morgan Foundation, a UK registered charity of which Steve Morgan is a trustee (£622,500 in the year ended 30 June 2012
(2011: £564,000); the donation amount is calculated based upon a notional £425,000 salary and cash bonus percentage consistent with that
earned by John Tutte and Barbara Richmond). Further details are given in the Directors’ report on page 58 and in note 22 to the financial
statements.
(ii)
Benefits in kind represent fully expensed cars and private health insurance.
Pension Scheme
Details of the Executive Directors’ pension entitlements are as follows:
Disclosure required by Part 15 to the Companies Act 2006
Defined Benefit accrued entitlements
Director
John Tutte
Accrued
benefit at
30 June 2012
£
Additional
accrued
benefits
earned in
the year
£
Transfer
value of
accrued
benefit at
30 June 2011
£
Transfer
value of
accrued
benefit at
30 June 2012
£
Change in
transfer value
less directors’
contributions
£
50,364
5,334
529,673
943,706
397,018
Director
John Tutte
Additional
accrued
benefit
over year net
of inflation
£
Transfer value
of change
in accrued
benefit less
directors’
contributions
£
Accrued
benefit at
30 June 2012
£
50,364
2,992
39,056
The accrued pension shown above is the amount of pension entitlement that would be paid each year on retirement at age 65 based on service to
29 February 2012. The Scheme closed to the accrual of future benefits with effect from 1 March 2012. The transfer value shown above has been
calculated on the basis of actuarial advice in accordance with relevant legislation, less Directors’ contributions. The transfer values represent the
present value of future payments from the Scheme rather than remuneration currently due to the individual and cannot be meaningfully
aggregated with annual remuneration.
The following table sets out those share options held by Directors under SAYE, CSOP and LTSIP schemes. The options granted in respect of the LTSIP schemes
were granted at nil cost to the Directors and were awarded in respect of past performance with future performance conditions attached. All options are in
respect of shares in Redrow plc. Once the award has vested the exercise of the share options is unconditional.
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Interests in share options
Directors’ interests in share options
Scheme Options Options Options Options Options Exercise From To
held at granted exercised lapsed held at price
1 July in year in year 30 June
2011 2012 £
John Tutte
SAYE 2008 9,025 - (9,025) - - 1.06 01/01/12 01/07/12
SAYE 2011 - 9,453 - - 9,453 0.95 01/01/15 01/07/15
LTSIP 2008 † 471,512 - - - 471,512 - 21/11/13 20/11/18
CSOP 2008 23,981 - - - 23,981 1.25 21/11/13 20/11/18
LTSIP 2009 †† 229,007 - - - 229,007 - 22/12/12 21/12/19
LTSIP 2010 ††† 365,131 - - - 365,131 - 18/02/14 20/04/24
LTSIP 2011 †††† - 323,834 - - 323,834 - 21/09/14 20/09/24
1,098,656 333,287 (9,025) - 1,422,918
Barbara Richmond
LTSIP 2009 †† 358,423 - - - 358,423 - 25/02/13 24/02/20
SAYE 2010 9,146 - - - 9,146 0.98 01/01/14 01/07/14
LTSIP 2010 ††† 243,421 - - - 243,421 - 18/02/14 20/04/24
LTSIP 2011 †††† - 215,889 - - 215,889 - 21/09/14 20/09/24
610,990 215,889 - - 826,879
† The performance conditions attached to the exercise of share options granted under the LTSIP 2008 are ROCE, growth in EPS and generation of Total
Shareholder Return. The performance condition end date is 30 June 2013.
†† The performance conditions attached to the exercise of share options granted under the LTSIP 2009 are ROCE, growth in EPS and generation of Total
Shareholder Return. The performance condition end date is 30 June 2012.
††† The performance conditions attached to the exercise of share options granted under the LTSIP 2010 are ROCE, growth in EPS and generation of Total
Shareholder Return. The performance condition end date is 30 June 2013.
†††† The performance conditions attached to the exercise of share options granted under the LTSIP 2011 are ROCE and growth in EPS. The performance
condition end date is 30 June 2014.
56 Redrow plc Annual Report
and Accounts 2012
Directors’
Remuneration
report
(continued)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 57
Directors’
report
No other Directors have been granted share options in shares of the Company. The mid-market price of Redrow plc shares at 30 June 2012 was
120.9p and the range during the year was 103.5p to 135.3p.
Gains made by Directors on share options
John Tutte exercised SAYE share options during the year and retained the shares. The notional gain is outlined in the table below and is calculated as
at the exercise date.
Mid price
Share No. of on date of Notional gain
option shares Date of exercise on exercise
Executive Director scheme exercised exercise (pence) (£000)
John Tutte SAYE 2008 9,025 10/01/12 116.4 1
Directors’ contingent interests in share options
No Director has a contingent interest in share options as at 30 June 2012 or 30 June 2011.
Directors’ interests in shares (This section does not constitute an auditable part of the Remuneration report)
The Directors’ interests in the original shares of the Company were:
Beneficial: 18 September 30 June 30 June
2012 2012 2011
No. No. No.
Executive Directors
Steve Morgan 1 149,486,045 149,486,045 92,436,874
John Tutte 158,334 158,334 128,657
Barbara Richmond 89,819 89,819 70,512
Non-Executive Directors
Alan Jackson 22,177 22,177 19,285
Debbie Hewitt 21,605 21,605 18,787
Paul Hampden Smith 52,900 52,900 46,000
1 Includes shares held by Bridgemere
By order of the Board
Debbie Hewitt
Chairman of the Remuneration Committee
18 September 2012
The Directors have pleasure in presenting to the members their report
and the audited financial statements for the 12 months ended 30 June
2012.
Principal Activities and Business Review
The principal activity of the Group is residential development which
includes mixed use development. Redrow plc is a public listed company,
listed on the London Stock Exchange and domiciled in the UK.
Revenue and profit on ordinary activities before taxation from
continuing operations are stated at £478.9m and £43.0m respectively.
In the current environment, the Board considers that shareholders are
best served by retaining cash within the business and therefore does not
propose making a final dividend payment.
The information that fulfils the requirements of the business review can
be found in the Chairman’s statement and the Operating review and
Financial review on pages 8 to 29. This includes a review of the key risks
facing the business and a review of the key performance indicators of
the business and future developments. Details of the financial risk
management objectives and policies and associated risk exposure is
given in note 14: Financial Risk Management.
Potential Offer
On 31 August 2012, Bridgemere Securities Limited, Toscafund Asset
Management LLP and Penta Capital LLP announced that they had made
an initial approach to the independent Directors and were considering
the possibility of making an offer for Redrow. It was noted in the
announcement that the approach was at a preliminary stage and that
there could be no certainty that an offer will ultimately be made for
Redrow. Redrow also released an announcement on 31 August 2012
confirming the initial approach and noting that the Company would
establish a committee of independent Directors to consider the
approach. These announcements were sent to shareholders on
3 September 2012 and are available on the Company’s website.
The committee of Independent Directors has now been established
and further announcements will be made in due course.
Going Concern
The Directors have acknowledged the guidance on going concern and
financial reporting published by the Financial Reporting Council in
October 2009.
The current economic conditions and uncertainty in the housing market
create uncertainties for the business, and a description of the Group’s
principal risks and uncertainties and the arrangements to manage these
risks are set out on pages 28 to 29. The Group’s business activities,
together with the factors likely to affect its future performance, are set
out in the Business review section on pages 8 to 37. The Group’s
management of exposure to financial risk, including liquidity, interest
rate risk and credit risk, is disclosed in note 14 to the financial
statements together with details of the Group’s banking facilities and
capital management policies and processes.
As explained in the Financial review on pages 24 to 27, the Group
maintains adequate committed banking facilities which comprise an
unsecured £200m revolving credit facility due to mature in December
2014. As stated in note 14 to the financial statements, at 30 June 2012,
the Group had £170m of undrawn committed borrowing facilities
available.
The Directors have reviewed the Group’s financial forecasts for the
period to 31 December 2013 and associated financial covenants and
have considered various downside sensitivities reflecting the potential
impact of a further reasonably foreseeable deterioration in economic
conditions. This review confirmed headroom within both financial
covenants and facilities, subject to the business undertaking identified
mitigating actions which lie within the Group’s control. The principal
sensitivity relates to the impact of market conditions on profitability
and in turn on the Group’s net asset position relative to the covenanted
level.
After making appropriate enquiries, the Directors consider they have a
reasonable expectation for stating that the Group and the Company
have adequate resources to continue trading for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing
the financial statements.
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Significant Interests
As at 18 September 2012, the Company has been advised of the
following notifiable interests of 3% or more in its ordinary shares:
Name
Bridgemere
(incl. Steve Morgan)
Toscafund
FIL Limited
BlackRock Inc
Norges Bank
Legal & General
Investment Management
No. of
shares held
% of issued
share capital
149,486,045
40.42%
51,016,111
15,450,460
15,277,577
15,077,934
13.80%
4.18%
4.13%
4.08%
12,146,138
3.28%
The persons set out in the table above have notified the Company
pursuant to Rule 5 of the Disclosure and Transparency Rules of their
interests in the ordinary share capital of the Company.
At 18 September 2012, no change in these holdings had been notified
nor, according to the registrar of members, did any other shareholder at
that date have a notifiable holding of issued share capital.
58 Redrow plc Annual Report
and Accounts 2012
Directors’
report
(continued)
Directors & Board reports
Directors & Board reports
Redrow plc Annual Report
and Accounts 2012 59
Directors
The Directors of the Company during the year and up to the date of signing
are listed on page 54 of the Directors’ Remuneration report and are also
listed together with their biographical details on pages 38 and 39.
Formal appraisals of Executive Directors were undertaken during the
financial year. All the Non-Executive Directors underwent an annual
appraisal conducted by the Non-Executive Deputy Chairman.
The Board confirms that Steve Morgan, John Tutte and Barbara
Richmond, who stand for re-appointment as Executive Directors, and
Alan Jackson, Debbie Hewitt and Paul Hampden Smith who stand for re-
appointment as a Non-Executive Directors, continue to be effective and
demonstrate the appropriate commitment to their roles.
The Executive Directors have formal service agreements. Termination of
their employment may be effected by 12 months notice given by the
Company except for Steve Morgan where the notice period is six
months.
The Non-Executive Directors have fixed term service agreements
outlining their duties and responsibilities.
Details of Directors’ service agreements are given in the Directors’
Remuneration report on page 53.
Directors’ Interests
Related party transactions are disclosed in note 22 to the financial
statements. A summary of remuneration provided to key management
personnel is provided in note 7c.
The Directors’ interests in the ordinary shares of the Company are given
in the Directors’ Remuneration report on pages 55 to 56. There has been
no change in the Directors’ interests between 30 June 2012 and
18 September 2012.
Charitable and Political Donations
The Group made no political donations but paid £625,000 in charitable
donations during the year being £623,000 in respect of National
charities and £2,000 in support of local charities. The Group and its
employees are actively involved in fundraising activities for specific
charities. The Group made a £622,500 donation during the year to the
Morgan Foundation, a UK registered charity of which Steve Morgan is a
trustee. This is included within the charitable donations in respect of
National charities noted above.
Employees
Redrow places considerable importance on the provision of training and
development; training@redrow, a purpose built in-house training facility
at Tamworth, completed over 2,302 training days during the year ended
30 June 2012 including those which support the Group induction
process.
The Group supports the employment of disabled persons wherever
possible through recruitment and by the retention and retraining of
those who become disabled during their employment.
The Directors recognise the importance of good communications with
employees. Companies within the Group are encouraged to make their
employees aware of the financial and economic factors affecting their
respective companies and the Group. This is assisted through the
medium of regular management meetings, staff publications and the
Redrow intranet.
Employee share ownership is encouraged through savings related
schemes.
Creditor Payment Policy
The Group values its relationships with suppliers and subcontractors. It is
the policy to agree credit terms prior to commencement of trading.
Subject to any items of genuine dispute, it is policy to pay creditors
within the terms agreed. At June 2012, the Group had 48 days’
(2011: 39 days’) purchases outstanding in respect of payments to
suppliers and the Company had nil days’ purchases outstanding in
respect of payments to suppliers (2011: nil).
Research and Development
The Group has a centralised Product Development Team charged with
identifying and evaluating new construction techniques and products.
Environmental and sustainability issues play a prominent role in its
activities. The charge to the income statement in respect of research and
development in the year was £0.3m (2011: £0.3m).
Environment
Redrow recognises its responsibilities to the community as a whole and
has adopted an environmental strategy which is a core part of the
Group’s objectives. Further details are provided in the Corporate
responsibility review on pages 30 to 37 and also on our website at
redrowplc.co.uk.
Significant Agreements
The Company’s banking arrangements are terminable upon a change of
control of the Company. There are no contractual or other arrangements
essential to the business which require disclosure under the Companies
Act 2006.
Independent Auditors
A resolution to re-appoint PricewaterhouseCoopers LLP as
external Auditors will be proposed at the Annual General Meeting on
12 November 2012.
Provision of information to auditors:
In the case of each Director in office at the date the Directors’ report is
approved, confirm that:
(a) so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
(b) he has taken all the steps that he ought to have taken as a Director
in order to make himself aware of any relevant audit information
and to establish that the Company’s auditors are aware of that
information.
