Redwire Annual Report 2016

FY2016 Annual Report · Redwire

Loading PDF…

R
e
d
r
o
w
p
l
c

A
n
n
u
a
l

R
e
p
o
r
t
2
0
1
6

Redrow plc
Redrow House, St. David’s Park, Flintshire CH5 3RX
Tel: 01244 520044 Fax: 01244 520720
Email: groupservices@redrow.co.uk

ANNUAL REPORT
2016

A BETTER
WAY TO LIVE

PRODUCT. PEOPLE. PLACES.

AT REDROW, OUR ENTHUSIASTIC AND COMMITTED TEAM TAKE PRIDE IN THE HOMES
WE BUILD FOR OUR CUSTOMERS AND THE COMMUNITIES WE HELP TO CREATE

FIRST-TIME BUYERS

YOUNG PROFESSIONALS

GROWING FAMILIES

Providing the same build quality and
attention to detail for first homes as we do
for any other, Redrow ensures that first
step on the property ladder comes without
compromise. As easy to manage as they
are to afford, these homes are a firm
foundation on which to build a lifetime of
home ownership.

Stylish homes for sharing and socialising,
our houses and apartments for young
professionals are a cool and cost effective
alternative to the expensive rental market.
With attractive layouts, these homes are
designed for fun, friends and family when
the working day is done.

Redrow understands the dynamics of
family living, bringing everyone together
when it counts, in the heart of the home,
while allowing plenty of personal space for
them to express their own style. From the
generous bedrooms to the en-suite that
avoids the queue for the bathroom, these
are homes designed with family life in mind.

Read more on
pages 44 to 47

Improvement in accident
incident rate although build
activity increased

*Read the Glossary on page 134 to see how we calculate our key performance indicators

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION

OUR MARKETS
THE HOUSING MARKET PLAYS AN IMPORTANT ROLE IN THE UK
ECONOMY WITH UNDERLYING DEMAND FOR HOUSING BEING
FUNDAMENTALLY STRONG

CHART 1

Planning applications granted
to March (‘000)

CHART 2

Mortgage approvals
calendar year (‘000)

CHART 3

Mortgage approvals 2016
(seasonally adjusted) (‘000)

CHART 4

NHBC build starts
(England and Wales) (‘000)

CHART 5

CHART 6

Residential transactions calendar
year (England and Wales) (‘000)

House Prices
Nationwide House Price Index (£’000)

354

342

349

360

373

736

769

806

593

610

Jan

Feb

Mar

Apr

May

Jun

Source: Department for Communities and
Local Government – District Level applications

Source: Bank of England, CML

STRATEGIC REPORT

1,101

1,105

969

800

843

London Average
UK Average

500

400

300

200

100

Q3
13

Q4
13

Q1
14

Q2
14

Q3
14

Q4
14

Q1
15

Q2
15

Q3
15

Q4
15

Q1
16

Q2
16

Source: HM Revenue & Customs

Q3
13

Q4
13

Q1
14

Q2
14

Q3
14

Q4
14

Q1
15

Q2
15

Q3
15

Q4
15

Q1
16

Q2
16

PLANNING

MORTGAGE APPROVALS

RESIDENTIAL TRANSACTIONS

ISAS

The number of applications granted has increased
again and is at its highest level since 2008/09. The
approval rate has been maintained at 88%, leading
to an increase in the supply of residential land in
the market (Chart 1).

SDLT CHANGES

New legislation brought in from 1 April 2016
added an extra 3% to the stamp duty bills of
those buying a second or rental property. It will
also apply if you haven’t sold your existing
property when moving house, though in this case
a refund of the stamp duty is available if it is sold
within three years of purchasing your new home.
The aim of the tax is to reduce competition
between buy-to-let investors and first time
buyers in the starter home market, with the
Government promising to invest some of the
proceeds into communities where the impact
of second homes is more significant.

Mortgage approvals are a key indicator of the level
of activity in the housing market. There has been a
57% increase in approvals since 2008, when there
were 515,000 approvals in the calendar year, with
a consistent improvement over the last five years
(Chart 2).

Seasonally adjusted figures for the first half of
2016 showed a decrease in the second quarter
compared to the first quarter, with 198,000
approvals compared to 216,000 approvals,
respectively (Chart 3). The changes in SDLT
mentioned earlier are understood to be the
reason for this fall.

HOUSING SUPPLY

NHBC new build starts were 126,800 for the year
to June 2016 (Chart 4). In the three month period
to June the NHBC data showed a 2.5% decrease in
starts on the prior year, with a decrease in
affordable sector starts (down 17%) mainly offset
by an increase in private sector starts (up 2.2%).

In the three months to the end of June 2016,
private sector completions were up 6% on the
previous year, while affordable sector completions
were down 13%, giving an overall increase of 1.4%
compared to the three months to June 2015.

Residential transactions in England and Wales
edged up slightly on the prior year, to 1,105,000.
There was a sharp increase in transactions in
March, followed by a substantial decrease in April,
most likely due to the change in SDLT rates noted
previously. Housing market volumes have
stabilised since those changes (Chart 5).

UK average prices per the Nationwide House
Price Index increased by 5.1% in the 12 months to
June 2016, slightly up on the 4.1% increase in the
12 months to June 2015. London was again the
driving force behind these increases, with prices
in the capital up 9.9% over the same period
(Chart 6). In recent months prices in Central
London have softened whilst the Outer London
market remains robust.

Help to Buy ISAs were introduced on 1 December
2015 and are available until April 2019 at
participating banks for first time buyers to
purchase a new build or second hand property up
to £250,000 (£450,000 in London). Savers can put
away up to £200 a month and the Government
will provide a bonus of £50 for every £200 saved,
up to a maximum of £3,000, provided that the
money saved is used to buy a house.

The 2016 Budget also introduced the Lifetime ISA.
This will be available from April 2017 to anyone
aged between 18 and 40. Up to £4,000 a year can
be saved in the account and the Government will
add a bonus of 25% to any savings put in before
the saver is 50. The savings can then either be
used to purchase a first home, up to the value of
£450,000, or saved towards retirement, with all
of the savings available tax free after the saver
turns 60.

Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION12

Redrow plc Annual Report 2016

PRODUCT. PEOPLE. PLACES.

FIRST-TIME BUYERS

HELPING TO GET ON
THE HOUSING LADDER

The combination of excellent
build quality and customer
service, along with location and
being walking distance from
Wilton’s shops made it an easy
and quick decision for us.

Emily Ludlow
Erskine Park, Wilton

FOR FIRST TIME BUYER EMILY LUDLOW, A NEW
BUILD PROPERTY WASN’T ON HER WISH LIST
OF ‘DREAM BUYS’, UNTIL SHE AND HER PARTNER
VISITED ERSKINE PARK

With their sights set on buying an old property, they initially went to
view a Victorian townhouse. However, when they visited the Redrow
Homes development in Wilton near Salisbury less than two weeks later,
they decided that the benefits of buying new build were perfectly suited
to their first purchase.

They chose a Cadogan style house from Redrow Homes’ Regent Collection
at Erskine Park. The Erskine Park development was created by the transformation
of the former Erskine Barracks Ministry of Defence establishment.

“The combination of excellent build quality and customer service, along with
location and being walking distance from Wilton’s shops made it an easy and
quick decision for us.”

Emily has subsequently joined the Redrow team as a sales consultant.

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION14

PRODUCT. PEOPLE. PLACES.

YOUNG PROFESSIONALS

CLIMBING TO NEW HEIGHTS

We were attracted to Northway
House for many reasons, but
were particularly keen on its
location near Totteridge &
Whetstone tube station. We
were also really impressed by
the specification and design
of the show apartment, with
elegant, modern materials and
floor to ceiling windows.

Johnny Ho
Northway House, London

FIRST-TIME BUYER COUPLE JOHNNY HO AND
GIULIA SORRENTINO WERE KEEN TO GET ONTO
THE PROPERTY LADDER AND FOUND THEIR
IDEAL APARTMENT AT REDROW LONDON’S
NORTHWAY HOUSE DEVELOPMENT

Since leaving university in 2008, freelance cameraman Johnny (30) has lived
with his parents, with the aim of saving money to buy a property in London
with long-term girlfriend Giulia, who works in the City. By pooling resources,
the couple were in a position to pay a deposit of c10% to secure a one bedroom
home, bought off plan.

Only 25 minutes from central London, the Northway House Tower
Apartments are on the upper floors of a striking development with
uninterrupted views.

Designed to capitalise on the unique location and offer contemporary living
for couples, young families and professionals, each apartment boasts modern
interiors and uninterrupted views of the Hertfordshire countryside, with
many offering generously proportioned private terraces and balconies.

“It was obvious it was going to be a high quality development, which gave us
the confidence to buy off plan – a lot of the other developments we viewed
just didn’t come close.”

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATION16

Redrow plc Annual Report 2016

PRODUCT. PEOPLE. PLACES.

GROWING FAMILIES

A LARGER SPACE
FOR A GROWING FAMILY

My favourite part of the house
is the light and spacious kitchen
diner at the back. Or maybe
our lovely big garden.

Katy Morgan
Hillcrest, Plymouth

KATY MORGAN AND HER FAMILY HADN’T
EXPECTED TO FIND EVERYTHING THEY WERE
LOOKING FOR WHEN THEY VISITED REDROW’S
HILLCREST DEVELOPMENT IN PLYMOUTH

Having lived in their previous house for 10 years, the Morgans fell in love
with the four bedroom Windsor home from Redrow’s Heritage Collection
as soon as they saw it. With exteriors inspired by the Arts and Crafts
movement, these homes marry traditional architecture with contemporary
interiors designed for the practicalities of modern family life.

“My favourite part of the house is the light and spacious kitchen diner at the
back. Or maybe our lovely big garden; we’ve got three boys so having plenty
of outside space is really important to us. I love our views too.”

The family is looking forward to enjoying the two football pitches Redrow
is creating to Sport England standards for the Hillcrest community. They
already take advantage of the development’s central location, appreciating
the proximity to the town centre, Plympton and Plymstock, as well as the
boys’ school and Plymouth Life Centre for swimming.

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION18

PRODUCT. PEOPLE. PLACES.

MOVING UP

UPGRADING YOUR LIFESTYLE

The house has lovely
high ceilings and beautiful
woodwork. And the under-
floor heating is amazing.

Claire Walters
Compton Park, Wolverhampton

CLAIRE WALTERS AND HER FAMILY WERE
PERFECTLY HAPPY WHERE THEY WERE LIVING,
UNTIL A FRIEND MENTIONED HER NEW HOME
AT COMPTON PARK AND CLAIRE DECIDED TO
TAKE A LOOK

Claire (42) and her husband David (46) were living in a five bedroom house in
Wolverhampton with their two children when Claire’s friend Rachael told her
how happy she was with her new Redrow home and inspired her to visit the
Compton Park development.

Claire and David, who runs his own double glazing firm, hadn’t been planning
to move, until they visited the development show home and decided to buy
a Highgrove house type. “We love the space of the Highgrove; our previous
house wasn’t nearly as big. I really like the idea of the living area at the back
of the house being the hub of the family home. The house has lovely high
ceilings and beautiful woodwork. And the under-floor heating is amazing.
One of the first things David looked at was the windows, which are of the
same profile as those we fit so we’re happy with those. They’re beautiful
and very energy efficient, keeping the warm air in and the cold out”.

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATION20

PRODUCT. PEOPLE. PLACES.

RIGHT SIZERS

DOWNSIZING, NOT DOWNGRADING

We wandered around the show
home and liked everything we
saw; especially the character.

Andrew Church-Taylor
Lawson Rise, Whalley

ORIGINALLY LOOKING TO BUY A COTTAGE,
DOWNSIZERS ANDREW AND JEAN CHURCH-
TAYLOR WERE WON OVER BY THE EASE AND
SIMPLICITY OF A NEW HOME WITH
TRADITIONAL TOUCHES

Having sold their large house in Whalley, the couple had set out to buy a
cottage in the Ribble Valley, but every property they viewed would have
needed a lot of work and upkeep. They had been searching for a smaller home
that would still be able to accommodate three grown-up children and their
families for Christmas and other events, when a local shop owner suggested
they take a look at Redrow’s Lawson Rise development.

“A new home hadn’t been on our radar, but we went to take a look and were
very impressed.”

Keen gardeners Andrew and Jean also relished the opportunity to make the
garden their own, and returned the next day to sign up for a Balmoral house, in
the same Arts and Crafts style as the show home. The cul-de-sac location and
stone-fronted design also appealed to the retired solicitor and his wife, a
former nurse.

A few minutes’ walk from the centre of the village where Andrew was born
and where the couple had brought up their children, the development is also
close to Clitheroe, surrounded by beautiful Lancashire countryside and boasts
easy access to Blackburn, Preston and Burnley.

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATION22

Redrow plc Annual Report 2016

PRODUCT. PEOPLE. PLACES.

BUY-TO-LET INVESTORS

INVEST IN QUALITY FOR A
SOUND FINANCIAL RETURN

It has been a delight. A market
researcher would typically call it
‘extremely satisfied’ and would
give it a perfect score of ten!

Josef Wolf
The Summit, Bournemouth

JOSEF WOLF WAS LOOKING FOR AN
INVESTMENT PROPERTY HE COULD RETIRE TO IN
THE FUTURE AND FOUND HIS IDEAL BOUTIQUE
APARTMENT ON BOURNEMOUTH’S POPULAR
THE SUMMIT DEVELOPMENT

Josef (43), who works at a software firm in London, wanted to buy an
apartment as an investment in the first instance, with a view to retiring
there later. Searching in Bournemouth, Josef visited Redrow Homes’ luxury
development, The Summit. The following day he reserved a one bedroom
apartment off plan.

“We visited the plot when there were just concrete floors, the moment we
met the site manager, Daryl, and later on the sales advisor, Helyn, we realised
that we made the right choice and above all that we were in good hands.
Many builders would not be as flexible as Redrow Homes when it comes to
buying off plan; we were given dozens of options, from kitchen to bathroom,
from sockets to spotlights.”

Each home has a private balcony, parking space and is a short walk from the
beach, shops and restaurants. The apartments’ floor-to-ceiling windows help
accentuate the spacious interiors and open-plan layouts, creating a
particularly light and airy feel.

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION24

CHAIRMAN’S STATEMENT
OUR STRATEGY IS TO CONTINUE TO GROW THE BUSINESS,
INCREASING THE NUMBER OF OUTLETS AND HENCE THE
NUMBER OF HOMES WE BUILD

Pre-tax profits increased by 23% to a record
£250m (2015: £204m) and earnings per share
rose 24% to 55.4 pence (2015: 44.5p).

This strong trading performance, together with
increasing the level of deferred payments on our
land purchases, has enabled us to reduce our net
debt to £139m at the end of the financial year,
giving gearing of 14% (2015: 18%).

Two key measures of our performance, Return
on Capital Employed and Return on Equity,
improved to 24.2% (2015: 22.8%) and 26.8%
(2015: 26.4%) respectively.

As a result of this excellent performance, and as
I reported in my Interim Statement in February,
the Board is proposing a final dividend of 6p per
share (2015: 4p) making 10p in total for the year,
an increase of 67% on 2015. Subject to
shareholder approval at the Annual General
Meeting, this will be paid on 11 November 2016
to shareholders on the register at the close of
business on 23 September.

Last year we updated our medium-term guidance,
targeting turnover of £1.6bn, earnings per share
of 62p and Return on Equity of 25%. We remain
comfortably on schedule to deliver these objectives.

MARKET

Demand for new homes was strong throughout
the year. Our growth in output has benefitted
from the Government’s Help to Buy scheme which
has continued to be a major support, not only to
Redrow, but to the industry as a whole.

I reported in my Interim Statement in February
that the higher end of the market, and in particular
Central London, had slowed down, principally as a
result of the Stamp Duty changes that came into
effect last year and further hikes that came into
effect in April this year. Activity in this section of
the market remains sluggish; however, Redrow’s
exposure is very limited and all other areas in
which we operate, including Outer London, have
shown strong growth. We have seen very little
impact as a result of the Brexit vote.

We have recently launched a number of significant
new sites and have a strong pipeline in the
planning process. Our strategy is to continue to
grow the business, increasing the number of
outlets and hence the number of homes we build.
This process is on track and as such I am confident
that this will be another year of significant
progress for Redrow.

Steve Morgan
Chairman

5 September 2016

LAND AND PLANNING

Redrow has had a very successful year in acquiring
land and obtaining planning permission on our
forward land holdings, with the owned and
contracted land bank increasing to 26,000 plots.
This gives the Group a significant platform for
increasing the number of new homes built going
forward and to maintain our expansion plans;
however obtaining planning through Local
Authorities remains tortuous.

PEOPLE

As a result of the continuing growth of the
business, we have also expanded our workforce in
the last 12 months from just over 1,600 people to
just under 2,000 adding over 300 direct jobs, an
increase of 19%. We continue our commitment to
training and development and at the end of June
employed 297 trainees across all disciplines, up
22% on 2015.

The record performances we have achieved in
recent years have only been made possible by the
hard work and commitment of our people and I
would like to thank them for all their efforts in
support of the business.

CURRENT TRADING AND OUTLOOK

Redrow entered the new financial year with a
record private forward order book of £807m,
up 54% on the previous year; including Social
Housing, the total forward order book is £897m,
up 51%. Sales in the first 10 weeks are very
encouraging and up 8% on a strong comparator
last year.

PRE-TAX PROFITS WERE £250M,
ACHIEVED AS A RESULT OF COMPLETING
OVER 4,700 MUCH NEEDED NEW HOMES,
A 17% INCREASE OVER LAST YEAR.

STEVE MORGAN

Chairman

I am delighted to report that for the third
consecutive year Redrow has delivered a record
set of results. Pre-tax profits were £250m,
achieved as a result of completing over 4,700
much needed new homes, a 17% increase over
last year.

FINANCIAL RESULTS

Group turnover rose by 20% to a record £1.38bn
(2015: £1.15bn). Revenue from residential legal
completions increased by 26% to £1.36bn (2015:
£1.08bn). This was due to a 17% rise in legal
completions to 4,716 (2015: 4,022), combined
with a 7% rise in average selling price to £288,600
(2015: £269,800).

Gross margin improved by 40 basis points to
24.2% mainly due to 94% of our completions
coming from sites purchased post downturn
with normal margins.

Operating expenses remained stable at 5.3% of
turnover, despite the additional overheads of
opening two new divisions (Colindale and South
East) at the beginning of the financial year.

Operating profit was £48m higher at £261m
(2015: £213m), with the operating margin
equating to 18.9% (2015: 18.5%).

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION26

CHIEF EXECUTIVE’S REVIEW
THE GROUP HAS ONCE AGAIN DELIVERED
RECORD RESULTS

GROUP PERFORMANCE

DELIVERING MORE HOMES

CUSTOMERS

LOOKING TO THE FUTURE

JOHN TUTTE

Group Chief Executive

The Group has once again delivered record results.
Turnover increased by 20% to £1.38bn and pre-tax
profits were up 23% to £250m. However, behind
these headline results there is a bigger story. This
year’s integrated Annual Report provides much
more detail on the progress we have made across
the many parts of our business that have come
together to make these outstanding results possible.

Our growth in recent years has been exceptional.
Over the past three years legal completions have
grown by 67%, turnover by 128% and profit before
tax by 262% and our strategy is to continue to
grow, albeit we expect the pace to moderate. Our
divisions in the South grew most strongly in the
year and it is pleasing to report that the new South
East division made a valuable contribution to the
Group’s results in its first year of trading.

To deliver more homes the industry needs
more outlets. Increasing outlets is essential,
but is a huge challenge: it requires talented and
determined teams to close land deals and progress
sites through what is a long-winded, under-
resourced planning system. Despite the
frustrations of the system we have a good
track record of growing outlets year-on-year.
Over the past three years we have increased
outlets by nearly 40% from 92 to 128 and we
expect the number of outlets to rise in 2017.

To grow outlets you need land. 2016 was a very
successful year for land acquisition across the
Group. We took advantage of a benign market and
benefitted from an exceptional pull-through from
the forward land portfolio that included 2,900
plots at Colindale, North London.

MARKET

PLACEMAKING

The market throughout the year was stronger than
the previous year which resulted in our average sales
per outlet per week increasing by 6% to 0.72 with a
seasonally stronger performance in the second-half.
The top-end of the market however suffered from
the impact of successive SDLT increases and this was
particularly notable in London.

In response to the weaker top-end of the market
we have focused our land buying and development
programmes more towards our mid-range homes
that have proven to be so popular with buyers –
with many also being able to take advantage of
Help to Buy. In London we announced some time
ago that our strategy was to concentrate on more
affordable apartments in the outer boroughs and
it is within these areas we have acquired new sites.
We have made good progress working through
our legacy of prime London apartments, including
Connaught Place, and now have very little
exposure to this sector of the market.

Our product distinguishes us from our major
competitors. Heritage is and will remain our core
collection. We make continuous but subtle
changes to the range to ensure it maintains its
leading and award winning position in the new
homes market.

But creating great places to live is not just about
individual homes; it’s about much more. It’s about
Placemaking: designing developments that are
sympathetic to the surroundings where our
customers can enhance their wellbeing and feel
part of a community. It’s about creating a Better
Way to Live which we adopted as a new strap-line
during the year.

We have also worked hard to make our
developments more sustainable from an
environmental perspective. We are working towards
ISO14001 certification for our environmental
management systems and became the first major
housebuilder to score a maximum rating of ‘three
trees’ in the WWF’s Timber Scorecard.

We are a customer focused business and we
recognised some time ago that our customers’
expectations were rising at a faster rate than we
could support. We responded by making a
significant investment to raise our game in this
area: we expanded our customer service teams,
introduced new technology and most recently
obtained accreditation from the Institute of
Customer Service. It is comforting to know that
in a fast growing business such as ours, close to
90% of our discerning customers continue to
recommend us.

PEOPLE

It is pleasing to report that a record 24 of our
site managers received NHBC Pride in the Job
awards in this year’s competition. This is a great
achievement at a time when the industry has
a shortage of skilled trades, managers and
technicians: a shortage that we recognised
a number of years ago and have been doing
more than our share to address ever since.

The wider industry needs to do more to address
the skills crisis and I was delighted to accept the
opportunity to Chair the Homebuilding Skills
Partnership (HSP). The HSP is an HBF initiative and
has secured four years of funding from the CITB to
help tackle the country’s skills shortage. The HSP
will be looking to broaden the industry’s appeal to
attract a more diverse workforce as well as looking
at ways to raise standards and productivity.

As we grow we have a responsibility for the
welfare of an increasing number of people and we
have to ensure our sites are safe places to live and
work. We have expanded our Health and Safety
teams during the year and despite a significant
increase in build output, reduced the number of
notifiable accidents per site.

In summary, 2016 was an excellent year for the
Group. We are an innovative organisation and our
initiatives are aimed at both improving shareholder
value and supporting our brand purpose – to
create a better way for people to live. We
produced a very strong set of record results but of
equal importance made significant progress across
those parts of the business that are essential to
our strategy for sustainable growth. We have an
excellent product with a strong brand, we have an
operational structure with capacity to grow and
expand and a land bank with which to do so. We
have talented, dedicated and loyal teams of people
that share the same values. The Group is in good
shape and well-positioned for the future. I am
confident 2017 will be another excellent year for
the business.

John Tutte
Group Chief Executive

5 September 2016

THE GROUP IS IN GOOD
SHAPE AND WELL-POSITIONED
FOR THE FUTURE.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION28

OPERATING REVIEW

WE HAVE A CLEARLY DEFINED GROWTH STRATEGY, TO INCREASE REVENUE,
PROFITS AND RETURNS TO SHAREHOLDERS BY INCREASING OUTLETS AND
LEGAL COMPLETIONS OVER THE MEDIUM-TERM

GROW OUR BUSINESS RESPONSIBLY

2,827

2,458

4,716

4,022

3,597

17,620

LEGAL COMPLETIONS
IN LAST FIVE YEARS

NEXTGENERATION
SILVER AWARD

STRATEGIC REPORT

2016 PERFORMANCE HIGHLIGHTS

+20% to £1.38bn

REVENUE

+17% to 4,716

LEGAL COMPLETIONS

+9% to 128

OUTLETS

2016 WAS THE SEVENTH
SUCCESSIVE YEAR OF
GROWTH IN THE BUSINESS.

NEW DIVISIONS

At the start of the financial year we opened a
new division in the South East and as part of a
reorganisation that created a Greater London
Region, we established our Colindale Gardens
site, which was the former Hendon Police
Training Centre, as a standalone division given
its scale and importance to the Group. Colindale
Gardens was granted planning permission for
2,900 homes at the beginning of this calendar
year and has got off to a flying start. We have
secured over 300 private sales including 211
private rented sector sales. Construction works
are well underway and the first legal completions
are on track to be delivered in January 2018.

With the South East and Colindale we now have
13 homes’ divisions as well as Harrow Estates,
who achieved considerable success in the year
obtaining planning permissions on a number of
strategic sites and making profits on the disposal of
land. Although our existing operational structure
has capacity to build over 6,500 homes per year,
a number of our divisions will reach maturity in
terms of output over the next two years and place
a natural brake upon the pace of growth from the
existing structure. As more of our businesses reach
this stage we have the potential to continue to
grow by expanding geographically and opening
more new divisions in areas of strong demand.
Ultimately our growth comes from increasing the
number of outlets from which we operate.

REVENUE

2016 was the seventh successive year of growth
in the business: since 2009 revenues have grown
by over £1bn and in the past three years alone,
revenues have more than doubled to £1.38bn.

STRATEGY IN ACTION – CREATING WOODFORD GARDEN VILL AGE

Redrow acquired an interest in the former BAE Systems Woodford Aerodrome in 2011 following the closure of the facility.
The part brownfield site, which is designated greenbelt, extends across 500 acres of land within Stockport MBC and Cheshire
East local authority areas. Through policy promotion, the site was identified in emerging local plans for Stockport MBC as a
possible strategic mixed use development site suitable for housing.

Harrow Estates used their master planning expertise and worked collaboratively with Stockport MBC to assist in the
preparation of the Policy Framework and design guidance for the site which sets out the principles of development.

The main development related planning applications were approved by Stockport MBC in the summer of 2014 and following
review by the Secretary of State and finalisation of the S106 agreement, planning permission was granted in January 2015.

The proposals for Woodford Garden Village include 920 homes (with detailed planning permission for the first phase
comprising 145 homes); extra care accommodation; local retail; public house; 90,000 sq ft of employment space; c37 ha
of public open space including a village green and 108 ha of restored agricultural land.

In addition the development will deliver c£28m of community benefits including on-site and off-site social housing; a new
primary school; new bus services; improvements and contributions to footpaths and cycleways – including connections
historically severed by the aerodrome. The development will also provide play parks and formal sports pitches and a
commitment to a local consultative forum throughout the development lifespan. Woodford Garden Village draws on the
latest Government thinking for the delivery of large scale housing projects.

Following the commencement of the demolition of the existing structures and infrastructure works, housebuild started
in September 2015. Stockport MBC completed their construction of the major new junction into the site in June 2016 and
the Sales Centre and seven show home complex opened shortly afterwards. In addition to the show homes, prospective
customers can use a new interactive 3D marketing system to virtually walk the streets of the development and into the
homes and gardens to obtain a real sense of how the development will eventually look and feel.

16Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION30

OPERATING REVIEW CONTINUED

As the Group has expanded geographically,
volumes and average selling prices have increased
in both existing and new divisions. The divisions in
the South grew most strongly and it is pleasing to
report that the new South East division made a
valuable contribution to the Group’s results in its
first year of trading.

OUR BRAND PURPOSE

Redrow prides itself on consistently delivering
excellence in the homes it builds and the
communities it creates. To achieve this, everyone
in the business at every level is aligned with a clear
sense of purpose and how they contribute to the
team effort: Redrow’s brand purpose.