Capital Structure
The Company has an authorised share capital of 480,000,000 ordinary
shares of 10p each of which 369,799,938 have been issued. The
Company has one class of ordinary shares which carry ordinary rights to
dividends (subject to the Company’s Articles of Association). Each share
carries the right to one vote at general meetings of the Company.
No person has any special rights of control over the Company’s share
capital and all issued shares are fully paid.
Authority was given to the Directors at last year’s AGM to allot unissued
shares up to an aggregate nominal amount of £10,286,915 equivalent to
approximately 33% of the Company’s issued share capital and up to a
further aggregate nominal amount of £10,285,915 in connection with
an offer by way of a rights issue. As this authority expires at the
forthcoming AGM the Directors will be seeking new authorities as set
out in the Notice of Meeting and as referred to below.
Voting and Transfer of Shares
The Company’s Articles of Association do not contain any specific
restrictions on the size of a shareholder’s holding or on the transfer of
shares.
The Company is not aware of any agreements between shareholders
that may result in restrictions on the transfer of securities and/or voting
rights.
The Company’s Articles of Association do not contain and the Company
is not aware of any restrictions on voting rights including any limitations
on voting rights of holders of a given percentage or number of votes,
deadlines for exercising voting rights and arrangements by which, with
the Company’s co-operation, financial rights carried by securities are
held by a person other than the holder of the securities.
The voting rights attaching to the shares held by the Company’s
Employee Benefit Trust are exercisable by Abacus Trust Company (Isle of
Man), the trustee of the Trust.
Notice of Annual General Meeting
Pages 96 to 99 set out the Notice of Annual General Meeting and details
the resolutions proposed together with explanatory notes.
To the extent that the Directors’ report makes reference to information
contained in other sections of the Annual Report, such information will
be regarded as forming part of the Directors’ report.
By order of the Board
Graham Cope
Company Secretary
Redrow plc
Registered no. 2877315
18 September 2012
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60 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 61
Statement of Directors’ Responsibilities
Independent Auditors’ report to the members of Redrow plc
The Directors of Redrow plc as at the date of this statement are:
Steve Morgan, Chairman
Alan Jackson, Deputy Chairman and Senior Independent Director
John Tutte, Group Managing Director
Barbara Richmond, Group Finance Director
Debbie Hewitt, Non-Executive Director
Paul Hampden Smith, Non-Executive Director
By order of the Board
Graham Cope
Company Secretary
18 September 2012
Redrow plc
Redrow House
St. David’s Park
Flintshire
CH5 3RX
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have prepared the
Group and parent company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the
European Union. 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 the Company and
of the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
n
select suitable accounting policies and then apply them consistently;
n make judgements and accounting estimates that are reasonable and
prudent;
n
n
state whether applicable IFRSs as adopted by the European Union
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and the Group and enable them to ensure that the
financial statements and the Directors’ Remuneration report comply
with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and hence for
taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed below
confirm that, to the best of their knowledge:
n
n
the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and result of the
Group and Company; and
the Directors’ report contained on pages 57 to 59 includes a fair
review of the development and performance of the business and the
position of the Group and Company, together with a description of
the principal risks and uncertainties that they face.
We have audited the financial statements of Redrow plc for the year
ended 30 June 2012 which comprise the Consolidated income
statement, the Consolidated Group and Company statement of
comprehensive income, the Group and parent company Balance sheets,
the Group and parent company Statement of changes in equity and the
Group and parent company Statement of cash flows, the Accounting
Policies and the related notes. The financial reporting framework that
has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set
out on page 60, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
n
n
the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union 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 lAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
n
n
n
the part of the Directors’ Remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006;
the information given in the Directors’ report for the financial year
for which the financial statements are prepared is consistent with
the financial statements; and
the information given in the Corporate Governance Statement set
out on pages 40 to 46 with respect to internal control and risk
management systems and about share capital structures is
consistent with the financial statements.
This report, including the opinions, has been prepared for and only for
the Company’s members as a body in accordance with Chapter 3 of Part
16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that
the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s and the parent
company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the
financial statements.
In addition, we read all the financial and non-financial information in the
Annual Report and Accounts to identify material inconsistencies with the
audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion:
n
n
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 30 June 2012 and
of the Group’s profit and Group’s and parent company’s cash flows
for the year then ended;
the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
n
n
n
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
n we have not received all the information and explanations we
require for our audit; or
n
a corporate governance statement has not been prepared by the
parent company.
Under the Listing Rules we are required to review:
n
n
n
the Directors’ statement, set out on page 57, in relation to going
concern;
the parts of the Corporate Governance Statement relating to the
Company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review; and
certain elements of the report to Shareholders by the Board on
Directors’ remuneration.
Ian Morrison (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
18 September 2012
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62 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 63
Consolidated income statement
Balance sheets
12 months ended 30 June
As at 30 June
The Group
The Company
2012 2011
Note £m £m
Revenue 478.9 452.7
Cost of sales (396.1) (388.4)
Gross profit 82.8 64.3
Administrative expenses (34.8) (33.1)
Operating profit before financing costs 2 48.0 31.2
Financial income 3 2.4 2.7
Financial expenses 3 (7.4) (8.6)
Net financing costs (5.0) (5.9)
Share of loss of joint ventures after interest and taxation 10 - -
Profit before tax 43.0 25.3
Income tax (expense) 4 (12.8) (11.8)
Profit for the period 30.2 13.5
Earnings per share - basic 6 9.7p 4.4p
- diluted 6 9.7p 4.4p
Consolidated statement of comprehensive income
12 months ended 30 June
The Group
The Company
Profit/(loss) for the period
Other comprehensive income/(expense)
Effective portion of changes in fair value of interest rate cash flow hedges
Deferred tax on change in fair value of interest rate cash flow hedges
Actuarial (losses)/gains on defined benefit pension scheme
Deferred tax on actuarial (losses)/gains taken directly to equity
Other comprehensive (expense)/income for the period net of tax
Total comprehensive income/(expense) for the period
Note
7e
18
2012
£m
30.2
-
-
(7.9)
1.9
(6.0)
24.2
2011
£m
13.5
1.1
(0.3)
2012
£m
(6.0)
-
-
9.7
(7.9)
(2.5)
8.0
21.5
1.9
(6.0)
(12.0)
2011
£m
(5.4)
1.1
(0.3)
9.7
(2.5)
8.0
2.6
Assets
Intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Retirement benefit surplus
Trade and other receivables
Total non-current assets
Non-current assets held for sale
Inventories
Trade and other receivables
Current income tax receivables
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium account
Hedge reserve
Other reserves
Retained earnings
Total equity
Liabilities
Bank loans
Trade and other payables
Deferred tax liabilities
Retirement benefit obligations
Long-term provisions
Total non-current liabilities
Bank overdrafts and loans
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Note
8
9
10
11
7
12
9
13
12
4
14
17
18
18
18
18
14
15
11
7
16
14
15
2012
£m
1.8
12.1
9.3
51.8
-
26.0
101.0
1.4
708.2
27.2
-
37.4
774.2
875.2
37.0
58.7
-
7.9
457.9
561.5
30.0
40.6
0.7
2.6
8.2
82.1
21.4
210.2
231.6
313.7
875.2
2011
£m
1.7
12.9
2.6
63.8
5.0
31.4
117.4
1.4
562.7
38.2
-
32.0
634.3
751.7
30.9
58.7
-
7.9
361.1
458.6
85.0
12.4
1.8
-
8.0
107.2
22.4
163.5
185.9
293.1
751.7
2012
£m
-
-
0.1
3.9
-
-
4.0
-
-
419.1
8.3
-
427.4
431.4
37.0
58.6
-
7.0
276.1
378.7
30.0
-
-
2.6
-
32.6
3.5
16.6
20.1
52.7
431.4
2011
£m
-
-
0.1
2.1
5.0
-
7.2
-
-
391.8
6.5
7.3
405.6
412.8
30.9
58.6
-
7.0
216.2
312.7
85.0
-
-
-
-
85.0
-
15.1
15.1
100.1
412.8
The financial statements on pages 62 to 95 were approved by the Board of Directors on 18 September 2012.
Directors
S P Morgan B M Richmond
Redrow plc Registered No. 2877315
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64 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 65
Statement of changes in equity
The statement of cash flows
12 months ended 30 June
The Group
The Company
12 months ended 30 June
2011
£m
Total comprehensive income/(expense) relating to the period (net) 24.2 21.5 (12.0) 2.6
Shares issued 18 78.0 - 78.0 -
Share-based payment 18 0.3 0.3 - -
Movement in LTSIP/SAYE 18 0.4 0.9 - -
Net increase in equity 102.9 22.7 66.0 2.6
2012
£m
2011
£m
2012
£m
Note
Cash flow from operating activities
Operating profit/(loss) before financing costs 48.0 31.2 (0.2) (0.4)
Depreciation and amortisation 1.3 1.3 - -
Adjustment for non-cash items (3.1) (2.8) (0.6) 0.6
Operating profit/(loss) before changes in working capital and provisions 46.2 29.7 (0.8) 0.2
Note
The Group
The Company
2012
£m
2011
£m
2012
£m
2011
£m
Opening equity 458.6 435.9 312.7 310.1
Closing equity 561.5 458.6 378.7 312.7
As permitted by section 408 of the Companies Act 2006, the income statement of Redrow plc is not presented as a part of these financial
statements.
Decrease/(increase) in trade and other receivables 6.3 (10.2) (27.3) (11.9)
(Increase) in inventories (145.5) (71.1) - -
Increase in trade and other payables 75.2 25.1 1.4 0.2
Increase/(decrease) in provisions 0.2 (0.4) - -
Cash (outflow) generated from operations (17.6) (26.9) (26.7) (11.5)
The consolidated profit/(loss) on ordinary activities after taxation for the financial year, excluding intra-Group dividends, is made up as follows:
2012 2011
£m £m
Holding company (6.0) (5.4)
Subsidiary companies 36.2 18.9
30.2 13.5
Interest paid (3.6) (4.9) (7.1) (6.1)
Tax received - 0.5 - -
Net cash from operating activities (21.2) (31.3) (33.8) (17.6)
Cash flows from investing activities
Sale of business 12.3 5.0 - -
Sale of subsidiary to other Group company - - - -
Acquisition of property, plant and equipment (0.7) (0.7) - -
Proceeds from sale of property, plant and equipment - 0.6 - -
Interest received - 1.0 - -
Payments to joint ventures - continuing operations (6.7) (0.4) - -
Net cash inflow from investing activities 4.9 5.5 - -
Cash flows from financing activities
Issue of bank borrowings 30.0 85.0 30.0 85.0
Repayment of bank borrowings (85.0) (50.0) (85.0) (50.0)
Issue costs of bank borrowings - (2.5) - (2.5)
Purchase of own shares (0.3) - - -
Proceeds from issue of share capital 78.0 - 78.0 -
Net cash inflow from financing activities 22.7 32.5 23.0 32.5
Increase/(decrease) in net cash and cash equivalents 6.4 6.7 (10.8) 14.9
Net cash and cash equivalents at the beginning of the period 9.6 2.9 7.3 (7.6)
Net cash and cash equivalents at the end of the period 19 16.0 9.6 (3.5) 7.3
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66 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 67
Accounting policies
Both the consolidated and Company financial statements have been
prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union (EU) and effective at 30 June
2012, and in accordance with IFRIC interpretations and the Companies Act
2006 as it applies to companies reporting under IFRS and Article 4 of the IAS
Regulation and in accordance with the historical cost convention as
modified by the revaluation of derivative financial instruments.
The preparation of financial statements in conformity with IFRS requires the
use of estimates and assumptions that affect the reported amounts of
assets and liabilities at the balance sheet date and the reported amounts of
revenue and expenses during the reporting period. Whilst these estimates
are based on management’s best knowledge of the amount, event or
actions, actual results ultimately may differ from those estimates (refer to
note 1).
The financial statements have been prepared on a going concern basis.
The principal accounting policies have been applied consistently in the
periods presented and are outlined below:
Basis of Consolidation
The consolidated financial statements incorporate the financial statements
of Redrow plc and all its subsidiaries, together with the Group’s share of the
results and share of net assets of jointly controlled entities i.e. the financial
statements of Redrow plc and entities controlled by Redrow plc (and its
subsidiaries). Control is achieved where Redrow plc has the power to govern
the financial and operating policies of an entity. Redrow plc’s accounting
reference date is 30 June. Consistent with the normal monthly reporting
process, the actual date to which the balance sheet has been drawn up is to
1 July 2012 (2011: 3 July 2011). For ease of reference all references to the
year or 12 months and financial position are for the year ended 30 June and
as at 30 June.
The Group has taken advantage of the exemption provided under Section
408 of the Companies Act 2006 not to present Redrow plc's Company
Income Statement. The profit/(loss) for the financial year is dealt with in
the Statement of Changes in Equity.
a) Subsidiaries
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured at their fair value at the date of acquisition. Any
excess of the cost of acquisition over the fair value of the Group’s share of
the identifiable net assets represents goodwill. Goodwill is subject to an
annual impairment review, with any reduction in value being taken straight
to the income statement.
Adjustments are made as necessary to the financial statements of
subsidiaries to ensure consistency with the policies adopted by the Group.
Income and Deferred Tax
Income tax comprises current tax and deferred tax.