The sale of homes accounted for £1.36bn of
turnover with the balance of £21m attributable to
land sales including the disposal of two sites by
our Harrow Estates subsidiary.

COMPLETIONS

As one of the fastest growing housebuilders in
the UK it is particularly important that everyone
joining the business understands this brand
purpose and the reason Redrow operates in a
certain way: The Redrow Way.

The key driver behind the rise in homes’ revenue
was the increase in legal completions. Overall
completions grew by 17% to 4,716. Private
completions were 12% ahead and social
completions were 46% up. Social housing
accounted for 18% of completions compared to
14% last year. Apartments represented 12% of
private completions against 15% last year with the
reduction largely being due to the timing of build.

Redrow’s philosophy is one of continuous
improvement regardless of how good the previous
performance level has been. This is an approach
shared with many world class businesses and is
achieved through the Group wide values of hard
work, innovation, passion, attention to detail and
the pursuit of excellence. Communication is an
essential ingredient and senior management work
hard to ensure all staff understand The Redrow Way.

There were 2,538 completions in the second-half,
17% more than the 2,178 delivered in the first-half
and in line with the overall growth of the business.

OUTLETS

With the growth in overall average selling prices
moderating, revenue growth is more reliant upon
volume increases which in turn are dependent on
the number of outlets from which the Group
operates. Active outlets increased by 9% in the
year to 128: the Group opened 54 new outlets and
closed 43 giving a net increase of 11. The Group
has increased the number of outlets from which it
operates by nearly 40% since 2013.

Bringing new outlets on-stream remains a
challenge for the industry. Obtaining detailed
planning permissions and clearing often
superfluous pre-commencement conditions is time
consuming and places an unnecessary burden
upon scarce local authority resources. Any changes
the Government can introduce to reduce red-tape
in this part of the planning process will be very
much welcomed.

A range of communications tools have been
developed to clearly communicate the
brand purpose to every member of staff. All of
Redrow’s marketing messages and materials are
consistent in communicating the brand purpose
and the Group strapline is completely aligned.

Typically Redrow build a high quality product
in aspirational locations, employing people
passionate about the business operating in high
performance teams. There is a healthy level of
competition across the Group, helping to avoid
complacency and encouraging improvement
and innovation.

SILVER AWARD FROM NEXTGENERATION

We were pleased that our efforts to become more
sustainable were recognised with a silver award
from NextGeneration, an independent
organisation which benchmarks the UK’s top 25
housebuilders on their sustainability performance.
This year’s NextGeneration benchmark saw us
moving up into fifth place in the rankings. Our
above average score of 71% is up 8% on last year
and was calculated by assessing the impact our
operations and the products we build have on
the environment, society and the economy.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION32

OPERATING REVIEW CONTINUED

TO ENSURE THAT WE GROW OUR BUSINESS RESPONSIBLY, WE ARE FOCUSED
ON MANAGING ALL OUR RESOURCES EFFICIENTLY AND EFFECTIVELY

MANAGE OUR RESOURCES EFFICIENTLY

5,372

North – 2,588

Central – 2,625

South – 4,114

Greater London – 3,397

12,724

LAND ADDITIONS
BY GEOGRAPHY

1,991

2,139

1,975

1,068

12,545

FORWARD LAND
CONTRIBUTION TO
OWNED LAND BANK
IN LAST FIVE YEARS

STRATEGIC REPORT

2016 PERFORMANCE HIGHLIGHTS

+6% TO 24.2%

ROCE

+27% TO 4.95 years

LAND BANK YEARS

+172% TO 5,372 plots

FORWARD LAND CONTRIBUTION
TO OWNED LAND BANK

WE ARE WORKING TOWARDS
CERTIFICATION TO ISO14001
BY 2018.

LAND

The Group took advantage of a benign land market
during the year to secure 12,724 plots across 46
new sites on attractive terms. After taking into
account legal completions, land sales and re-plans,
the current owned and contracted land bank with
planning increased by 7,784 plots to 26,000 with a
Gross Development Value based upon the 2016
average selling price of £7.5bn. The owned current
land bank stands at 23,374 plots and represents
4.95 years of output.

Forward land contributed 5,372 plots across ten
sites to the owned land bank with Colindale
accounting for 2,900 plots. Colindale was acquired
unconditionally under contract in December 2013
and obtained planning two years later: the site was
transferred to the owned land bank in the second-
half of 2016. In addition to successfully pulling
through plots from the forward land bank, we also
made good progress on securing draft allocations
on a number of strategic sites as local authorities
work towards meeting the Government’s deadline
of having Local Plans in place next year.

All regions increased their owned and contracted
land banks during the year. The largest gains were
in the South, where we have seen most growth
in the business and in Greater London, largely
as a result of the Colindale site. Elsewhere in
London we adopted a cautious approach to land
buying focusing on the more affordable Outer
London boroughs.

A combination of a benign market with the
opportunity to acquire a number of large sites
on favourable terms, and a strong pull through
from forward land, meant we were able to secure
land at margins above our hurdle rates.

STRATEGY IN ACTION –
WA STE AND CONSTRUC TION
RESOURCE EFFICIENC Y

In order to help identify areas to improve our
waste and construction resource efficiency further,
Redrow commissioned Ethical Partnerships to
undertake a programme of independent site
inspections on developments in our South East
division. A number of opportunities to minimise
waste were identified and we have subsequently
developed a blueprint for reducing waste on site and
improving resource efficiency. Work carried out to
date on this blueprint has highlighted the value of
integrated action across the business involving
construction, commercial, buying and technical teams
working together to develop a culture of resource
efficiency and waste prevention.

One important component of the blueprint is working
with subcontractors to improve their understanding of
waste prevention and control. To support this we have
become an ambassador for a new UK-wide information
campaign that aims to provide practical support to
small businesses, helping them manage waste
efficiently and meet their Duty of Care obligations.
The ‘Right Waste, Right Place’ campaign, sponsored by
the Environment Agency, the Chartered Institution of
Wastes Management and the Environmental Services
Association, provides practical information and a range
of tools to help small businesses identify their current
level of compliance.

16Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION34

OPERATING REVIEW CONTINUED

As a result, and despite buying proportionally
more land in the south, the average plot cost of
the land bank represents just 21% of the private
average selling price.

CONSTRUCTION

Build output increased by around 20% in the year
as the number of sites under construction grew
and the Group positioned itself to meet its growth
targets. Although the shortage of skills remains an
issue for the industry, there were few instances of
trade shortages leading to serious build delays as
we continued to work hard to nurture existing and
new subcontractors. Some material lead times
fluctuated during the year with suppliers at times
unable to deliver a reliable service. Our
longstanding relationships with a number of key
suppliers helped us mitigate the impact of supply
issues across a range of materials.

Overall material costs were relatively stable
during the year. However, labour rates continued
to rise in areas where skill shortages are most
acute and as a result, like-for-like build costs
increased by about 4%. On top of this, additional
costs due to last year’s Building Regulation
changes and some changes to enhance our
specification and improve build times are
beginning to emerge. The specification changes
will however be recovered through improved
selling prices and productivity gains.

ROCE AND CAPITAL TURN

Return on capital employed is a key measure for
the Group and is a fundamental consideration
when bidding for land.

We target to increase ROCE through both
operating margin and capital turn improvements.
However, achieving a consistent improvement in
capital turn in a growing business is challenging
across a portfolio of sites that includes apartment
blocks, where work in progress is unavoidably high,
and large strategic sites that require early
infrastructure provision. Notwithstanding this, in
2016 ROCE increased from 22.8% to 24.2% due
to improvements in both operating margins and
capital turn.

USING NATURAL AND CONSTRUCTION
RESOURCES EFFICIENTLY
Our approach to managing natural
resources efficiently
Our plans to develop a net positive
environmental approach include making
efficiencies in energy and water and reducing
carbon emissions from our operations. To assist
with managing these aspects, we have started to
develop our existing environmental management
systems and are working towards certification
to ISO14001 by 2018; ensuring continual
environmental improvement year-on-year
going forward.

Supporting sustainably sourced timber
Promoting responsible forest management and
eradicating illegal wood products from our supply
chain is a core part of our strategy and we
continue our longstanding membership of WWF’s
Global Forest and Trade Network (GFTN). This
year we became the first major UK housebuilder to
score a maximum rating of ‘three trees’ in the
WWF’s Timber Scorecard. Our purchasing actions
in this area send the strongest message of
sustainable procurement; between 2011 and 2015
we have seen a 55% increase in the volume of
sustainable ‘credibly certified’ timber incorporated
in our homes to 62,031m3. Our usage of timber in
accordance with GFTN categories ‘credibly
certified’, ‘source assessed and verified’ currently
stands at 99.83%. (2015: 99.82%).

Julia Young, WWF’s Global Forest and
Trade Network Manager said:

“Redrow has participated in the WWF Global
Forest and Trade Network programme since 2003,
and the commitment made to sourcing timber
from sustainable forest sources shows great
leadership at a time when our natural resources
are under great pressure. Redrow’s persistence
over the years to ensure it knows where all the
timber it buys for customer’s homes comes from,
and that it isn’t contributing to forest loss but
instead to a future where people and nature thrive,
is a great achievement and example to others in
the sector.”

Energy use, carbon emissions & water
We continue to disclose our carbon emissions
and reduction activities to the Carbon Disclosure
Project (CDP) annually and have seen a significant
increase in our CDP score in the most recent
submission. The scoring system reflects progress
towards excellence in carbon management by
measuring awareness, management and actions
taken on climate change.

CDP Score 2014

CDP Score 2015

86C

91C

Our Greenhouse Gas (GHG) emissions expressed
in relation to the quantity of build we have
undertaken have increased marginally this year
to 2.61 tonnes of CO2e per 100m2 (2015:
2.57tCO2e/100m2). We continue to raise our
ambitions in this area and are currently developing
a new carbon reduction plan to tackle operational
energy use and carbon emissions systematically
across the business, with a view to moving towards
a net positive approach. Our GHG emissions are
independently verified to a limited level
of assurance.

Our efforts to reduce water consumption on
our sites have paid off this year as we have
seen a 30% reduction in site water use to
14.66m3/100m2 of build. Some of this decrease
is also attributable to improvements in our
reporting systems in this area.

Driving down waste
During the year we completed an introductory
waste campaign across all of our divisions,
investigating key sources of waste generation and
developing a blueprint for waste minimisation.
These blueprints provide a framework for
exploring ways to reduce waste at source, saving
materials and money as well as reducing the
environmental impacts of waste management.
We are already starting to see the benefits of this
work since our total waste produced relative to
productivity has reduced this year to 9.76 tonnes
per 100m2 of build (2015: 9.84t/100m2) and the
amount of waste we diverted from landfill has
increased to 94.8% (2015: 92.6%).

Supply chain collaboration
We are proud of our reputation for supporting our
supply chain and this work continued throughout
the year as we strengthened links with our
suppliers and subcontractors across all aspects of
our business. Every year we provide a series of best
practice events for our subcontractors and those
interested in tendering for work with us. Our
North West and Lancashire divisions have recently
run such events for Groundworkers and Scaffolders
to enable sharing of best practice and provide a
platform to discuss and resolve key issues
such as skills, performance, quality, health and
safety and sustainability. At both events industry
and legal specialists were in attendance and there
was an opportunity for subcontractors to take part
in an ‘ask the expert’ session.

OUR TOTAL WASTE PRODUCED
RELATIVE TO PRODUCTIVITY HAS
REDUCED THIS YEAR TO 9.76 TONNES
PER 100M2 OF BUILD.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION36

OPERATING REVIEW CONTINUED

WE ARE FOCUSED ON CREATING HIGH QUALITY PLACES TO LIVE BY DELIVERING
WELL DESIGNED, WELL BUILT, ATTRACTIVE HOMES WHILST AT THE SAME TIME
ENHANCING THE BENEFICIAL CHARACTERISTICS OF THE LOCAL LANDSCAPE,
ECOLOGY AND COMMUNAL RESOURCES

CREATE BETTER PLACES TO LIVE

STRATEGIC REPORT

2016 PERFORMANCE HIGHLIGHTS

+11% to £142m

MONIES COMMITTED TO FUND
IMPROVEMENTS TO LOCAL COMMUNITIES

+46% to 834 homes

SOCIAL HOUSING LEGAL COMPLETIONS

+14% to c240 hectares

HECTARES OF PUBLIC OPEN SPACE CREATED

WE DELIVERED 834 SOCIAL
HOUSING HOMES IN THE
YEAR WITH A VALUE OF £86M.

PRODUCT

Our product distinguishes Redrow from its
main competitors. We have three house type
collections: Heritage, Regent and Abode.

Heritage is the backbone of our business and in
2016 accounted for 79% of the Group’s private
sales. The Collection combines attractive street
elevations with modern spacious internal layouts
and a high specification. Although we always
ensure it remains faithful to its concept we make
continuous but subtle improvements to maintain
its market-leading position and to make it more
productive to build. The most recent changes
have seen the introduction of taller internal doors
to complement our higher ceilings and a switch
to more aesthetically pleasing hipped roofs on
certain house types that have the advantage
of reducing build times.

Regent and Abode are two collections that
provide higher density housing using similar
floorplates. Regent is more traditional in terms
of appearance and internal layout whilst Abode
offers more contemporary elevations and living
spaces. Both have been more widely plotted and
we have been successful in using both these
collections on larger sites alongside the Heritage
Collection to attract a broader market and
improve output and return on capital employed.

In addition to our Collections, we have also
developed a winning formula for our bespoke
apartment schemes, especially in London where
we have the expertise and resources to undertake
the building of these complex schemes in-house.

We delivered 834 social housing homes in the year,
with a value of £86m (2015: 571 homes, £59m).

834

634

571

332

353

2,724

SOCIAL HOUSING LEGAL
COMPLETIONS IN LAST FIVE YEARS

STRATEGY IN ACTION – REGENER ATING COLINDALE

Colindale Gardens, London, NW9, is a 48 acre site formerly owned by the Metropolitan Police. It was acquired by Redrow
unconditionally under contract without planning in December 2013.

Following extensive work and consultation on the masterplan to regenerate the site, a detailed planning consent for 888
homes together with an outline consent for a further 2,012 homes, was granted in December 2015 and the agreement on
community contributions concluded in February 2016.

In addition to the 2,900 new homes planned for the development, across 24 blocks of apartments and townhouses with a
residents’ gym and concierge service, there will be 100,000 sq. ft. of commercial and retail space.

c£143m of community benefits are being provided as a result of the development. These include 580 social housing apartments,
a primary school, a health centre, a new neighbourhood centre, a nursery, investment in transport improvements, nine acres of
public open space and community financial contributions.

Preparatory works began on the site in January 2016 with construction commencing in earnest in March 2016 to deliver a
c12 year construction programme.

We expect c450 construction workers on site on an average day when at peak production and the first legal completions are
expected in January 2018. Strong sales have been achieved since the Colindale Gardens sales launch, including a 211 unit
Private Rental Sector sale.

16Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION38

OPERATING REVIEW CONTINUED

ENERGY EFFICIENT HOMES

Our average home scores 84 out of 100 using
the Government sponsored Standard Energy
Assessment Procedure (SAP), which compares
well to the average for all new homes of 81.

During the year we also increased the proportion
of our homes fitted with smart meters and
including domestic recycling facilities to 82%
and 58% respectively (2015: 79% and 56%).

QUALITY OF CONSTRUCTION

We are focused on delivering quality homes to
our customers. This year a record 24 of our site
managers have been awarded Pride in the Job
Quality Awards, setting the highest standards
in housebuilding. 70% of these site managers
have come up through Redrow’s succession and
training initiatives.

PLACEMAKING
Advancing our approach
We focus on building the right homes in the right
settings, taking full advantage of the beneficial
characteristics of the local landscape, ecology and
communal architecture. We have a Group Master
Planning team that are charged with the
responsibility of upholding our design ethos
ensuring, through a comprehensive programme
of design reviews, that all of our developments
create better places for people to live and work.

We are creating visual maps for our developments
to highlight key sustainability features, such as
public open space, biodiversity improvements,
transport links and renewable energy. We want our
customers to know that as well as buying a
premium home they are moving into a development
which we have sympathetically designed so as to
enhance their sense of wellbeing, help them to get
in touch with nature and feel part of a community.

The intention is to strengthen and further embed
our Placemaking design ethos by establishing a
suite of supporting design principles. A framework
will be constructed around the design principles
to ensure, that through planning, training,
communication and review, they are
systematically applied throughout Redrow.

Monies committed to fund the
improvement of local communities
In 2016, we committed £142m to funding
improvements to communities local to our
developments, an 11% increase over last year
(2015: £128m).

Working with the community and partners
We adopt a collaborative approach to planning
consultation, engaging wherever possible with
local partners and community stakeholders.

For example, on our Redbridge Park site, part of
the Liverpool Housing Partnership, we consulted
closely with local ward members and the
community. We arranged ‘drop-in’ sessions where
local people could inspect exhibition boards,
discuss the proposals in detail and provide
feedback. Observations from participants resulted
in us exploring options to address concerns over
traffic disruption and congestion.

At Wretchwick Green, a forward land site in
Bicester, working alongside Wates Developments,
we carried out extensive engagement with the
Town and District Council, local residents and the
wider community. These consultation processes
have significantly shaped the proposals for this
potential development.

Leisure facilities and green transport
Many of our developments provide opportunities
for residents to participate in leisure activities.
For example, on our Fleetwood development in
Lancashire, we have upgraded public footpaths to
become cycleways and are constructing a £1m
pedestrian and cycleway bridge.

We part funded and supported the creation
of a new report by Carplus on car clubs, in
collaboration with the University of the West of
England. Our Cheswick Village development, in
Bristol, was one of the case studies featured. As
well as helping new residents that do not own a
car to be more mobile, the report concludes that
car clubs can reduce traffic congestion, carbon
emissions and improve air quality.

On a number of our developments including
Warren Grove, Dawlish, Devon, each home
receives a welcome travel pack. The pack, which
contains walking and cycling maps, includes a
£50 cycle voucher and a £250 public green travel
transport voucher.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION40

0.70

0.68

0.72

0.62

0.58

PRIVATE
RESERVATION RATE

OPERATING REVIEW CONTINUED

WE ARE WORKING HARD TO ENSURE THAT WE ARE WELL PLACED TO DELIVER THE
BEST POSSIBLE CUSTOMER SERVICE AND CUSTOMER EXPERIENCE AS OUR NUMBER
OF CUSTOMERS INCREASES IN LINE WITH OUR GROWTH STRATEGY

PUT CUSTOMERS FIRST

STRATEGIC REPORT

2016 PERFORMANCE HIGHLIGHTS

+54% to £807m

PRIVATE ORDER BOOK

+70% to £17m

MY REDROW EXTRAS SOLD

+6% to 0.72 per outlet per week

PRIVATE RESERVATION RATE

IT IS IMPORTANT THAT EXCELLENT
CUSTOMER SERVICE IS EMBEDDED
WITHIN OUR BUSINESS.

CUSTOMER SERVICE CULTURE
Training accreditation
It is important that excellent customer service
is embedded within our business. To that end,
during the year our dedicated Learning and
Development team designed a Customer Service
Culture course which received a TrainingMark
accreditation from the Institute of Customer
Service and was delivered to all Redrow Customer
Service teams. This course is now part of our
Customer Service, Sales and Build induction
training and it is intended to extend this to all
departments going forward.

In addition, all our Customer Service Heads of
Department are currently working towards an
Institute of Customer Service coaching qualification
designed to enhance the service our teams offer
our customers through improved engagement.

Understanding what is important to
our customers
Post occupancy evaluation
We work closely with our customers to
incorporate their changing needs and aspirations
in the design of our homes. Part of this process
involves engaging with them once they have lived
in the house for a period of time, to ascertain their
opinions on various aspects of Redrow living. We
have recently taken part in a study commissioned
by the Department of Communities and Local
Government examining indoor air quality in new
homes. The aim of the project is to consider
whether existing regulations provide satisfactory
indoor air quality and evaluate how this is
impacted by occupant behaviour.

16Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION42

OPERATING REVIEW CONTINUED

Understanding what is important to
our customers continued
Post occupancy evaluation continued
Customers at our Horsforth Vale development,
Yorkshire, helped the project with measurements
of air quality over the course of several weeks.
Once published, the report should improve
understanding on the role and impact of
ventilation on our customers and identify
opportunities to improve indoor air quality
through both design and the provision
of information to customers on living in their
new home.

Customer research
This year we have carried out several independent
studies to delve deeper into what factors our
customers consider make a better way to live.
Both the adults and the children surveyed felt
that the surrounding area and its facilities were
important factors, prioritising proximity to
schools, good transport links, parks and green
space, being near friends and having a good
sense of community. These are all aspects that
we pride ourselves on developing and improving
in the communities in which we operate. The
results of the survey will be incorporated in the
development of our supporting design principles.

RESERVATION AND ORDER BOOK

The market was seasonably consistent
throughout the financial year with no discernible
impact leading up to the European referendum.
All divisions saw good demand for the Group’s
product. Whilst the market in Outer London
boroughs remained strong, higher-priced
property in Central London continued to suffer
from successive rises in SDLT. Despite demand
being weak for prime London property, the Group
made good progress on selling its most expensive
apartments and now has very little exposure
to this end of the market.

The Group secured £1.56bn of reservations in the
year, a 46% increase on the previous year. The
increase in the value of reservations was due to a
combination of the private average selling price
increasing across more reservations. The number
of reservations increased as a result of the sales
rate per week rising to 0.72 compared to 0.68 in
2015 and the Group operating from more outlets.

Help to Buy remains an attractive incentive for
many buyers and supported 34% of private
reservations in the year.

The cancellation rate for the year was 15%, a
relatively small increase on the previous year.

As a consequence of the strong sales
performance, the Group closed the year with
a private order book of £807m: £283m and
54% ahead of last year.

THE GROUP CLOSED THE YEAR WITH A
PRIVATE ORDER BOOK OF £807M: £283M
AND 54% AHEAD OF LAST YEAR.

STRATEGY IN ACTION – REDROW CUSTOMER FIRST: MADE FOR YOU

As our home sales increase, we’re committed to ensuring that every single one of our customers receives the best possible
customer experience during the home buying process. To meet their expectations, during the year we launched our new
‘Customer First: Made for You’ initiative across the Group, creating an enhanced customer journey that guides them from
exchange of contracts to Move in Day.

The five stage Made for You journey begins after a customer exchanges contracts, with a personalised
congratulatory email and an introduction to their Customer Services Manager, who will guide them through
the rest of the process.

The next stage is the Welcome Party. Here, small groups of customers attend an informal evening allowing
them to meet their sales and customer service teams. It is also an excellent opportunity for customers to meet
their future neighbours, so they can feel part of a community as soon as they move in.

Nearer to the completion date, a Redrow Living event is held. Again for small groups of customers, this
makes the transition to living in a new home as easy as possible, with demonstrations of the key features
in a Redrow home.

As part of the ‘Customer First’ initiative, our construction, sales and customer service teams formally inspect the
property to ensure a high quality finish. After all internal inspections are complete, the customer is invited to a
Home Preview, allowing them to familiarise themselves with their new home and highlight any items that need
resolving prior to Move in Day.

On Move in Day, the final stage of the ‘Made for You’ journey, customers receive the keys to their brand new home.

Following completion, our customer service team is still on hand, using tailored web and app platforms to support our
customers as they settle in to their new home.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION44

OPERATING REVIEW CONTINUED

WE ARE FOCUSED ON DEVELOPING THE SKILLS OF OUR OWN CURRENT TEAM AND
ENSURING WE ATTRACT BOTH EXPERIENCED TALENT AND NEW AND ENTHUSIASTIC
YOUNG PEOPLE INTO OUR BUSINESS TO UNDERPIN OUR GROWTH OBJECTIVE

VALUE AND DEVELOP OUR PEOPLE

STRATEGIC REPORT

2016 PERFORMANCE HIGHLIGHTS

up over20% to c300

TRAINEES

Top 100

APPRENTICESHIP EMPLOYER 2015

Employer of the Year

2015 CITB APPRENTICESHIP AWARDS

EQUIPPING OUR PEOPLE WITH
THE SKILLS THEY NEED IS AN
ESSENTIAL PART OF GROWING
THE BUSINESS IN A RESPONSIBLE
AND SUSTAINABLE WAY.

EMPLOYEES

As we have grown, so has our workforce. During
the year we created over 300 new directly
employed jobs, increasing our total number of
direct employees to 1,962 at June 2016. Many
of these new jobs were taken by young people
starting out on their careers and entering our
industry for the first time.

Given this 19% increase in employee numbers, we
are pleased to have again maintained our proportion
of trainees at 15% of the increased workforce,
with over half of these being trade apprentices.

It is also very satisfying to have been listed as
a Top 100 Apprenticeship Employer in the
National Apprenticeship Service awards for
the third consecutive year. In addition, we
were named GB Employer of the Year at the
2015 Construction Industry Training Board
Apprenticeship Awards. We have an enviable track
record in this area and it is pleasing to see so many
of our apprentices taking the next steps on their
career paths by moving onto our further site
training programmes.

LEARNING AND DEVELOPMENT
Training Centres
Equipping our people with the skills they need is
an essential part of growing the business in a
responsible and sustainable way. We continue to
develop our team at all levels and we completed
c4,800 training days during the year, a 24%
increase on the previous year. Much of our training
is carried out in-house. In addition to our national
training centre in the Midlands where our in-house
Learning and Development team are based, we
have opened a Southern training centre based
at our Colindale Gardens development and have
added training facilities at our Head Office.

4,787

3,859

2,952

2,687

14,285

TRAINING DAYS IN LAST FOUR YEARS

STRATEGY IN ACTION – BUILDING A PARTNERSHIP WITH SOUTH ESSEX COLLEGE

As part of a strategic partnership with the Homes and Communities Agency and Basildon Borough Council, our Eastern
division has joined forces with South Essex College in an ongoing alliance, providing a variety of opportunities to help embed
classroom based learning, for Construction and the Built Environment students. Site visits, work experience and personal
insights from Redrow employees all provide invaluable knowledge of the many career paths available.

Barry Port, project director for our Eastern division, said: “It’s important that we continue to attract young people into the
industry and it’s great to see the students from South Essex College showing such enthusiasm for construction. Trainees make
up around 15% of Redrow’s direct employees and we’re looking to maintain that going forward as the company grows. Who
knows, maybe some of the students from the college could be site managers in future.”

John Smith, curriculum manager for South Essex College, said: “The site visit was an invaluable experience for the students as
for some of them it was the first time they’d been on a live construction project. It was great for them to see how professional
and passionate the Redrow team are and how people working in construction should conduct themselves. It’s helped the
students relate their college work to actual projects and inspire them to achieve better grades and enter the construction
industry as a professional. Many of them have asked how to apply for a trainee position within Redrow.”

Student Callum Ewing (18) added: “It was great to be on site and to see how everything that we’ve been learning in the
classroom can be applied in practice in the construction of new homes.”

16Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION46

OPERATING REVIEW CONTINUED

EMPLOYEE ENGAGEMENT

Our people are at the heart of our business and we
recognise that for them to contribute to the best of
their ability they need to work in an environment
which is supportive, rewarding and enjoyable. We
therefore regularly evaluate employee engagement
and use the results to improve working practices.
A survey in 2015 by Employee Feedback Ltd put
Redrow in the top 25% of the organisations they
work with. A further interim mini survey was
conducted this year. Employee Feedback Ltd
reported employees were now even more engaged
than in 2015 advising that there was increased
‘satisfaction’ with working conditions, job structure
and training and even more ‘commitment’.

We have continued investing in our e-learning
platform, evolve, with over 80 modules
now available.