The assets useful lives are reviewed and adjusted if appropriate at each
balance sheet date.
All inter-company transactions and balances between Group companies are
eliminated on consolidation.
b) Interests in Joint Ventures
A joint venture is a contractual arrangement whereby the Group and other
parties undertake an economic activity which is subject to joint control.
Joint venture arrangements which involve the establishment of a separate
entity in which each venturer has an interest are referred to as jointly
controlled entities.
The Group reports its interests in jointly controlled entities using the equity
method of accounting - the Group’s share of profit after tax is shown
separately on the face of the income statement and its share of net assets is
included within non-current assets in the balance sheet as an investment.
When the Group transacts with its jointly controlled entities, unrealised
profits and losses are eliminated to the extent of the Group’s interest in the
joint venture, except where unrealised losses provide evidence of
impairment of the asset transferred. Where joint venture arrangements are
undertaken directly, the Group’s share of jointly controlled assets and
liabilities are recognised in the relevant subsidiary company and classified
according to their nature.
Revenue and Profit Recognition
Revenue represents the fair value received and receivable in respect of the
sale of residential housing and land and of commercial land and
developments net of value added tax and discounts. This is recognised on
legal completion.
Profit is recognised on legal completion.
Segmental Reporting
The main operation of the Group is focused on housebuilding.
As it operates entirely within the United Kingdom, the Group has only one
business and geographic segment. This is consistent with the information
provided for internal reporting purposes to the Chief Operating decision
maker (the Board). The Group has no key customers.
Exceptional Items
Exceptional items are those which in the opinion of the Board, are material
by size or nature, non-recurring and of such significance that they require
separate disclosure.
Net Financing Costs
Interest income is recognised on a time apportioned basis by reference to
the principal outstanding and the effective interest rate. Interest costs are
recognised in the income statement on an accruals basis in the period in
which they are incurred.
Current tax is based on taxable profits for the year and any appropriate
adjustment to tax payable in respect of prior years. Taxable profit differs
from profit before tax as shown in the income statement as it excludes
income or expenditure items which are never chargeable or allowable for
tax or which are chargeable or deductible in other accounting periods.
These are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying values may not be recoverable.
The gain or loss arising on the disposal of an asset represents the difference
between the sales proceeds and the carrying amount of the asset and is
recognised in the income statement.
Deferred tax is provided in full, using the balance sheet liability method, on
temporary differences arising between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax
bases used in the calculation of taxable profit.
Non-current Assets Held for Sale
Non-current assets are classified as assets held for sale when their carrying
amount is to be recovered principally through a sale transaction and a sale is
considered highly probable. They are stated at management’s best estimate
of realisable value less estimated costs necessary to make the sale.
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Deferred tax liabilities are recognised for all
temporary differences. Deferred tax is calculated at the rates enacted at the
balance sheet date.
Deferred tax is credited or charged in the income statement, statement of
consolidated statement of comprehensive income, or retained earnings as
appropriate.
Intangible Assets – Computer Software
Acquired computer software licences are capitalised on the basis of costs
incurred to bring to use the specific software and are amortised over their
estimated useful lives of three years. These are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
values may not be recoverable.
Property, Plant and Equipment
Freehold property comprises offices or other buildings held for
administrative purposes. Freehold property is shown at cost less the
subsequent depreciation of buildings.
All other property, plant and equipment is stated at historic cost less
depreciation. Historic cost includes any costs directly attributable to
bringing the assets to the location and condition necessary for them to be
capable of operating in the manner intended by management.
Land is not depreciated. Depreciation on other assets, is charged so as to
write off the cost of assets to their residual values over their estimated
useful lives, on a straight line basis as follows:
Buildings 50 years
Plant & machinery 5 – 10 years
Fixtures & fittings 3 – 5 years
Investment in Subsidiary Companies
In the parent company books, the investment in its subsidiaries is held at
cost less any impairment.
Leases
Leases in which substantially all of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Rentals payable
under operating leases are charged to work in progress or income on a
straight line basis over the term of the relevant lease. Leases classified as
finance leases are those where substantially all of the risks and rewards of
ownership pass to the lessee. The corresponding liability to the lessor is
included in the balance sheet as a finance lease obligation.
Inventories
Inventories are stated at the lower of cost and net realisable value less cash
on account.
Cost comprises land and associated acquisition costs, direct materials and
subcontract work, other direct costs and those overheads (based on normal
operating capacity) that have been incurred in bringing the inventories to
their present location and condition, excluding borrowing costs.
The Group differentiates its inventories into two categories:
a) Type 1: land where generally the construction of homes had
commenced at the year end and which was generally short to medium
term in its development horizon. This category also includes
undeveloped land on which housebuild had not commenced at 30 June
2012 but which the Group believes it is more likely to develop than to
sell undeveloped.
b) Type 2: land where housebuild had not commenced and land could be
identified as a distinct parcel. This land is more generally medium to
long term in time horizon and the Group believes it is more likely to be
sold undeveloped.
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68 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 69
Accounting policies (continued)
Net realisable value for land where construction of homes had commenced
at the year end (Type 1) was assessed by estimating selling prices and cost
(including sales and marketing expenses), taking into account current
market conditions.
Under IAS 19, revised December 2004, the Group has taken the option to
allow actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions to be charged or credited to equity as they
arise in full via the statement of comprehensive income.
The Group’s use of financial derivatives is governed by an interest rate risk
management framework adopted by the Board which sets parameters to
ensure an appropriate level of hedging is maintained to manage interest rate
risk in respect of borrowings.
Dividend Distribution
Dividend distribution to the Company’s shareholders is recognised as a
liability in the Group’s financial statements in the period in which the
dividends are declared and paid.
The net realisable value of land where housebuild had not commenced
(Type 2) and is more likely to be sold undeveloped was assessed by
re-appraising the land using current selling prices and costs for the proposed
development and assuming an appropriate financial return to reflect the
current housing market conditions and the prevailing financing
environment. This net realisable value represents valuing the land at the
amount the Group estimates it could be sold for at the balance sheet date
less estimated costs necessary to make the sale.
This net realisable value provision will be closely monitored for adequacy
and appropriateness as regards under and over provision to reflect
circumstances at future balance sheet dates. This will include consideration
of the continued appropriateness of the allocation of sites between Type 1
and Type 2. Any material change to the underlying provision will be reflected
through cost of sales as an exceptional item.
Forward Land
Expenditure relating to forward land excluding owned sites without residential
planning consent but including options, fees etc is provided for when incurred.
After exercise of an option and acquisition of land following the securing of
planning permission, the provisions relating to that land are released.
Expenditure incurred on owned sites without residential planning consent is
included in inventories and is subject to a regular impairment review.
Employee Benefits
a) Pension obligation
The Group operates two pension schemes for its staff. The Redrow Staff
Pension Scheme (the ‘Scheme’) closed to the accrual of new benefits with
effect from 1 March 2012, with new benefits now being provided via the
Redrow Group Personal Pension Plan (the ‘GPP’). The Scheme is externally
invested and comprises two sections: a defined benefit section and a
defined contribution section. A defined benefit plan is a pension plan which
defines an amount of pension benefit that an employee will receive on
retirement. It is funded through payments to trustee administered funds,
determined by actuarial valuations carried out on at least a triennial basis. A
defined contribution plan is a pension plan under which the Group pays
agreed contributions into a separate fund for each employee and any
subsequent pension payable to a specific employee is determined by the
amount accumulated in their individual fund. The GPP is also a type of
defined contribution plan.
The asset/(liability) recognised in the balance sheet in respect of the defined
benefit section of the scheme is the present value of the defined benefit
obligation at the balance sheet date, less the fair value of plan assets. The
defined benefit obligation is determined using the projected unit credit
method on an annual basis by an independent scheme actuary.
Scheme service costs are charged to cost of sales and administrative
expenses as appropriate and scheme finance costs are included in net
financing costs. Past service costs are recognised immediately to the extent
that the benefits are already vested, or otherwise amortised on a straight
line basis over the vesting period, if they are conditional on the employees
remaining in service for a further period.
In respect of the defined contribution section of the Scheme and the GPP,
contributions are recognised as an employee benefit expense when they are
due. The Group has no further payment obligations in respect of the above
once the contributions have been paid.
b) Bonus plans
The Group recognises a liability and an expense for bonuses where
contractually obliged.
c) Share-based payments
The Group has applied the requirements of IFRS 2 ‘Share-based payments’.
In accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002, which had not vested
as of 1 July 2004. Equity settled share-based payments are measured at fair
value on the date of grant and expensed on a straight line basis over the
vesting period, based on the Group’s estimate of shares that will eventually
vest.
d) Termination benefits
Termination benefits are payable when employment is terminated by the
Group before normal retirement date by redundancy. These benefits are
recognised by the Group in the period in which it becomes demonstrably
committed to terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal.
Financial Instruments
a) Land creditors
Deferred payments arising from land creditors are held at discounted
present value using the effective interest method, in accordance with IAS
39. The difference between the fair value and the nominal value is amortised
over the deferment period via financing costs.
The interest rate applied is an equivalent loan rate available on the date of
the land purchase.
b) Derivative financial instruments and hedge accounting
Derivative financial instruments are initially recorded at fair value and the
fair value is remeasured to fair value at each reporting date.
The policy prohibits any trading in derivative financial instruments or their
use for speculative purposes.
Impact Of New Standards And Interpretation
a) New Standards
The effective portion of changes in the fair value of derivative financial
instruments which are designated and which qualify as cash flow hedges are
recognised directly in equity in a hedge reserve. The gains or losses relating
to the ineffective portion are recognised in the income statement
immediately they arise.
c) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months
after the balance sheet date which are classified as non-current assets.
Loans and receivables include ‘trade receivables’ and ‘other receivables’ and
cash and cash equivalents in the balance sheet.
Trade receivables are held at discounted present value less any impairment.
The amount is then increased to settlement value over the settlement
period via financing income.
d) Cash and Cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand, forming an integral part of the
Group’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
e) Borrowings and Trade payables
Interest bearing borrowings and trade payables are recorded at the proceeds
received, net of transaction costs incurred and subsequently at amortised
cost. Any difference between the proceeds, net of transaction costs and the
redemption value is recognised in the income statement over the period of
the borrowings.
Onerous Contracts
Onerous contracts are contracts in which the unavoidable costs in meeting
the obligations under the contract exceed the economic benefits expected
to be received under it. Provision is made to reflect management’s best
current estimate of the least net cost of either fulfilling or exiting the
contract.
Share Capital
Ordinary shares are classed as equity.
Revised IAS 24, ‘Related party disclosures’ issued in November 2009 and
superseding IAS 24, ‘Related party disclosures’, issued in 2003. The revised
IAS24 is required to be applied from 1 January 2011.
b) New and amended standards, and interpretations mandatory for the first
time for the financial year beginning 1 July 2011 but not currently
relevant to the group
‘Prepayments of a minimum funding requirement’ (Amendments to IFRC
14), issued in November 2009. The amendments correct an unintended
consequence of IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset,
minimum funding requirements and their interaction’. Without the
amendments, entities are not permitted to recognise as an asset some
voluntary prepayments for minimum funding contributions. This was not
intended when IFRIC 14 was issued, and the amendments correct the
problem. The amendments are effective for annual periods beginning
1 January 2011. The amendments should be applied retrospectively to the
earliest comparative period presented.
IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This
interpretation clarifies the accounting when an entity renegotiates the
terms of its debt with the result that the liability is extinguished through the
debtor issuing its own equity instruments to the creditor. Not relevant for
the Group.
c) New standards, amendments and interpretations issued but not effective
for the financial year beginning 1 July 2011 and not early adopted
IAS 19 (revised 2011) ‘Employee benefits’. This amendment makes
significant changes to the recognition and measurement of defined benefit
pension expense and termination benefits, and to the disclosures for all
employee benefits. The changes will affect most entities that apply IAS 19.
They could significantly change a number of performance indicators and
might also significantly increase the volume of disclosures. This is effective
for annual periods beginning on or after 1 January 2013. The Group will
adopt this for the first time for the year beginning 1 July 2013, subject to
endorsement by the EU.
IFRS 9 ‘Financial instruments’ on classification and measurement of financial
assets. This is the first part of a new standard on classification and
measurement of financial assets that will replace IAS 39. IFRS 9 has two
measurement categories: amortised cost and fair value. All equity
instruments are measured at fair value. A debt instrument is at amortised
cost only if the entity is holding it to collect contractual cash flows and the
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 71
Accounting policies (continued)
Notes to the financial statements
cash flows represent principal and interest. Otherwise it is at fair value
through profit or loss. Effective for periods beginning on or after 1 January
2013. The Group have not assessed the full impact of this standard, and will
adopt this for the first time for the year beginning 1 July 2013, subject to
endorsement by the EU.
IFRS 10 ‘consolidated financial statements’. This standard builds on existing
principles by identifying the concept of control as the determining factor in
whether an entity should be included within the consolidated financial
statements. The standard provides additional guidance to assist in
determining control where this is difficult to assess. This new standard might
impact the entities that a group consolidates as its subsidiaries. Effective for
periods beginning on or after 1 January 2013. The Group have not assessed
the full impact of this standard, and will adopt this for the first time for the
year beginning 1 July 2013, subject to endorsement by the EU.
IFRS 11 ‘Joint arrangements’. This standard provides for a more realistic
reflection of joint arrangements by focusing on the rights and obligations of
the arrangement, rather than its legal form. There are two types of joint
arrangements: joint operations and joint ventures. Joint operations arise
where a joint operator has rights to the assets and obligations relating to
the arrangement and hence accounts for its interest in assets, liabilities,
revenue and expenses. Joint ventures arise where the joint operator has
rights to the net assets of the arrangement and hence equity accounts for
its interest. Proportional consolidation of joint ventures is no longer allowed.
Effective for periods beginning on or after 1 January 2013. The Group have
not assessed the full impact of this standard, and will adopt this for the first
time for the year beginning 1 July 2013, subject to endorsement by the EU.
IFRS 12 ‘Disclosure of interests in other entities’. This standard includes the
disclosure requirements for all forms of interests in other entities, including
joint arrangements, associates, special purpose vehicles and other off
balance sheet vehicles. Not expected to be relevant to the Group, but is
effective 1 January 2013.
IFRS 13 ‘Fair Value Measurement’. This standard will impact the disclosure of
fair value measurements and is effective for periods beginning on or after
1 January 2013. The Group will adopt this for the first time for the year
beginning 1 July 2013, subject to endorsement by the EU.
Note 1. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Management consider the key sources of estimation uncertainty and critical
accounting judgements relate to:
Carrying value of inventories
The Group carries inventories at the lower of cost and net realisable value less cash on account.
Due to the nature of development timescales, it is routinely necessary to estimate costs to complete and future revenues and to allocate non-unit
specific development costs between units legally completing in the current financial year and in future periods.
A full review of the net realisable value of inventories was undertaken by the Group as at 30 June 2012.
In respect of land where the construction of homes had commenced or undeveloped land that the Group believes it is more likely to develop than
sell undeveloped (Type 1 land), the Group estimated selling prices and costs of its homes under construction. These estimates were based on a
combination of experience to date, local market research and management experience.
In respect of land where housebuild had not commenced, land could be identified as a distinct parcel and the Group believes it is more likely to be
sold undeveloped (Type 2 land), the Group judged it appropriate to assess the net realisable value of the undeveloped land. It prepared estimates
using a land appraisal methodology reflecting land as a residual value and used an appropriate financial return to take into account the current
housing market conditions and the prevailing financing environment. The estimates reflected management’s estimate at the balance sheet date of
home selling prices and costs and current estimate of the market required rate of return.
The categorisation of undeveloped land between land the Group believes it is more likely to develop (Type 1 land) and land the Group believes it is
more likely to sell undeveloped (Type 2 land) is based on the Group’s current judgement of its medium term land requirements and prevailing
market conditions. The Directors regularly consider which element of the Group’s land bank they intend to develop and that which they do not.
Land which is not intended for development is generally considered as available to swap or sell.
Pensions
The Group has utilised assumptions including a rate of return on assets, mortality assumptions and a discount rate having been advised by its
actuary. To the extent that such assumed rates are different from what actually transpires, the retirement benefit obligations of the Group would
change.
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Financial information
Redrow plc Annual Report
and Accounts 2012 73
Notes to the financial statements (continued)
Note 2. Operating Profit Before Financing Costs
2012 2011
Note £m £m
Operating profit before financing costs is stated
After crediting:
Rental income 0.2 0.1
Profit on disposal of property, plant and equipment - -
After charging:
Inventories expensed in the year 13 373.2 415.4
Depreciation 9 1.2 1.2
Amortisation 8 0.1 0.1
Loss on disposal of property, plant and equipment - -
Operating leases - plant and machinery 1.5 1.3
- other 0.3 0.2
Research and development expenditure 0.3 0.3
Auditors’ remuneration - fees payable to Company’s auditor for audit services 0.1 0.2
- fees payable to Company’s auditor for other services 0.1 -
Fees payable to Company’s auditor for audit services comprise:
(i)
(ii) Fees payable for the audit of the Company’s subsidiaries pursuant to legislation £100,000 (2011: £120,000).
Fees payable for the audit of parent company and consolidated financial statements £30,000 (2011: £30,000) and
Auditors’ remuneration for non-audit services comprised £20,000 (2011: £20,000) in respect of an independent review of the half-yearly financial
statements and £120,000 in respect of the preparation of a working capital report in conjuction with the Firm Placing and Open Offer in May 2012
(2011: £nil).
Note 3. Net Financing Costs
2012 2011
£m £m
Interest payable on other bank loans (4.2) (6.1)
(4.2) (6.1)
Net interest paid on pension scheme - (0.1)
Imputed interest on deferred land creditors (3.2) (2.4)
Financial expense (7.4) (8.6)
Net interest received on pension scheme 0.2 -
Other interest receivable 2.2 2.7
Financial income 2.4 2.7
Net financing costs (5.0) (5.9)
Interest expense includes £nil in respect of the amortisation of the issue costs of bank borrowings (2011: £2.5m).
Note 4. Income Tax Expense
2012 2011
£m £m
Current tax charge
UK Corporation Tax at 25.5% (2011: 27.5%) - -
(Over) provision in respect of prior year - -
- -
Deferred tax
Origination and reversal of temporary differences 9.3 7.0
Impact of changes in deferred tax rate 3.5 4.8
Total income tax charge in income statement 12.8 11.8
Reconciliation of tax charge for the year
Profit before tax 43.0 25.3
Tax calculated at UK corporation tax rate of 25.5% (2011: 27.5%) 11.0 7.0
Impact of change in deferred tax rate 3.5 4.8
Tax effect of share of losses in joint ventures - -
Expenses not deductible for tax purposes net of rolled over capital gains - -
Short term temporary differences (1.7) -
Tax charge for the year 12.8 11.8
Deferred tax recognised directly in equity
Relating to pension scheme 1.9 (2.5)
Relating to fair value adjustment on interest rate swaps - (0.3)
1.9 (2.8)
Current income tax receivable in the Company is £8.3m (2011: £6.5m).
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74 Redrow plc Annual Report
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 75
Notes to the financial statements (continued)
Note 5. Dividends
No dividend was paid in the year ended 30 June 2012 (2011: £nil).
Note 6. Earnings Per Ordinary Share
The basic earnings per share calculation for the year ended 30 June 2012 is based on the weighted number of shares in issue during the period of
311.9m (2011: 304.3m) excluding those held in trust under the Redrow Long Term Incentive Plan (4.3m shares (2011: 4.3m shares)), which are
treated as cancelled.
Diluted earnings per share has been calculated after adjusting the weighted average number of shares in issue for all potentially dilutive shares held
under unexercised options.
12 months ended 30 June 2012
No. of
Earnings shares Per share
£m millions pence
Basic earnings per share 30.2 311.9 9.7p
Effect of share options and SAYE - 0.4 -
Diluted earnings per share 30.2 312.3 9.7p
No. of
Earnings shares Per share
£m millions pence
Basic earnings per share 30.2 311.9 9.7p
Adjustment to deferred tax rate change 3.5 - 1.1p
Adjusted earnings per share 33.7 311.9 10.8p
Adjusted diluted earnings per share are 10.8p (2011: 6.0p).
12 months ended 30 June 2011
No. of
Earnings shares Per share
£m millions pence
Basic earnings per share 13.5 304.3 4.4p
Effect of share options and SAYE - 0.3 -
Diluted earnings per share 13.5 304.6 4.4p
Note 7. Employees
a. Cost (including Directors)
2012 2011
£m £m
Salaries and wages 33.4 32.3
Social security 4.0 3.7
Pensions 2.8 2.8
Share-based payments 0.8 1.4
41.0 40.2
Included in salaries and wages are £0.2m of redundancy and termination payment costs (2011: £0.1m).
b. Number
2012 2011
No. No.
The average number of persons employed by the Group was:
Directors and administrative staff 408 361
Other personnel 559 572
967 933
c. Key Management remuneration
Key management personnel, as defined under IAS 24 (Related Party Disclosures), are identified as the Main Board together with Group Senior
Management.
Summary key management remuneration is as follows:
2012 2011
£m £m
Salaries and short term employee benefits 1.6 1.4
Post-employment benefits - -
Share-based payments 0.6 0.6
2.2 2.0
In addition, the Redrow Staff Pension scheme paid £10,403 (2011: £10,000) to Steve Morgan in his capacity as an active Scheme pensioner.
Detailed disclosure of Directors’ emoluments and interests in shares are included in the Directors’ Remuneration report on pages 54 to 56, which
form part of these financial statements.
d. Share-based payments
Save As You Earn Share Option Scheme
The Redrow plc Save As You Earn scheme is open to all employees and share options can be exercised either 3 or 5 years after the date of grant,
depending on the length of the savings contract. The Save As You Earn schemes are not subject to performance conditions.
The Save As You Earn schemes have been valued using the Black-Scholes pricing model.
2012 2011
Options granted during the year 1,181,685 1,054,055
Date of grant 1 January 2012 1 January 2011
Fair value at measurement date £0.74 £0.48/£0.55
Share price £1.19 £1.23
Exercise price £0.95 £0.98
Expected volatility 47% 47.0%
Option life (contract length) 3/5/7 years 3/5 years
Expected dividend 1.3% 1.7%
Risk free interest rate 1.5% 1.43%/1.43%
The expected volatility on Save As You Earn schemes is based on the historic volatility of the Group’s share price over periods equal to the length of
the savings contract.
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76 Redrow plc Annual Report
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 77
Notes to the financial statements (continued)
Long Term Share Incentive Scheme
Except in specified circumstances, options granted under the scheme are exercisable between 3 and 10 years after the date of grant.
Share Options Outstanding
The following share options were outstanding at 30 June 2012:
Options granted under the LTSIP on the 21 September 2011 were granted to a limited number of Senior Executives. The scheme is discussed in
greater detail within the Remuneration report.
Type of scheme
Date of Grant
The Long Term Share Incentive schemes have been valued using the Black-Scholes pricing model, with the exception of the TSR element of the
options granted on 20 April 2011, 25 February 2010, 22 December 2009 and 21 November 2008, for which a simulation model provided by external
consultants has been used.
2012 2011
Options granted during the year 721,070 637,649 and 175,377
Date of grant 21 September 2011 18 February 2011 & 20 April 2011
Fair value at measurement date £1.06 £0.62/£1.21
Share price £1.10 £1.26
Exercise price £0.00 £0.00
Expected volatility N/A† 47.0%
Option life 3 years 3 years
Expected dividend 1.3% 1.7%
Risk free interest rate N/A† 1.43%
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
Long Term Share Incentive
28 September 2001
23 September 2002
30 June 2003
25 June 2004
28 September 2004
24 June 2005
21 November 2008
22 December 2009
25 February 2010
18 February 2011
20 April 2011
21 September 2011
Number
of options
2012
-
541
161
145
-
120
-
389,312
358,423
637,649
175,377
721,070
Number
of options
2011
1,552
541
161
145
1,552
120
611,401
389,312
358,423
637,649
175,377
-
Company Share Option Plan
21 November 2008
803,336
963,204
The fair value at measurement date of the LTSIP granted on 21 September 2011 comprises £1.06 in respect of non-market based performance
conditions (18 February 2011 and 20 April 2011 comprises £0.62 in respect of the TSR element, and £1.21 in respect of non-market based
performance conditions).
The expected volatility of the Long Term Share Incentive scheme is based on the historic volatility of the Group’s share price over a period
equivalent to that of the options’ vesting. The expected volatility of the TSR element of the options granted on 20 April 2011 was based on the
historic volatility of Redrow and its peer group companies (being the comparator group as defined in the Directors’ Remuneration report).
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
2 January 2006
2 January 2007
2 January 2008
1 January 2009
1 January 2010
1 January 2011
1 January 2012
-
-
7,440
243,405
145,286
742,838
1,094,026
8,077
4,285
40,667
853,445
204,307
974,655
-
† For nil-cost awards not subject to a market based condition, volatility and risk free rate are not applicable.
Company Share Option Plan
Grants under the CSOP were limited to Senior Management. Except in specified circumstances, options granted to those other than the Executive
Directors are exercisable between 3 and 10 years after the date of grant and are not subject to performance conditions. Except in specified
circumstances, options granted to the Executive Directors are exercisable between 5 and 10 years after the date of grant and are subject to
performance conditions.
The CSOP scheme has been valued using a simulation model provided by external consultants. No CSOP options were granted in 2012 or 2011.
A dividend yield of 1.3% has been used in the SAYE, LTSIP and CSOP valuations.
The total share options outstanding at 30 June 2012 under the Long Term Share Incentive Plan, Company Share Option Plan and the Save As You
Earn schemes represent 1.4% of the issued share capital (2011: 1.7%).
Exercise
price
-
-
-
-
-
-
-
-
-
-
-
-
£1.25
£2.63
£3.82
£2.26
£1.06
£1.42
£0.98
£0.95
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78 Redrow plc Annual Report
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 79
Notes to the financial statements (continued)
Movements In The Year
The number and weighted average exercise prices of share options is as follows:
Long Term Share Incentive scheme:
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Company Share Option Plan:
Outstanding at the beginning of the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
Save As You Earn scheme:
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted
average
exercise
price
2012
-
-
-
-
-
-
£1.25
£1.25
£1.25
£1.25
£1.09
£1.17
£1.23
£0.95
£1.13
£1.06
Number of
options
2012
2,176,233
(611,401)
(3,104)
721,070
2,282,798
967
963,204
(159,868)
803,336
755,374
2,085,436
(530,378)
(503,748)
1,181,685
2,232,995
48,908
Weighted
average
exercise
price
2011
-
-
-
-
-
-
£1.25
£1.25
£1.25
-
£1.27
£1.38
£1.26
£0.98
£1.09
Number of
options
2011
1,465,195
(101,988)
-
813,026
2,176,233
4,071
1,033,147
(69,943)
963,204
-
1,595,375
(552,397)
(11,597)
1,054,055
2,085,436
The weighted average share price at the date of exercise of share options exercised during the year was £1.23 (2011: £1.26).