Our structured approach to succession planning
identifies and develops future leaders and senior
managers, as well as individuals to fill other
business-critical positions. A six-monthly review
is conducted across the whole organisation to
identify people with the potential to progress
in the organisation and we put in place structured
development to help them fulfil their potential.

This talent management process not only aids the
progression of individuals’ careers but also helps
the business retain key people for the ongoing
growth of the organisation.

In 2016 we more than tripled the number of
individuals undertaking structured leadership
development. With the introduction of further
leadership and talent programmes, such as a
mentoring scheme, we will continue to increase
our investment in future leaders.

Developing the next generation
of housebuilders
Redrow North West division apprentice Liam
Sargeant was named GB Apprentice of the Year at
the 2015 CITB Apprenticeship Awards. Liam has
now been promoted to Trainee Site Assistant.

In addition, 11 graduates from our Trainee Site
Assistant Programme, introduced two years ago,
are now Assistant Managers, whilst eight
Assistants have progressed to Site Manager.

We recognise however that there remains a skills
shortage within the construction industry and that
it is important we create ongoing partnerships
with educational establishments to help address
this. For example, Redrow continues to be an
employer patron of the West Midlands University
Technical College (WMUTC) which provides
education for 14 to 18 year-olds across the
curriculum but with a focus on the built
environment and IT. During the year we hosted
30 students on visits to our developments and
Redrow senior management have visited the
WMUTC to give lectures and engage with the
students on team project work.

This year our Graduate Programme Community
Project was to create a Fairy garden for the
children at Hope House Children’s Hospice in
Oswestry. The Graduates were responsible for
planning, managing and delivering the project,
with the generous support of over 30 suppliers
and subcontractors who donated time, money and
supplies. The garden transformation was carried
out over three days and was a great success.

HEALTH & SAFETY
Accidents
Build output across the Group increased by around
20% during the year but despite this we again
reduced the number of notifiable accidents per
site from 0.23 in 2015 to 0.20 in 2016. Overall
accidents increased by 11% to 318 (2015: 286).

Awards
This year our developments received five awards
in the annual NHBC Safety Awards, two more than
last year. We have also been recognised for our
automated external defibrillator initiative,
receiving the Outstanding Organisation Award
at the 2015 North West Construction Safety
Group Awards.

Contractor engagement
Redrow understands that in order to improve
health and safety standards at site level continual
engagement on health and safety and
environmental matters with our contractor base
is essential. Numerous events have taken place
over the last 12 months to assist our contractors
in maintaining their knowledge of current health
and safety issues and transfer this knowledge
within their own businesses.

Community engagement
The Health and Safety Team, assisted by our
construction and sales teams continues to carry
out safety talks at primary and junior schools
close to our developments. Our popular mascots
‘Buster’ and ‘Buddy’ help us to engage with young
children in a fun and informative way. During the
year over 500 children have attended these
important informative presentations.

Graduate Programme Community Project at Hope House Children’s Hospice, Oswestry, Shropshire

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION48

Redrow plc Annual Report 2016

CONNECTING PEOPLE
WITH HOMES

CREATING HIGH QUALITY HOMES THAT APPEAL TO A BROAD RANGE
OF BUYERS IS KEY TO ENSURING THAT NEW DEVELOPMENTS FLOURISH
AND BECOME SUSTAINABLE COMMUNITIES

STRATEGIC REPORT

CONNECTING PEOPLE WITH HOMES

Our development at St Andrew’s Park was launched three
years ago in Halling, a mid-sized village in the North Downs
area of Kent. Situated near to the River Medway and set
against a scenic backdrop of chalk cliffs and the ‘Blue Lake’,
this flagship project has transformed a former cement works
into a highly desirable place to live.

installed to link our homes with the lake and wildlife areas
and new playgrounds and football pitches are planned to
help bring the residents together and encourage a community
spirit. In addition, a footbridge will be built to connect with
the local village, providing access to shops, a pub and
local activities.

Before we could start building, the brownfield site required
extensive remediation work. In keeping with Redrow’s
environmental policies, all materials salvaged from this
process, including crushed concrete and metal, were either
reused or recycled off site.

Today, St Andrew’s Park offers everything from two bedroom
apartments to substantial family homes, located on a carefully
designed development that takes full advantage of its
outstanding landscape and ecology.

Our carefully considered approach to placemaking has helped
to integrate the development with its beautiful surroundings
and the existing community. Footpaths are currently being

The consideration to detail that has gone into St Andrew’s
Park has not gone unnoticed and c60% of the planned 385
homes on the development have already been sold. Buyers
include a mix of first-time buyers, young professionals,
growing families and right sizers. The development has also
attracted buy-to-let investors looking for properties within
commutable distance of London via Ebbsfleet International
train station.

From an unsightly shell of a cement works to a vibrant
community offering a great quality of life, St Andrew’s Park
is a great example of what can be achieved through
responsible redevelopment of Britain’s brownfield sites.

A representation of the
St Andrew’s Park development, Halling, Kent

CUSTOMERS ENJOYING THE REDROW WAY OF
LIVING AT ST ANDREW’S PARK, HALLING, KENT

Sustainability elements on the development
Pond feature
An attenuation pond will be situated to the east of the
development. This pond will be used to filter sediment
from surface water before being discharged directly to
the River Medway.

Wildlife area
Biodiversity enhancements on the development centre
on the wildlife area around the existing blue lake which
is formed with woodland, herb-rich wet grassland,
colonising vegetation and reed beds.

Playground
There will be a children’s play area to the south of the
development which will consist of a climbing structure,
cradle nest, jumping disk, carousels, rotating beam,
balancing blocks and timber balancing beams.

Other sustainability features include:
• Energy efficient lighting in all homes and LED lights

in street lighting columns

• Bicycle racks available to some properties either in

cycle stores (for apartments) or within a shed or garage

• Recycling bins provided by Medway Council
• PV Solar panels
• Good public transport links
• Considerate Constructor Site
• Good proportion of Affordable homes

FIRST-TIME BUYERS

YOUNG
PROFESSIONALS

GROWING FAMILIES

MOVING UP

RIGHT SIZERS

BUY-TO-LET
INVESTORS

Chloe and Matt
Setting up home
Read more on page 50

Melanie and Seyi
Moving out of London
Read more on page 50

Karen and Terry
A bigger home needed
Read more on page 50

Grace and Jon
Moving to be nearer
family and friends
Read more on page 51

Mike and Linda
Wanted a detached home
Read more on page 51

Dr Nadeem
A shrewd investment
Read more on page 51

STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION50

CONNECTING PEOPLE
WITH HOMES CONTINUED

FIRST-TIME BUYERS

YOUNG PROFESSIONALS

GROWING FAMILIES

MOVING UP

RIGHT SIZERS

BUY-TO-LET INVESTORS

Chloe Ashby (23) and Matt Hacker (29)
are first-time buyers who used Help to
Buy to make setting up home easier to
afford. Chloe is an administrator and
Matt is a senior consultant. They
purchased a Cambridge house type.

Chloe said: “We were both living at home
with our families; I was in Gravesend and
Matt in Croydon. We made the decision to
buy together because we don’t see the
benefit of renting. We were open to
suggestions but soon realised that buying
new meant we wouldn’t need to spend
money replacing the kitchen, bathroom
and lots of other things like in a second
hand home.

We really liked the Heritage Collection
and did a test run from St Andrew’s Park;
it’s 10 minutes to Ebbsfleet train station
for Matt and I get the coach to Canary
Wharf. For the price of a four bedroom
home here we would only have been able
to buy a two bedroom flat in Croydon or
Bromley. Help to Buy has enabled us to
buy a bigger home so that, looking to the
future, if we start a family we won’t have
to move again. We hope to be here for at
least 10 years.”

Matt added: “It’s a completely different
market to London. We could have bought
a smaller property closer to work but we
decided we’d rather buy a detached house
and the commute is only about an hour.
We have friends who are starting to move
out of London because they’re being priced
out of the market and get better value
further out as long as the commute is ok.”

Melanie and Seyi Olubajo moved out of
London to take their first step onto the
property ladder. Melanie (31) is a teacher,
and Seyi (34) is an accountant.

Melanie explained: “We wanted to buy a
home of our own, but because of the high
prices in London we couldn’t afford to buy
in Islington where we’d been renting an
apartment. We realised that moving to
Kent would be more affordable and saved
for a year for a deposit.

Moving out of London is a really good
option for first-time buyers and
professionals like us and an investment in
our future, plus the mortgage repayments
are lower than the rent we were paying in
London. A friend suggested that we came
to St Andrew’s Park and while we hadn’t
wanted a new build, we liked the
traditional style of the houses and the
attention to detail.

We bought a four bedroom detached
Oxford like one of the show homes
because we liked the aesthetic look of the
property, particularly the way the light
comes through from the open plan
kitchen and dining room when you walk in
to the house, it’s really homely. It’s a good
family home and we’re thinking about
starting a family. When you’re renting
you’re limited as to what you can do to
the property, but because this is our home
we’ve been able to put our own stamp on
it and make it our own.”

The Whites, parents Karen (32) and
Terry (36), who both work in retail
management wanted a bigger home for
their growing family. Daughter Sienna is
three and since they’ve moved into their
three bedroom Letchworth they’ve had
another child, Darcey.

Karen said: “We were living in a two
bedroom terrace with our daughter Sienna
and realised we’d need an extra bedroom if
we were to have another child. We hadn’t
looked at new builds to start with and had
considered buying an older property to do
up. We saw St Andrew’s Park online and
came to look and were impressed by the
size of the properties; they’re bigger than
the other new builds we viewed. I brought
my dad, who’s in the building trade, with
me to view and he gave Redrow the
thumbs up.

We were able to choose the kitchen and
add some other features using My Redrow.
It was great to be able to get an idea of
what it would look like and then keep
things in the basket and double checking it
in the sales office before confirming the
choice. We socialise with friends in
Rochester and have a friend who lives in
Halling so we’d seen the village lifestyle,
everyone seems really friendly. It’s close
to the A2 but not too close, plus there are
good schools nearby for when the children
are older.”

Grace Neville, a 31-year-old office
manager, moved out of a London
apartment to start a family with husband
Jon (35), a QA engineer. They purchased a
Cambridge house type.

Retirees Mike and Linda Remon see their
four bedroom detached Oxford as an
investment. Mike (65) is a former sales
and marketing manager and Linda (54)
worked in catering.

Grace said: “I’m originally from Chatham
but we’d been living in a two bedroom
apartment in Forest Hill, London, and
wanted to start a family, which was never
going to happen in London. We decided to
move back to Kent to be nearer to family
and friends and looked at some new builds
but they seemed too modern.

We really liked the traditional look of
Redrow’s Heritage Collection and decided
it was exactly what we wanted. We hadn’t
really thought about living in Halling but as
soon as we visited St Andrew’s Park we
realised how beautiful it is with a
countryside feel, but still close to the
motorways. I drive to Ebbsfleet station and
then get the high-speed train to work.”

“We’d previously downsized from a four
bedroom detached home to a three
bedroom semi but decided we wanted to
go back to a detached property,” said
Mike. “I felt that we were lucky to be in a
position to be able to invest our money
more wisely in bricks and mortar than in
stocks and shares. We’d been looking at St
Andrew’s Park for some time, but never
thought we’d buy a new house. We put
our home on the market and had 24
viewings in one day and an instant buyer
but nowhere to move to. By coincidence
we had an email from Redrow telling us
there was a property that had just
become available.

We liked the traditional style of the
Heritage Collection and the Oxford in
particular because of the accommodation
it offers. From that point it was an easy
decision. I was born and bred in Medway
so know the area. The homes are in a rural
location close to the Downs and we can
walk out into the countryside without
having to drive. We’re making friends with
our new neighbours as, because it’s a new
development, we’re all in the same boat.”

Dr Nadeem Sajjad Raja (49) owns three
properties at St Andrew’s Park – he lives
in one and rents out the others.

Nadeem said: “I was living in a four
bedroom Kenilworth and because I had
extended family who come to visit I
decided to buy a larger property, a
detached Cambridge, also with four
bedrooms. St Andrew’s Park is near to my
place of work and convenient for my
daughter’s school, plus the M2 and M20 are
within easy reach and there are convenient
links to Kings Cross. It fits really well with
my lifestyle and because everything’s new I
don’t need to do anything to the houses,
plus they’re energy efficient so bills should
be lower. They’re ideal properties for
investment. When I visited the Redrow
sales office and saw how quickly the
properties were selling I knew it was a
favoured area and I would be able to secure
tenants quickly so I bought a third house.”

“We couldn’t have afforded a three
bedroom home in London but moving out
of the capital to St Andrew’s Park meant
we were able to buy a four bedroom
detached Cambridge.”

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION52

FINANCIAL REVIEW
THIS IS ANOTHER RECORD BREAKING
FINANCIAL YEAR FOR THE GROUP

2016

2015

North

Central

South

Greater London

2016

2015

376

328

524

154

282

304

326

238

1,382

1,150

CHART 1
REVENUE BY GEOGRAPHY (£M)

STRATEGIC REPORT

BARBARA RICHMOND

Group Finance Director

THIS WAS ANOTHER RECORD
BREAKING FINANCIAL YEAR
FOR THE GROUP.

1,361

1,085

861

600

467

Homes
Other

CHART 2
REVENUE (£M)

PROFITABILITY

This was another record breaking financial
year for the Group in terms of both revenue
and profits.

Total Group revenue increased by 20% to
£1.38bn. This comprised private homes revenue
which increased by 24% to £1,275m (2015:
£1,026m) as a result of a 12% increase in private
legal completions and a 10% increase in average
selling price, social homes revenue of £86m (2015:
£59m) and other revenue of £21m (2015: £65m)
from land sales.

As a consequence of the higher revenue, gross
profit increased by £60m in the year to £334m
(2015: £274m) giving a gross margin of 24.2%
(2015: 23.8%). The improvement in gross margin
benefitted from a further decrease, from 12% to
6%, in the proportion of our legal completions
from provisioned land acquired before the
downturn, offset in part by increased levels of
social homes legally completed in the year. As
reported previously, we expect to legally complete
the remaining provisioned plots by the end of the
2017 financial year leaving us with full margin on
all our remaining land bank.

Operating profit increased by 23% to £261m
(2015: £213m) as a result of the strong revenue
growth. This represents an operating margin of
18.9% (2015: 18.5%), just below the 19% target
we have set for 2018.

18.5%

18.9%

0.6%

0.3%

(0.3%)

(0.2%)

2
17

Provisioned
Plot reduction

Net HPI

Increased
Social

Margin on
Other Revenue

CHART 3
% PROVISIONED PLOTS IN COST OF SALES

CHART 4
OPERATING MARGIN BRIDGE (%)

Improving margin

Reducing margin

Net financing costs at £11m were £2m higher than
the prior year reflecting a £1m increase in bank
interest and a £1m increase in imputed interest
payable on deferred land creditors as we continue
to be successful in negotiating deferred terms on
our selected land opportunities.

The Group’s record profit before tax of £250m
(2015: £204m) for the year generated a basic
earnings per share of 55.4p, up 24% on the
prior year (2015: 44.5p).

TAX

DIVIDENDS

As reported at the time of our half year results, the
Board has proposed a 2016 final dividend of 6p per
share, a 50% increase on last year, which will be
paid on 11 November 2016, subject to Shareholder
approval at the 2016 Annual General Meeting.

The Group paid dividends totalling £30m (2015:
£15m) during the year. This represented a 4.0p per
share final dividend for 2015 paid in November
2015 and a 4.0p per share interim dividend for
2016 paid in March 2016.

The corporation tax charge for the year was £50m
(2015: £42m). The Group’s tax rate for 2016 was
20.0% (2015: 20.75%) and we expect our
normalised rate of tax for the year ending 30 June
2017 to be 19.75% based on rates which are
substantively enacted currently.

The Group paid £46m of corporation tax in the
year (2015: £22m) in the normal quarterly pattern.
Payments will continue in the normal quarterly
pattern until the new legislation for corporation
tax payments by very large companies takes effect
for our financial year ending 30 June 2020, when it
will bring our instalment payments forward by
four months.

RETURNS

Net assets at 30 June 2016 exceeded £1bn for
the first time at £1,017m, a 20% increase on
prior year levels (2015: £849m). Capital
employed at 30 June 2016 was £1,156m (2015:
£1,003m), up 15%. Despite the increase in
capital employed, our capital turn rose to
1.3 times (2015: 1.2 times). As a result of our
higher profits and capital turn, our return on
capital employed increased from 22.8% to
24.2%, although we expect this to moderate
going forward towards our 2018 guidance
of 21%, due to ongoing investment in land and
work in progress.

Return on equity increased from 26.4% to 26.8%,
well ahead of our 2018 guidance of 25%. Again we
expect this to moderate towards the 2018
guidance in 2017.

Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION54

FINANCIAL REVIEW CONTINUED

26.4

26.8

24.2

22.8

20.5

18.0

12.2

12.3

8.7

8.4

ROCE
ROE

Plot cost in COS as % ASP
Plot cost owned and
contracted as % ASP

2016

2015

North

Central

South

2016

2015

5,753

4,510

5,579

4,395

10,420

8,188

Greater London

4,248

1,123

26,000

18,216

Owned
Owned and
contracted

CHART 5
ROCE & ROE (%)

STRATEGIC REPORT

CHART 6
PLOT COST (%)

CHART 7
CURRENT LAND BY GEOGRAPHY (NO. PLOTS)

CHART 8
PLOT COSTS (£’000)

INVENTORIES

RECEIVABLES

(i) Liquidity

PENSIONS

Our investment in land increased to £1,215m
(2015: £1,020m), up 19% year on year. However,
our owned plot cost has remained unchanged at
£68,000 per plot, reducing to 21% of the average
selling price of private legal completions in the
year (2015: 23%).

Our investment in work in progress increased to
£593m (2015: £480m), up 24% year on year. This
increase resulted from a combination of a 9%
increase in active outlets, a higher number of
strategic sites coming into production and an
increase in the number of apartment schemes in
the South East at later stages of the build process.

Our net realisable value provision on land and
work in progress reduced by £9m to £19m in the
year. Provisioned plots represented less than 1% of
our owned land bank at June 2016 (2015: 2%), and
will be eliminated by June 2017.

Land creditors increased by £112m to £378m at
June 2016 representing 31% of land inventory
(2015: 26%). This reflects favourable land market
conditions prevailing during the year.

Trade receivables reduced by £6m during the year
to £23m (2015: £29m) with the receipt of shared
equity scheme monies.

PAYABLES

Trade payables and accruals increased by £55m
to £336m (2015: £281m) due to increased levels
of production as a result of our increased outlets.

Current income tax liabilities increased by £5m
to £24m at June 2016 (2015: £19m) as a result
of our higher profitability.

CASH FLOW AND NET DEBT

Net debt decreased by £15m to £139m at June
2016 (2015: £154m) which is 14% gearing (2015:
18%). This reduction in net debt reflects a cash
inflow generated from operations of £130m (2015:
£61m) which more than funded the growth in the
business, the increased dividend payments and
increased corporation tax payments in the year.

FINANCING AND TREASURY MANAGEMENT

Financial management at Redrow is conducted
centrally using policies approved by the Board.

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.

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
five 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. No hedging was undertaken
in the year.

As at 30 June 2016, the Group’s financial
statements showed a £6m surplus (2015: £3m
deficit) in respect of the defined benefits section
of The Redrow Staff Pension Scheme (which closed
to future accrual with effect from 1 March 2012).
The £9m improvement is mainly due to
improvements in returns on scheme assets which
more than offset actuarial losses arising from
changes in financial assumptions.

Barbara Richmond
Group Finance Director

5 September 2016

Redrow plc Annual Report 2016STRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION

RISK MANAGEMENT

HOW WE MANAGE RISK

BOARD OVERSIGHT

MAIN BOARD

OUR RISK MANAGEMENT PROCESS

The Main Board is responsible for setting the strategic and financial objectives and identifying the principal risks and material
concerns which could impact the future success of the Group.

The Risk Register is compiled using the principal risks and material concerns and is reviewed annually to ensure it is up to date.

Once approved, the risks identified in the register are proactively eliminated or mitigated by updating the policies and procedures,
monthly management meetings and weekly operational meetings.

If new risks are identified during the year, their potential impact is assessed and appropriate controls developed and implemented,
as required.

Audit Committee

Nomination Committee

Remuneration Committee

Sustainability Committee

OPERATIONAL COMMITTEES

EXECUTIVE COMMITTEE

Divisional Boards

Functional Seminars

Team Meetings

POLICIES FOR IDENTIFYING AND CONTROLLING RISK

Land Bank
Management System

Budgeting & Forecasting

Price & Sales Monitoring

Cost Reviews

G
N
T
R
O
P
E
R

PROCEDURES AND INTERNAL CONTROLS

Authorisation Processes

Business Process Reviews

Site Completion Reviews

Business Policies and Procedures

System Based Controls

P
O
L
I
C
I
E
S
A
N
D
D
E
C
I
S
I
O
N
S

PEOPLE AND CULTURE

Professionalism

Strong Communication

Qualified Personnel

Pride and Achievement

Interests Aligned with Shareholders

Commitment to Training

BUSINESS RISK

RISK REGISTER
AND POLICIES AND
PROCEDURES UPDATE

PRINCIPAL RISKS
AND MATERIAL
CONCERNS IDENTIFIED
BY MAIN BOARD

OUR RISK
ASSESSMENT PROCESS

RISK OWNERS AND
EXECUTIVE BOARD

OPERATIONAL REVIEW
AND FEEDBACK FROM
DIVISIONS

The principal risks and material concerns are identified following a critical review of the strategic objectives. The headline risks
and material concerns are broken down into component parts and sub level risks.

These risks are then reviewed by each Divisional Board, looking at the risks and the controls, together with an assessment of the
probability and impact of each risk following the mitigation achieved from our controls.

The Risk Owners use the feedback from the Divisions to inform their formal review of their risks. The Risk Owner ensures we
have both preventative controls and detective controls.

The Risk Register is reviewed by the Audit Committee to ensure the risks are relevant and appropriate to the business.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION

RISK MANAGEMENT CONTINUED

CATEGORY

RISK

GROW OUR
BUSINESS
RESPONSIBLY

Key supplier,
main contractor or
subcontractor failure
The failure or inability to
expand capacity of a key
supplier, main contractor
or subcontractor may
disrupt Redrow’s ability
to manage its production
process in an efficient and
cost effective manner.

KEY CONTROLS AND
MITIGATING STRATEGIES

RISK
MOVEMENT

Experienced supply chain partners with
good reputation and strong track record.

Proactive monitoring of supplier, main
contractor and subcontractor quality
through annual assessments.

Group Monthly Product Development
meetings to monitor any changes to the
regulatory environment.

The shortage of skilled trades is mitigated
by the monitoring of the subcontract supply
chain to maintain the appropriate number
of companies for each trade.

Subcontractor utilisation on sites is monitored
to ensure workload and capacity are aligned.

Cyber security
Failure of the Group’s IT
systems and the security
of our internal systems,
data and our websites.

Fraud/uninsured losses
A significant fraud or
uninsured loss could
damage the financial
performance
of Redrow.

GROW OUR
BUSINESS
RESPONSIBLY

MANAGE OUR
RESOURCES
EFFICIENTLY

IT Director

Proactive approach to cyber security.

Regular third party testing of the
Group’s cyber security systems.

Accredited cyber essentials plus.

Finance
Director
Operations

Systems, policies and procedures have been
designed to segregate duties and minimise
the opportunity for fraud.

Regular Business Process Reviews followed
by formal action plans are undertaken to
ensure compliance with policies and procedures.

Timely management reporting and challenge.

Business driven insurance strategy.

VIABILITY STATEMENT

STRATEGIC REPORT APPROVAL

The Strategic Report outlined on pages 03 to 61
has been approved by the Board.

By order of the Board

Graham Cope
Company Secretary

5 September 2016

In accordance with provision C.2.2 of the UK
Corporate Governance Code 2014, the Directors
have assessed the prospects and viability of
the Group.

The Group’s investment case, business model and
strategy are key to understanding Redrow’s future
prospects. The Directors’ assessment has made
reference to our current position, our strategy, the
potential impact of the principal risks facing the
Group, and the Board’s appetite for risk which are
to be found in this Report in the Strategic Report.
The Group has committed banking facilities
through to March 2020.

The Directors have selected a three year
timeframe over which to assess the viability of
the Group, from 1 July 2016 to 30 June 2019. This
timeframe was chosen as it corresponds with the
Board’s three year planning horizon. On an annual
basis, the Directors review the financial forecasts
for the Group constructed using a detailed bottom
up process incorporating assumptions about the
timing of legal completions of new homes and
land purchases, selling prices, profitability,
working capital requirements and cash flows.
The Group also uses a top down model to give
another perspective.

The three year plan is stress tested for robust
downside scenarios. This involves flexing key
assumptions including the impact of reduced
average selling prices, sales rates and land prices
which could arise from a deterioration in housing
market conditions and mortgage availability.

The Directors confirm that they have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities as
they fall due over the three year period ending
30 June 2019.

Redrow plc Annual Report 2016STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATION62

Redrow plc Annual Report 2016

CORPORATE GOVERNANCE

THE BOARD IS COMMITTED TO COMPLYING WITH CORPORATE GOVERNANCE
GUIDELINES AND TO MAINTAINING HIGH STANDARDS OF CORPORATE GOVERNANCE

There have been no changes in corporate
governance best practice during the financial
year ended 30 June 2016.

Our 2016 Annual General Meeting will be held
on Wednesday, 9 November 2016 and the
Notice of Annual General Meeting together with
Explanatory Notes will be sent to you separately.

Finally on behalf of the Board, for those who wish
to attend our 2016 Annual General Meeting, the
Board looks forward to meeting with you.

Graham Cope
Company Secretary

GOVERNANCE REPORT

GRAHAM COPE

Company Secretary

DEAR SHAREHOLDER

I am delighted to introduce the Corporate
Governance Report outlining the Company’s
approach to corporate governance. As outlined
elsewhere in the Report, the Board remains
committed to high standards of governance
across all aspects of our business. This Report on
corporate governance sets out and explains in clear
terms the processes in place which are essential
for delivery of long-term success, while ensuring
that the Company complies with all applicable
laws and regulations and, of course, meeting the
requirements of our shareholders and their
representative bodies.

This report has been prepared and approved by
the Board and, on behalf of the Board I confirm
that during the financial year ended 30 June
2016, the Company was compliant with the
provisions of the UK Corporate Governance Code
other than as set out in this report. This report
also explains what the Board of Directors actually
does and describes how it is responsible for
setting the codes and values of the Company,
thereby ensuring that the Company is run in the
best interests of our shareholders and other
stakeholders and how it interacts with its
shareholders and explains the Company’s
strategic goals and performance against them.

The Board continues to believe that the balance
of Non-Executives and Executive Directors has
worked well. A number of Board meetings have
been held in a number of the divisions during the
year and have included open discussions with the
Management Teams on such matters as people,
land, sales outlets, sales and our product.

Royal Waterside, Park Royal, North West London

GOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT64

BOARD OF DIRECTORS

AN ACTIVE, COMMITTED BOARD OF DIRECTORS WITH DIVERSE
AND COMPLEMENTARY SKILL SETS

GOVERNANCE REPORT

COMPOSITION OF THE BOARD

LENGTH OF TENURE OF
NON-EXECUTIVE DIRECTORS

MAIN BOARD BY GENDER

Executive

Non-Executive

One to three years

Over three years

Female

Male

STEVE MORGAN (63)
CHAIRMAN

JOHN TUTTE (60)
GROUP CHIEF EXECUTIVE

BARBARA RICHMOND (56)
GROUP FINANCE DIRECTOR

GRAHAM COPE (52)
COMPANY SECRETARY

SIR MICHAEL LYONS (66)
NON-EXECUTIVE DIRECTOR

LIZ PEACE (63)
NON-EXECUTIVE DIRECTOR

DEBBIE HEWITT (53)
SENIOR INDEPENDENT DIRECTOR

NICK HEWSON (58)
NON-EXECUTIVE DIRECTOR

ROLE: He is responsible for the
operational management of the
Group, the implementing of
strategic plans and reporting on
these to the Board.