The options outstanding at 30 June 2012 had a range of exercise prices of £nil to £2.26 (2011: £nil to £3.82) and a weighted average remaining
contractual life of 4.7 years (2011: 5.5 years).
The expected life used in the models has been adjusted, based on best estimates, to reflect exercise restrictions and behavioural considerations.
The charge to income in relation to equity settled share-based payments in the year is £0.8m (2011: charge: £1.4m).
e. Retirement benefit schemes
The Redrow Staff Pension Scheme (the “Scheme”) comprises two sections: a funded, self-administered, defined benefit section and a funded defined
contribution section. The defined benefit section was closed to all new entrants from July 2006, having been closed to all but a limited number of
agreed new entrants from October 2001. Both sections of the Scheme were closed to future accrual with effect from 1 March 2012.
The total pension charge for the year was £10.7m (2011: credit of £6.9m). A charge of £8.5m related to the defined benefit section of the Scheme
(2011: credit of £8.7m), with £0.6m being charged to the income statement (2011: charge of £1.0m) and a charge of £7.9m to the statement of
comprehensive income (2011: credit of £9.7m). The charge arising from the defined contribution section was £2.2m (2011: £1.8m).
Triennial Valuation
A full independent triennial actuarial valuation of the defined benefit section of the Scheme was undertaken at 1 July 2011. The method used was
the Projected Unit Method. In the opinion of the Actuary, there was a deficit of £9.8m in the defined benefit section of the Scheme, with the value
of the Scheme’s assets representing 90% of the Scheme’s liabilities. As at 1 July 2011 the value of the defined benefit section of the Scheme’s
assets was £83.7m. The previous triennial valuation was undertaken as at 1 July 2008 and reported a surplus of £9.9m.
Defined Benefit Scheme – IAS 19 Valuation
Redrow has a policy of recognising all actuarial gains and losses for its defined benefit plan in the period in which they occur, outside the income
statement, in the statement of comprehensive income.
This disclosure relates to the defined benefit section of the Scheme. The Scheme’s assets are held separately from the assets of Redrow and are
administered by the trustees and managed professionally.
The latest formal actuarial valuation of the defined benefit section was carried out at 1 July 2011. This valuation has been updated to
30 June 2012 by a qualified actuary for the purposes of these accounts.
The Group expects to contribute £1.1m to the Scheme in the year ending 30 June 2013.
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80 Redrow plc Annual Report
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 81
Notes to the financial statements (continued)
The major financial assumptions used in arriving at the IAS 19 valuation were:
Long term rate of increase in pensionable salaries
Rate of increase of benefits in payment (lesser of 5% per annum and RPI) 1
Rate of increase of benefits in payment (lesser of 2.5% per annum and RPI) 2
Discount rate
Inflation assumption - RPI
- CPI
Expected return on assets
2012
n/a
3.1%
2.2%
4.6%
3.2%
2.2%
5.4%
2011
2.4%
3.8%
2.4%
5.8%
3.9%
2.9%
6.1%
1
2
In respect of pensions in excess of the guaranteed minimum pension earned prior to 30 June 2006.
In respect of pensions in excess of the guaranteed minimum pension earned after 30 June 2006. Other pension increases are valued in a
consistent manner.
The expected return on assets assumption has been derived by considering the appropriate return for each of the main asset classes listed on page
81. The yields assumed on bond type investments are based on published redemption yields at the balance sheet date. The assumed return on
equities, property and diversified growth funds reflects an assumed allowance for the out-performance of these asset classes over UK Government
bonds in the long term. The rates of return are shown net of investment manager expenses.
The mortality tables used in the actuarial valuation were as follows (which make allowance for projected further improvements in mortality):
For male members:
SIN X A CMI_2010 1% Long Term Trend
The life expectancies implied by these tables for typical members are:
Pensioner currently aged 65:
Future pensioner when aged 65:
Male 22.4 years
Male 23.1 years
It has been assumed that the majority of members will commute part of their pension in return for a tax free cash sum on retirement.
The Scheme closed to future benefit accrual on 29 February 2012. Prior to the closure, active members received Pensionable Salary increases which
were capped each year at the Retail Price Index (‘RPI’) or 2.5% if lower. Deferred pensions are assumed to increase in line with the Consumer Price
Index (‘CPI’). At the date the Scheme closure was effected, the best estimate of future CPI was almost identical to the salary growth assumption,
hence the closure does not result in any curtailment item.
An enhanced transfer value exercise was completed during Spring 2012. Approximately £3.5m was paid in transfer values to settle the benefits of
approximately 70 members. The liability under IAS19 of these members was approximately £3.2m. Therefore the exercise resulted in a settlement
loss of £0.3m.
The total assets, the split between the major asset classes in the Scheme, the present value of the Schemes’ liabilities and the amounts recognised
in the balance sheet are shown below:
Equities
Property
Gilts
Corporate bonds
High yield bonds
Diversified growth funds
Cash
Insurance policies
Total market value of assets
Present value of obligations
(Deficit)/surplus in the Scheme
The total amounts credited/(charged) against income in the year were as follows:
Amounts included within the income statement:
Administrative expenses
Current service cost
(Losses)/gains on curtailments and settlements
Financing costs
Expected return on assets
Interest cost
Amounts recognised in the statement of comprehensive income:
Actuarial (losses)/gains
The Group and Company
2011
£m
21.2
6.0
17.4
16.0
6.7
16.4
0.1
1.9
85.7
(80.7)
5.0
2012
£m
18.2
6.3
17.7
17.5
6.9
17.2
0.1
1.9
85.8
(88.4)
(2.6)
The Group and Company
2011
£m
2012
£m
(0.5)
(0.3)
4.8
(4.6)
(0.6)
(7.9)
(8.5)
(0.9)
-
4.3
(4.4)
(1.0)
9.7
8.7
Cumulative amount of (losses) recognised in the statement of comprehensive income since 1 July 2004
(22.0)
(14.1)
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82 Redrow plc Annual Report
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 83
Notes to the financial statements (continued)
The amount included in the balance sheet arising from the surplus/(deficit) in respect of the Group’s defined benefit section is as follows:
Balance sheet surplus/(deficit)
At start of year
Amounts (charged)/credited against statement of comprehensive income
Employer contributions paid
At end of year
Changes in the present value of the defined benefit obligation:
At start of year
Current service cost
Interest cost
Member contributions
Losses/(gains) on curtailments and settlements
Benefit payments, group life insurance death in service premiums and administration costs
Actuarial losses/(gains) on liabilities
At end of year
Changes in the fair value of the Scheme’s assets:
At start of year
Normal employer contributions
Member contributions
Expected return on assets
Benefit payments, group life insurance death in service premiums and administration costs
Actuarial (losses)/gain on assets
At end of year
The actual return on the plan assets was a profit of £4.5m (2011: profit of £9.5m).
A five year history of experience adjustments is set out below:
Present value of defined benefit obligation (£m)
Present value of Scheme assets (£m)
Scheme (deficit)/surplus (£m)
Experience adjustments on Scheme liabilities over the year
excluding change in assumptions (£m)
Percentage of Scheme liabilities
Experience (loss)/gain on Scheme assets over the year (£m)
Percentage of Scheme assets
2012
88.4
85.8
(2.6)
0.6
0.7%
(0.3)
(0.3%)
2011
80.7
85.7
5.0
-
-
5.2
6.1%
2010
81.1
76.7
(4.4)
0.4
0.5%
6.7
8.7%
The Group and Company
2011
£m
2012
£m
5.0
(8.5)
0.9
(2.6)
80.7
0.5
4.6
0.3
0.3
(5.6)
7.6
88.4
85.7
0.9
0.3
4.8
(5.6)
(0.3)
85.8
2009
63.2
66.0
2.8
(4.4)
8.7
0.7
5.0
81.1
0.9
4.4
0.5
-
(1.7)
(4.5)
80.7
76.7
0.7
0.5
4.3
(1.7)
5.2
85.7
2008
72.4
72.2
(0.2)
(0.2)
(0.3%)
(12.8)
(19.4%)
0.4
0.6%
(7.7)
(10.7%)
Note 8. Intangible Assets
Group
Cost
At 1 July 2010
Additions
At 30 June 2011
Additions
At 30 June 2012
Accumulated amortisation
At 1 July 2010
Charge
At 30 June 2011
Charge
At 30 June 2012
Net book value
At 30 June 2012
At 30 June 2011
At 30 June 2010
Note 9. Property, Plant and Equipment
Group
Cost
At 1 July 2010
Additions
Disposals
At 30 June 2011
Additions
Disposals
At 30 June 2012
Accumulated depreciation
At 1 July 2010
Charge
Disposals
At 30 June 2011
Charge
Disposals
At 30 June 2012
Net book value
At 30 June 2012
At 30 June 2011
At 30 June 2010
Goodwill
£m
Software
£m
Total
£m
1.5
-
1.5
-
1.5
-
-
-
-
-
1.5
1.5
1.5
1.1
-
1.1
0.2
1.3
0.8
0.1
0.9
0.1
1.0
0.3
0.2
0.3
Freehold
property
£m
Plant &
machinery
£m
Fixtures &
fittings
£m
14.4
0.1
(1.2)
13.3
-
-
13.3
2.4
0.5
(0.2)
2.7
0.3
-
3.0
10.3
10.6
12.0
3.9
0.1
(0.3)
3.7
-
(0.1)
3.6
2.5
0.3
(0.1)
2.7
0.3
-
3.0
0.6
1.0
1.4
5.3
0.5
(0.8)
5.0
0.5
-
5.5
4.1
0.4
(0.8)
3.7
0.6
-
4.3
1.2
1.3
1.2
2.6
-
2.6
0.2
2.8
0.8
0.1
0.9
0.1
1.0
1.8
1.7
1.8
Total
£m
23.6
0.7
(2.3)
22.0
0.5
(0.1)
22.4
9.0
1.2
(1.1)
9.1
1.2
-
10.3
12.1
12.9
14.6
There was £nil of capital expenditure contracted at 30 June 2012 (2011: £nil).
The carrying value of non-current assets held for sale at 30 June 2012 was £1.4m (2011: £1.4m).
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84 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 85
Notes to the financial statements (continued)
Note 10. Investments
a. Investments
The Group The Company
2012 2011 2012 2011
£m £m £m £m
Joint ventures
Subsidiary companies
9.3
-
9.3
2.6
-
2.6
-
0.1
0.1
-
0.1
0.1
b. Investments in joint ventures
The Group The Company
2012 2011 2012 2011
£m £m £m £m
Share of joint venture net assets:
Current assets
Current liabilities
Non-current liabilities
Net (liabilities)
Loans from Group companies
12.0
(3.0)
(10.0)
(1.0)
10.3
9.3
4.1
(3.4)
(1.7)
(1.0)
3.6
2.6
-
-
-
-
-
-
-
-
-
-
-
-
Share of post-tax losses from joint ventures:
Revenue
Cost of sales
Gross loss
Administrative expenses
Operating profit/(loss)
Finance costs
Result before tax
Taxation
The Group’s principal joint venture investments are:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i)
Its 50% shareholding in the ordinary share capital of The Waterford Park Company Limited, a company incorporated in Great Britain with a
30 June year end. The Waterford Park Company Limited was formed to pursue the potential redevelopment of Watford Junction railway station.
(ii) Its 50% shareholding in the ordinary share capital of Redmira Limited, a company incorporated in Great Britain with a 30 June year end.
Redmira Limited was formed to pursue potential redevelopment opportunities in the South East of England.
c. Investments in subsidiary undertakings
At 1 July 2011 and 30 June 2012
The Company
£m
0.1
The principal subsidiary company is Redrow Homes Limited. All subsidiary companies are incorporated in Great Britain except Redrow Homes (Park
Heights) Limited which is incorporated in Jersey. A full list of subsidiary undertakings as at 30 June 2012 will be appended to the Company’s next
annual return. The capital of all the subsidiary companies, consisting of ordinary shares, is wholly owned. HB (HDG) Limited is directly owned by
Redrow plc.
In the opinion of the Directors the carrying value of the Company’s investment in subsidiary undertakings is supported by their underlying net
assets.