STRENGTHS AND SKILLS: John
Tutte joined the Board of Redrow
in July 2002. In September 2009 he
was promoted to Group Managing
Director and in July 2014 became
Group Chief Executive.

John qualified in civil engineering
and has amassed more than 35
years’ experience within the
industry, having previously held
the position as Chief Executive of
Wilson Connolly plc.

ROLE: She is responsible for the
financial management of the Group
in its broadest sense.

STRENGTHS AND SKILLS: Barbara
Richmond joined the Board of
Redrow in January 2010, bringing
with her a proven track record, with
over 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.

John was appointed to the board
of the Home Builders Federation
in February 2015.

Barbara was appointed a Non-
Executive Director of Lonza Group
Ltd with effect from 16 April 2014.

Barbara is a Fellow of the Institute
of Chartered Accountants in
England and Wales and a graduate
of the University of Manchester.

ROLE: He is responsible for
governance structures and
mechanisms, corporate conduct
within the Company’s regulatory
environment and circulars to
shareholders and is the primary
source of advice on the conduct of
the business.

Graham is Company Secretary to
the Main Board and Secretary to
all Committees.

STRENGTHS AND SKILLS: 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.

Graham qualified as a Solicitor
in 1989 and is a member of the
Law Society.

ROLE: He is primarily responsible for
the effective working of the Board,
taking a leading role in determining
the Board’s composition and
structure and ensuring that effective
communications are maintained
with shareholders.

STRENGTHS AND SKILLS: 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,
Carden Leisure and Trinity Aviation.
He set up The Morgan Foundation
in 2000, which is one of the
largest charitable trusts in the
north of England.

Steve is a Fellow of the Chartered
Institute of Building and holds five
Honorary Degrees. He was awarded
an OBE in 1992 for services to the
construction industry and a CBE in
2016 for philanthropy.

ROLE: The Non-Executive Directors are members of the Board but do not form part of the Executive Management team. They have responsibility to
constructively challenge and contribute to the development of strategy, scrutinise the performance of management, satisfy themselves that financial
information is accurate and that financial controls and systems of risk management are robust and are responsible for determining appropriate levels
of remuneration of the Executive Management team.

STRENGTHS AND SKILLS: Sir
Michael joined the Redrow Board in
January 2015. He recently chaired
the Lyons Housing Commission to
produce a road map for increasing
house building in this country.

He is also Chairman of the English
Cities Fund, which undertakes large
scale urban regeneration schemes
in a number of places and is
Chairman of SQW Group and a
strategic adviser to CBRE.

Prior to this, following a long and
distinguished career in local
government, Sir Michael completed
a four year term as Chairman of
the BBC and has held a range of
non-executive positions across
the three sectors.

M A N R

STRENGTHS AND SKILLS: Liz joined
the Redrow Board in September
2014. She spent 13 years as the
CEO of the British Property
Federation and also had a long
and distinguished career in the
Civil Service.

She is currently a Non-Executive
Director of Morgan Sindall Group plc
and The Howard de Walden Estate.
She is also a Trustee of the Peabody
Trust and a Trustee and Chair of the
property charity Land Aid.

Liz was awarded a CBE in the 2008
New Year’s Honours List.

M A N R S

STRENGTHS AND SKILLS: Debbie
joined the Redrow Board in August
2009. She has a wealth of board
experience in executive and
non-executive roles.

She is currently the Non-
Executive Chairman of Moss
Bros plc, The Restaurant Group
plc, White Stuff and Visa UK.

She is also Non-Executive
Director of NCC plc, BGL and
Domestic & General.

Debbie has an MBA from Bath
University, is a fellow of the
Chartered Institute of Personnel
and Development and was awarded
an MBE in 2011 for services to
business and the public sector.

M A N R

STRENGTHS AND SKILLS: Nick
joined the Redrow Board in
December 2012. His business
career to date has been spent
mainly in the property industry,
from commercial to residential.

Nick is currently a Non-Executive
Director of Croma Security
Solutions Group Plc.

Nick is a Fellow of the Institute of
Chartered Accountants in England
and Wales and has a degree in Law
from Cambridge University.

M A N R S

Board Experience:

Finance

Property

Operational

Sustainability

Committee membership:

M Main Board A Audit Committee N Nomination Committee R Remuneration Committee S Sustainability Committee

FINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT

CORPORATE GOVERNANCE CONTINUED

THE BOARD IS COMMITTED TO COMPLYING WITH CORPORATE GOVERNANCE
GUIDELINES AND TO MAINTAINING HIGH STANDARDS OF CORPORATE GOVERNANCE

MAIN BOARD

Senior Independent Director
Independent Non-Executive Directors

NON -EXECUTIVE
TEAM

Chairman
Group Chief Executive
Group Finance Director
Company Secretary
Group Regional Chief Executives
Group Human Resources Director
Group Sales & Marketing Director
Group Development Director

EXECUTIVE
MANAGEMENT
TEAM

INTRODUCTION

This report sets out the Company’s compliance
with the UK Corporate Governance Code
(the ‘Code’) issued by the Financial Reporting
Council (www.frc.org.uk) and describes how the
governance framework is applied by the Company.

The Directors have considered the contents and
requirements of the Code and confirm that
throughout the year ended 30 June 2016, the
Company has been compliant with the provisions
of the Code other than as set out in this Report.

THE BOARD

The Board comprises an Executive Chairman, two
further Executive Directors and four Independent
Non-Executive Directors.

The governance structure is set out in the
diagram above.

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
Executive 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. Where appropriate, the Board
delegates decisions to the Executive Management
Team and other relevant management bodies.

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 Chief Executive, 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. This balanced approach also ensures no
one individual has unfettered powers of decision.

BOARD MEETINGS

The Board meets regularly and frequently, not
less than six times during the year and maintains
a close dialogue, as appropriate, between
meetings. Board meetings are held at Head
Office or 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 meetings are
set out below.

Details of internal control and risk management
processes are included in the Audit Committee
Report on pages 70 to 73.

9.8.4R(14), the Board confirms that the Company
complied with the independence provisions set out
in the Relationship Agreement during the period
under review and, so far as the Company is aware,
Bridgemere Securities Limited, Steve Morgan and
their associates complied with the independence
provisions set out in the Relationship Agreement
during the period under review.

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
housebuilding industry and that enables it to
discharge their respective duties and responsibilities
effectively. The Non-Executive Directors bring a
wealth of experience and understanding from
outside the Company which enables them to
challenge and help develop proposals on the
Company’s strategy. All Non-Executive Directors
holding office during the year ended 30 June 2016
are considered to be independent.

Details of the Directors’ respective experience
is set out in their biographical profiles on pages
64 to 65.

Under the Code, at least half the Board, excluding
a Non-Executive Chairman, should comprise
Non-Executive Directors determined by the Board
to be independent. The Board currently comprises
three Executive Directors, including the Chairman,
and four Independent Non-Executive Directors in
compliance with the Code.

The Board considers that each Director is able
to allocate sufficient time to the Company to
discharge their responsibilities effectively.

RELATIONSHIP AGREEMENT

The Company is party to a Relationship
Agreement with Bridgemere Securities Limited
and Steve Morgan, which regulates the relationship
between the parties and complies with the
requirements of the Listing Rules, including Listing
Rule 9.2.2AR(2)(a) and Listing Rule 6.1.4DR. In
accordance with the requirements of Listing Rule

BOARD PERFORMANCE EVALUATION AND
PROFESSIONAL DEVELOPMENT

The Board undertook an internal formal
evaluation of its own performance during the
year ended 30 June 2016. This started with a
questionnaire designed to assess performance
and ongoing effectiveness across key areas in the
year ended 30 June 2016 and to maintain
visibility and progress during the financial year.
Following the completion of the questionnaire, a
report was presented to the Board and discussed
and, as a result, the Board considers that it
continues to operate effectively with meetings
to facilitate and debate decision making.

The evaluation also considered succession
planning for the Executive Team.

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 working
relationships with Divisional Management Teams.

Table of Attendance

Name

Role

Attendance at Meetings

Steve Morgan

Chairman

John Tutte

Group Chief Executive

Barbara Richmond

Group Finance Director

Debbie Hewitt

Senior Independent Director

Nick Hewson

Non-Executive Director

Liz Peace

Non-Executive Director

Sir Michael Lyons

Non-Executive Director

6/6

All details for the Directors are provided on pages 64 to 65.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT68

CORPORATE GOVERNANCE CONTINUED

All Directors undertake a comprehensive induction
programme following their first appointment.

• approval of Redrow’s long-term objectives

and strategy;

The programme for the Non-Executive Directors
is specifically designed to encompass the full
breadth of the business and includes visits to
operating businesses.

During the year the formal appraisals of the Group
Chief Executive, the Group Finance Director and
Senior Independent Director were undertaken by
the Chairman.

All Independent Non-Executive Directors had an
annual appraisal conducted by the Senior
Independent Director.

COMMITTEES

The Board is supported by Audit, Nomination,
Remuneration and Sustainability Committees and
their memberships, roles and activities are set out
in separate reports; the Audit Committee Report
can be found on pages 70 to 73; the Nomination
Committee Report on page 74; the Directors’
Remuneration Committee Report on pages 77 to
91; and the Sustainability Committee Report can
be found on pages 75 to 76.

Each Committee has terms of reference approved
by the Board and the Minutes of the Committee
meetings are circulated, and the Committee
Chairmen provide reports, to the Board.

The Audit Committee is chaired by Nick Hewson,
the Remuneration and the Nomination
Committees are chaired by Debbie Hewitt
and the Sustainability Committee by Liz Peace.

The Board completed a performance evaluation
of its Committees during the financial year ended
30 June 2016 and it was concluded they were
contributing and functioning effectively and
were complying with their terms of reference.

GOVERNANCE AT WORK IN THE BUSINESS

The Board aims to meet governance best practice
where it fits with the Company’s business.

The Board has a formal schedule of matters
reserved specifically for its decisions. The
matters reserved include:

• approval of the Annual Report, preliminary
and half-yearly financial statements, interim
management statements, trading updates
and the recommendation of dividends;

• approval of any significant changes in accounting
policies or practices; any changes relating to
capital structure; approval of treasury policies;

• ensuring the maintenance of a sound system
of internal control and risk management;

• approval of corporate acquisitions or disposals,

significant land purchases or contracts;

• changes to the size, structure and composition

of the Board;

• approval of significant policies, including
Redrow’s Health and Safety policy; and

• review of overall corporate governance

arrangements.

The Chairman is primarily responsible for:

• effective working of the Board;

• taking a leading role in determining the
Board’s composition and structure; and

• ensuring that effective communications

are maintained with shareholders.

The Chief Executive is responsible for:

• operational management of the Group;

• implementing strategic plans; and

• reporting on these to the Board

Debbie Hewitt, the Senior Independent Director
supports the Chairman in ensuring the Board is
effective and that constructive relations are
maintained. In addition to acting as a Senior
Independent Director in which capacity she
leads the annual performance evaluation of
the Chairman, she also provides an additional
point of contact for shareholders.

The Company has Directors’ and Officers’
insurance in place which insures Directors
against certain liabilities, including legal costs.

APPOINTMENTS AND RE-ELECTIONS
TO THE BOARD

The Nomination Committee has recommended
the re-appointment of the Executive and Non-
Executive Directors. The Nomination Committee
Report can be found on page 74.

SHAREHOLDER ENGAGEMENT

The Company announces its financial results
half-yearly and, immediately following their
publication, undertakes formal presentations
to equity analysts. These presentations are
available on the Company’s website.

Under the Company’s Articles of Association, all
Directors are subject to re-election at their first
General meeting after appointment. The Board
having been informed of the conditions of the
Code on election and re-election, including that
there should be a formal, rigorous and transparent
procedure for the appointment of new directors
to the Board, and that re-election is subject to
continued satisfactory performance, has decided
that all Directors will be submitting themselves for
re-election at the Annual General Meeting. The
Board has satisfied itself that all Directors who will
be submitting themselves for re-election continue
to perform satisfactorily. Details of appropriate
Annual General Meeting Resolutions will be found
in the Notice of Annual General Meeting which
will be sent to shareholders separately.

CAPITAL STRUCTURE

The information of the capital structure of the
Company is included in the Directors’ Report on
page 93.

DIVERSITY

The principle of boardroom diversity is strongly
supported by the Board. It is the Board’s policy
that appointments to the Board will always be
based on merit, so that the Board has the right
individuals in place and recognises that diversity is
seen as an important consideration as part of the
selective criteria used to assess candidates to
achieve a balanced Board.

The table below sets out the current position of
the Company on a gender basis.

Main Board

Female

Male

3 (43%)

4 (57%)

Executive Management Team

2 (20%)

8 (80%)

Direct reports to Executive
Management Team

10 (29%)

25 (71%)

Redrow employees at June 2016 648 (33%) 1,314 (67%)

During the year ended 30 June 2016, the
Chairman, the Group Chief Executive and the
Group Finance Director, together with the Senior
Independent Director, also held a number of
meetings with significant shareholders and
subsequently briefed the Board on issues
discussed at these meetings.

Following the full year and half-yearly results’
announcement in September 2015 and February
2016, the Chairman, Group Chief Executive and
Group Finance Director met current and potential
significant shareholders. This included visits to
London and Edinburgh and feedback from these
meetings was independently collated and
disseminated to the Board.

The Annual General Meeting takes place at a
venue close to the Company’s Head Office. All
Directors attended the Annual General Meeting on
10 November 2015. Shareholders are encouraged
to attend the 2016 Annual General Meeting, which
represents an opportunity for all shareholders
attending to table questions formally during the
meeting and informally afterwards to the
Company’s Directors.

Formal notification of the 2016 Annual General
Meeting is sent to shareholders at least 21 working
days in advance. It is the Company’s policy to
propose a separate Resolution at the Annual
General Meeting on each substantive issue.

Redrow’s website, www.redrowplc.co.uk, gives access
to current financial and corporate information.

Graham Cope
Company Secretary

5 September 2016

GOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORTRedrow plc Annual Report 201670

AUDIT COMMITTEE REPORT

THE 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

NICK HEWSON

Chairman of the
Audit Committee

COMMITTEE MEMBERSHIP AND MEETINGS

• reviewing and monitoring the effectiveness of

The four Members of the Committee are
Independent Non-Executive Directors and the
Board believes the Committee has the appropriate
level of experience to fulfil its Terms of Reference.

systems for internal control, financial reporting
and risk management;

• reviewing and overseeing the effectiveness of

Internal Audit;

The Group Finance Director and Finance
Director – Group Services attend meetings by
invitation and both were present at all the
meetings in the year ended 30 June 2016. The
external Auditors, PricewaterhouseCoopers LLP
(‘PwC’), and the Finance Director (Operations) who
has responsibility for Internal Audit, were also in
attendance at all meetings.

• making recommendations to the Board in

relation to the appointment and removal of
external Auditors and approving the
remuneration and terms of engagement; and

• reviewing and monitoring the external Audit

process and independent activity of the Auditors
as well as the nature and scope of the external
Audit and its effectiveness.

The Committee met three times in the year ended
30 June 2016 and a summary of the principal
activities of the Committee are listed below.

Detailed papers and information were circulated
sufficiently in advance of meetings to allow proper
consideration of the matters for discussion. The
Committee also met separately with the external
Auditors and Internal Audit following the final audit
and the review of the year ended 30 June 2016
financial statements. No matters of concern were
raised within these discussions. The Committee
Chairman also met privately with the Engagement
Partner of the external Auditors and the Finance
Director (Operations) to discuss Internal Audit
matters. The Group Company Secretary acts as
Secretary to the Committee.

Table of Attendance

Name

Role

Attendance at Meetings

Nick Hewson

Chairman 3/3

Debbie Hewitt

Member

Liz Peace

Member

Sir Michael Lyons Member

3/3

RESPONSIBILITIES AND TERMS OF REFERENCE

The key responsibilities of the Committee are:

• monitoring the integrity of the financial

statements of the accompanying reports to
the shareholders and Corporate Governance
Statements including reviewing the findings
of external Auditors;

The Committee’s Terms of Reference are available
on the Company’s website (www.redrowplc.co.uk).

AUDIT COMMITTEE REPORTING ON
SIGNIFICANT ISSUES

The primary areas of judgement which were
considered by the Committee and how these
were addressed is set out below.

Net realisable value of inventories
The Committee receives a paper prepared by
management at each reporting date outlining the
approach taken by management to assess the net
realisable value of inventories together with
details of sites with significant areas of judgement.
The Group Finance Director and Finance Director
– Group Services attend meetings by invitation to
answer any questions the Committee may have.

The Committee also annually reviews the
internal controls that are in place and reviews
the findings of PwC’s testing of controls and
processes for estimating as well as the adequacy
of disclosures that management propose to be
made in financial statements.

Defined benefit pension scheme valuation
The Committee receives details of the IAS 19R –
Employee Benefits valuations carried out at each
reporting date for management by the actuary
who advises the Company and the underlying
assumptions. A sensitivity analysis is also provided
for its consideration. The Committee also receives
details of the triennial independent scheme
valuation report prepared by the Scheme Actuary
and reviews key judgement areas made including
relevant actuarial advice that has been received.

In addition the Committee also reviews the
findings of PwC’s testing of pension scheme
assets and liabilities.

MAIN ACTIVITIES DURING THE YEAR

The Committee followed a programme which is
structured around the annual reporting cycle and
received reports from Internal Audit, the external
Audit and management.

The principal activities undertaken are shown in
Table 1 below.

AUDIT INDEPENDENCE

PwC were appointed Auditors in 1999 having
succeeded Coopers & Lybrand who were appointed
in 1987. The current Audit Partner from PwC
commenced his tenure following the conclusion
of the year ended 30 June 2015 audit.

At its meeting in February 2016 the committee
considered whether to retain PwC as auditor and
concluded that, in view of the quality of service
provided and the cost effectiveness of the work
carried out, it would be appropriate to retain them.

The Committee does not currently have a formal
policy on re-tendering of the external Audit.

TABLE 1

However following the Order of the Competition
and Markets Authority in relation to FTSE 350
companies the Company will be required to
change its statutory auditor by June 2020. The
Committee has had initial discussions regarding
its future policy, strategy and timing for tendering
of the external 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.

September 2015 A review of the full year 2015 results, including the Annual Report and a report from the external Auditors;

and consideration of the Group risk assessment process and a going concern review.

February 2016

A review of the 2016 half-yearly accounts and going concern including a report from the external Auditors;

A review of the Terms of Reference of the Committee;

A review of the proposed external Audit strategy for 2016 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.

June 2016

A review of the appropriateness of the Group’s accounting policies;

A review of the Risk Register;

A review of the Group’s Whistleblowing Policy;

A review of the Group’s Anti-Bribery Policy;

A review of internal controls across the whole business;

An update on Internal Audit, its strategy and a review of the Internal Audit timetable for 2017; and

Initial discussions regarding the future tendering of the external Audit in compliance with the Order of the Competition
and Markets Authority.

September 2016 A review of the full year 2016 results, including the Annual Report and a report from the external Auditors;

and consideration of the Group risk assessment process and a going concern review.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT72

AUDIT COMMITTEE REPORT CONTINUED

The external Auditors are not indemnified by the
Company nor has the Company purchased liability
insurance for them.

Details of fees paid to PwC are disclosed on
page 111.

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,
any internal control system can only provide
reasonable but not absolute assurance against
material misstatement or loss.

Key business activities, including finance, land
acquisition, product design and procurement and
information technology are controlled 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,
Regional Chief Executives, Group Human Resources
Director, Group Sales and Marketing Director and
Group Development Director (‘the Executive Board’)
meet monthly to discuss the Group’s key issues,
risks and opportunities. The Divisions also hold
monthly board meetings which are attended on a
rotational basis by the Executive Directors.

The key features of the Group’s internal controls
are as follows:

• defined authorisation levels exist over key areas
such as land purchase, the placing of orders and
contracts and staff recruitment;

• a comprehensive prioritised Risk Register which

is regularly reviewed and presented to the
Audit Committee;

• 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
environment management. The department
works closely with the Divisions to ensure
that training is provided to employees and
subcontractors. Best practice is shared and
appropriate actions are taken to comply with
health 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;

• key functional Directors complete a Principal

Controls Self-Assessment Questionnaire which
is reviewed by the Board to assist in
improvements in the control framework;

• 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;

• 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;

• preparation and regular updates of Strategic Plans;

• 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

• daily statements of a reconciled cash position
identifying significant payments are prepared,
rolling cash flow forecasts are prepared and
forecast banking covenant compliance are tested.

Throughout the year, the Committee has carried
out assessments of internal control by considering
documentation from the Executive Directors
and the internal audit function as well as taking
into consideration events since the year end.

The internal controls extended to the financial
reporting process and the preparation of
consolidated financial statements. The basis
for the preparation of consolidated financial
statements has been undertaken in accordance
with the Group’s Accounting policies as set out
on pages 106 to 110.

The Committee therefore confirms that it is
satisfied that the system of controls has been
in operation throughout the financial year and
up to the date of this report.

RISK REGISTER

The Group formally reviews its prioritised Risk
Register every year. The updated and reviewed
Risk Register is then discussed and approved by
the Committee. 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
preventative or detective and identifies owners
for 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 with PwC
and discussed and agreed with the Committee.
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.

WHISTLEBLOWING

The Group has a widely publicised
Whistleblowing Policy which enables employees
and other stakeholders to raise concerns in
confidence. The Committee has arranged to
receive reports on all occasions when such issues
are raised under this policy. The Whistleblowing
Policy is formally reviewed and approved each
year by the Committee.

BRIBERY ACT

Following the introduction of the Bribery Act 2010
the Company put in place a policy on bribery and
corruption for all employees to strictly adhere to.
The Company Secretary ensures that the policy is
complied with, updates the policy, procedures and
company code of practice as and when required
and provides regular reports to the Committee.
The Bribery Act policy is formally reviewed and
approved each year by the Committee.

Training is given to all staff to highlight the various
forms of bribery and all new staff attend an
induction course at the commencement of their
employment which includes a section relating to
bribery and the implication on individuals and the
company of an act of bribery either given or
received. Every year, through its new internal
e-learning facility, each employee will be required
to complete a mandatory compliance test which
reminds each employee of their obligations.

PERFORMANCE EVALUATION

The Committee completed a performance
evaluation during the Financial Year and a report
was presented to the Committee and discussed.
The Committee was found to be effective and it
was concluded that the Committee had fulfilled
its remit and had in place appropriate Terms
of Reference.

Nick Hewson
Chairman of the Audit Committee

5 September 2016

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT74

NOMINATION COMMITTEE REPORT

SUSTAINABILITY COMMITTEE REPORT

THE COMMITTEE REVIEWS THE SIZE, STRUCTURE, BALANCE AND COMPOSITION OF
THE BOARD, OVERSEES BOARD AND SENIOR EXECUTIVE SUCCESSION PLANNING AND
IDENTIFIES AND NOMINATES FOR APPROVAL CANDIDATES TO FILL BOARD VACANCIES

THE COMMITTEE ASSESSES THE IMPACT OF COMPANY OPERATIONS
ON THE ENVIRONMENT AND COMMUNITIES AFFECTED BY ITS ACTIVITIES

DEBBIE HEWITT

Chairman of the
Nomination Committee

COMMITTEE MEMBERSHIP AND MEETINGS

All Members of the Committee are Independent
Non-Executive Directors with Debbie Hewitt, the
Senior Independent Director, being Chair of the
Committee. The other Members of the Committee
during the year ended 30 June 2016 were Nick
Hewson, Liz Peace and Sir Michael Lyons.

The Committee met twice during the year ended
30 June 2016. For all meetings, papers were
circulated sufficiently in advance to allow proper
consideration of all matters for discussion. The
Group Company Secretary acts as Secretary to
the Committee.

Table of Attendance

Name

Role

Attendance at Meetings

Debbie Hewitt

Chairman 2/2

Nick Hewson

Member

Liz Peace

Member

Sir Michael Lyons Member

2/2

RESPONSIBILITIES AND TERMS OF REFERENCE

The key responsibilities of the Committee are:

• reviewing the structure, size and composition of

the Board (including skills, knowledge and
experience) and making recommendations for
further recruitment to the Board or proposing
changes to the existing Board;

• reviewing the leadership needs of the Company,
both executive and non-executive, ensuring
appropriate succession planning for directors
and other senior executives within the business;

• leading the process for Board appointments
ensuring they are conducted on merit and
against objective criteria;

• making recommendations to the Board,

including on appointment of Executive and
Non-Executive Directors to the Board, the
re-appointment of Directors, the re-election
of Directors at the Annual General Meeting
and the membership of the Audit, Nomination,
Remuneration and Sustainability Committees;

• ensure that a formal structured and tailored
induction programme is undertaken by any
newly appointed member of the Board; and

• reviewing annually the time required from the

Non-Executive directors.

The Committee’s Terms of Reference are published
on the Group’s website (www.redrowplc.co.uk)

MAIN ACTIVITIES DURING THE YEAR

During the year ended 30 June 2016 the
Committee undertook the following activities:

• the approval and appointment of Nick Hewson,
Matthew Pratt and Robert MacDiarmid to the
Sustainability Committee;

• a review of the structure, size and composition
of the Board. The Committee subsequently
concluded that the present Board balance and
composition remains appropriate but that it
will be kept under review;

• recommended that the Directors stand for

re-election at the 2016 Annual General Meeting
in accordance with UK Corporate Governance
Code; and

• reviewed the Committee’s Terms of Reference.

The Directors were not present and did not vote
when their individual proposals were discussed.

PERFORMANCE EVALUATION

The Committee completed a performance
evaluation during the financial year and a report
was presented to the Committee and discussed.
The Committee was found to be effective and it
was concluded that the Committee had fulfilled
its remit and had in place appropriate Terms
of Reference.

Debbie Hewitt
Chairman of the Nomination Committee

5 September 2016

LIZ PEACE

Chairman of the
Sustainability
Committee

COMMITTEE MEMBERSHIP AND MEETINGS

The Members of the Committee comprise:

Liz Peace, – Chair of the Committee and an
Independent Non-Executive Director,

• to have regard to environmental corporate
social responsibility and community issues,
including environmental management systems,
waste management systems, recycling and
energy management;

Nick Hewson – Independent Non-Executive Director,

• to ensure that the Group Sustainability Director

produces in advance of each meeting a
sustainability performance scorecard to assist
the Committee to more clearly evaluate the
relationship between the sustainability
initiatives in place, or being considered, and the
related performance levels being achieved;

• to ensure that the Group supports its people on
a learning and development pathway to deliver
high quality products and services and to ensure
that there is sufficient encouragement and
support given to Group employees so that they
can realise their capability to contribute to the
social, environment and economic health of our
communities and having regard to promoting
and maintaining the highest degree of physical,
mental and social well-being in the workplace;

• to ensure that the Group continues to be an

employer of choice in the industry, valuing and
respecting its diversity; providing both advantage,
and equality of opportunity in recruitment,
development, recognition and reward;

• to review the Group’s policies and reporting with
regard to personnel recruitment, development
and succession planning to ensure a sustainable
and engaged workforce;

• to have regard to the Group’s involvement in
the community, and the Company’s policy on
charitable donations and activities; and

• to have regard to the Group’s developments in
customer engagement and service to ensure its
values are upheld.

The Committee regularly reviews its Terms of
Reference; these were last reviewed in May 2016
and are published on the Group’s website
(www.redrowplc.co.uk).

Matthew Pratt – Northern & Central Regional
Chief Executive,

Karen Jones – Group Human Resources
Director, and

Robert MacDiarmid – Group Research and
Sustainability Director.

Nigel Smith left the business during the course
of the financial year and was replaced by
Robert MacDiarmid.

The Committee met three times during the year
ended 30 June 2016. For all meetings, papers were
circulated sufficiently in advance to allow proper
consideration of all matters for discussion. The
Group Company Secretary acts as Secretary to
the Committee.

Table of Attendance

Name

Role

Attendance at Meetings

Liz Peace

Chairman 3/3

Nick Hewson

Member

Matthew Pratt Member

Robert
MacDiarmid

Karen Jones

Nigel Smith

Member

2/2

3/3

1/1

RESPONSIBILITIES AND TERMS OF REFERENCE

The key responsibilities of the Committee are:

• to develop and monitor the Group’s approach to
sustainability and to review and approve the
sustainability targets proposed by management;

• to assess the impact of the Group’s operations
on the environment and communities affected
by its activities, including the consideration
of policies to enhance the benefits of those
activities and mitigate any negative impact
of those activities;

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT76

SUSTAINABILITY COMMITTEE
REPORT CONTINUED

DIRECTORS’
REMUNERATION REPORT

MAIN ACTIVITIES DURING THE YEAR

During the year ended 30 June 2016 the principal
activities of the Committee were as follows:

• debated and approved a re-alignment of the

Group’s sustainability aspirations to focus not
only on environmental stewardship and
improvement but also on a broader contribution
to economic, physical and social wellbeing.
Set in hand action to further integrate these
aspirations into the Group’s core strategy
through the creation of high level business
principles and supporting objectives;

• oversaw the findings from customer research on
purchasing intentions in respect to sustainable
homes to improve communication on this issue
to prospective buyers;

• approved the expansion of the sustainability
team, with an additional team member being
added during the year, to increase the
Company’s focus on the social and community
aspects of sustainability; and

• approved the proposal to transition the

environmental management system from
BS8555 to BS EN ISO 14001:2015.

PERFORMANCE EVALUATION

The Committee completed a performance evaluation
during the Financial Year and a report was presented
to the Committee and discussed. The Committee
was found to be effective and it was concluded that
the Committee had fulfilled its remit and had in place
appropriate Terms of Reference.

Liz Peace
Chairman of the Sustainability Committee

5 September 2016

• approved the procurement process to obtain
a software solution which will enable more
efficient and effective sustainability data
collection and reporting;

• supported a programme of visits across all

Divisions to discuss waste management and
outline plans to tackle resource efficiency
going forward;

• monitored the internal communication of

community, wellbeing and environmental issues
and approved the publication of ‘In the Loop’ a
new quarterly, in-house, sustainability magazine;

• monitored a programme of internal engagement

that took place with all the Green Teams to
determine their continuing value and to propose
actions to re-invigorate the teams. A new
broader programme entitled ‘Pathfinder’ which
addresses social as well as environmental issues
was launched in August 2016;

• monitored and reviewed the Group’s response
to legislation and regulation by requiring that a
programme of site reviews across all Divisions
was planned and implemented to check the
continuing appropriateness of environmental
risk mitigation measures;

DEBBIE HEWITT

Chairman of the
Remuneration
Committee

I am pleased to present the Directors’ Remuneration
Report for the year ended 30 June 2016.

OUR PHILOSOPHY – ALIGNING REWARD
WITH PERFORMANCE

At the Annual General Meeting on 10 November
2014 our Directors’ Remuneration Policy was
put to a binding shareholder vote, which was
approved by over 95% of the votes cast. The
Remuneration Committee believes that this
approved Policy continues to reflect our overall
remuneration philosophy set out below and is
working effectively to drive and reward the
exceptional performance that the business is
delivering. We are therefore not proposing any
changes to our Remuneration Policy this year.
As shareholders are now familiar with it, the full
Policy is not included in this year’s report but a
summary is provided in the form of a Policy table
(which explains how our framework operates)
and is set out on pages 79 to 80. We will be
submitting a Policy for shareholder approval at
the 2017 AGM in line with the three year cycle
set out in the regulations.

The Annual Remuneration Report (pages 82 to
91) provides details on the remuneration we paid
in respect of 2016 and how we intend to operate
our policies in 2017. It will be submitted to an
advisory shareholder vote at the 2016 Annual
General Meeting.

Our Remuneration strategy has been designed to
reflect the needs of a UK based, capital intensive,
housebuilder, with ambitious growth plans. We
make long-term investments, which are
differentiated by the constant innovation and
quality of our product. Successfully acquiring
land, achieving planning consent, opening outlets,
building quality homes and selling and handing
them over on time, are all critical success factors
and feature as part of our management
incentive programmes.

We adopt clear, simple and market competitive
remuneration arrangements. The alignment of
executive remuneration with the objectives of our
shareholders has been the principal focus, ensuring
remuneration structures are fully attuned to the
business strategy. We aim to balance the short,
medium and long-term components of our
remuneration, to ensure that we motivate and
retain our executives and keep them focused on
delivering long-term, sustainable growth. The
annual bonus encourages performance in key areas
of strategic focus for the business and the Long
Term Incentive Plan (LTIP) reflects our market
related growth and return ambitions.

Based on these principles, our remuneration
framework, as codified in our Remuneration Policy,
includes the components shown in the table below.

FIXED COMPONENTS

VARIABLE COMPONENTS

SALARY

BENEFITS

PENSION

ANNUAL BONUS

LTIP

Market competitive

Maximum 100% of salary

– Reflect nature of role, and skills

– Balanced scorecard of key

– Based on stretching long-term

and experience

performance measures – for example,
PBT, ROCE, land bank, order book

EPS and ROCE targets

– Subject to clawback for five

– 50% deferred into shares – half vest

years following vesting

after one year and half after two years

– Cash and shares subject to clawback for
five years following payment/vesting

– 100% of salary to be built up over five years from appointment

SHAREHOLDING GUIDELINES

GOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORTRedrow plc Annual Report 201678

DIRECTORS’
REMUNERATION REPORT CONTINUED

We keep our policies under review to ensure they
remain appropriate in the face of evolving best
practice, regulatory developments and market
data. We will do so again during the year ahead,
ahead of submitting our Policy to shareholders
at the 2017 AGM, as referred to earlier.

2016 OUTCOMES – AN OUTSTANDING YEAR

As described in detail on pages 03 to 61 of this
Annual Report, 2016 was another outstanding
year for Redrow, which saw:

• Record profits of £250m before tax

• Legal completions increasing by 17%

• Record turnover of £1.38bn, up 20%

• Underlying EPS increasing to 55.4p

• ROCE increasing to 24.2%

• Closing private order book increasing to £807m

• c12,700 plots added to the current land bank

The alignment between performance and reward
which underpins our executive remuneration
framework, is reflected in the outcomes for the
annual bonus and LTIP:

• Based on exceptional performance, with the
targets for maximum payment exceeded for
all four of the annual bonus measures (PBT,
ROCE, land bank, order book), the Committee
determined that the annual bonus should pay
out at the maximum level of 100% of salary for
all of the Executive Directors. 50% of this will be
paid in shares and half of these will be deferred
for a period of one year and the remaining half
deferred for two years; and

• EPS of 55.4p and ROCE of 24.2% in 2016
were both significantly above the targets
for maximum vesting of 48p and 20%,
respectively. The Committee therefore
determined that the 2013 LTIP award should
vest in full on 24 September 2016.

The Committee has considered and reaffirmed the
policy introduced in 2014 that, given the highly
competitive nature of the sector, annual bonus
performance targets remain commercially
sensitive immediately following the year end.
Therefore, subject to the Committee determining
that they are no longer commercially sensitive, it
is intended that bonus targets will be disclosed on

a two year delayed basis. In line with this policy,
the targets for 2016 will be disclosed in the 2018
report, and this report contains the bonus targets
for the 2014 financial year.

REMUNERATION DECISION FOR 2017

The Committee has decided to award salary
increases to the Chairman, Chief Executive
and Finance Director of 2.5%, effective from
1 July 2016. The average increase for all other
employees across the business was 3.6%.

The annual bonus and LTIP will operate in line
with the Policy. The annual bonus will continue
to be based on a balanced scorecard of equal
performance measures – PBT, ROCE and a measure
based on the number of outlets opened (replacing
the previously used measure based on order book
to better align with strategic and operational
priorities for the year). We will consider including
a fourth measure, land bank, once current market
conditions stabilise. The EPS and ROCE target
ranges for the 2017 LTIP award are set out on
page 86 of this report.

SHAREHOLDER ENGAGEMENT

We remain committed to an ongoing and
transparent dialogue with our shareholders on
the issue of executive remuneration. In putting
in place our current Policy, I engaged with a
number of our major shareholders and their
valuable feedback was taken into account by the
Committee in finalising the Policy. November 2015
was the first advisory vote on the Remuneration
Report since the Policy was applied in November
2014, and 99.58% of votes cast were in favour. We
will continue to engage with our shareholders on
any significant changes to Policy.

The Annual Report on Remuneration will again be
put to an advisory vote at the Annual General
Meeting in November 2016. The year ended
30 June 2016 was another year of significant
progress for Redrow and in this context, we look
forward to receiving your support on our approach
to remuneration at this Annual General Meeting.

Debbie Hewitt
Chairman of the Remuneration Committee

This report has been prepared
in accordance with the UK
Corporate Governance Code,
the relevant provisions of the
Listing Rules and Schedule 8
of the Large and Medium-
sized Companies and
Groups (Accounts and
Reports) (Amendment
Regulations 2013.

REMUNERATION POLICY

The Remuneration Policy became effective following shareholder approval at the 2014 Annual General Meeting. An extract
of the remuneration policy table (with updated references, where relevant) and supporting disclosures is reproduced below for
information only. The full Remuneration Policy is contained on pages 62 to 68 of the 2014 Annual Report and Accounts which
is available in the investor relations section of the Group’s website, http://investors.redrowplc.co.uk/.

Policy Table for Executive Directors

Component

Purpose/Link to Strategy

Operation

Maximum

Performance Framework

Base Salary

To provide a market competitive
element of fixed remuneration
to attract and retain leaders of
the required calibre to deliver
the strategy.

N/A

Salaries are determined by the Committee
taking into account all relevant factors
such as: the size and complexity of the
Company, the scope and responsibilities
of the role, the skills and experience of
the individual, and performance in role.

The Committee’s assessment of the
competitive market positioning of base
salaries is based on consideration of
market data from UK companies of similar
size and complexity, and companies in the
housebuilding sector.

Salaries are normally reviewed annually,
with any changes effective at the start of
the financial year.

Salaries effective from 1 July 2016 are
shown on page 83 of the Annual
Remuneration Report.

There is no prescribed maximum
salary. Any salary increases will
normally be in line with those of
the wider workforce.

The Committee has discretion to
award larger increases where it
considers this appropriate, such
as to reflect (for example):

– a significant change in the size

and complexity of the Company;

– an increase in scope and

responsibility of the role,
or a change in role;

– an Executive Director being

moved to market positioning
over time; and

– an Executive Director falling
below competitive market
positioning.

Benefits

To provide a market competitive
benefits package to support the
Director in fulfilling their role.

Benefits may include: a company car (or
equivalent cash allowance), private medical
insurance, permanent health insurance,
fixed term group income protection and a
death in service benefit.

Benefit provision, for which
there is no prescribed monetary
maximum, is set at an appropriate
level for the specific nature and
location of the role.

N/A

Participation in all employee share
plans is subject to statutory limits.

Executive Directors may also participate in
all-employee share plans on the same basis
as other employees.

The Committee has discretion to include,
where it considers it appropriate to do so,
other benefits to reflect specific individual
circumstances, such as housing, relocation,
travel, or other expatriate allowances.

Pension

To provide a market competitive
element of fixed remuneration
for retirement planning.

Individuals are eligible to participate in the
Company’s Defined Contribution (DC)
pension scheme or receive a pension
allowance cash supplement.

The maximum DC contribution/
cash supplement (in respect of a
financial year) is 20% of
base salary.

N/A

Executive Directors who are members of
the Company’s Defined Benefit (DB)
pension scheme will continue to receive
benefits under the terms of that scheme.
There will be no new entrants or accrual of
future benefits under the DB scheme.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT80

DIRECTORS’
REMUNERATION REPORT CONTINUED

Component

Purpose/Link to Strategy

Operation

Maximum

Performance Framework

Annual
Bonus

A variable pay opportunity which
motivates and rewards annual
performance and delivery of the
strategy on an annual basis.

Deferral aligns reward with
long-term value of Redrow shares.

Long Term
Incentive
Plan (‘LTIP’)

Designed to motivate and reward
long-term performance and
delivery of the strategy, and
provide alignment with Redrow
shareholders.

100% of salary

The maximum award
which may be granted
in respect of a financial
year will normally not
exceed 100% of salary.

However, in exceptional
circumstances only, the
Committee may make
awards of up to 200%
of salary.

The Committee determines participation
levels each year. Targets are set by the
Committee at the start of the relevant
financial year and are assessed following
the year end.

A portion (currently 50%) of any bonus
earned will be deferred into Redrow shares,
which are awarded in the form of nil-cost
options which vest after a period set by the
Committee. Currently, half of the deferred
shares vests after one year and half after two
years, subject to continued employment.

Following exercise of a vested deferred share
award, participants will be entitled to receive
an amount equal to the aggregate of any
dividends which they would have been
entitled to receive as a shareholder during
the period between the grant and
satisfaction of the award.

In future years, the Committee retains the
discretion to change the deferred amount
and/or lengthen the deferral period.

Where appropriate, the Committee may
determine that deferral is in the form of an
equivalent cash award (which in all other
respects mirrors the terms of the deferred
share awards).

Clawback provisions apply to both the cash
and deferred elements (see section below).

Awards may be made under the Redrow plc
2014 Long Term Incentive Plan (LTIP).

Awards are normally in the form of nil-cost
options and vest subject to the satisfaction
of performance conditions measured over a
period of at least three years.

The Committee may also determine that
awards are made in the form of conditional
share awards or as an equivalent cash
award (which in all other respects mirrors
the terms of the LTIP).

Clawback provisions apply (see
section below).

Awards under the 2015 LTIP may
incorporate the right to receive (in cash or
shares) the aggregate value of dividends
paid on vested shares between the vesting
date and the date on which the awards are
satisfied, on such basis as the Committee
may determine, which may assume the
reinvestment of these dividends in shares
on a cumulative basis.

Dividend amounts are not paid on any
awards until such time as the performance
conditions are achieved and shares vest.

Performance is assessed against
key financial and operational
performance measures linked to
the delivery of the strategy and
shareholder value determined
each year by the Committee.

The current performance measures
are disclosed on page 83 of the
Annual Remuneration Report.

The Committee retains discretion
to adjust the measures and/or
weightings in future years to reflect
prevailing financial, strategic and
operational objectives of the
business or of the individual.
However, a minimum of 50% of
the total will always be based on
key financial measures.

The Committee has discretion
to adjust the level of pay out if
the outcome from a formulaic
assessment does not appropriately
reflect underlying business
performance.

The LTIP is based on performance
measures aligned to the creation
of long-term shareholder value,
measured over a performance
period of at least three years. The
current performance measures are:

• 50% based on earnings per share

(EPS); and

• 50% based on return on capital

employed (ROCE)

For threshold performance, 20%
of the maximum vests.

The Committee retains discretion
to include additional or alternative
financial performance measures
and/or adjust the weightings in
future years to reflect prevailing
strategic or operational objectives
of the business aligned with
shareholder value creation.

Performance conditions applicable
to 2015 LTIP awards may be
amended if an event occurs which
causes the Committee to consider
that an amended performance
condition would be more
appropriate and not materially
less difficult to satisfy.

Where an individual waives any current or future right or entitlement to a remuneration payment or other benefit which he would
otherwise be eligible to receive under any of the components set out in the Policy Table on pages 79 and 80, the Committee may
determine that a charitable donation, which is, in its opinion, equivalent to the value of that payment or benefit, may be made by
the Company.

The Committee reserves the right to make any remuneration payments and payments for loss of office
(including exercising any discretions available to it in connection with such payments) notwithstanding
that they are not in line with the Remuneration Policy set out above where the terms of the payment
were agreed (i) before the Remuneration Policy came into effect or (ii) at a time when the relevant
individual was not a director of the Company and, in the opinion of the Committee, the payment was
not in consideration for the individual becoming a director of the Company. For these purposes
‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to
an award over shares, the terms of the payment are ‘agreed’ at the time the award is granted.

The Committee may make minor amendments to the Remuneration Policy (for regulatory, exchange
control, tax or administrative purposes or to take account of a change in legislation) without obtaining
shareholder approval.

CLAWBACK

For awards under the annual bonus plan (including deferred share awards) made in respect of the
2015 financial year onwards and awards under the 2014 LTIP, the Committee has discretion to claw
back awards in the event of a material misstatement of the Company’s audited financial results or
employee misconduct.

In such circumstances, at any time prior to the fifth anniversary of the payment of any cash bonus or
vesting of a deferred bonus/LTIP award, the Committee has discretion to:

• reduce, cancel or impose further conditions on outstanding deferred bonus/LTIP awards; or require
the participant to repay (in cash or shares) some or all of the value delivered from a deferred bonus/
LTIP awards; and/or

• require the participant to repay some or all of any cash bonus received.

Where a charitable donation has been made in accordance with the Remuneration Policy, clawback will
not apply.

For deferred bonus plan awards granted in previous years, if a participant’s gross misconduct has
resulted in the material misstatement of the Group accounts (or the accounts of one of its members),
any unexercised awards will lapse immediately and the participant will forfeit any shares previously
acquired under awards made under that plan.

SERVICE CONTRACTS

The service agreements of the Executive Directors are rolling contracts which were entered into on the
dates shown in the table below.

Name

Contract date

Notice period from the Director

Notice period from the Company

Steve Morgan

John Tutte

01/01/11

01/07/14

Barbara Richmond

18/01/10

6 months

12 months

6 months

12 months

The service agreements provide for formal notice to be served to terminate the agreement, by either
the Company or the Executive Director, with the required period of notice shown in the table. The
agreements do not include any provisions for pre-determined compensation for early termination.
The Committee may terminate service agreements immediately by making a payment in lieu of notice
consisting of base salary, benefits and pension for the unexpired period of notice. At the discretion
of the Committee, this payment may be made as instalments over the period, subject to a duty to
mitigate, or as a lump sum.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT82

DIRECTORS’
REMUNERATION REPORT CONTINUED

For future appointments, it is the Committee’s policy that notice periods will normally be 12 months
from both the Director and the Company, and that payments in lieu of notice will comprise no more
than base salary, benefits and pension only over the unexpired period of notice.

The Non-Executive Directors’ terms of appointment are detailed in formal letters of appointment as
shown in the table below. Each appointment is for a fixed initial period of three years although this term
is terminable upon either party giving three months’ notice.

Name

Position

Date of initial appointment

Current date of appointment

Debbie Hewitt

Senior Independent Director

Nick Hewson

Non-Executive

Liz Peace

Non-Executive

Sir Michael Lyons

Non-Executive

ANNUAL REMUNERATION REPORT

21/08/09

01/12/12

01/09/14

06/01/15

19/08/15

1/12/15

01/09/14

06/01/15

The tables below set out the remuneration for the Directors in respect of 2016. Further discussion of
each of the components, including the intended operation of the policy for 2017, is set out on the pages
which follow. Where indicated, these disclosures have been audited.

SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)

The remuneration of the Executive Directors in respect of 2016 is shown in the table below (with the
prior year comparative).

Salary

Benefits(ii)

Pension(iii)

Annual bonus(iv)

LTIP(v)

Total

£’000

Steve Morgan(i)

John Tutte

Barbara Richmond

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

555

314

540

305

–

111

–

108

–

555

314

–

540

305

–

651 1,151 1,888 2,355

436

768 1,143 1,454

(i)

Steve Morgan draws a nominal salary of £15k per annum which he donates via Payroll Giving to the Morgan Foundation, a UK registered
charity of which Steve Morgan is a trustee.

The Company also made a donation to the Morgan Foundation of £698k in respect of 2016 (2015: £678k). This donation amount
is made up of a notional salary of £460k (being the balance of Steve Morgan’s notional salary of £475k less the £15k nominal salary)
and £238k (being an amount in respect of the cash annual bonus which Steve Morgan waived his entitlement to). The notional cash
bonus represents half of the total bonus for 2016, calculated using the notional salary of £475k and a bonus percentage of 100% of
maximum, equivalent to that earned by John Tutte and Barbara Richmond.

The remaining half of Steve Morgan’s 2016 bonus amount (£238k) is deferred into cash awards over notional Redrow shares, and will
become exercisable as described in footnote (iv) below. Steve Morgan’s 2013 LTIP award, also structured as a cash award over notional
Redrow shares, will vest in full on 24 September 2016 based on performance to the 2016 financial year (as described in the section
below). The value of this award (calculated using the average share price over the last three months of 2016 in accordance with footnote
(v) below) is £717k (2015: £1,271k). Steve Morgan currently intends to waive his entitlement to these awards at a future point (at any
time during the relevant exercise period). A donation to the Morgan Foundation may be made by the Company of an amount equivalent
to the cash value of the awards over notional Redrow shares at that time. Any such donation will be disclosed in the relevant
remuneration report.

Further details on the donation to the Morgan Foundation are given in the Directors’ Report on page 94 and in note 22 to the
financial statements.

(ii) Benefits include a fully expensed company car (or equivalent cash allowance) and private health insurance.

(iii) Pension includes the value of the cash allowance paid to John Tutte and Barbara Richmond in respect of the relevant year.

(iv) Annual bonus represents the full value of the bonus awarded in respect of the relevant financial year. Half of the bonus is deferred into
Redrow shares, which vests in two tranches of 50% each, on the first and second anniversaries of the grant date, subject to continued
employment. For Steve Morgan, deferral is in the form of cash awards over notional Redrow shares.

(v)

LTIP represents the value of the LTIP award which vests in respect of a performance period ending in the relevant financial year. The 2016
column includes the value of the 2013 LTIP award which will vest in full on 24 September 2016, using the average share price over the last
three months of 2016. The 2015 column includes the vested value of the 2012 LTIP award (which vested at 100% of maximum), based on
the share price on the date of vesting (23 October 2015).

The fees of the Non-Executive Directors in respect of 2016 are shown in the table below (with the prior
year comparative).

£’000

Debbie Hewitt

Nick Hewson

Liz Peace (i)

Sir Michael Lyons (ii)

Fees

2016

2015

(i)

Liz Peace was appointed to the Board on 1 September 2014

(ii) Sir Michael Lyons was appointed to the Board on 6 January 2015

KEY COMPONENTS OF REMUNERATION

The following sections describe how the Committee implemented key elements of the policy in 2016
and how the policy is intended to operate in 2017.

Salary
The Committee’s policy on salary increases, as set out in the Remuneration Policy, is that they should
normally be in line with increases for employees within the business. This approach has been applied
consistently by the Committee over a number of years.

The average increase for all Redrow employees on 1 July 2016 was 3.6% of which 2.5% was awarded as
an annual increment. The Committee decided to award base salary increases for the Executive Directors
of 2.5%, effective 1 July 2016, as follows:

£’000

Steve Morgan

John Tutte

Barbara Richmond

2017

487

569

322

2016

475

555

314

Change

2.5%

Annual bonus
The maximum bonus opportunity for the Executive Directors during 2016 continued to be 100% of
salary, in line with the Remuneration Policy. This was based on the achievement of stretching targets
under a balanced scorecard of four equally weighted key performance measures. The scorecard
combines measures which represent an appropriate balance between ‘backward looking’ financial
performance (PBT and ROCE) and ‘forward looking’ strategic and operational measures (land bank and
order book) which support shareholder value creation over the medium to long-term.

% of bonus opportunity

Rationale

PBT

ROCE

Land bank

Order book

25%

A fundamental measure of annual profitability

A measure of how effectively we use our capital base

Measures the foundation for our future growth

A key indicator of medium-term profitability

As described in detail on pages 03 to 61 of this Annual Report, 2016 was another outstanding year for
Redrow. As a result of the targets for maximum payment being exceeded for all four of the measures,
the Committee determined that the bonus should pay out at the maximum level, resulting in bonus
awards to the Executive Directors as shown in the Single Total Figure of Remuneration on page 82.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT

DIRECTORS’
REMUNERATION REPORT CONTINUED

The Committee and Board of Redrow consider that, given the highly competitive nature of the sector,
the annual bonus performance targets remain commercially sensitive in the period following the
relevant financial year and it would therefore be inappropriate to disclose the targets at that point.
Therefore, after careful consideration, the Committee’s policy on bonus target disclosure continues to
be that, subject to the Committee determining that they are no longer commercially sensitive, it is
intended that bonus targets will be disclosed in the Annual Remuneration Report on a two year delayed
basis. Therefore, the targets for the 2016 bonus will be disclosed in the 2018 report. The targets for the
2015 bonus will be disclosed next year (2017). In line with this policy, the Committee has confirmed
that the targets for the 2014 annual bonus are no longer commercially sensitive and are therefore
disclosed in the following table:

% of bonus
opportunity

Threshold payout
(10% of maximum)

Target payout
(50% of maximum)

Maximum payout

2014 Target Range

Actual 2014
performance

Payout (% of
total bonus
opportunity)

PBT

ROCE

Land bank

Order book

Total

25%

100%

£109M

14.1%

£117m

15.6%

£125m

17.1%

£133m

18.0%

Based on a combination of targets for year-end active outlets
and Gross Development Value purchased in the year

53 active outlets/
£1,640m GDV

£260m

£275m

£300m

£482m

25%

100%

Executive Directors are required to defer 50% of any bonus earned into shares, half of which will vest
after one year and the remaining half after two years, subject to continued employment and clawback.
Steve Morgan’s notional cash award is subject to the same deferral schedule. Clawback provisions for
both the cash and deferred share elements will apply.

For 2017, the annual bonus will operate on the same basis as for 2016, assessed using a balanced
scorecard of measures. Private order book will be replaced by outlets opened to better reflect
operational priorities and we will reflect on an appropriate land bank measure to reflect current market
conditions. In line with the policy outlined above, it is the current intention that the targets will be
disclosed in the 2019 Annual Remuneration Report provided the Committee is comfortable they are
no longer sensitive.

Long Term Incentive Plan (LTIP)
The LTIP is designed to motivate and reward long-term performance and delivery of the strategy and
provide alignment with Redrow shareholders. The current policy is to make annual awards at the level
of 100% of salary.

The vesting of LTIP awards is based on performance of EPS and ROCE, pre-exceptional, with 50%
relating to performance of each measure.

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:

• EPS ensures that the team delivers strong ‘bottom line’ profitability and growth for shareholders; and

• ROCE provides balance by requiring that profit is delivered efficiently from a capital perspective.

The Remuneration Committee has discretion to adjust the number of shares vesting from the award if it
considers that performance in the metrics above is not sufficiently reflective of the general growth
created by the market.

Steve Morgan’s awards under the LTIP are receivable in cash but in all other respects mirror the terms
and conditions of the LTIP awarded to the other Executive Directors.

The sections below summarise details of the LTIP awards which vested in respect of 2016 (2013 awards)
and which were granted during the 2016 financial year. The final section provides details of awards
which will be made during the 2017 financial year.

LTIP awards vesting in respect of 2016
The LTIP awards granted in September 2013 were based on performance over the three year
performance period ending in 2016. Based on performance against the EPS and ROCE targets set when
the award was granted, summarised in the table below, the Committee determined that the 2013 LTIP
awards will vest in full on 24 September 2016. The value of these vested awards is included in the 2016
LTIP column of the Single Total Figure of Remuneration on page 82.