Note 11. Deferred Tax Assets And Liabilities
The following are the deferred tax assets and liabilities recognised by the Group and the movements thereon during the current and prior year:
Deferred tax assets
At 1 July 2010
Charge to income
Charge to equity
At 1 July 2011
Credit/(charge) to income
Credit to equity
At 30 June 2012
Deferred tax liabilities
At 1 July 2010
Credit to income
Charge to equity
At 1 July 2011
Charge to income
Credit to equity
At 30 June 2012
Employee
benefits
£m
Imputed
interest
£m
Hedge
reserve
£m
Share-
based
payment
£m
Short term
temporary
differences
£m
1.4
-
(1.2)
0.2
-
0.6
0.8
2.4
(0.2)
-
2.2
0.2
-
2.4
0.3
-
(0.3)
-
-
-
-
0.3
(0.2)
-
0.1
-
-
0.1
0.7
-
-
0.7
1.7
-
2.4
Employee
benefits
£m
Imputed
interest
£m
Hedge
reserve
£m
Share-
based
payment
£m
Short term
temporary
differences
£m
-
-
(1.3)
(1.3)
-
1.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.6)
0.1
-
(0.5)
(0.2)
-
(0.7)
Losses
carried
forward
£m
72.1
(11.5)
-
60.6
(14.5)
-
46.1
Losses
carried
forward
£m
-
-
-
-
-
-
-
Total
£m
77.2
(11.9)
(1.5)
63.8
(12.6)
0.6
51.8
Total
£m
(0.6)
0.1
(1.3)
(1.8)
(0.2)
1.3
(0.7)
The Group has no material unrecognised deferred tax assets.
The deferred tax balances in the Company relate to a deferred tax asset arising on retirement benefit obligations of £3.9m (2011: £2.1m).
The Group has considered carefully the extent to which it is probable that future taxable profit will be available resulting in taxable amounts against
which the carried forward tax losses could be utilised. The basis for supporting the recognition of the deferred tax asset is as follows:
(i) Historic profitability
The Group floated in May 1994 and, prior to the financial year ended June 2008, had never made a loss before tax since flotation or during the
five years prior to flotation provides evidence of historic profitability.
(ii)
Identifiable causes of the losses and likelihood of reoccurrence
The carried forward tax losses arise primarily from the exceptional net realisable value provisions created in 2008 and 2009 and to a lesser
extent the trading losses in 2009 arising from the challenging housing market conditions. The provisions principally arise from the reductions in
house prices and the reduced rate of sales which have reduced land values. Whilst the housing market remains uncertain, short of a collapse of
market conditions from those experienced to date during 2012, material provisioning is not anticipated to reoccur regularly into the future.
(iii) Financial forecasts demonstrating a return to profitability
The Group’s medium term financial forecasting model has been reviewed. This forecasts increased profitability building on the profitable
performance in 2011 and 2012 and the deferred tax asset being utilised in the medium term.
A corporation tax rate of 23% from 1 April 2013 was substantively enacted on 3 July 2012. The carrying value of the £51.8m deferred tax asset at
June 2012 at 23.0% would be £49.6m.
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86 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 87
Notes to the financial statements (continued)
Note 12. Trade And Other Receivables
The Group The Company
2012 2011 2012 2011
£m £m £m £m
Non-current assets
Trade receivables (net)
Other receivables
25.7
0.3
26.0
31.1
0.3
31.4
-
-
-
-
-
-
Current assets
Trade receivables (net)
Amounts due from subsidiary companies
Other receivables
Prepayments and accrued income
21.2
-
3.8
2.2
27.2
27.2
-
7.2
3.8
38.2
419.1
-
-
419.1
-
391.8
-
-
391.8
Trade receivables due after more than one year are stated after an allowance of £7.6m has been made (2011: £6.0m) in respect of estimated
irrecoverable amounts. This allowance is based on an estimate of default rates. £1.7m provision was made during the year (2011: £1.6m). £0.1m was
utilised (2011: £0.1m). It is not considered that a material amount of current asset trade receivables are overdue for payment.
Trade and other receivables due in 1 to 2 years are £10.5m (2011: £9.8m), due between 2 and 5 years are £2.4m (2011: £11.1m) and due in more
than 5 years are £13.1m (2011: £10.2m). The Group holds a charge over the underlying assets. Trade receivables include £26.5m re the Scotland
disposal (2011: £38.8m). At the balance sheet date, there is no material difference between the fair value of trade and other receivables and their
carrying values as shown in the balance sheet.
Note 13. Inventories
The Group The Company
2012 2011 2012 2011
£m £m £m £m
-
Land for development
-
Work in progress
-
Stock of showhomes
-
-
-
515.9
183.3
21.8
721.0
(12.8)
708.2
377.8
170.0
23.3
571.1
(8.4)
562.7
Payments on account
-
-
-
-
-
-
Inventories of £373.2m net of £46.7m net realisable value provision utilisation, were expensed in the year (2011: £415.4m net of £95.5m net
realisable value provision). Work in progress includes £9.7m (2011: £7.2m) in respect of part exchange properties. Land held for development in the
sum of £95.5m is subject to a legal charge as security in respect of deferred consideration (2011: £35.7m).
The carrying value of undeveloped land where net realisable value has been determined on the basis of a sale of land in its current state is £nil
(2011: £5.9m). Of the net realisable value provision of £111.5m (2011: £158.3m), £88.2m (2011: £135.0m) is attributed to land and £23.3m
(2011: £23.3m) is attributed to work in progress. The allocation of land between Type 1 and Type 2 is described in the Inventories accounting policy.
As discussed in note 1, the Group considers the carrying value of inventories to be a critical accounting judgement.
The net realisable value provision movement is analysed below:
As at 1 July 2011
Utilised during the year
Created during the year
Reclassified during the year
Released during the year
As at 30 June 2012
Type 1
£m
132.1
(40.3)
21.3
6.3
(17.7)
101.7
Type 2
£m
26.2
(6.4)
0.8
(6.3)
(4.5)
9.8
Total
£m
158.3
(46.7)
22.1
-
(22.2)
111.5
The net realisable value provisions of £22.1m and £22.2m created and released in the year are the result of our review at the balance sheet date in
the context of prevailing market conditions and the re-assessment of selling prices and costs. They represent the creation of additional provisions
against sites acquired pre June 2009 and the reduction of provisions already in place against such sites as required i.e. a reallocation of the quantum
of provision amongst sites where provisions already exist.
Note 14: Financial Risk Management
The Group’s financial instruments comprise cash and cash equivalents, bank loans and overdrafts, derivative financial instruments and various items
included within trade receivables and trade payables which arise during the normal course of business.
The tables below provide a summary of financial assets and liabilities by category.
The accounting policies for financial instruments have been applied to the following items:
The Group
Assets per the balance sheet
Non current trade and other receivables
Current trade and other receivables
Cash and cash equivalents
Liabilities per the balance sheet
Bank loans & overdrafts
Trade payables and other payables
Land creditors
2012
Loans &
receivables
£m
2011
Loans &
receivables
£m
26.0
25.0
37.4
88.4
2012
Liabilities at
fair value
through the
income
statement
£m
2012
Other
financial
liabilities
at amortised
cost
£m
-
-
108.3
108.3
51.4
114.8
-
166.2
2011
Liabilities at
fair value
through the
income
statement
£m
2011
Other
financial
liabilities
at amortised
cost
£m
-
-
44.8
44.8
107.4
98.2
-
205.6
2012
Total
£m
51.4
114.8
108.3
274.5
31.4
34.4
32.0
97.8
2011
Total
£m
107.4
98.2
44.8
250.4
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88 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 89
Notes to the financial statements (continued)
The Company
Assets per the balance sheet
Cash and cash equivalents
Amounts due from subsidiary companies
Liabilities per the balance sheet
Bank loans & overdrafts
Amounts due to subsidiary companies
2012
Loans &
receivables
£m
2011
Loans &
receivables
£m
-
419.1
419.1
2011
Other
financial
liabilities
£m
85.0
13.1
98.1
7.3
391.8
399.1
2011
Total
£m
85.0
13.1
98.1
2012
Other
financial
liabilities
£m
33.5
13.2
46.7
2012
Total
£m
33.5
13.2
46.7
The following table shows the profile of interest bearing debt together with its effective interest rates, after taking account of interest rate swaps as
at the balance sheet date and the periods in which they will reprice:
Effective
interest
rate
%
2.5
5.2
Total
£m
21.4
20.0
10.0
51.4
2012
0-1
year
£m
21.4
-
-
21.4
1-2
years
£m
-
-
-
-
Effective
interest
rate
%
2.5
-
5.4
2-5
years
£m
-
20.0
10.0
30.0
Total
£m
22.4
-
85.0
107.4
2011
0-1
year
£m
22.4
-
-
22.4
1-2
years
£m
-
-
-
-
2-5
years
£m
-
-
85.0
85.0
Bank overdraft
Bank loans - fixed rate
Bank loans - floating rate
The notional principal amounts in respect of the interest rate swaps together with their maturities are given in the table below.
2012
2011
Balance
at 30 June
£m
20.0
-
0-1 year
£m
-
-
1-2 year
£m
20.0
-
Fair values of financial assets and liabilities are determined by reference to the rates at which they could be exchanged between knowledgeable and
willing parties. Where no such price is readily available then fair value is determined by discounting net forward cash flows at a risk adjusted rate.
At 30 June 2012, the fixed interest rates varied from 0.985% to 1.045% excluding borrowing margin and the floating rates were 3 month LIBOR.
The swaps have a neutral value at 30 June 2012.
All financial assets and liabilities (measured at fair value) are categorised at level 2 within the hierarchical classification of IFRS 7 Revised.
The Group’s activities expose it to a variety of financial risks.
Financial risk management is conducted centrally using policies approved by the Board. Market risk is negligible due to the Group’s limited exposure
to equity securities (some limited exposure arises through the Pension Scheme’s investment portfolio) and the associated price risk. Its foreign
exchange exposure is negligible given the nature of the Group’s business and its exclusive UK activities.
a. Liquidity risk and interest rate risk
Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations as they fall due. Liquidity risks are
managed through the regular review of cash forecasts and by maintaining adequate committed banking facilities to ensure appropriate headroom.
At 30 June 2012, the Group had total unsecured bank borrowing facilities of £202.5m, representing £200.0m committed facilities and £2.5m
uncommitted facilities.
The Group’s cash surpluses arise from the short term timing differences. As a consequence the Group does not consider it bears significant risk of
changes to income and cashflows as a result of movements on interest rates on its interest bearing assets.
The Group is exposed to interest rate risk as it borrows money at floating rates. The Group’s interest rate risk arises primarily from long term
borrowings. In order to manage its interest rate risk, the Group enters into simple risk management products, almost exclusively interest rate swaps.
All interest rate swaps are sterling denominated. The swaps are arranged so as to match with those of the underlying borrowings to which they
relate. There was no ineffectiveness to be recorded in respect of these cashflow hedges in 2012 or 2011. As noted in the Financial review on page 27
during the year the Board decided, taking into account the current predicted LIBOR rates and the pricing of interest rate swaps, to take out £20.0m
of 2 year sterling denominated interest rate swaps.
For the year ended 30 June 2012, it is estimated that a general increase of 1% in interest rates applying for the full year would decrease the Group’s
profit before tax by £0.7m (2011: £0.5m).
b. Maturity of bank loans and borrowings
The maturity of bank loans and borrowings is as below:
The Group
Due within one year
Due between one and two years
Due between two and five years
The Company
Due within one year
Due between one and two years
Due between two and five years
Bank
overdraft
2012
£m
21.4
-
-
21.4
Bank
overdraft
2012
£m
3.5
-
-
3.5
Bank loans
2012
£m
-
-
30.0
30.0
Bank loans
2012
£m
-
-
30.0
30.0
Bank
overdraft
2011
£m
22.4
-
-
22.4
Bank
overdraft
2011
£m
-
-
-
-
Bank loans
2011
£m
-
-
85.0
85.0
Bank loans
2011
£m
-
-
85.0
85.0
The Company was fully compliant with its banking covenants as at 30 June 2012.
At the year end, the Group and Company had £170.0m (2011: £115.0m) of undrawn committed bank facilities available.
There is no material difference between the fair value of the bank overdrafts and bank loans and their carrying values as shown in the balance sheet.
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90 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 91
Notes to the financial statements (continued)
c. Amounts due in respect of development land
The Group’s policy permits land purchases to be made on deferred payment terms. In accordance with IAS 39, the deferred creditor is recorded at
fair value and nominal value is amortised over the deferment period via financing costs, increasing the land creditor to its full cash settlement value
on the payment date.
f. Capital management
The Group defines total capital as equity plus net debt where net debt is calculated as total borrowings less cash and cash equivalents.
The Group monitors capital on the basis of the level of returns achieved on its capital base and, with respect to its financing structure, the gearing
ratio. This is defined as net debt divided by equity.
The interest rate used for each deferred payment is an equivalent loan rate available on the date of land purchase, as applicable to a loan lasting for
a comparable period of time to that deferment.
The maturity profile of the total contracted cash payments in respect of amounts due in respect of land creditors at the balance sheet date is as
follows:
The Group’s objective in managing capital is to safeguard its ability to continue as a going concern in order to deliver value to its shareholders and
other stakeholders. The Group operates within policies outlined by the Board in order to maintain an appropriate funding structure. The Board keeps
the Group’s capital structure under review.
No dividends were paid in the year. The Board has a policy of only paying a dividend once the Group has an appropriate level of earnings cover.
2012
2011
d. Maturity of Trade and other payables
These represent current liabilities due within one year.
Total
contracted
cash
payment
£m
114.2
48.3
Balance at
30 June
£m
108.3
44.8
Due less
than
one year
£m
67.7
32.5
Due
between
1 and 2 years
£m
43.1
4.5
Due
between
2 and 5 years
£m
3.4
11.3
e. Credit risk
Credit risk arises from cash and cash equivalents, including call deposits with banks and financial institutions, derivative financial instruments and
trade receivables. It represents the risk of financial loss where counterparties are unable to meet their obligations.