Award vesting level (for each component)

Nil

10%

30%

50%

Vesting between the points above is on a sliding scale basis

Actual performance

Vesting (% of total award)

EPS for 2016

ROCE for 2016

Below 39p

Below 16.1%

39p

43.5p

16.1%

18.1%

48p or above

20% or above

55.4p

50%

24.2%

50%

LTIP awards granted during 2016
The LTIP awards granted in September 2015 will vest in September 2018 based on performance over the
three year performance period ending in 2018 as follows:

Award vesting level (for each component)

Nil

10%

30%

50%

Vesting between the points above is on a sliding scale basis

EPS for 2018

ROCE for 2018

Below 62.5p

Below 18.0%

62.5p

69.4p

18.0%

20.0%

76.3p or above 22.0% or above

SCHEME INTERESTS AWARDED DURING 2016 (AUDITED)

The following table sets out details of LTIP awards to Executive Directors during the 2016 financial year.

Executive Director

Type of interest

Basis of award

Face value

Threshold vesting
(% of maximum)

End of performance
period

Steve Morgan

LTIP (cash)

100% of salary

John Tutte

Barbara Richmond

LTIP

100% of salary

£475k

£555k

£314k

20%

30 June 2018

Awards to John Tutte and Barbara Richmond are made in the form of nil-cost options. As described
above, awards to Steve Morgan are made in the form of cash which in all other respects mirror the
terms of the awards to other directors.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT86

DIRECTORS’
REMUNERATION REPORT CONTINUED

The face value has been calculated using the average share price used to determine the number of
shares awarded, being 494p (the average, over the three days to the date of grant, 14 September 2015).

Awards under the 2014 LTIP were made at 100% of the base salary for the current financial year in line
with the rules of that scheme.

LTIP awards to be granted during 2017
Awards in the 2017 financial year will be made at the level of 100% of salary and will be subject to the
following EPS and ROCE performance targets, measured over the three year period ending in 2019:

Award vesting level (for each component)

Nil

10%

30%

50%

Vesting between the points above is on a sliding scale basis

EPS for 2019

ROCE for 2019

Below 74.1p

Below 21.0%

74.1p

82.4p

21.0%

23.0%

90.6p or above 25.0% or above

Shareholding guidelines and share interests
Under the shareholding guidelines, Executive Directors are expected to build and retain a shareholding
in the Group at least equivalent to 100% of base salary. The expected level of shareholding should be
met within five years of appointment to the Board. As shown in the table below, all Executive Directors
currently meet this guideline. Non-Executive Directors are not subject to a shareholding guideline.

STATEMENT OF SHAREHOLDING AND SCHEME INTERESTS (AUDITED)

The following table sets out the shareholding (including connected persons) of the Directors in the
Company as at 30 June 2016 and current interests in long-term incentives.

Number of shares beneficially
held at 30 June 2016

Shareholding as
% of salary

Guideline met?

Executive Directors

Steve Morgan

John Tutte

Barbara Richmond

Non-Executive Directors

Debbie Hewitt*

Nick Hewson*

Liz Peace

Sir Michael Lyons

Yes

149,386,045

120,000%

206%

282%

299,619

231,954

21,605

19,000

3,400

3,000

* On 1 July 2016 Debbie Hewitt increased her shareholding to 30,687 and Nick Hewson increased his shareholding to 20,500.

Shareholding as a percentage of salary is calculated using the shareholding and base salary as at
1 July 2016 and the average share price for the final quarter of 2016.

The table below provides details of the interests of the Executive Directors in incentive awards during the year.

John Tutte

SAYE 2015

LTIP 2012

LTIP 2013

LTIP 2014

LTIP 2015

DEF BONUS 2012

DEF BONUS 2013

DEF BONUS 2014

DEF BONUS 2015

Barbara Richmond

SAYE 2014

SAYE 2015

LTIP 2011

LTIP 2012

LTIP 2013

LTIP 2014

LTIP 2015

DEF BONUS 2012

DEF BONUS 2013

DEF BONUS 2014

DEF BONUS 2015

Steve Morgan*

LTIP 2010

LTIP 2011

LTIP 2012

LTIP 2013

LTIP 2014

LTIP 2015

DEF BONUS 2012

DEF BONUS 2013

DEF BONUS 2014

DEF BONUS 2015

Awards
held at

1 July 2015 Grant Date

Share Price
on Grant
£

Award
Vested

Awards
granted in
year

Awards
exercised
in year

8,163

30/10/14

246,164

23/10/12

166,316

24/09/13

189,474

08/09/14

–

14/09/15

62,459

23/10/12

66,526

24/09/13

71,053

08/09/14

–

14/09/15

810,155

4,545

4,081

11/11/13

30/10/14

159,889

21/09/11

164,322

23/10/12

111,579

24/09/13

107,018

08/09/14

–

14/09/15

41,693

23/10/12

44,632

24/09/13

47,719

08/09/14

–

14/09/15

685,478

78,625

18/02/11

367,012

21/09/11

271,739

23/10/12

183,158

24/09/13

162,105

08/09/14

–

14/09/15

137,897

23/10/12

73,263

24/09/13

78,246

08/09/14

–

14/09/15

2.76

1.54

2.37

2.85

1.54

2.37

2.85

4.94

2.48

2.76

1.10

1.54

2.37

2.85

4.94

1.54

2.37

2.85

4.94

1.30

1.10

1.54

2.37

2.85

4.94

1.54

2.37

2.85

4.94

–

246,164

–

62,459

66,526

71,053

–

112,348

–

54,656

446,202

167,004

–

159,889

164,322

–

41,693

44,632

47,719

–

458,255

78,625

367,012

271,739

–

137,897

73,263

78,246

–

63,462

–

30,870

94,332

–

96,154

–

46,761

–

Awards
held at
30 June
2016

8,163

246,164

166,316

189,474

112,348

62,459

66,526

71,053

54,656

977,159

4,545

4,081

159,889

164,322

111,579

107,018

63,462

41,693

44,632

47,719

30,870

779,810

78,625

367,012

271,739

183,158

162,105

96,154

137,897

73,263

78,246

46,761

Exercise
Price
£

From

2.21

01/01/18

01/07/18

23/10/15

22/10/22

24/09/16

24/09/23

08/09/17

08/09/24

14/09/18

14/09/25

23/10/13

22/10/22

24/09/14

24/09/23

08/09/15

08/09/24

14/09/15

14/09/25

1.98

2.21

01/01/17

01/07/17

01/01/18

01/07/18

21/09/14

20/09/21

23/10/15

22/10/22

24/09/16

24/09/23

08/09/17

08/09/24

14/09/18

14/09/25

23/10/13

22/10/22

24/09/14

24/09/23

08/09/15

08/09/24

14/09/18

14/09/25

18/02/14

19/04/21

21/09/14

20/09/21

23/10/15

22/10/22

24/09/16

24/09/23

08/09/17

08/09/24

14/09/18

14/09/25

23/10/13

22/10/22

24/09/14

24/09/23

08/09/15

08/09/24

14/09/18

14/09/25

1,352,045

1,006,782

142,915

– 1,494,960

(i)

(ii)

All scheme interests held by Steve Morgan are receivable in cash on terms which in all other respects mirror those for other Executive Directors.

The performance conditions attached to 2010 LTIP awards were EPS, ROCE and TSR over the three year performance period to 2014. As disclosed in the 2013 Directors’
Remuneration Report, these awards vested at 19% of maximum on 18 February 2014.

The performance conditions attached to 2011 LTIP awards are EPS and ROCE over the three year performance period to 2014. As disclosed in the 2014 Directors’
Remuneration Report, these awards vested in full on 21 September 2014.

(iii) The performance conditions attached to 2012 LTIP awards are EPS and ROCE over the three year performance period to 2015. As disclosed in the 2015 Directors’

Remuneration Report, these awards vested in full on 23 October 2015.

(iv) The performance conditions attached to 2013 LTIP awards are EPS and ROCE over the three year performance period to 2016. As disclosed on page 85,

these awards will vest in full on 24 September 2016.

(v) The performance conditions attached to the 2014 LTIP awards were disclosed in the 2015 Directors’ Remuneration Report.

(vi) The performance conditions attached to the 2015 LTIP awards are shown on page 85.

(vii) There are no further performance conditions attached to the exercise of the deferred bonus awards.

(viii) Between 1 July 2016 and 5 September 2016 (being the latest practicable date prior to the posting of this report), there were no further changes to the

directors’ interests set out in the Statement of shareholding and scheme interests above.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT

DIRECTORS’
REMUNERATION REPORT CONTINUED

Pension
John Tutte is a deferred member of the Redrow Staff Pension Scheme (now closed to future accrual)
and details of entitlements under this plan are set out below. He also receives a pension allowance
supplement of 20% of salary. Barbara Richmond receives a pension allowance supplement equivalent to
20% of salary. The value of these cash supplements is included in the pension column of the Single Total
Figure of Remuneration Table on page 82. John Tutte and Barbara Richmond are also covered by fixed
term group income protection and death in service benefit.

Steve Morgan is a pensioner member of the Redrow Staff Pension Scheme.

TOTAL PENSION ENTITLEMENTS (AUDITED)

Details of the Executive Directors’ pension entitlements under the defined benefit section of the
Redrow Staff Pension Scheme are as follows:

Director

John Tutte

Normal retirement date

Accrued benefit
at 30 June 2016
£

Benefits paid to
Director during period
up to 30 June 2016
£

Defined Benefit
accrued during period
up to 30 June 2016
£

24 June 2021

53,437

Nil

The normal retirement date shows the date at which the director can retire without actuarial reduction.
No additional benefit is available on early retirement.

The accrued pension shown above is the amount of pension entitlement that would be paid each year
on retirement on the normal retirement date, based on service to 29 February 2012. The Scheme closed
the accrual of future benefits with effect from 1 March 2012.

NON-EXECUTIVE DIRECTOR FEE POLICY

The Senior Independent Director receives an annual fee of £70k. All other Non-Executive Directors
receive an annual fee of £45k.

SUPPORTING DISCLOSURES AND ADDITIONAL CONTEXT
Percentage change in remuneration of Group Chief Executive
The table below shows the percentage change in the salary, benefits and annual bonus of the Group
Chief Executive and of all Redrow employees who qualify for participation in the Company’s bonus and
benefits plans between 2015 and 2016.

Salary

Benefits

Annual bonus

Group Chief Executive

All Redrow employees

2.8%

nil%

2.8%

3.9%

-9.7%

-1.5%

Relative importance of spend on pay
The chart below shows total employee remuneration and distributions to shareholders, in respect of
2016 and 2015 (and the difference between the two).

£m

Total employee remuneration

Distributions to shareholders

2016

100

2015

Change (%)

+23%

+68%

Total employee remuneration represents amounts included in note 7a to the accounts in respect of
wages, social security, pension and incentive costs for all Group employees. Distributions to
shareholders include the total dividend in respect of each financial year (see note 5 to the financial
statements). This represents 10 pence per share in respect of 2016 compared to 6 pence per share in
respect of 2015.

Performance graph and table
The chart below shows the TSR of Redrow in the seven year period to 30 June 2016 against the TSR
of the FTSE 250 and FTSE Small Cap. TSR refers to share price growth with re-invested dividends. The
Committee believes the FTSE 250 and FTSE Small Cap indices are the most appropriate indices against
which the TSR of Redrow should be measured.

Total shareholder Return chart
for the year ended 30 June (re-based to 100)

350

300

250

200

150

100

Redrow
FTSE 250
FTSE Small Cap

2009

2010

2011

2012

2013

2014

2015

2016

The table below provides remuneration data for the Chairman/Group Chief Executive (as applicable) for
each of the seven financial years over the equivalent period.

Name

2010

2011

2012

2013

2014

Steve
Morgan

2015

John
Tutte

2016

John
Tutte

Remuneration/donations*

£592k

£582k

Bonus (% of Maximum)

LTIP vesting (% of Maximum)

52%

50%

£855k

100%

£1,050k

£1,922k

£2,355k

£1,888k

80%

19%

100%

For Steve Morgan, this value includes the nominal salary and benefits disclosed in the Single Total Figure of Remuneration Table as well
as Company donations to the Morgan Foundation, a UK registered charity of which Steve Morgan is a trustee, reflecting notional salary
and waived annual cash bonus in respect of the relevant year, as disclosed in the footnotes to the Single Total Figure of Remuneration
Table and in the Directors’ Report on page 94 and in note 22 to the financial statements. It also includes the value of deferred bonus and
vested LTIP cash awards in respect of each relevant year (calculated in accordance with the methodology applicable to the Single Total
Figure of Remuneration Table).

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT90

DIRECTORS’
REMUNERATION REPORT CONTINUED

Statement of voting at Annual General Meeting
At the Annual General Meeting held on 10 November 2015, votes cast by proxy and at the meeting in
respect of directors’ remuneration are shown in the table.

Resolution

Approval of Remuneration Report
for year ended 30 June 2015

Votes For

Votes Against

Total

No.

votes cast

Votes
Withheld

310,350,439

99.58

1,299,387

0.42 311,649,826

2,829,085

By order of the Board

Debbie Hewitt
Chairman of the Remuneration Committee

5 September 2016

External non-executive directorships held by Executive Directors
It is the Committee’s policy that, with the approval of the Board, Executive Directors may hold one
non-executive directorship at another company in order to broaden their knowledge and experience
to the benefit of the Company. The Executive Director may retain any fee received for these duties.

Barbara Richmond is a non-executive director of Lonza Group Ltd and in line with the committee’s
policy, she is entitled to retain the fees from this appointment. She received fees of £148k during 2016.

Consideration of directors’ remuneration – Remuneration Committee and advisors
The Remuneration Committee is comprised solely of Non-Executive Directors and comprises Debbie
Hewitt as Chairman, Nick Hewson, Liz Peace and Sir Michael Lyons.

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 are published on the Group’s
website and include:

• determining the Remuneration Policy in respect of the Executive Directors and the Company

secretary (together ‘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
package of each Senior Executive;

• 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

• 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 2016 and details of Committee attendance
are set out in the table below.

Table of Attendance
Name

Debbie Hewitt

Nick Hewson

Liz Peace

Sir Michael Lyons

Role

Chairman

Member

Attendance at Meetings

3/3

The Committee retained Deloitte LLP as independent advisor to the Committee during the year.
Deloitte LLP was originally appointed by the Committee in 2010 following a selection process
undertaken by the Committee. Deloitte LLP is a member of the Remuneration Consultants Group and as
such voluntarily operates under the Code of Conduct in relation to executive remuneration consulting in
the UK. The Committee is comfortable that the Deloitte LLP engagement partner and team that provide
remuneration advice to the Committee do not have connections with Redrow plc that may impair their
objectivity and independence. The fees charged by Deloitte LLP for the provision of independent advice
to the Committee during 2016 were £12k. Deloitte LLP also provides the Company with tax advisory
services but does not have any other connection with the Company.

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT92

DIRECTORS’ REPORT

THE DIRECTORS HAVE PLEASURE IN PRESENTING TO THE SHAREHOLDERS
THEIR REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE 12 MONTHS ENDED 30 JUNE 2016

GRAHAM COPE

Company Secretary

RESULTS AND DIVIDENDS

The Group made a profit after tax of £200m
(2015: £162m). An interim dividend of 4.0p (2015:
2.0p) per share was paid on 31 March 2016. The
Board proposes to pay on 11 November 2016,
subject to shareholder approval at the 2016
Annual General Meeting, a final dividend of 6.0p
(2015: 4.0p) per share in respect of the year ended
30 June 2016 to shareholders on the Register as
at the close of business on 23 September 2016.
The Company’s dividend re-investment plan
gives shareholders the opportunity to re-invest
their dividends.

ACCOUNTING REFERENCE DATE

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 26 June 2016 (2015:
28 June 2015). 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.

ANNUAL GENERAL MEETING

Notice of the 2016 Annual General Meeting to be
held on Wednesday, 9 November 2016 will be sent
to shareholders separately. Members wishing to
vote should return forms of proxy to the
Company’s Registrar not less than 48 hours
before the time for holding the meeting.

CORPORATE GOVERNANCE

The Board remains committed to high standards
of corporate governance; details relating to the
Company’s compliance with the UK Corporate
Governance Code are given in the Corporate
Governance Report on pages 62 to 96.

DIRECTORS

The Directors of the Company during the year
to the date of signing together with their
biographical details on pages 64 and 65.

Details of Directors pay, service contracts, and
Directors interests in the ordinary shares of the
Company, are included in the Directors’
Remuneration Report on pages 77 to 91.

Formal appraisals of the Executive Directors were
undertaken during the financial year and the
Non-Executive Directors underwent an annual
appraisal conducted by the Senior Independent
Non-Executive Director. In addition, the Non-
Executive Directors met without the Executive
Directors to undertake an appraisal of the Board.

The Board confirms that Steve Morgan, John
Tutte and Barbara Richmond, who stand for
re-appointment as Executive Directors and
Debbie Hewitt, Nick Hewson, Liz Peace and Sir
Michael Lyons who stand for re-appointment as
Non-Executive Directors, continue to be effective
and demonstrate the appropriate commitment
to their roles.

The Executive Directors have formal service
agreements and termination of their employment
may be effective by 12 months’ notice given by
the Company, except for Steve Morgan where the
notice period is six months.

In accordance with the UK Corporate Governance
Code, all the Directors will retire at the Annual
General Meeting to be held on Wednesday,
9 November 2016, and, being eligible, offer
themselves for re-appointment.

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 7.

POWERS OF THE DIRECTORS

Subject to the Company’s Articles of Association,
UK legislation and any of the directions given by
Special Resolution, the business of the Company is
managed by the Board, which may exercise all the
powers of the Company. Directors have been
authorised to allot and issue shares by way of
Resolutions of the Company passed at its Annual
General Meeting.

The rules in relation to the appointment and
replacement of Directors are as set out in the
Company’s Articles of Association and UK company
law. The Articles of Association can only be
amended, or new Articles adopted, by a resolution
passed by shareholders in general meeting by at
least three quarters of the votes cast.

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 in respect of resolutions which are
taken on a poll.

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
Annual General Meeting to allot unissued shares
up to an aggregate nominal amount of
£12,326,665 equivalent to approximately 33% of
the Company’s issued share capital and up to a
further aggregate nominal amount of £12,326,665
in connection with an offer by way of a rights
issue. The authority was not exercised during the
period ending 30 June 2016 or prior to the date of
this Report. The Company has no current intention
of exercising the authority but nevertheless as this
authority expires at the forthcoming Annual
General Meeting the Directors will be seeking new
authorities as set out in the Notice of Meeting.

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.

SUBSTANTIAL HOLDINGS IN THE COMPANY

As at 5 September 2016, the Company has been
advised of the following notifiable interests of 3%
or more in its ordinary shares:

Bridgemere Securities Limited
(including Steve Morgan)

149,386,045

40.40%

Toscafund Asset
Management LLP

Schroders plc

36,427,860

9.85%

24,499,172

6.62%

Vidacos Nominees

18,770,138

5.08%

FIL Limited

BlackRock Inc

17,343,977

4.69%

15,277,577

4.13%

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 5 September 2016, 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.

VOTING AND TRANSFER OF SHARES

EMPLOYEES

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 the Company’s co-operation, financial rights
carried by securities are held by a person other
than the holder of the securities.

The Company’s employment policies do not
discriminate between employees or potential
employees on the grounds of gender, sexual
orientation, age, colour, creed, ethnic origin,
religious beliefs, pregnancy or maternity or trade
union membership. It is Company policy to give
full and fair consideration to applications for
employment by, and the employment needs of,
disabled persons (and in the case of employment
needs, persons who become disabled whilst
employed by the Company) where requirements
may be adequately covered by these persons and
to comply with any current legislation with regard
to disabled persons.

GOVERNANCE REPORTFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORTRedrow plc Annual Report 201694

DIRECTORS’ REPORT CONTINUED

The Company places considerable importance
on the provision of training and development
of its employees and completed 4,787 training
days during the year ended 30 June 2016,
including those which support the Company’s
induction process.

The Directors recognise the importance of good
communications with employees. The Divisions
are encouraged to make their employees aware
of the financial and economic factors affecting
their respective Divisions and the Company as a
whole. This is assisted through the medium of
regular management meetings, staff publications,
its internal staff ‘InSight Magazine’ and the
Redrow intranet. Employees are consulted on
a regular basis so that employee views may be
taken into account when decisions are made
that may affect their interests.

Employee share ownership is encouraged through
savings related schemes.

CHARITABLE AND POLITICAL DONATIONS

The Group made no political donations but paid
£0.8m in charitable donations during the year,
being £0.7m in respect of national charities and
£0.1m in support of local charities. The Company
and its employees are actively involved in
fundraising activities for specific charities. The
Company made a £0.7m 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.

RESEARCH AND DEVELOPMENT

INDEPENDENT AUDITORS

The Company has a centralised Product
Development Team charged with identifying
and evaluating new construction techniques
and products. In addition, the Company has a
centralised Environmental and Sustainability
Team. The Company recognises its responsibilities
to the community as a whole and has adopted an
environment strategy which is a core part of the
Company’s objectives.

The charge to the income statement in respect
of research and development in the year ended
30 June 2016 was £0.4m (2015: £0.5m).

GREENHOUSE GAS EMISSIONS

This disclosure in the form of the table below
includes all of the emission sources required
under the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013. These
sources fall within our consolidated financial
statement and we do not have responsibility
for any emission sources that are not included
in our consolidated statement.

This inventory of greenhouse gas emissions has
been verified by SGS to a limited level of
assurance, in accordance with ISO 14064-3:2006,
as meeting the requirements of the Greenhouse
Gas Protocol – A Corporate Accounting and
Reporting Standard. Emissions have been
calculated using the UK Government’s GHG
Conversion Factors for Company Reporting:
2015 and 2016 respectively.

A resolution to reappoint PricewaterhouseCoopers
LLP as external Auditors will be proposed at
the Annual General Meeting on Wednesday,
9 November 2016.

PROVISION OF INFORMATION TO AUDITORS:

In the case of each Director in office at the date the
Directors’ Report is approved, they confirm that:

(a) so far as the Director is aware, there is no

relevant audit information (as defined in
section 418(3) of the Companies Act 2006)
of which the Company’s Auditors are
unaware; and

(b) he has taken all of the steps that he ought
to have taken as a Director in order to
make himself aware of any such relevant
audit information and to establish that
the Company’s Auditors are aware of
that information.

GOING CONCERN

The Directors acknowledge the guidance on going
concern and financial reporting published by the
Financial Reporting Council in October 2009.

As explained in the Financial Review on pages 52
to 55, the Group maintains adequate committed
banking facilities. As stated in note 14 to the
financial statements, at 30 June 2016, the Group
had £135m of undrawn committed borrowing
facilities available.

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. These enquiries consisted of
a detailed review of the Group’s financial forecast
for the period to 31 December 2017. The
forecasts take into account current market trends
with reasonable judgements and estimates
applied to arrive at future cash flow estimates.
As part of the review, the Group analysed its
forecast covenant compliance over this period
linked to its banking facility, arriving at an
assessment of the headroom evident between
the forecast covenant test outturn and the
outturn necessary to achieve covenant
compliance. The review confirmed headroom
within both financial covenants and facilities.

Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.

An assessment of the Group’s viability has been
undertaken by the Directors and is summarised
on page 61.

By order of the Board

Graham Cope
Company Secretary
Redrow plc
Registered no: 2877315

5 September 2016

GREENHOUSE GAS EMISSIONS

Greenhouse gas (‘GHG’) emissions data for the period 1 July 2015 to 30 June 2016 are set out in the table below.

Emissions from:

Scope 1 activities:

Current Reporting Year
(1 July 15 to 30 June 16)

Comparison Year
(1 July 14 to 30 June 15)

Units

• Combustion of fuel at our offices and sites

• Business use of Redrow-owned and leased vehicles

10,607

Scope 2 activities:

• All purchased electricity

Total Greenhouse Gas Emissions:

• (Scope 1 + Scope 2)

Our preferred intensity ratio:

2,814

13,421

8,636

2,899

tonnes of CO2e

11,535

tonnes of CO2e

Total Greenhouse Gas emissions relative to build:

2.61

2.57

tonnes of CO2e per 100m2 of build

GOVERNANCE REPORTFINANCIAL STATEMENTSRedrow plc Annual Report 2016SHAREHOLDER INFORMATIONSTRATEGIC REPORTGOVERNANCE REPORT96

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF REDROW PLC

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 (IFRS) 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:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable

and prudent;

• state whether applicable IFRS 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.

Each of the Directors, whose names and functions are listed below,
confirms that, to the best of their knowledge:

• the Group financial statements, which have been prepared in

accordance with IFRS as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of the
Group; and

• the Strategic Report contained on pages 03 to 61 includes a fair

review of the development and performance of the business and
the position of the Group, together with a description of the
principal risks and uncertainties that it faces.

The Directors of Redrow plc as at the date of this statement are:

Steve Morgan, Chairman
John Tutte, Group Chief Executive
Barbara Richmond, Group Finance Director
Debbie Hewitt, Senior Independent Non-Executive Director
Nick Hewson, Non-Executive Director
Liz Peace, Non-Executive Director
Sir Michael Lyons, Non-Executive Director

By order of the Board

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.

Graham Cope
Company Secretary

5 September 2016

Redrow plc
Redrow House
St. David’s Park
Flintshire
CH5 3RX

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.

The Directors consider that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company’s position and performance,
business model and strategy.

Report on the financial statements

Our opinion
In our opinion:

• Redrow plc’s Group financial statements and Company financial statements (the ‘financial statements’) give a true and fair view of the state

of the Group’s and of the Company’s affairs as at 30 June 2016 and of the Group’s profit and the Group’s and the Company’s cash flows for the
12 months then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as

adopted by the European Union;

• the 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 IAS Regulation.

What we have audited
The financial statements, included within the Annual Report, comprise:

• the Group and Company balance sheets as at 30 June 2016;

• the consolidated income statement and consolidated statement of comprehensive income for the 12 months then ended;

• the Group and Company statement of cash flows for the 12 months then ended;

• the Group and Company statement of changes in equity for the 12 months then ended;

• the accounting policies; and

• the notes to the financial statements, which include other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements.
These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union
and, as regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006, and applicable law.

Materiality

Our audit approach
Overview
• Overall Group materiality: £12.5 million which represents 5% of profit before tax.

Audit scope

• Net realisable value of inventories.

• Valuation of pension scheme surplus.

Areas
of focus

The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular,
we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified
as ‘areas of focus’ in the table on page 98. We have also set out how we tailored our audit to address these specific areas in order to provide
an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context.
This is not a complete list of all risks identified by our audit.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS98

INDEPENDENT AUDITORS’ REPORT CONTINUED
TO THE MEMBERS OF REDROW PLC

Area of focus

How our audit addressed the area of focus

Net realisable value of inventories
See the Accounting Policies and Financial Risk Management sections
for the directors’ disclosures of related accounting policies and key
accounting estimates. See note 13 for the detailed disclosures on the
inventory provision.

The Group carries historic net realisable value provisions against the
value of inventories, represented by land and work-in-progress. £19
million of these provisions remain at the year end in relation to sites
which have not yet completed. This constitutes the whole inventory
provision as at the year end. The calculation of these provisions
involves a number of estimates, the most significant of which are
forecast movements in the sales prices of plots and expected build
costs. These assumptions could have a significant impact on the level
of provisions recognised.

The carrying value of the remaining inventory balance is subject to
estimates, in particular over the likelihood of planning consent being
granted for the proposed developments. As this can have a significant
impact on whether the value of the land is impaired, this is also an
area of focus for us.

Valuation of pension scheme surplus
See the Accounting Policies and Financial Risk Management sections
for the directors’ disclosures of related accounting policies and key
accounting estimates. See note 7 for the detailed disclosures on the
pension scheme surplus.

The Group operates a defined benefit pension scheme with a net
surplus of £6 million at the year end. This surplus is derived from
assets with a gross value of £122 million less the present value of
obligations of £116 million, both of which are significant in the
context of the overall balance sheet and the results of the Group.