Credit risk is managed centrally in respect of cash and cash equivalents and derivative financial instruments. In respect of placing deposits with
banks and financial institutions and funds, individual risk limits are approved by the Board. The table below shows the cash and cash equivalents as
at the balance sheet date:
The Group The Company
2012 2011 2012 2011
£m £m £m £m
7.3
A -
7.3
37.4
37.4
32.0
32.0
-
-
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.
There is no specific concentration of credit risk in respect of home sales as the exposure is spread over a number of customers. In respect of trade
receivables, the amounts presented in the balance sheet are stated after adjusting for any doubtful receivables, based on the judgement of the
Group’s management through using both previous experience and knowledge of the current position of any more substantial debtors.
The total capital levels and gearing ratios as at 30 June 2012 and 30 June 2011 are as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Equity
Total capital
Gearing ratio
2012
£m
51.4
(37.4)
14.0
561.5
575.5
2%
2011
£m
107.4
(32.0)
75.4
458.6
534.0
16%
g. Fair values
At 30 June 2012 there is no material difference between the fair value of financial instruments and their carrying values in the balance sheet.
Note 15: Trade And Other Payables
The Group The Company
2012 2011 2012 2011
£m £m £m £m
Non-current liabilities
Amounts due in respect of development land
40.6
40.6
12.4
12.4
-
-
-
-
Current liabilities
Trade payables
Amounts due in respect of development land
Amounts owed to subsidiary companies
Other payables
Other taxation and social security
Accruals and deferred income
Note 16. Long Term Provisions
The Group
At 1 July 2011
Provisions created during the year
Provisions released during the year
Provisions utilised during the year
At 30 June 2012
109.4
67.7
-
5.4
1.4
26.3
210.2
88.4
32.4
-
9.8
1.3
31.6
163.5
Onerous
contracts
£m
6.7
0.3
-
-
7.0
-
-
13.2
-
-
3.4
16.6
Other
£m
1.3
0.1
-
(0.2)
1.2
-
-
13.1
-
-
2.0
15.1
Total
£m
8.0
0.4
-
(0.2)
8.2
Provisions relate to onerous contracts (in place at June 2009 and viewed as onerous) and maintenance and sundry remedial costs in respect of
development activities, which it is assessed will be utilised within four years.
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92 Redrow plc Annual Report
and Accounts 2012
Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 93
The Company
At 1 July 2010
Total comprehensive income
Shares issued
Dividends paid
Dividends received from subsidiary companies
At 30 June 2011
Total comprehensive income
Shares issued
Dividends paid
Dividends received from subsidiary companies
At 30 June 2012
Share
capital
£m
30.9
-
-
-
-
30.9
-
6.1
-
-
37.0
Share
premium
account
£m
58.6
-
-
-
-
58.6
-
-
-
-
58.6
Hedge
reserve
£m
(0.8)
0.8
-
-
-
-
-
-
-
-
-
Other
reserves
£m
7.0
-
-
-
-
7.0
-
-
-
-
7.0
Retained
earnings
£m
214.4
1.8
-
-
-
216.2
(12.0)
71.9
-
-
276.1
Hedge Reserve
The hedge reserve comprises the effective portion of the gain or loss arising from the fair value of cash flow hedging transactions entered into by the
Company that have not yet crystallised.
Other Reserves
Other reserves consists of a £7.0m Capital Redemption reserve (2011: £7.0m).
Undistributable Reserves
The hedge reserve and other reserves are not available for distribution.
Notes to the financial statements (continued)
Note 17. Share Capital
Authorised
480,000,000 ordinary shares of 10p each (2011: 480,000,000)
Allotted, called up and fully paid
1 July 2011
Shares issued re Firm Placing and Open Offer
At 30 June 2012
2012
£m
48.0
37.0
2011
£m
48.0
30.9
Number of ordinary
shares of 10p each
308,607,479
61,192,459
369,799,938
Options granted to Directors and employees under the LTSIP, the CSOP and the SAYE schemes are set out in Note 7d.
On 15 May 2012 the Company issued 61,192,459 new ordinary shares at 130 pence per share through a firm placing and open offer. Net proceeds
were £78.0m, being gross proceeds on issue of £79.6m less expenses of £1.6m.
The placing was effected through a structure which resulted in the excess of the net proceeds over the nominal value of the share capital being
recognised within retained earnings under section 612 of the Companies Act 2006.
The placing shares rank pari passu in all respects with the existing issued shares.
Note 18. Share Capital, Share Premium Account And Reserves
The Group
At 1 July 2010
Total comprehensive income
Shares issued
Dividends paid
Share-based payment
Credit in respect of LTSIP/SAYE
At 30 June 2011
Total comprehensive income
Shares issued
Dividends paid
Share-based payment
Movement in respect of LTSIP/SAYE
At 30 June 2012
Share
capital
£m
30.9
-
-
-
-
-
30.9
-
6.1
-
-
-
37.0
Share
premium
account
£m
58.7
-
-
-
-
-
58.7
-
-
-
-
-
58.7
Hedge
reserve
£m
(0.8)
0.8
-
-
-
-
-
-
-
-
-
-
-
Other
reserves
£m
7.9
-
-
-
-
-
7.9
-
-
-
-
-
7.9
Retained
earnings
£m
339.2
20.7
-
-
0.3
0.9
361.1
24.2
71.9
-
0.3
0.4
457.9
Hedge Reserve
The hedge reserve comprises the effective portion of the gain or loss arising from the fair value of cash flow hedging transactions entered into by
the Group that have not yet crystallised.
Other Reserves
Other reserves consists of a £7.0m Capital Redemption reserve (2011: £7.0m) and a £0.9m Consolidation reserve (2011: £0.9m).
Undistributable Reserves
The hedge reserve and other reserves are not available for distribution.
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94 Redrow plc Annual Report
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Financial information
Financial information
Redrow plc Annual Report
and Accounts 2012 95
Notes to the financial statements (continued)
Note 19. Movement In Net (Debt)/Cash
The Group
Cash and cash equivalents
Bank overdrafts
Bank loans
Issue costs
The Company
Cash and cash equivalents
Bank overdrafts
Bank loans
Issue costs
Note 20. Operating Lease Commitments
Within one year
Within one to five years
Later than 5 years
At
1 July
2011
£m
32.0
(22.4)
9.6
(85.0)
-
(75.4)
At
1 July
2011
£m
7.3
-
7.3
(85.0)
-
(77.7)
Cash
flow
£m
8.5
1.0
9.5
55.0
-
64.5
Cash
flow
£m
(6.7)
(3.5)
(10.2)
55.0
-
44.8
Other
movements
£m
(3.1)
-
(3.1)
-
-
(3.1)
Other
movements
£m
(0.6)
-
(0.6)
-
-
(0.6)
Net
movement
in the year
£m
5.4
1.0
6.4
55.0
-
61.4
Net
movement
in the year
£m
(7.3)
(3.5)
(10.8)
55.0
-
44.2
2012
£m
1.4
1.8
0.8
At
30 June
2012
£m
37.4
(21.4)
16.0
(30.0)
-
(14.0)
At
30 June
2012
£m
-
(3.5)
(3.5)
(30.0)
-
(33.5)
2011
£m
1.4
1.9
0.4
Note 21. Contingent Liabilities
The Company has guaranteed the bank borrowings of its subsidiaries. Performance bonds, financial guarantees in respect of certain deferred land
creditors and other building or performance guarantees have been entered into in the normal course of business.
Note 22. Related Party Transactions
Within the definition of IAS 24 (Related Party Disclosures), the Board and key management personnel are related parties. Detailed disclosure of the
remuneration of the Board is given in the Directors’ Remuneration report on pages 49 to 56. A summary of remuneration provided to key
management personnel is provided in note 7c.
In addition, related party transactions were carried out with parties related to Steve Morgan during the year totalling £0.7m (Company £0.7m),
primarily relating to the donation to the Morgan Foundation as described in the Directors’ Remuneration report on page 54 and in respect of the
Group, in addition relating to services provided by Harrow Estates plc on an arm’s length basis under promotional agreements forming part of the
acquisition of the Harrow business.
As at 30 June 2012, an amount of £nil was due to Harrow Estates plc under normal trading terms.
During the year, the Group made purchases of £4.5m (2011: £3.7m) (£nil (2011: £nil) for the Company) from Travis Perkins plc, a company in which
Paul Hampden Smith is an Executive Director. As at 30 June 2012 an amount of £0.2m (2011: £0.2m) was due to Travis Perkins plc in respect of
those purchases.
There have been no other material transactions with key management personnel. There is no other difference between transactions with key
management personnel of the Company and the Group.
The Company funds the operating companies through both equity investment and loans at commercial rates of interest. In addition, the Company
provides its subsidiaries with the services of Senior Management, for which a recharge is made to those subsidiary companies based upon utilisation
of services.
The amount outstanding from subsidiary undertakings at 30 June 2012 was £419.1m (2011: £391.8m). The amount owed to subsidiary undertakings
at 30 June 2012 was £13.2m (2011: £13.1m).
The Company provided the Group’s defined benefit pension scheme, as detailed in note 7e. Expected service costs were charged to the operating
businesses at cost. There is no contractual arrangement or stated policy relating to the charge. Experience and actuarial gains are recognised in the
Company, via the statement of comprehensive income.
The Group did not undertake any transactions with The Waterford Park Company Limited or Redmira Limited joint ventures. The Group’s loans to its
joint ventures are disclosed in note 10.
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96 Redrow plc Annual Report
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Notice of AGM
Notice of AGM
Redrow plc Annual Report
and Accounts 2012 97
Notice of annual general meeting
Notice is hereby given that the Annual General Meeting of Redrow plc
will be held at De Vere, St. David’s Park Hotel, St. David’s Park, Flintshire
on Monday 12 November 2012 at 12 noon for the following purposes.
All resolutions will be proposed as ordinary resolutions except numbers
11 and 12 which will be proposed as special resolutions.
would or might require shares to be allotted or rights to subscribe for or
to convert any security into shares to be granted after such expiry and
the Directors may allot shares or grant rights to subscribe for or convert
securities into shares in pursuance of such offer or agreement as if the
authority had not expired.
Resolution 1 - Annual Report & Accounts
To receive and adopt the Directors’ report and the financial statements
for the year ended 30 June 2012, together with the Auditors’ report.
Resolution 2 - Re-appointment of Director
To re-appoint Steve Morgan as a Director.
Resolution 3 - Re-appointment of Director
To re-appoint John Tutte as a Director.
Resolution 4 - Re-appointment of Director
To re-appoint Barbara Richmond as a Director.
Resolution 5 - Re-appointment of Director
To re-appoint Alan Jackson as a Director.
Resolution 6 - Re-appointment of Director
To re-appoint Debbie Hewitt as a Director.
Resolution 7 - Re-appointment of Director
To re-appoint Paul Hampden Smith as a Director.
Resolution 8 - Re-appointment of Auditors
To re-appoint PricewaterhouseCoopers LLP as external Auditors to the
Company, to hold office until the end of the next general meeting at
which financial statements are laid before the Company and to
authorise the Directors to fix their remuneration.
Resolution 9 - Directors’ Remuneration report
To approve the Directors’ Remuneration report for the year ended
30 June 2012.
Resolution 10 - Authority to allot shares
That the directors, in place of any existing authority conferred upon
them for the purpose of section 549/551 of the Companies Act 2006, be
generally and unconditionally authorised pursuant to and in accordance
with section 551 of the Companies Act 2006 to exercise all powers of
the Company to allot and to make offers or agreements to allot shares
or convert any securities into shares:
(i)
up to an aggregate nominal amount of £12,326,665;
(ii)
up to a further aggregate nominal amount of £12,326,665 in
connection with an offer by way of a rights issue.
Provided that this authority shall (unless previously revoked or renewed)
expire on the date of the next Annual General Meeting of the Company
(or 31 December 2013 whichever may be the earlier) but so that the
Company may, before such expiry, make an offer or agreement which
Resolution 11 - Authority to disapply pre-emption rights
That, subject to the passing of Resolution 10 as set out above, the
Directors be given power pursuant to Resolution 10 to make allotments
of equity securities (as defined in section 560(1) of the Companies Act
2006) pursuant to the authority contained in the said Resolution 10 and
to sell shares which are held in treasury wholly for cash as if section
561(1) of the said Act did not apply to such allotments or sale provided
that this power shall be limited to:
(i)
allotments of equity securities in connection with a rights issue,
being an offer of equity securities by way of rights to ordinary
shareholders of the Company in proportion (as nearly as may be)
to their holdings subject to such exclusions or other arrangements
as the Directors may deem necessary or expedient in relation to
fractional entitlements or legal or practical problems under the
laws of or the requirements of any recognised regulatory body or
stock exchange in any territory; and
(ii)
any other allotments for cash or equity securities or sale of shares
held in treasury up to a maximum nominal amount of
£1,849,000;
and shall (unless previously revoked or renewed) expire on the date
which is the earlier of the next Annual General Meeting of the Company
or 31 December 2013 save that the said power shall permit the
Company to make an offer or enter into an agreement before the expiry
of such power which would or might require equity securities to be
allotted after such expiry and the Directors may allot equity securities in
pursuance of such offer or agreement as if such power conferred had not
expired. For the purposes of this Resolution, the nominal amount of any
securities shall be taken to be, in the case of rights to subscribe for or
convert any securities into shares of the Company, the nominal amount
of such shares which may be allotted pursuant to such rights.