The valuation of this net surplus is dependent on the application of
significant judgements in the actuarial assumptions, in particular
discount rates, future Retail Price Index (‘RPI’) inflation and mortality
rates, and on the expected returns on investments.

Unfavourable changes in any of the key actuarial assumptions could
lead to a material movement in the calculated net position.

For sites impacted by the exceptional net realisable value provisions,
we compared forecast sales prices to actual prices achieved post
year-end and assessed the accuracy of management’s historical
forecasts by comparing net realisable values recognised in the prior
year with actual sales prices achieved in the current year. We assessed
expected market trends with reference to independent third party
house price indices and our independently formed assumption. We
also identified and tested any significant differences between
budgeted and actual build costs recognised in the year. We did not
identify any material differences between management’s estimations
and actual results or independent indices.

We tested management’s controls over the process for estimating the
expected remaining build costs, including the budgeting and review
processes. We also inspected evidence of the Board’s review of
forecast sales prices used in this provision model. We did not identify
any significant deficiencies of control in this process.

We performed sensitivity analysis to identify the impact that
changes in key assumptions, notably the overall market house price
variance assumption, have on the provision calculation in
challenging management on the overall levels of provisioning. We
also considered the adequacy of the disclosures made in the
financial statements regarding the provisions. We considered the
assumptions used in the calculation of the provisions and the
disclosures made to be appropriate.

For significant sites that have not yet been developed, we considered
the latest stage of planning applications and assessed the accuracy of
management’s historical estimates by comparing previous estimated
impairments to actual outturns achieved. We did not identify any
material differences between management’s estimations and actual
results achieved.

We obtained and read the actuarial report that was prepared by an
independent firm of actuaries and used by the directors in estimating
the value of the Group’s surplus in respect of the scheme.

We tested the completeness and accuracy of the pension scheme
membership data provided to management’s actuary on which the
pension surplus is calculated, comparing the data to the underlying
payroll systems. We noted no material exceptions from our testing.

We challenged the key assumptions used in that actuarial valuation,
being the discount rate, future RPI inflation, mortality rates and
expected returns on investments by comparing them to internally-
generated typical ranges used for such assumptions, taking into
account the industry in which the Group operates and other specific
characteristics of this pension scheme. The actuarial assumptions
were within the typical ranges for similar pension schemes.

The pension scheme assets are invested in a mixture of pooled funds,
individual equities, government and corporate bonds and cash. We
obtained independent confirmations of the existence and valuation of
all of the scheme assets from the external investment managers and
tested the valuations of a sample of these assets by agreeing them to
valuations obtained from independent third party sources.

We also confirmed the Group’s right to recognise the net surplus by
reviewing the scheme documentation. No material differences were
identified from our testing performed.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the group operates.

The Group comprises one principal trading company and a number of smaller subsidiaries and joint ventures, all of which are based in the UK.

We performed audits of the Company and all of the Group’s subsidiaries and joint ventures. This gave us the evidence we needed for our opinion
on the Group financial statements. All work was performed by the Group engagement team.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial
statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall group materiality

£12.5 million (2015: £10 million).

How we determined it

5% of profit before tax.

Rationale for benchmark applied

We believe that profit before tax is the primary measure used by the shareholders in
assessing the performance of the Group, and is a generally accepted auditing benchmark.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.6 million (2015: £0.5
million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page 96, in relation to going concern. We have nothing to
report having performed our review.

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the
directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We
have nothing material to add or to draw attention to.

As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going concern basis in preparing the
financial statements. The going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that
the directors intend them to do so, for at least one year from the date the financial statements were signed. As part of our audit we have
concluded that the directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted,
these statements are not a guarantee as to the Group’s and Company’s ability to continue as a going concern.

Other required reporting

Consistency of other information
Companies Act 2006 reporting
In our opinion:

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is

consistent with the financial statements.

In our opinion:

• the information given in the Corporate Governance Statement set out on pages 62 to 69 with respect to internal control and risk management

systems and about share capital structures is consistent with the financial statements.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS100

101

INDEPENDENT AUDITORS’ REPORT CONTINUED
TO THE MEMBERS OF REDROW PLC

ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:

•

information in the Annual Report is:

We have no exceptions to report.

− materially inconsistent with the information in the audited financial statements; or

−

apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group and Company acquired in the course of performing our audit; or

−

otherwise misleading.

•

the statement given by the directors on page 96, in accordance with provision C.1.1 of the UK
Corporate Governance Code (the ‘Code’), that they consider the Annual Report taken as a whole to
be fair, balanced and understandable and provides the information necessary for members to assess
the Group’s and Company’s position and performance, business model and strategy is materially
inconsistent with our knowledge of the Group and Company acquired in the course of performing
our audit.

the section of the Annual Report on page 70, as required by provision C.3.8 of the Code, describing
the work of the Audit Committee does not appropriately address matters communicated by us to
the Audit Committee.

The directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency
or liquidity of the group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:

•

the directors’ confirmation on page 96 of the Annual Report, in accordance with provision C.2.1 of
the Code, that they have carried out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future performance, solvency or liquidity.

We have nothing material
to add or to draw attention to.

the disclosures in the Annual Report that describe those risks and explain how they are being
managed or mitigated.

the directors’ explanation on page 96 of the Annual Report, in accordance with provision C.2.2 of the
Code, as to how they have assessed the prospects of the Group, over what period they have done so
and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.

We have nothing material
to add or to draw attention to.

Under the Listing Rules we are required to review the directors’ statement that they have carried out a
robust assessment of the principal risks facing the Group and the directors’ statement in relation to the
longer-term viability of the Group. Our review was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statements;
checking that the statements are in alignment with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge acquired by us in the course of performing
our audit. We have nothing to report having performed our review.

Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches

not visited by us; or

• the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Directors’ Remuneration Report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.

Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by
law are not made. We have no exceptions to report arising from this responsibility.

We have no exceptions to report.

Corporate governance statement
Under the Companies Act 2006 we are required to report to you if, in our opinion, a corporate governance statement has not been prepared by
the Company. We have no exceptions to report arising from this responsibility.

Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the Code.
We have nothing to report having performed our review.

We have no exceptions to report.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities, 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 ISAs (UK & Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

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.

What an audit of financial statements involves
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 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.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis
for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.

Arif Ahmad (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester

5 September 2016

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS

102

103

CONSOLIDATED INCOME STATEMENT
FOR THE 12 MONTHS ENDED 30 JUNE

BALANCE SHEETS
AS AT 30 JUNE

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit

Financial income

Financial costs

Net financing costs

Share of profit of joint ventures after interest and taxation

Profit before tax

Income tax expense

Profit for the year

Earnings per share – basic

– diluted

Note

2016
£m

1,382

(1,048)

334

(73)

261

(14)

(11)

–

250

(50)

200

2015
£m

1,150

(876)

274

(61)

213

(12)

(9)

–

204

(42)

162

55.4p

55.2p

44.5p

44.4p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 12 MONTHS ENDED 30 JUNE

Note

Profit for the year

Other comprehensive income

Items that will not be reclassified to profit or loss

Remeasurements of post employment benefit obligations

Deferred tax on actuarial gains taken directly to equity

Other comprehensive income for the year net of tax

Group

Company

2016
£m

200

(2)

2015
£m

162

(2)

2016
£m

201

(2)

2015
£m

158

(2)

Total comprehensive income for the year

206

168

207

164

Assets

Intangible assets

Property, plant and equipment

Investments

Deferred tax assets

Retirement benefit surplus

Trade and other receivables

Total non‑current assets

Inventories

Trade and other receivables

Current income tax receivables

Cash and cash equivalents

Total current assets

Total assets

Equity

Share capital

Share premium account

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

Current income tax liabilities

Total current liabilities

Total liabilities

Total equity and liabilities

Group

2016
£m

Note

Company

2015
£m

2016
£m

2015
£m

–

1,808

1,500

–

135

1,979

2,046

913

1,017

230

156

–

395

566

634

1,029

2,046

–

1,595

1,644

745

849

150

245

471

550

795

1,644

–

918

–

134

1,052

1,060

701

804

230

–

230

–

256

1,060

–

741

798

802

524

627

150

–

153

–

175

802

The financial statements on pages 102 to 133 were approved by the Board of Directors on 5 September 2016 and were signed on its behalf by:

Steve Morgan
Director

Barbara Richmond
Director

Redrow plc Registered Number 2877315

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS

104

105

STATEMENT OF CHANGES IN EQUITY
FOR THE 12 MONTHS ENDED 30 JUNE

STATEMENT OF CASH FLOWS
FOR THE 12 MONTHS ENDED 30 JUNE

Group

Company

Group

Company

Profit for the year

Other comprehensive income for the year

Total comprehensive income relating to the year (net)

Dividend paid

Movement in LTIP/SAYE

Net increase in equity

Opening equity

Closing equity

Note

2016
£m

200

206

(30)

(8)

168

849

1,017

2015
£m

162

168

(15)

–

153

696

849

2016
£m

201

207

(30)

–

177

627

804

2015
£m

158

164

(15)

–

149

478

627

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.

The consolidated profit on ordinary activities after taxation for the financial year, excluding intra-Group dividends, is made up as follows:

Holding company

Subsidiary companies

2016
£m

188

200

2015
£m

154

162

Note

Cash flows from operating activities

Operating profit/(loss)

Depreciation and amortisation

Adjustment for non-cash items

Operating profit/(loss) before changes in working capital and provisions

Decrease/(increase) in trade and other receivables

Increase in inventories

Increase in trade and other payables

Increase in provisions

Cash inflow generated from operations

Interest paid

Tax paid

Net cash inflow from operating activities

Cash flows from investing activities

Sale of business

Acquisition of software, property, plant and equipment

Interest received

Net payments to joint ventures – continuing operations

Net cash (outflow)/inflow from investing activities

Cash flows from financing activities

Issue of bank borrowings

Repayment of bank borrowings

Purchase of own shares

Dividend paid

Net cash inflow/(outflow) from financing activities

Increase/(decrease) in net cash and cash equivalents

Net cash and cash equivalents at the beginning of the year

Net cash and cash equivalents at the end of the year

2016
£m

261

(5)

257

(308)

174

–

130

(6)

(46)

–

(6)

–

(11)

(17)

230

(150)

(16)

(30)

(4)

2015
£m

213

(5)

209

(2)

(343)

196

(6)

(22)

(1)

–

(6)

150

(175)

(2)

(15)

(42)

(7)

(4)

2016
£m

2015
£m

(2)

–

(2)

–

(5)

–

230

(150)

–

(30)

134

(2)

–

(2)

–

(6)

–

150

(175)

–

(15)

(40)

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS106

ACCOUNTING POLICIES

107

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 2016, and in accordance with IFRS Interpretations
Committee 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.

Redrow plc is a public listed company, listed on the London Stock
Exchange and domiciled in the UK.

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 26 June
2016 (2015: 28 June 2015). 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 for the financial year is dealt
with in the statement of changes in equity.

a. Subsidiaries
Subsidiaries are all entities over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that
control ceases. 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.

All inter-company transactions and balances between Group
companies are eliminated on consolidation.

b. Interests in joint ventures
The Group applies IFRS 11 to all joint arrangements. Under IFRS 11
investments in joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights and
obligations of each investor. Redrow plc has assessed the nature of its
joint arrangements and determined them to be joint ventures. Joint
ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are
initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses and movements
in other comprehensive income. When the Group’s share of losses in a
joint venture equals or exceeds its interests in the joint ventures, the
Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint
ventures are eliminated to the extent of the Group’s interest in the
joint ventures. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.

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.

Income and Deferred Tax
Income tax comprises current tax and deferred tax.

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.

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.

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,
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, charged
to administrative expenses. 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 within freehold property
Plant and machinery
Fixtures and fittings

50 years
5–10 years
3–5 years

The assets’ useful lives are reviewed and adjusted if appropriate at
each balance sheet date.

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.

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.

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.

Inventories
Inventories are stated at the lower of cost and net realisable value
less cash on account (which represents payments made against work
in progress, including customer deposits).

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.

Provisions are established to write down land where the estimated net
sales proceeds less costs to complete exceed the current carrying
value. Adjustments to the provisions will be required where selling
prices or costs to complete change.

Net realisable value for land was assessed by estimating selling prices
and cost (including sales and marketing expenses), taking into account
current market conditions.

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. 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.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS108

109

ACCOUNTING POLICIES CONTINUED

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.

Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity
as they arise in full via the statement of comprehensive income.

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
in income.

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
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.

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.

The interest rate applied is an equivalent loan rate available on the
date of the land purchase.

Share Capital
Ordinary shares are classed as equity.

b. Derivative financial instruments and hedge accounting
Derivative financial instruments are initially recorded at fair value
nd the fair value is remeasured to fair value at each reporting date.

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.

The policy prohibits any trading in derivative financial instruments
or their use for speculative purposes.

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 when
the proceeds are 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.

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.

Impact of New Standards and Interpretations
a. New and amended standards adopted by the Group
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning
1 July 2015:

• Amendment to IAS 19 regarding defined benefit plans. These narrow
scope amendments apply to contributions from employees or third
parties to defined benefit plans. The objective of the amendments is
to simplify the accounting for contributions that are independent of
the number of years of employee service, for example, employee
contributions that are calculated according to a fixed percentage of
salary. Published November 2013, effective date: annual periods
beginning on or after 1 July 2014 endorsed for periods on or after
1 February 2015.

• Annual improvements 2013 (endorsed for annual periods on or

after 1 January 2015) The amendments include changes from the
2011-2-13 cycle of the annual improvements project that affect
4 standards: IFRS 1, ‘First time adoption’ IFRS 3,‘Business
combinations’ IFRS 13, ‘Fair value measurement’ and IAS 40,
‘Investment property’.

b. The following new standards, new interpretations and
amendments to standards and interpretations have been issued
but are not effective for the financial year beginning 1 July 2015
and have not been early adopted. With the exception of IFRS 16
‘Leases’ these are not expected to have a material impact on the
Group financial statements:
• Amendment to IFRS 11, ‘Joint arrangements’ on acquisition of an
interest in a joint operation. This amendment adds new guidance
on how to account for the acquisition of an interest in a joint
operation that constitutes a business. The amendments specify
the appropriate accounting treatment for such acquisitions.
Published May 2014, effective date: annual periods beginning
on or after 1 January 2016.

• Amendment to IAS 16, ‘Property, plant and equipment’ and IAS
38,’Intangible assets’, on depreciation and amortisation. In this
amendment the IASB has clarified that the use of revenue based
methods to calculate the depreciation of an asset is not appropriate
because revenue generated by an activity that includes the use of an
asset generally reflects factors other than the consumption of the
economic benefits embodied in the asset. The IASB has also clarified
that revenue is generally presumed to be an inappropriate basis for
measuring the consumption of the economic benefits embodied in
an intangible asset. Published May 2014, effective date: annual
periods beginning on or after 1 January 2016.

• IFRS 14,’Regulatory deferral accounts’. IFRS 14, ‘Regulatory deferral
accounts’ permits first–time adopters to continue to recognise
amounts related to rate regulation in accordance with their previous
GAAP requirements when they adopt IFRS. However, to enhance
comparability with entities that already apply IFRS and do not
recognise such amounts, the standard requires that the effect of
rate regulation must be presented separately from other items.
Published January 2014, effective date: annual periods beginning
on or after 1 January 2016.

• Amendments to IAS 27, ‘Separate financial statements’ on the

equity method. These amendments allow entities to use the equity
method to account for investments in subsidiaries, joint ventures
and associates in their separate financial statements. Published
August 2014, effective date: annual periods beginning on or after
1 January 2016.

• Amendment to IAS 1, ‘Presentation of financial statements’ on the
disclosure initiative. These amendments are as part of the IASB
initiative to improve presentation and disclosure in financial reports.
Effective for annual periods beginning on or after 1 January 2016,
subject to EU endorsement. Published December 2014, effective
date: annual periods beginning on or after 1 January 2016.

• Amendments to IFRS 10, ‘Consolidated financial statements’

and IAS 28, ‘Investments in associates and joint ventures’. These
amendments address an inconsistency between the requirements
in IFRS 10 and those in IAS 28 in dealing with the sale or
contribution of assets between an investor and its associate or
joint venture. The main consequence of the amendments is that
a full gain or loss is recognised when a transaction involves a
business (whether it is housed in a subsidiary or not). A partial
gain or loss is recognised when a transaction involves assets that
do not constitute a business, even if these assets are housed in a
subsidiary. Published September 2014, effective date: annual
periods beginning on or after 1 January 2016.

• IAS Amendments to IAS 7, Statement of cash flows on disclosure
initiative. These amendments to IAS 7 introduce an additional
disclosure that will enable users of financial statements to evaluate
changes in liabilities arising from financing activities. The
amendment is part of the IASB’s Disclosure Initiative, which
continues to explore how financial statement disclosure can be
improved. Published February 2016 effective date: annual periods
beginning on or after 1 January 2017.

• Amendments to IFRS 2, ‘Share-based payments’, on clarifying how
to account for certain types of share-based payment transactions
(effective 1 January 2018). This amendment clarifies the
measurement basis for cash-settled, share-based payments and the
accounting for modifications that change an award from cash-
settled to equity-settled. It also introduces an exception to the
principles in IFRS 2 that will require an award to be treated as if it
was wholly equity-settled, where an employer is obliged to withhold
an amount for the employee’s tax obligation associated with a
share-based payment and pay that amount to the tax authority.
Published June 2016, effective date: annual periods beginning on or
after 1 January 2018.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS110

111

ACCOUNTING POLICIES CONTINUED

NOTES TO THE FINANCIAL STATEMENTS

Impact of New Standards and Interpretations continued
• IFRS 15 ‘Revenue from contracts with customers’. IFRS 15, ‘Revenue
from contracts with customers’ is a converged standard from the
IASB and FASB on revenue recognition. The standard will improve
the financial reporting of revenue and improve comparability of the
top line in financial statements globally. Published May 2014,
effective date: annual periods beginning on or after 1 January 2017.

• Amendment to IFRS 15, ‘Revenue from contracts with customers’.
These amendments comprise clarifications of the guidance on
identifying performance obligations, accounting for licences of
intellectual property and the principal versus agent assessment
(gross versus net revenue presentation). New and amended
illustrative examples have been added for each of those areas of
guidance. The IASB has also included additional practical
expedients related to transition to the new revenue standard.
Published April 2016, effective date: annual periods beginning
on or after 1 January 2018.

• IFRS 9 ‘Financial instruments’. This standard replaces the guidance

in IAS 39. It includes requirements on the classification and
measurement of financial assets and liabilities; it also includes an
expected credit losses model that replaces the current incurred loss
impairment model. Published July 2014, effective date: annual
periods beginning on or after 1 January 2018.

• Amendments to IFRS 9, ‘Financial instruments’, regarding general

hedge accounting. These amendments to IFRS 9, ‘Financial
instruments’, bring into effect a substantial overhaul of hedge
accounting that will allow entities to better reflect their risk
management activities in the financial statements. Published
November 2013, effective date: annual periods beginning on or
after 1 January 2018.

• IFRS 16 ‘Leases’. This standard replaces the current guidance in IAS

17 and is a far-reaching change in accounting by lessees in particular.
Under IAS 17, lessees were required to make a distinction between a
finance lease (on balance sheet) and an operating lease (off balance
sheet). IFRS 16 now requires lessees to recognise a lease liability
reflecting future lease payments and a ‘right-of-use asset’ for
virtually all lease contracts. The IASB has included an optional
exemption for certain short-term leases and leases of low-value
assets; however, this exemption can only be applied by lessees. For
lessors, the accounting stays almost the same. However, as the IASB
has updated the guidance on the definition of a lease (as well as the
guidance on the combination and separation of contracts), lessors
will also be affected by the new standard. At the very least, the new
accounting model for lessees is expected to impact negotiations
between lessors and lessees. Under IFRS 16, a contract is, or
contains, a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. Published January 2016, effective annual periods
beginning on or after 1 January 2019 with earlier application
permitted if IFRS 15, ‘Revenue from Contracts with Customers’,
is also applied. The Group has not yet assessed the full impact of
this standard.

• Amendment to IFRS 10 and IAS 28 on investment entities applying

the consolidation exception. These amendments clarify the
application of the consolidation exception for investment entities
and their subsidiaries. Published December 2014, effective date:
annual periods beginning on or after 1 January 2016.

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 considers 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 2016. Reasonably foreseeable changes in the assumptions used would
not have a significant impact on the net realisable value.

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.

2. Operating profit

Operating profit is stated after charging:

Inventories expensed in the year

Depreciation

Operating leases – plant and machinery

– other

Research and development expenditure

Auditors’ remuneration – fees payable to Company’s Auditors for audit services (i)

– fees payable to Company’s Auditors for other services (ii)

Fees payable to Company’s Auditors comprise:

Note

2016
£m

2015
£m

992

826

–

(i)

fees payable for the audit of parent company and consolidated financial statements £30,000 (2015: £30,000) and fees payable for the
audit of the Company’s subsidiaries pursuant to legislation £145,000 (2015: £117,000).

(ii) Auditors’ remuneration for other services comprised £20,000 (2015: £20,000) in respect of an independent review of the half-yearly financial
statements (Audit related assurance services), and £8,000 (2015: £8,000) in respect of iXBRL tagging (Taxation compliance services).

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS
112

113

6. Earnings per ordinary share
The basic earnings per share calculation for the year ended 30 June 2016 is based on the weighted average number of shares in issue during the
period of 361m (2015: 364m) excluding those held in trust under the Redrow Long Term Incentive Plan (9m shares (2015: 6m 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.

3. Net financing costs

Interest payable on bank loans

Net interest expenses – pension scheme (note 7e)

Imputed interest on deferred land creditors

Financial costs

Other interest receivable

Financial income

Net financing costs

4. Income tax expense

Current tax charge

UK Corporation Tax at 20.00% (2015: 20.75%)

Deferred tax

Origination and reversal of temporary differences

Impact of changes in deferred tax rate

Total income tax charge in income statement

Reconciliation of tax charge for the year

Profit before tax

Tax calculated at UK Corporation Tax rate of 20.00% (2015: 20.75%)

Impact of change in deferred tax rate

Short-term temporary differences

Tax charge for the year

Deferred tax recognised directly in equity

Relating to pension scheme

Current income tax payable in the Company is £1m (2015: receivable £1m).

5. Dividends
The following dividends were paid by the Group:

Prior year final dividend per share of 4.0p (2015: 2.0p); Current year interim dividend per share of 4.0p (2015: 2.0p)

2016
£m

2015
£m

(8)

–

(6)

(14)

(11)

(7)

–

(5)

(12)

(9)

For the 12 months ended 30 June 2016

Basic earnings per share

Effect of share options and SAYE

Diluted earnings per share

2016
£m

2015
£m

For the 12 months ended 30 June 2015

(1)

–

250

–

(2)

2016
£m

–

204

–

(2)

2015
£m

Basic earnings per share

Effect of share options and SAYE

Diluted earnings per share

7. Employees
a. Cost (including Directors)

Wages and salaries

Social security costs

Other pension costs

Share-based payments

b. Number
The monthly average number of persons employed by the Group was:

Directors and administrative staff

Other personnel

The Board decided to propose a final dividend of 6.0p per share in respect of 2016 (£22m (2015: £15m)). The dividend has not been provided for
and there are no income tax consequences.

Earnings
£m

200

–

200

Earnings
£m

162

–

162

Number
of shares
millions

361

362

Number
of shares
millions

364

365

2016
£m

100

Per share
pence

55.4

(0.2)

55.2

Per share
pence

44.5

(0.1)

44.4

2015
£m

2016
Number

778

1,088

1,866

2015
Number

629

901

1,530

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED114

115

7. Employees continued
c. Key management remuneration
Key management personnel, as defined under IAS 24 ‘Related party disclosures’, are identified as the Executive Management Team.

Summary key management remuneration is as follows:

Salaries and short-term employee benefits

Share-based payments

2016
£m

2015
£m

In addition, the Redrow Staff Pension scheme paid £14,541 (2015: £14,411) 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 77 to 91,
which form part of these financial statements.

d. Share‑based payments
Save As You Earn Share Option scheme (SAYE)
The Redrow plc SAYE scheme is open to all employees and share options can be exercised either three or five years after the date of grant,
depending on the length of the savings contract. The SAYE schemes are not subject to performance conditions.

The SAYE schemes have been valued using the Black-Scholes pricing model.

Options granted during the year

Date of grant

Fair value at measurement date

Share price

Exercise price

Option life (contract length)

Expected dividend yield

Risk free interest rate

2016

679,476

2015

1,172,005

1 January 2016

1 January 2015

£1.75

£4.63

£3.70

£1.01

£2.76

£2.21

3/5 years

2.1%

1.5%

2.7%

1.5%

The expected volatility on SAYE schemes is based on the historic volatility of the Group’s share price over periods equal to the length of the
savings contract.

7. Employees continued
d. Share‑based payments continued
Long Term Incentive scheme (LTIP)
Except in specified circumstances, options granted under the scheme are exercisable between three and ten years after the date of grant.

Options granted under the LTIP on 14 September 2015 were granted to a limited number of Senior Executives. The scheme is discussed in
greater detail within the Directors’ Remuneration Report.

The LTIP have been valued using the Black-Scholes pricing model.

Options granted during the year

Date of grant

Fair value at the measurement date

Share price

Exercise price

Expected volatility

Option life

Expected dividend yield

Risk free interest rate

2016

175,810

2015

377,194

14 September 2015

8 September 2014

£4.65

£4.95

£0.00

N/A†

3 years

2.1%

N/A†

£2.53

£2.75

£0.00

N/A†

3 years

2.7%

N/A†

† For nil-cost awards not subject to a market based condition, volatility and risk free rate are not applicable.

The fair value at the measurement date of the LTIP granted on 14 September 2015 comprises £4.65 in respect of non-market based
performance conditions.

The fair value at the measurement date of the LTIP granted on 8 September 2014 comprises £2.53 in respect of non-market based
performance conditions.

Deferred Bonus Incentive (DBI)
Grants under the DBI were limited to Senior Management. Except in specified circumstances options granted under the scheme are exercisable
between one and ten years after the date of grant for Tranche 1 and between two and ten years after the date of grant for Tranche 2 and are
not subject to performance conditions.

The DBI has been valued using the Black-Scholes pricing model.

Options granted during the year

2016
Tranche 1

471,023

2016
Tranche 2

471,136

2015
Tranche 1

625,688

2015
Tranche 2

625,634

Date of grant

14 September 2015 14 September 2015

8 September 2014

Fair value at the measurement date

Share price

Exercise price

Expected volatility

Option life

Expected dividend yield

Risk free interest rate

£4.87

£4.95

£0.00

N/A†

1 year

1.7%

N/A†

£4.75

£4.95

£0.00

N/A†

2 years

2.1%

N/A†

£2.69

£2.75

£0.00

N/A†

1 year

2.2%

N/A†

£2.62

£2.75

£0.00

N/A†

2 years

2.4%

N/A†

† For nil-cost awards not subject to a market based condition, volatility and risk free rate are not applicable.

Company Share Option Plan (CSOP)
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 three and ten years after the date of grant and are not subject to performance conditions.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED116

117

7. Employees continued
d. Share‑based payments continued
Share options outstanding
The following share options were outstanding at 30 June 2016:

7. Employees continued
d. Share‑based payments continued
Movements in the year
The number and weighted average exercise prices of share options is as follows:

Type of scheme

Long Term Share Incentive 2011

Long Term Share Incentive 2012

Long Term Share Incentive 2013

Long Term Share Incentive 2014

Long Term Share Incentive 2015

Deferred Bonus Incentive 2012 – Tranche 1

Deferred Bonus Incentive 2012 – Tranche 2

Deferred Bonus Incentive 2013 – Tranche 1

Deferred Bonus Incentive 2013 – Tranche 2

Deferred Bonus Incentive 2014 – Tranche 1

Deferred Bonus Incentive 2014 – Tranche 2

Deferred Bonus Incentive 2015 – Tranche 1

Deferred Bonus Incentive 2015 – Tranche 2

Company Share Option Plan

Save As You Earn

Date of grant

Number
of options
2016

21 September 2011

159,889

23 October 2012

544,757

Number
of options
2015

159,889

544,757

24 September 2013

368,842

8 September 2014

377,194

14 September 2015

175,810

–

23 October 2012

16,130

54,341

23 October 2012

122,981

168,035

24 September 2013

99,984

24 September 2013

159,490

159,060

395,052

8 September 2014

278,849

572,585

8 September 2014

505,847

572,537

14 September 2015

428,506

14 September 2015

428,603

21 November 2008

1 January 2010

1 January 2011

95,920

1,836

21,514

1 January 2012

202,317

1 January 2014

772,612

–

161,865

1,836

180,874

234,416

863,174

1 January 2015

982,351

1,139,027

1 January 2016

638,482

–

Exercise
price

–

£1.25

£1.42

£0.98

£0.95

£1.98

£2.21

£3.70

The total share options outstanding at 30 June 2016 under the LTIP, Deferred Bonus Incentive Plan, Company Share Option Plan and the Save
As You Earn schemes represent 1.7% of the issued share capital (2015: 1.6%).

Long Term Share Incentive scheme:

Outstanding at the beginning of the year

Lapsed 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

Deferred Bonus Incentive scheme:

Outstanding at the beginning of the year

Lapsed 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

Lapsed during the year

Exercised 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

Lapsed 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

Number
of options
2016

Weighted
average
exercise price
2016

Number
of options
2015

Weighted
average
exercise price
2015

1,450,682

–

175,810

1,626,492

704,646

1,921,610

(61,617)

(761,763)

942,159

2,040,389

677,434

161,865

–

(65,945)

95,920

2,419,327

(274,917)

(204,774)

679,476

2,619,112

–

£1.25

–

£1.25

£1.91

£1.77

£1.10

£3.70

£2.39

–

1,665,139

–

(591,651)

377,194

1,450,682

159,889

1,295,187

(67,586)

(557,313)

1,251,322

1,921,610

381,436

263,780

–

(101,915)

161,865

2,153,643

(146,637)

(759,684)

1,172,005

2,419,327

3,402

–

£1.25

£0.98

£1.83

£0.96

£2.21

£1.91

£0.95

The weighted average share price at the date of exercise of share options exercised during the year was £4.40 (2015: £3.34).

The options outstanding at 30 June 2016 had a range of exercise prices of £nil to £3.70 (2015: £nil to £2.21) and a weighted average remaining
contractual life of 5.5 years (2015: 6.0 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 £3m (2015: charge £2m).

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED118

119

7. Employees continued
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 credit for the year was £1m (2015: credit of £1m). A credit of £8m related to the defined benefit section of the Scheme
(2015: credit of £7m), with £nil being charged to the income statement (2015: charge of £1m) and a credit of £8m to the statement of
comprehensive income (2015: credit of £8m). The charge arising from the defined contribution section was £7m (2015: £6m).

Triennial valuation
A full independent triennial actuarial valuation of the defined benefit section of the Scheme was undertaken at 1 July 2014 using the Projected
Unit Method. In the opinion of the Actuary, there was a deficit of £20m in the defined benefit section of the Scheme, based on the Trustees’
technical provisions assumptions with the Scheme’s assets representing 82% of the Scheme’s technical provisions. As at 1 July 2014 the value
of the defined benefit section of the Scheme’s assets was £92m. The previous triennial valuation was undertaken as at 1 July 2011 and reported
a deficit of £10m.

Defined benefit scheme – IAS 19R valuation
Redrow recognises 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 2014. This valuation has been updated
to 30 June 2016 by a qualified actuary for the purposes of these financial statements.

Based on the recovery plan agreed for the 1 July 2014 actuarial valuation, the Group expects to contribute £1m to the Scheme in the year
ending 30 June 2017.

The major financial assumptions used in arriving at the IAS 19R 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

2016

n/a

2.8%

2.0%

3.0%

2.8%

1.8%

2015

n/a

3.2%

2.2%

3.8%

3.2%

2.2%

1 In respect of pensions in excess of the guaranteed minimum pension earned prior to 30 June 2006.

2 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 mortality tables used in the actuarial valuation were as follows (which make allowance for projected further improvements
in mortality):

For male members:

SAPS CMI_2015 1.25% Long Term Trend (2015: SAPS CMI_2014 1.25% Long Term Trend)

The life expectancies implied by these tables for typical members are:

Pensioner currently aged 65:
Future pensioner when aged 65:

Male 22.2 years (2015: Male 22.4 years)
Male 23.5 years (2015: Male 23.7 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.

7. Employees continued
e. Retirement benefit schemes continued
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:

Group and Company

Equities

Property

Debt instruments

Other

Cash

Insurance policies

Total market value of assets

Present value of obligations

Surplus/(deficit) in the Scheme

2016
£m
Quoted
market price in
active market

2016
£m
No quoted
market price in
active market

–

115

–

2016
£m
Total

–

122

(116)

The defined benefit obligation can be approximately attributed to the scheme members as follows:

Deferred members

Pensioner members

All benefits are vested at 30 June 2016 (unchanged from 30 June 2015).

The total amounts credited/(charged) against income in the year were as follows:

Amounts included within the income statement:

Administrative expenses

Scheme administration expenses

Net interest on defined benefit liability

Amounts recognised in the statement of comprehensive income:

Return on scheme assets excluding interest income

Actuarial gains/(losses) arising from changes in demographic assumptions

Actuarial losses arising from changes in financial assumptions

Actuarial gains arising from experience adjustments

2015
£m
Quoted
market price in
active market

2015
£m
No quoted
market price in
active market

–

2016
%

100

2015
£m
Total

103

(106)

(3)

2015
%

100

Group and Company

2016
£m

2015
£m

–

(11)

–

(1)

–

(1)

(4)

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED120

121

7. Employees continued
e. Retirement benefit schemes 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 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

Interest expense

Benefit payments

Actuarial (gains)/losses arising from changes in demographic assumptions

Actuarial losses arising from changes in financial assumptions

Actuarial gains arising from experience adjustments

At end of year

Changes in the fair value of the Scheme’s assets:

At start of year

Interest income

Return on scheme assets excluding interest income

Scheme administration expenses

Normal employer contributions

Benefit payments

At end of year

Group and Company

2016
£m

2015
£m

(3)

(11)

(3)

106

105

(4)

(1)

–

116

103

–

(4)

122

(5)

(3)

106

(1)

(5)

103

7. Employees continued
e. Retirement benefit schemes continued
Sensitivity of key assumptions
The table below gives a broad indication of the impact on the IAS 19R numbers to changes in assumptions and experience (away from the
assumptions shown on page 118). All figures are before allowing for deferred tax.

Item

Increase/reduce discount rate by 0.25%

Increase/reduce inflation by 0.25% (assumed affects deferred and pensioner increases)

Members assumed to live one year longer in retirement

The above sensitivities are applied to adjust the defined benefit obligation at the end of the
reporting period. Whilst the analysis does not take account of the full distribution of cashflows
expected under the scheme, it does provide an approximation to the sensitivity assumptions shown.

No changes have been made to the method and assumptions used in the analysis from those used
in the previous period.

Approximate impact
on 2016 surplus

Approximate impact
on 2015 deficit

+£6m/-£7m

-£7m/+£6m

-£3m

-£6m/+£6m

+£6m/-£5m

+£3m

Note that some of the changes illustrated above may take the actuarial basis outside a reasonable range.

8. Intangible assets
Group

Cost

At 1 July 2014

Additions

At 30 June 2015

Additions

At 30 June 2016

Accumulated amortisation

At 1 July 2014

Charge

At 30 June 2015

Charge

At 30 June 2016

Net book value

At 30 June 2016

At 30 June 2015

At 30 June 2014

Goodwill
£m

Software
£m

Total
£m

–

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED122

123

9. Property, plant and equipment
Group

Cost

At 1 July 2014

Additions

Transfer from Non-current assets held for resale

Disposals

At 30 June 2015

Additions

Disposals

At 30 June 2016

Accumulated depreciation

At 1 July 2014

Charge

Disposals

At 30 June 2015

Charge

Disposals

At 30 June 2016

Net book value

At 30 June 2016

At 30 June 2015

At 30 June 2014

10. Investments
a. Investments

Joint ventures

Subsidiary companies

Freehold
property
£m

Plant and
machinery
£m

Fixtures
and fittings
£m

Total
£m

–

(3)

(1)

(3)

(1)

(3)

(1)

(3)

(1)

10. Investments continued
b. Investments in joint ventures

Share of joint venture net assets:

Current assets

Current liabilities

Non-current liabilities

Net (liabilities)

Loans from Group companies(i)

Share of post-tax profits from joint ventures:

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit

Finance costs

Profit before tax

Taxation

(i) £26m of the loans to joint ventures are secured (2015: £15m).

The Group’s joint venture investments are:

Group

2016
£m

Company

2015
£m

2016
£m

2015
£m

(6)

(19)

(1)

–

(5)

(10)

(1)

–

• its 50% shareholding in the ordinary share capital of Menta Redrow Limited and Menta Redrow (II) Limited, both companies incorporated
in Great Britain with a 30 June year end. Menta Redrow Limited and Menta Redrow (II) Limited were formed to pursue redevelopment
opportunities in Croydon.

Group

Company

• in August 2015 the Group purchased the remaining 50% shareholding in the ordinary share capital of The Waterford Park Company Limited,

2016
£m

–

2015
£m

–

2016
£m

2015
£m

–

a company incorporated in Great Britain with a 30 June year end, making it a subsidiary from that date.

c. Investments in subsidiary undertakings

At 1 July 2015 and 30 June 2016

Company
£m

–

The principal subsidiary company is Redrow Homes Limited. All subsidiary companies are incorporated in Great Britain except Redrow
Homes(Park Heights) Limited and Blue Capital (Jersey) Limited which are incorporated in Jersey. A full list of subsidiary undertakings as at
30 June 2016 is shown on page 124. The capital of all the subsidiary companies, consisting of ordinary shares, is wholly owned by HB (HDG)
Limited which in turn is wholly and directly owned by Redrow plc.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED124

125

10. Investments continued
c. Investments in subsidiary undertakings continued
Subsidiaries

Name
HB (HDG) Limited
Redrow Homes Limited
Harrow Estates plc
Redrow Real Estate Limited
Redrow Regeneration plc
Redmira Limited
HB (NW) Limited
HB (LCS) Limited
HB (MID) Limited
HB (SW) Limited
HB (SWA) Limited
HB (Y) Limited
HB (ESTN) Limited
HB (WM) Limited
HB (SM) Limited
HB (SN) Limited
HB (WC) Limited
HB (WX) Limited
HB (EM) Limited
HB (CD) Limited
HB (GRPS) Limited
HB (CPTS) Limited
HB (SE) Limited
HB (CSCT) Limited

Company
Number
1990709
1990710
6825371
3996541
5405272
7587765
1189328
SC38052
2469449
3522335
2230870
2293006
4017345
3379746
3522321
537405
4984069
1940936
2827161
2034733
2898913
1079513
3988594
SC231364

Name

HB (SC) Limited
HB (1995) Limited
Redrow Homes (Wallyford) Limited
Redrow Homes (London) Limited
St David’s Park Limited
PB0311 Limited
Debut Freeholds Limited
Tay Homes (Western) Limited
Tay Homes (Northern) Limited
Tay Homes (Midlands) Limited
Tay Homes (North West) Limited
Redrow Homes (Park Heights) Limited
Blue Capital (Jersey) Limited
Redrow Construction Limited
Poche Interior Design Limited
Redrow (Shareplan) Limited
Imagelines Limited
Cadmoore Limited
Redrow (Sudbury) Limited
The Waterford Park Company Limited
The Waterford Park Company (Balmoral) Limited
HB (Herne Bay No 1) Limited
HB (Herne Bay No 2) Limited

Company
Number

SC74732
SC155021
SC205159
7472674
2479183
7577839
4638403
2806562
2708575
2183136
2189721
66240
110509
1375826
2169473
3520984
3520986
3977222
4558070
5429823
6047122
7743649
9163243

11. Deferred tax assets and liabilities continued
A Corporation Tax rate of 20% from 1 April 2015 was substantively enacted on 2 July 2013. Changes to reduce the Corporation Tax rate to 19%
from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted on 26 October 2015. Deferred tax balances have been valued at the
rate of 19%. A further change to reduce the rate to 17% from 1 April 2020 was announced in the Chancellor’s Budget on 16 March 2016. As this
change had not been substantively enacted at the balance sheet date its effects are not included in these financial statements. The overall effect
of these changes, if they had applied to the deferred tax balance at the balance sheet date, would not be significant to the Group.

12. Trade and other receivables

Non‑current assets

Trade receivables (net)

Current assets

Trade receivables (net)

Amounts due from subsidiary companies

Other receivables

Prepayments and accrued income

Group

2016
£m

Company

2015
£m

2016
£m

2015
£m

–

918

–

918

–

741

–

741

Trade receivables due after more than one year are stated after an allowance of £9m has been made (2015: £13m) in respect of estimated
irrecoverable amounts. This allowance is based on an estimate of default rates. £nil provision was made during the year (2015: £1m). £1m was
utilised (2015: £nil). £3m provision was released during the year (2015: £nil). It is not considered that a material amount of current asset trade
receivables are overdue for payment.

Trade and other receivables due between two and five years are £9m (2015: £6m) and due in more than five years are £3m (2015: £7m). The
Group holds a charge over the underlying assets. 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.

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:

13. Inventories

Deferred tax assets
At 1 July 2014
Charge to income
Charge to equity
At 30 June 2015
Credit to income
Charge to equity
At 30 June 2016

Deferred tax liabilities
At 1 July 2014
Credit to income
Credit to equity
At 30 June 2015
Credit to income
Charge to equity
At 30 June 2016

Employee
benefits
£m

Imputed
interest
£m

Share‑based
payment
£m

Short‑term
temporary
differences
£m

Losses
carried
forward
£m

3
–
(2)
1
–
(1)
–

3
–
–
3
–
–
3

–
–
–
–
–
–
–

1
–
–
1
1
–
2

1
(1)
–
–
–
–
–

Employee
benefits
£m

Imputed
interest
£m

Share‑ based
payment
£m

Short‑term
temporary
differences
£m

Losses
carried
forward
£m

–
–
–
–
–
(1)
(1)

–
–
–
–
–
–
–

(1)
–
–
(1)
–
–
(1)

–
–
–
–
–
–
–

Total
£m

8
(1)
(2)
5
1
(1)
5

Total
£m

(1)
–
–
(1)
–
(1)
(2)

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 £2m (2015: £4m).

Land for development

Work in progress

Stock of showhomes

Payments on account

Group

Company

2016
£m

1,215

600

1,869

(61)

1,808

2015
£m

1,020

463

1,537

(37)

1,500

2016
£m

2015
£m

–

Inventories of £992m net of £9m net realisable value provision utilisation, were expensed in the year (2015: £826m net of £20m net realisable
value provision utilisation). Work in progress includes £3m (2015: £3m) in respect of part exchange properties. Land held for development in the
sum of £232m is subject to a legal charge as security in respect of deferred consideration (2015: £102m).

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
(2015: £nil). Of the net realisable value provision of £19m (2015: £28m), £9m (2015: £17m) is attributed to land and £10m (2015: £11m) is
attributed to work in progress.

As discussed in note 1, the Group considers the carrying value of inventories to be a critical accounting judgement.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED126

127

13. Inventories continued
The net realisable value provision movement is analysed below:

As at 1 July 2015

Utilised during the year

Created during the year

Released during the year

As at 30 June 2016

Total
£m

(9)

(3)

The net realisable value provision relates to land with residential planning consent.

The net realisable value provisions of £3m and £3m 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.

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 and overdrafts

Trade payables and other payables

Land creditors

Other financial liabilities are at amortised cost.

2016
Loans and
receivables
£m

2015
Loans and
receivables
£m

135

179

104

2016
Other
financial
liabilities
£m

2015
Other
financial
liabilities
£m

274

291

378

943

210

226

266

702

14. Financial risk management continued
The Company

Assets per the balance sheet

Cash and cash equivalents

Amounts due from subsidiary companies

Liabilities per the balance sheet

Bank loans and overdrafts

Amounts owed to subsidiary companies

2016
Loans and
receivables
£m

2015
Loans and
receivables
£m

134

918

1,052

741

797

2016
Other
financial
liabilities
£m

2015
Other
financial
liabilities
£m

230

244

150

164

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 Redrow Staff 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 2016, the Group had total unsecured bank borrowing facilities of £368m, representing £365m committed facilities and £3m
uncommitted facilities.

The Group’s cash surpluses arise from short-term timing differences. As a consequence the Group does not consider it bears significant risk of
changes to income and cash flows 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 from time to time 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 cash flow hedges in 2016 or 2015.

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:

Bank overdraft

Bank loans – floating rate

Effective
interest
rate
%

2.0

2.3

2016

Zero
to one
year
£m

–

Total
£m

230

274

One
to two
years
£m

Two
to five
years
£m

Effective
interest
rate
%

–

230

2.0

2.7

2015

Zero
to one
year
£m

–

Total
£m

150

210

One
to two
years
£m

Two
to five
years
£m

–

150

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED128

129

14. Financial risk management continued
a. Liquidity risk and interest rate risk continued
The notional principal amounts in respect of the interest rate swaps together with their maturities are given in the table below:

2016

2015

Balance at
30 June
£m

–

Zero
to one
year
£m

–

One
to two
years
£m

–

For the year ended 30 June 2016, it is estimated that for any incremental general increase of 1% in interest rates applying for the full year the
decrease in the Group’s profit before tax would be £3m (2015: £2m).

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

Maturities above include estimated interest payable to the maturity of the facilities.

The Company

Due within one year

Due between one and two years

Due between two and five years

2016
Bank
overdraft
£m

–

2016
Bank
overdraft
£m

–

2016
Bank
loans
£m

–

247

2016
Bank
loans
£m

–

247

2015
Bank
overdraft
£m

–

2015
Bank
overdraft
£m

–

2015
Bank
loans
£m

–

164

2015
Bank
loans
£m

–

164

Maturities above include estimated interest payable to the maturity of the facilities.

The Company was fully compliant with its banking covenants as at 30 June 2016.

At the year end, the Group and Company had £135m (2015: £215m) 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.

14. Financial risk management 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.

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:

2016

2015

d. Maturity of trade and other payables
These represent current liabilities due within one year.

Balance
at 30 June
£m

378

266

Total
contracted
cash
payment
£m

386

273

Due
less than
one year
£m

222

182

Due
between
one and
two years
£m

Due
between
two and
five years
£m

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:

Held at Banks with at least an A- credit rating per Standard & Poor

Group

Company

2016
£m

135

2015
£m

2016
£m

134

2015
£m

No credit limits were exceeded during the reporting year 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 receivables.

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 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.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED130

131

14. Financial risk management continued
f. Capital management continued
The total capital levels and gearing ratios as at 30 June 2016 and 30 June 2015 are as follows:

Total borrowings

Less cash and cash equivalents

Net debt

Equity

Total capital

Gearing ratio

2016
£m

274

(135)

139

1,017

1,156

14%

2015
£m

210

(56)

154

849

1,003

18%

17. Share capital

Authorised

480,000,000 ordinary shares of 10p each (2015: 480,000,000)

Issued and fully paid

As at 1 July 2015 and 30 June 2016

Options granted to Directors and employees under the LTIP, the CSOP and the SAYE schemes are set out in note 7d.

2016
£m

2015
£m

Number of ordinary
shares of 10p each

369,799,938

g. Fair values
At 30 June 2016 there is no material difference between the fair value of financial instruments and their carrying values in the balance sheet.

18. Share capital, share premium account and reserves
The Group

15. Trade and other payables

Non‑current liabilities

Amounts due in respect of development land

Other payables

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

16. Long‑term provisions
The Group

At 1 July 2015

Provisions created during the year

Provisions released during the year

Provisions utilised during the year

At 30 June 2016

Group

Company

2016
£m

156

–

156

286

222

–

566

2015
£m

2016
£m

2015
£m

–

221

182

–

471

–

Onerous
contracts
£m

Other
£m

Total
£m

–

(1)

–

(1)

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.

At 1 July 2014

Total comprehensive income

Dividends paid

Movement in respect of LTIP/SAYE

At 30 June 2015

Total comprehensive income

Dividends paid

Movement in respect of LTIP/SAYE

At 30 June 2016

Share
capital
£m

Share
premium
account
£m

Other
reserves
£m

Retained
earnings
£m

–

592

168

(15)

–

745

206

(30)

(8)

913

Other reserves
Other reserves consists of a £7m Capital redemption reserve (2015: £7m) and a £1m Consolidation reserve (2015: £1m).

Undistributable reserves
Other reserves are not available for distribution.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED132

133

18. Share capital, share premium account and reserves continued
The Company

At 1 July 2014

Total comprehensive income

Dividends paid

At 30 June 2015

Total comprehensive income†

Dividends paid

At 30 June 2016

† Includes dividends received from subsidiary companies.

Other reserves
Other reserves consists of a £7m Capital redemption reserve (2015: £7m).

Undistributable reserves
Other reserves are not available for distribution.

19. Movement in net (debt)/cash
The Group

Cash and cash equivalents

Bank overdrafts

Net cash and cash equivalents

Bank loans

Net debt

The Company

Cash and cash equivalents

Bank overdrafts

Net cash and cash equivalents

Bank loans

Net debt

Share
capital
£m

Share
premium
account
£m

Other
reserves
£m

Retained
earnings
£m

–

375

164

(15)

524

207

(30)

701

At
1 July 2015
£m

Cash flow
£m

At
30 June 2016
£m

(60)

(4)

(150)

(154)

(80)

135

(44)

(230)

(139)

At
1 July 2015
£m

Cash flow
£m

At
30 June 2016
£m

–

(150)

(94)

–

(80)

(2)

134

–

134

(230)

(96)

20. Operating lease commitments

Within one year

Within two to five years

Later than five years

2016
£m

2015
£m

–

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.

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 77 to 91. 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 £1.6m (Company £0.7m),
primarily relating to the donation to the Morgan Foundation as described in the Directors’ Remuneration Report on page 82 and additionally in
respect of the Group, relating to the purchase of six units at the Stretton Green site for £860k and services provided by Harrow Estates plc on an
arm’s length basis under promotional agreements forming part of the acquisition of the Harrow business.

On 9 May 2016 at a General Meeting an ordinary resolution was passed by the shareholders approving a Substantial Property Transaction in the
form of the sale of 6 units at Stretton Green, Tilston, Malpas, Cheshire (numbers 25, 26 and 28 to 31) by Redrow Homes Limited, a subsidiary of
the Company, to Steve Morgan, the Chairman of the Board of the Company, in accordance with a sale contract dated 8 April 2016 (as described
in the Company’s circular to shareholders dated 13 April 2016). Following shareholder approval the transaction was legally completed on
22 June 2016.

As at 30 June 2016, an amount of £nil was due to Harrow Estates plc under normal trading terms.

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 2016 was £918m (2015: £741m). The amount owed to subsidiary undertakings
at 30 June 2016 was £14m (2015: £14m).

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 Menta Redrow Limited and Menta Redrow (II) Limited joint ventures. The Group’s loans to its
joint ventures are disclosed in note 10.

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED134

GLOSSARY

CORPORATE AND SHAREHOLDER INFORMATION

135

NPPF
The National Policy Planning Framework

HBF
Home Builders Federation

NHBC
National House Building Council

CITB
Construction Industry Training Board

Forward Land
Land which is owned or controlled by Redrow, generally under
option, which is being promoted through the planning system
in order to ultimately achieve a residential planning consent

How Key Performance Indicator Measures are Calculated:

Land bank years
No. of plots in owned land bank at 30 June divided by
no. of legal completions in financial year

Sales outlets
No. of sales outlets open at 30 June

Private reservation rate
No. of private reservations per week in financial
year divided by average no. of sales outlets

Revenue
Revenue per consolidated income statement

Number of trainees
No. of trainees at 30 June

HBF customer satisfaction rating
Independent HBF customer satisfaction rating score

Accident incident rate by site
No. of notifiable accidents in financial year divided by
average no. of sites

Return on capital employed (ROCE)
Operating profit before exceptional items adjusted for joint
ventures as a percentage of opening and closing capital employed

Return on equity (ROE)
Profit before tax before exceptional items adjusted for joint
ventures as a percentage of opening and closing net assets

Earnings per share (EPS)
Profit attributable to ordinary equity shareholders (excluding
exceptional items and deferred tax rate changes) divided by
the weighted average no. of ordinary shares in issue during
the financial year

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:
www.redrow.co.uk

Dividend Tax Allowance
From 6 April 2016 dividend tax credits will be replaced by an annual
£5,000 tax-free allowance on dividend income across an individual’s
entire share portfolio. Above this amount, individuals will pay tax on
their dividend income at a rate dependent on their income tax bracket
and personal circumstances. The Company will continue to provide
registered shareholders with a confirmation of the dividends paid by
Redrow plc and this should be included with any other dividend
income received when calculating and reporting total dividend income
received. It is the shareholder’s responsibility to include all dividend
income when calculating any tax liability.

This change was announced by the Chancellor, as part of the UK
Government Budget in July 2015. If you have any tax queries, please
contact a Financial Advisor.

Group Contacts
Officers and advisers

Company Secretary
Graham Cope

Registered Office
Redrow House
St. David’s Park
Flintshire
CH5 3RX
Registered Number 2877315

Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ

Stockbrokers
Barclays
5 The North Colonnade
Canary Wharf
London
E14 4BB

Peel Hunt
Moor House
120 London Wall
London
EC2Y 5ET

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

Financial Public Relations Consultants
Instinctif Partners
65 Gresham Street
London
EC2V 7NQ

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTS136

FIVE YEAR SUMMARY
12 MONTHS ENDED 30 JUNE

Revenue

Operating profit before exceptional items

Operating profit before exceptional items
as a percentage of turnover

Profit before tax

Net assets

Net debt

2012
£m

479

2013*
£m

605

2014
£m

864

138

2015
£m

1,150

213

2016
£m

1,382

261

10.0%

12.1%

15.9%

18.5%

18.9%

562

(14)

609

(91)

133

696

(172)

204

849

(154)

250

1,017

(139)

Gearing – net debt as a percentage of capital and reserves

2.5%

14.9%

24.8%

18.1%

13.7%

Return on capital employed – operating profit before exceptional
items adjusted for joint ventures as a percentage of opening and
closing capital employed

Return on equity

Number of legal completions

Earnings per ordinary share

Dividends paid per ordinary share

Net assets per ordinary share

* Restated to reflect the application of IAS 19R – Employee Benefits.

8.7%

8.4%

2,458

9.7p

–

12.2%

12.3%

2,827

14.6p

–

18.0%

20.5%

3,597

28.3p

2.0p

22.8%

26.4%

4,022

44.5p

4.0p

24.2%

26.8%

4,716

55.4p

8.0p

151.8p

165.0p

188.1p

229.5p

275.0p

137

Redrow plc Annual Report 2016SHAREHOLDER INFORMATIONGOVERNANCE REPORTSTRATEGIC REPORTFINANCIAL STATEMENTSR
e
d
r
o
w
p
l
c

A
n
n
u
a
l

R
e
p
o
r
t
2
0
1
6

Redrow plc
Redrow House, St. David’s Park, Flintshire CH5 3RX
Tel: 01244 520044 Fax: 01244 520720
Email: groupservices@redrow.co.uk

ANNUAL REPORT
2016