Resolution 12 – Calling of a general meeting other than an AGM
That a general meeting other than the Annual General Meeting may be
called on not less than 14 clear days’ notice.
18 September 2012
Registered office:
Redrow House
St. David’s Park
Flintshire
CH5 3RX
Registered in England No. 2877315
By order of the Board
Graham Cope
Company Secretary
Notes:
(i)
A shareholder entitled to attend and vote may appoint a proxy or
proxies to attend, speak and vote instead of him. A proxy need not
be a member of the Company. A member may appoint more than
one proxy, provided that each proxy is appointed to exercise the
rights attached to a different share or shares held by him.
(ii)
(iii)
(iv)
(v)
(vi)
A form of proxy is enclosed which, if required, should be
completed in accordance with the instructions set out therein and
returned so as to reach the Company’s Registrars not later than
48 hours before the time of the meeting or any adjourned
meeting. Completion of a form of proxy will not preclude a
shareholder from attending and voting at the meeting in person if
they so wish.
All shareholders on the Register at 6pm on 10 November 2012 (or
if the meeting is adjourned 48 hours before the time fixed for the
meeting) and only those shareholders are entitled to attend and
vote at the Annual General Meeting in respect of the number of
shares registered in their respective names at that time. Changes
to entries on the Register after that time will be disregarded in
determining the rights of any person to attend or vote at the
meeting.
The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who have
been nominated to receive communications from the Company in
accordance with Section 146 of the Companies Act 2006
(“nominated persons”). Nominated persons may have a right
under an agreement with the member who holds the shares on
their behalf to be appointed (or to have someone else appointed)
as a proxy. Alternatively, if nominated persons do not have such a
right, or do not wish to exercise it, they may have a right under
such an agreement to give instructions to the person holding the
shares as to the exercise of voting rights.
Holders of ordinary shares are entitled to attend and vote at
general meetings of the Company. The total number of issued
ordinary shares in the Company on 18 September 2012 is
369,799,938, carrying one vote each on a poll. Therefore, the total
number of votes exercisable as at 18 September 2012 are
369,799,938.
Shareholders should note that, under Section 527 of the
Companies Act 2006, members meeting the threshold
requirements set out in that section have the right to require the
Company to publish on a website a statement setting out any
matter relating to: (i) the audit of the Company’s accounts
(including the auditors’ report and the conduct of the audit) that
are to be laid before the Annual General Meeting for the financial
year beginning 1 July 2011; or (ii) any circumstance connected
with an auditor of the Company appointed for the financial year
beginning 1 July 2011 ceasing to hold office since the previous
meeting at which annual accounts and reports were laid. The
Company may not require the shareholders requesting any such
website publication to pay its expenses in complying with
Sections 527 or 528 (requirements as to website availability) of
the Companies Act 2006. Where the Company is required to place
a statement on a website under Section 527 of the Companies
Act 2006, it must forward the statement to the Company’s
auditor not later than the time when it makes the statement
available on the website. The business which may be dealt with at
the Annual General Meeting for the relevant financial year
includes any statement that the Company has been required
under Section 527 of the Companies Act 2006 to publish on a
website.
(vii) Any member attending the meeting has the right to ask
questions. The Company must cause to be answered any such
question relating to the business being dealt with at the meeting
but no such answer need be given if (a) to do so would interfere
unduly with the preparation for the meeting or involve the
disclosure of confidential information, (b) the answer has already
been given on a website in the form of an answer to a question, or
(c) it is undesirable in the interests of the Company or the good
order of the meeting that the question be answered.
(viii) A copy of this notice and other information required by Section
311A of the Companies Act 2006 can be found at redrow.co.uk.
(ix) Under Section 338 and Section 338A of the Companies Act 2006,
members meeting the threshold requirements in those sections
have the right to require the Company (i) to give, to members of
the Company entitled to receive notice of the meeting, notice of
a resolution which may properly be moved and is intended to be
moved at the meeting and/or (ii) to include in the business to be
dealt with at the meeting any matter (other than a proposed
resolution) which may be properly included in the business. A
resolution may properly be moved or a matter may properly be
included in the business unless (a) (in the case of a resolution
only) it would, if passed, be ineffective (whether by reason of
inconsistency with any enactment or the Company’s constitution
or otherwise), (b) it is defamatory of any person, or (c) it is
frivolous or vexatious. Such a request may be in hard copy form or
in electronic form, must identify the resolution of which notice is
to be given or the matter to be included in the business, must be
authorised by the person or persons making it, must be received
by the Company not later than 1 October 2012, being the date six
clear weeks before the meeting, and (in the case of a matter to be
included in the business only) must be accompanied by a
statement setting out the grounds for the request.
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(x)
Copies of the Directors’ service contracts will be available for
inspection at the registered office during normal business hours
on any business day and at the place of the Annual General
Meeting for at least 15 minutes before the meeting is held until
its conclusion.
98 Redrow plc Annual Report
and Accounts 2012
Notice of AGM
Notice of AGM
Redrow plc Annual Report
and Accounts 2012 99
Notice of annual general meeting
(xi)
The register of Directors’ interests in the share capital of the
Company will be available for inspection at the place of the
meeting from 12 noon on 12 November 2012 until the
conclusion of the meeting. None of the Directors has a service
contract which cannot be terminated within one year without
payment of compensation.
(xii) CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for
the meeting (and any adjournment of the meeting) by following
the procedures described in the CREST Manual. CREST Personal
Members or other CREST sponsored members (and those CREST
members who have appointed a voting service provider) should
refer to their CREST sponsor or voting service provider, who will
be able to take the appropriate action on their behalf.
(xiii)
In order for a proxy appointment or instruction made by means of
CREST to be valid, the appropriate CREST message (a "CREST
Proxy Instruction") must be properly authenticated in accordance
with Euroclear’s specifications and must contain the information
required for such instructions, as described in the CREST Manual
(available via www.euroclear.com/CREST). The message
(regardless of whether it constitutes the appointment of a proxy
or an amendment to the instruction given to a previously
appointed proxy) must, in order to be valid, be transmitted so as
to be received by the issuer’s agent (ID 3RA50) by the latest
time(s) for receipt of proxy appointments specified in Note (ii)
above. For this purpose, the time of receipt will be taken to be the
time (as determined by the timestamp applied to the message by
the CREST Applications Host) from which the issuer’s agent is
able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of instructions to
a proxy appointed through CREST should be communicated to
him by other means.
(xiv) CREST members (and, where applicable, their CREST sponsors or
voting service providers) should note that Euroclear does not
make available special procedures in CREST for any particular
messages. Normal system timings and limitations will therefore
apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member or sponsored
member or has appointed a voting service provider, to procure
that his CREST sponsor or voting service provider takes) such
action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular
time. In this connection, CREST members (and, where applicable,
their CREST sponsors or voting service providers) are referred, in
particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
(xv)
The Company may treat as invalid a CREST Proxy Instruction in
the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
(xvi)
If you have any questions about the meeting or need any special
assistance at the meeting, please contact the Company Secretary
at the registered office or telephone 01244 520044 during normal
business hours.
Explanatory Notes To Annual General Meeting Resolutions:
Resolutions 2-7 - Re-appointment of directors
As required by the UK Corporate Governance Code, annual
re-election of all directors is now required.
Resolution 8 - Re-appointment of Auditors
The Company is required to appoint Auditors at every general meeting
at which the accounts are presented to shareholders.
PricewaterhouseCoopers LLP were appointed at last year’s Annual
General Meeting and are willing to seek re-appointment this year. It is
normal practice for a Company’s Directors to be authorised to agree the
Auditors’ fees. If this resolution is passed, the Audit Committee will
approve the fees for recommendation to the Board.
Resolution 9 - Directors’ Remuneration report
Under the Companies Act 2006 companies are required to ask
shareholders to vote on the Directors’ Remuneration report. The report is
contained on pages 49 to 56 of the Annual Report & Accounts.
Resolution 10 - Authority to allot shares
Shareholders are being invited to renew the authority given to Directors
in previous years to allot new shares. If passed, Resolution 10 would
renew this authority by authorising the Directors to allot shares up to an
aggregate nominal amount of £12,326,665 or an additional £12,326,665
in respect of a Rights Issue (or 66% in the context of a rights issue). This
represents 123,266,646 ordinary shares of 10p each and is equivalent to
approximately 33% of the Company’s current issued ordinary share
capital (excluding shares held in treasury). The authority will expire on
the date of the next Annual General Meeting of the Company or, if
earlier, 31 December 2013.
The Company does not, as of 18 September 2012 hold any shares in
treasury.
The Directors will exercise the authority to allot only when satisfied that
it is in the interests of the Company to do so. They have no present
intention of exercising the authority, except in connection with the issue
of shares under the Company’s share option schemes.
Resolution 11 - Authority to disapply pre-emption rights
The Directors may only allot shares for cash to persons who are not
already shareholders in the Company if authorised to do so by the
shareholders in a general meeting. This resolution renews authority for
the Directors to allot shares for cash without first offering them to
existing members up to an aggregate nominal amount of £1,849,000.
This sum represents 18,489,997 ordinary shares of 10p each, being
equivalent to approximately 5% of the Company’s current issued share
capital. The resolution also enables the Directors to modify the strict
requirements for a rights issue in circumstances where they consider it
necessary or expedient.
In addition, if the Company has purchased its own shares and holds
them in treasury, this resolution would give the Directors power to sell
these shares for cash to persons other than existing shareholders,
subject to the same limit that would apply to issues of shares for cash to
these persons.
The authority will expire on whichever is the earlier of the conclusion of
the next Annual General Meeting or 31 December 2013.
Resolution 12 – Calling of a general meeting other than an AGM
Changes made to the Companies Act 2006 by the Shareholders’ Rights
Regulations increase the notice period required for general meetings of
the Company to 21 days unless shareholders approve a shorter notice
period, which cannot, however, be less than 14 clear days. AGMs of the
Company will continue to be held on at least 21 clear days’ notice.
Documents available for your inspection
Copies of the following documents will be available for inspection during
normal business hours on Monday to Friday each week (public holiday
excepted) at the company’s registered office and at the office of
Linklaters LLP at One Silk Street, London EC2Y 8HQ from the date of
this document up to and including the date of the Annual General
Meeting and at the place of the Annual General Meeting from 11.45am
until the close of the meeting.
n
n
the Articles of Association and Memorandum of the Company;
and
the service agreements and letters of appointment of the
Directors.
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100 Redrow plc Annual Report
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Miscellaneous information
Miscellaneous information
Redrow plc Annual Report
and Accounts 2012 101
Corporate & shareholder information
5 year summary
12 months ended 30 June
Revenue
Operating profit/(loss) before financing costs pre-exceptional item
Operating profit/(loss) before financing costs pre-exceptional item
as a percentage of turnover
Operating profit/(loss) before financing costs
Profit/(loss) for the period
Net assets
Net (debt)
Gearing – net (debt) as a percentage of capital and reserves
Return on capital employed – operating profit as a percentage of
opening and closing capital employed
Number of legal completions
Earnings per ordinary share †
Dividends per ordinary share
Net assets per ordinary share
† Restated in 2010 to reflect the Rights Issue
IFRS
2012
£m
478.9
48.0
10.0%
48.0
30.2
561.5
(14.0)
2.5%
8.7%
2,458
9.7p
-
151.8p
IFRS
2011
£m
452.7
31.2
6.9%
31.2
13.5
458.6
(75.4)
16.4%
6.1%
2,626
4.4p
-
148.6p
IFRS
2010
£m
396.9
12.7
3.2%
12.7
0.5
435.9
(47.1)
10.8%
2.6%
2,587
0.2p
-
141.3p
IFRS
2009
£m
301.8
(22.4)
(7.4%)
(119.0)
(100.4)
293.5
(214.6)
73.1%
(21.0%)
2,113
(47.9p)
-
183.4p
IFRS
2008
£m
650.1
84.5
13.0%
(174.9)
(139.9)
404.6
(223.3)
55.2%
(25.3%)
3,925
(66.7p)
9.3p
252.9p
Shareholder Discounts
The Company offers a discount of 1% to shareholders off the purchase
price of a new Redrow home. In order to qualify for the discount a
purchaser must hold a minimum of 2,500 ordinary shares in Redrow plc
for a minimum of 12 months prior to the date of reservation, subject to
a cap of £5,000.
Details of our current developments are available on our website:
redrowplc.co.uk
Group contacts
Officers and Advisers
Company Secretary
Graham A Cope
Registered Office
Redrow House
St. David’s Park
Flintshire
CH5 3RX
Registered No. 2877315
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Stockbrokers
BofA Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
101 Barbirolli Square
Lower Mosley Street
Manchester
M2 3PW
Solicitors
Linklaters LLP
One Silk Street
London
EC2Y 8HQ
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Redrow plc
Redrow House, St David’s Park, Flintshire CH5 3RX
Telephone: 01244 520044 Facsimile: 01244 520720
Email: groupservices@redrow.co.uk